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 December 31, 2010February 28, 2013
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from N/A__________ to N/A.__________
Commission File No. 333-165391
Victoria Internet Services: 333-165301
Earn-A-Car, Inc.
(Exact Namename of Registrantregistrant as Specifiedspecified in its Charter)charter)
Nevada 7514 27-1320213
(State or other 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 incorporation or organization)
2470 East 16th Street
Brooklyn, NY 11235South Africa
(Address of Principal Executive Offices)
Copies of communications to:
Scott P. Doney, Attorney at Law
3273 E. Warm Springs Las Vegas, NV
89120principal executive offices)
+27 11 425 1666
(Issuer's telephone (702) 312-6255
(718) 344-0866
(Registrant's Telephone Number, including area code)number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Securities Registered Pursuantregistered pursuant to Section 12(b) of the Act: None
Securities Registered Pursuantregistered pursuant to Section 12(g) of the Act: Common Stock, Par Value $0.0000001 per Share
(Title of each class)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 Section 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 (ss.229.405 of this chapter)(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. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.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-AcceleratedNon-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check markcheckmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ] State theNo [X]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price of $.01 the price of the last private placementregistrant as of common equity: $6,750.
State theJune 11, 2013: US$472,500.
The number of shares outstanding of each of the Registrant's classes ofregistrant's common stock as of the latest practicable date. 4,675,000 issued and outstanding as of March 1, 2011.
DOCUMENTS INCORPORATED BY REFERENCE: None.June 11,
2013: 112,500,000.
VICTORIA INTERNET SERVICES INC.INDEX TO FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
Page
Numbers
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PART I
3
ITEMItem 1. Business 3
ITEMItem 1A. Risk Factors 6
ITEM7
Item 1B. Unresolved Staff Comments 9
ITEM13
Item 2. Properties 13
Item 3. Legal Proceedings 9
ITEM13
Item 4. Submission Of Matters To a Vote Of Securities Holders 9Mine Safety Disclosures 13
PART II
9
ITEMItem 5. Market Forfor Registrant's Common Equity, Related Stockholder
Matters Andand Issuer Purchases Ofof Equity Securities 9
ITEM13
Item 6. Selected Financial Data 10
ITEM14
Item 7. Management's Discussion Andand Analysis Ofof Financial Condition
Andand Results Of Operation 10
ITEM 7Aof Operations 14
Item 7A. Quantitative Andand Qualitative Disclosures About Market Risk 14
ITEM20
Item 8. Financial Statements Andand Supplementary Data 14
ITEM20
Item 9. Changes In Andin and Disagreements Withwith Accountants Onon Accounting
Andand Financial Disclosure 14
ITEM 9A.20
Item 9A(T). Controls Andand Procedures (ITEM 9A(T)) 14
ITEM20
Item 9B. Other Information 1521
PART III
15
ITEMItem 10. Directors, Executive Officers, Andand Corporate Governance 15
ITEM22
Item 11. Executive Compensation 17
ITEM24
Item 12. Security Ownership Ofof Certain Beneficial Owners Andand Management
Andand Related Stockholder Matters 19
ITEM26
Item 13. Certain Relationships Andand Related Transactions, Andand Director
Independence 19
ITEM27
Item 14. Principal Accounting Fees Andand Services 1927
PART IV
21
ITEMItem 15. Exhibits and Financial StatementsStatement Schedules 2128
SIGNATURES 2130
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. BUSINESS1.BUSINESS.
All dollar amounts refer to US dollars unless otherwise indicated.
GENERAL
We were incorporated inunder 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 have not
started full operations. We have reserved, and own,were engaged in the domain
(www.victoriainternetservices.com) and arebusiness of developing a websitean internet based tax preparation
service that willwould 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 havehad not
generated any substantial revenues and the only operation we havehad engaged in is
the development of a business plan. Our business address iswas at 2470 East 16th
Street, Brooklyn, NY 11235. Our11235 and our telephone number iswas 718- 344-0866.We havehad
only begun operations in a very limited capacity and will notit was uncertain when we
would begin full operations till the completion of
this offering.operations. Our plan of operation isplans were forward-looking and there iswas no
assurance that we willwould have ever beginbegun operations. We arewere a development stage
company and have earned $400 invery limited revenue from those operations since our
inception on October 9, 2009. It is
likelywas unlikely that we will notwould be able to achieve
profitability in our prior proposed business and will havewas likely that we would be
3
required to cease operations due to the lack of funding. The revenues earned to date are from a
single client whose taxes were prepared in person.
SERVICES
Upon completionIn the interests of our
websiteshareholders, 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 providein 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 interactive environmentautomobile.
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
4
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 allowgenerally 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
communicate on a real time basisensure that, when combined with tax preparersour 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 their home, office or anywhere. Our tax preparers will collect all income
and financial information fromourselves at the expected market price at the
end of the client's term. In our experience about 10% of our customers online and answer allhave
taken possession of their questions real time as well.cars pursuant to our loyalty scheme. 13 did so this
financial year (Previous financial year: 3).
All of our tax preparerscustomers 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
6
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 internet
cameraexcess of R50,000
(about US$6,000). Our average car is worth US$8,000, so thatmost of our cars are
largely self insured. EAC covers the customer can seecost 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 and feel like they werewhen 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 officeUSA. 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 tax preparer. Upon completion of the online real time session we will
electronically file our customer's tax return. We will charge a fee for this
service which will be paid online by credit card.
We intend to open our officefacility in Brooklyn, New York. The office will accommodate
between 5-10 tax preparers ("TP"). On an "as needed basis" each TP will be
provided with a computer, internet camera and telephone. Each TP will be
qualified to file individual and corporate tax returns.
Initially our sole Director and Officer, Leon Golden, will be responsible for
tax preparation and consultation.June
2012.
If we are successful in our marketing campaign
it may become necessary to hire accounting staff to help with the workload. This
is not expected until after the initial 5 months following the closing of our
financing. Seasonality of Work
Once in full operations we expect demand and the associated revenues to vary
drastically throughout the year. The nature of tax preparation is such that the
month leading up to April 15 are an extremely busy time while the rest of the
year business can often be sporadic. The need for seasonal employees will be
assessed during February of 2012 in order to determine staffing and training
requirements.
3
MARKETING PLAN
In the beginning of our business operations, we plan to advertise our business
on local billboards, local news paper and the internet that will promote our
business. Initially, our sole officer and director, Leon Golden, will look for
potential customers. We intend to use other marketing strategies, such as web
advertisements, direct mailing, and phone calls to potential customers.
Marketing is an ongoing matter that will continue during the life of our
operations. We also expect to get new clients from "word of mouth" advertising
where our potential clients from Mr. Golden's current clientele and new clients
will refer their colleagues to us. We will encourage such advertising by
rewarding persons who refer new clients to us. Rewards will be given in the form
of reductions in future tax preparation costs to customers who make referrals.
We intend to spend from 3,000 to 5,000 on marketing efforts during the first
year.
We have no plans to change our planned business activities or to combine with
another business, and we are not aware of any events or circumstances that might
cause these plans to change. We have not yet begun operations and will not begin
operations until we have completed this offering. Our plan of operation is
forward looking and there is no assurance that we will ever begin operations.
We have not conducted any market research into the likelihood of success of our
operations or the acceptance of our products or advisory services by the public.
STRATEGY
We intend to open a Real Time On-Line Income Tax Preparation service. Currently,
we do not have any customers or any contracts for our services. We also have not
yet commenced any operations.
MARKET
We intend to initially target New York City. In our first year of operation, we
plan to open one location. Customers will pay for our goods and services with
credit card.
REGULATORY REQUIREMENTS
We are not currently required to obtain any special licenses, or meet and
special regulatory requirements before establishing our business other than a
business license. If new government regulations, laws, or licensing requirements
are passed that would restrict or eliminate delivery of any of our intended
services, then our business may suffer. If we cannot hire enough qualified tax
preparers then our business may suffer as well.
MARKETING
Initially, our services will be promoted by Mr. Leon Golden who has many years
as a tax preparer. He will discuss our services with his friends and business
associates. We also anticipate utilizing other marketing avenues in our
4
attempt to make our services known to the general public and attract potential
customers. These marketing activities will be designed to inform potential
customers about the benefits of using our services and may include the
following: development and distribution of marketing literature; direct mail and
email advertising; billboards advertisement and, promotion of our web site.
WEBSITE MARKETING STRATEGY
We intend to promote our website by displaying it on our business cards, flyers
and brochures. We intend to attract traffic to our website by a variety of
online marketing tactics such as registering with top search engines using
selected key words (meta tags) and utilizing link and banner exchange options.
REVENUE
We intend to generate revenues by selling our tax preparation services.
Therefore, we will require substantial start-up capital in order to setup our
interactive online site and begin operations. Leon Golden, our president, will
be devoting approximately 20 hours a week of his time to our operations. Once we
begin operations Mr. Golden agreed to commit more time as required. Because Mr.
Golden will only be devoting limited time to our operations, our operations may
be sporadic and occur at times which are convenient to Mr. Golden. As a result,
operations may be periodically interrupted or suspended which could result in a
lack of revenues and a cessation of operations.
INSURANCE
We do not maintain any insurance and do not intend to maintain insurance in the
future. Because we do not have any insurance, if we are made a party of a
liability action, we may not have sufficient funds to defend the litigation. If
that occurs a judgment could be rendered against us that could cause us to cease
operations.
EMPLOYEES; IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES.
We are a development stage company and currently have no employees, other than
our sole officer and director. We intend to hire additional employees on an as
needed basis.
OFFICES
Our business office is located at 2470 East 16th Street Brooklyn NY 11235. Our
telephone number is (718) 334-0866. Upon the completion of our offering, we
intend to establish an office elsewhere. As of the date of this prospectus, we
have not sought or selected a new office sight.
GOVERNMENT REGULATION
We are not currently subject to direct federal, state or local regulation and we
do not believe that government regulation will have a material impact on the way
we conduct our business.
5
ITEM 1A. RISK FACTORS
BECAUSE OUR SOLE OFFICER AND DIRECTOR HAS OTHER BUSINESS INTERESTS, HE MAY NOT
BE ABLE OR WILLING TO DEVOTE A SUFFICIENT AMOUNT OF TIME TO OUR BUSINESS
OPERATIONS, CAUSING OUR BUSINESS TO FAIL.
Our sole officer and director, Leon Golden, will only be devoting limited time
to our operations. Mr. Golden intends to devote 35% of his business time to our
affairs. Because our sole officer and director will only be devoting limited
time to our operations, our operations may be sporadic and occur at times which
are convenient to him. As a result, operations may be periodically interrupted
or suspended which could result in a lack of revenues and a possible cessation
of operations. It is possible that the demands on Leon Golden from his other
obligations could increase with the result that he would no longer be able to devote sufficient time to the management of our business. In addition, Mr.
Golden may not possess sufficient time for our business if the demands of
managing our business increase substantially beyond current levels.
BECAUSE OUR CONTINUATION AS A GOING CONCERN IS IN DOUBT, WE WILL BE FORCED TO
CEASE BUSINESS OPERATIONS UNLESS WE CAN GENERATE PROFITABLE OPERATIONS IN THE
FUTURE.
We will be incurring losses untildemonstrate continued positive results we build a break-even level of revenue.
Further losses are anticipated in the development of our business. As a result,
there is substantial doubt about our ability to continue as a going concern. Our
ability to continue as a going concern is dependent upon our ability to generate
profitable operations in the future and/or to obtain the necessary financing to
meet our obligations and repay our liabilities arising from normal business
operations when they come due. We will require additional funds in order to move
forward with our business plan. At this time, we cannot assure investorsbelieve that we will
be able to obtain financing.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 unableable to raise neededarrange debt or equity
financing it may be on terms that are not beneficial to our shareholders. Any
financing that we willdo receive may dilute the interests of our current
shareholders. We do not have any agreements with any financing source to delay or abandon further operations. If we cannot raiseobtain
financing on any particular terms.
The Board has decided to meet our obligations, we will be insolventconstrain senior debt to 75% of total assets and will
be forcedendeavor to cease our
business operations.ensure that senior debt interest will not exceed 40% of EBIT.
IF LEON GOLDEN, OUR SOLE OFFICERWE ARE UNABLE TO CONTINUE TO RETAIN THE SERVICES OF JOHN STOREY AND DIRECTOR, SHOULD RESIGNBRUCE
DUNNINGTON OR DIE,IF WE WILLARE UNABLE TO SUCCESSFULLY RECRUIT QUALIFIED MANAGERIAL AND
COMPANY PERSONNEL, WE MAY NOT HAVE A CHIEF EXECUTIVE OFFICER. THIS COULD RESULT IN OUR OPERATIONS SUSPENDING,
AND INVESTORS COULD LOSE THIER INVESTMENT.
We depend onBE ABLE TO CONTINUE OPERATIONS.
Our success depends to a significant extent upon the continued services of John
Storey our sole officerCEO and director, Leon Golden for the
future success ofPresident and Bruce Dunnington our business.CFO. The loss of the
services of Mr. GoldenStorey could have ana material adverse effect on our business, financial conditiongrowth,
revenues, and results of
operations. If he should resign or die we willprospective business. Mr. Storey does not have an employment
agreement with us. We do not have a chief executive
officer."key person" life insurance policy on Mr.
Storey.
8
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 should occur, untilminimizes
strains on our resources, we find another person to act as our chief
executive officer,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 suspended.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 that event itaddition,
the attestation process by our independent registered public accounting firm is
possiblenew 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
could lose their entire investment.confidence and share value may be negatively impacted. We currently do not carry any key
personnel life insurance policies on Mr. Goldenhave
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 contractsufficient 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 his services.
BECAUSE OUR DIRECTOR OWNS 85.5%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 ISSUED AND OUTSTANDING COMMON STOCK, HE
CAN MAKE AND CONTROL CORPORATE DECISIONS THAT MAY BE DISADVANTAGEOUS TO MINORITY
SHAREHOLDERS.
Our director, Leon Golden, owns approximately 85.5%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 outstanding sharesmarket and depress
the price of our common stock.
Accordingly, he will haveADDITIONAL 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 significant influencematerial increase in determining the outcomenumber of all corporate transactions or other matters,
including mergers, consolidations,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 sale of all or substantially allvalue of our assets. He will also haveexisting 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 power to prevent or cause a change in control.
6
The interests of our director may differ from the interests of the other
stockholders and thus result in corporate decisions that are disadvantageous to
other shareholders.
U.S. INVESTORS MAY EXPERIENCE DIFFICULTIES IN ATTEMPTING TO EFFECT SERVICE OF
PROCESS AND TO ENFORCE JUDGMENTS BASED UPON U.S. FEDERAL SECURITIES LAWS AGAINST
THE COMPANY AND ITS SOLE NON-U.S. RESIDENT OFFICER AND DIRECTOR.
While we are organizedFINRA OTCQB under the laws of State of Nevada,Symbol EACR. There has been
a limited public market for our sole officercommon stock and director is non-U.S. resident. Consequently,an active public market for our
common stock may not develop. Failure to develop or maintain an active trading
market could make it may be difficult for investorsyou to affect servicesell your shares or recover any part
of process on Mr. Goldenyour investment in the United States and to enforce
in the United States judgments obtained in United States courts against Mr.
Golden based on the civil liability provisions of the United States securities
laws. Since all our assets will be located in England it may be difficult or
impossible for U.S. investors to collect a judgment against us. As well, any
judgment obtained in the United States against us may not be enforceable in the
United States.
OUR SHARES OF COMMON STOCK ARE SUBJECT TO THE "PENNY STOCK" RULES OF THE
SECURITIES AND EXCHANGE COMMISSION AND THE MARKET IN OUR SECURITIES WILL BE
LIMITED, WHICH WILL MAKE TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE THE
VALUE OF AN INVESTMENT IN OUR STOCK.
The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks." Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on the NASDAQ system, provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system). Penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document prepared by the
SEC, which specifies information about penny stocks and the nature and
significance of risks of the penny stock market. A broker-dealer must also
provide the customer with bid and offer quotations for the penny stock, the
compensation of the broker-dealer, and sales person in the transaction, and
monthly account statements indicating the market value of each penny stock held
in the customer's account. In addition, the penny stock rules require that,
prior to a transaction in a penny stock not otherwise exempt from those rules,
the broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the activity in the secondary market for stock that becomes subject
to those penny stock rules. IfEven if a market for our common stock develops,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 probablydevelop. 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 pennyreporting
requirements of the Exchange Act, we might elect to adopt a stock rules,option plan
and shareholders may have difficulty in selling their shares.
ANY ADDITIONAL FUNDING WE ARRANGE THROUGH THE SALE OF OUR COMMON STOCK WILL
RESULT IN DILUTION TO EXISTING SHAREHOLDERS.
We must raise additional capital in order for our business plan to succeed. Our
most likely source of additional capital will be throughfile a registration statement under the sale of additionalSecurities 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. SuchAll of our shares of common stock, issuancesexcept 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 cause stockholders' interests
inhave
on the market price of our companycommon stock or our ability to be diluted. Such dilution will negatively affect the valueraise capital through
an offering of investors' shares.
WE DO NOT EXPECT TO PAYour equity securities.
12
NO DIVIDENDS IN THE FORESEEABLE FUTURE.
7
We have never paid any dividends on our common stock. Westock and we do not expectintend to pay
cashany dividends on our common stock at any time in the foreseeable future.
The
future paymentITEM 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 dividends directly depends uponR24,000 (US$2,900) for our future earnings, capital
requirements, financial requirementsoffices and other factorsR10,000 (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
our board of
directors will consider. Since we do not anticipate paying cash dividends on our
common stock, a return on your investment, if any, will depend solely on an
increase, if any,suitable additional space is available in the market valuevicinity of our common stock.
AS A SHELL COMPANY, WE FACE SUBSTANTIAL ADDITIONAL ADVERSE BUSINESS ANDpresent facilities
at a reasonable cost.
ITEM 3. LEGAL CONSEQUENCES.
On June 29, 2005, the Securities and Exchange Commission adopted final rules
amending the Form S-8 and the Form 8-K for shell companies like us. The
amendments expand the definitionPROCEEDINGS.
We currently have no legal proceedings pending nor have any legal proceeding
been threatened against us or any of a shell company to be broader than a company
with noour officers, directors or nominal operations/assets or assets consisting of cash and cash
equivalents. The amendments prohibit the use of a Form S-8 (a form used by a
corporation to register securities issued to an employee, director, officer,
consultant or advisors), under certain circumstances, and revise the Form 8-K to
require a shell company to include current Form 10 information, including
audited financing statements, in the filing on Form 8-K that the shell company
files to report the acquisition of a business opportunity. This initial filing
must be made within four days of the acquisition. The Form 8-K filing may be
reviewed by the Securities and Exchange Commission and the prospects of certain
disclosure or review of the lack of the ability to issue securities using a Form
S-8 may delay the consummation of any potential business combination.
AS A SHELL COMPANY, OUR SHAREHOLDERS WILL NOT BE ABLE TO RELY UPON RULE 144 FOR
THE RESALE OF THEIR SHARES.
In general, Rule 144 requires restricted securities to be held for a particular
length of time and prescribes the conditions which must be satisfied prior to
the sale of the securities. The Securities and Exchange Commission codified a
staff interpretation relating to the treatment of the securities of shell
companies,control persons
of which we are one. Under the amendments, Rule 144 is not available
for the resale of securities initially issued by a shell company (reporting or
non-reporting) or a former shell company. Therefore, the securities held by our
shareholders can be resold only through a resale registration statement unless
certain conditions are met. These conditions are:
* The company has ceased to be a shell company;
* The company is subject to the reporting requirements of Section 13 or
15 (d) of the Securities Exchange Act of 1934, as amended;
* The company has filed all reports and other materials required to be
filed by Section 13 or 15(d) of the Securities Exchange Act, as
applicable, during the preceding twelve months; and
* One year has elapsed since the Company has filed current "Form 10
information" with the Securities and Exchange Commission reflecting
its status as an entity that is no longer a shell company.
If these conditions are satisfied, then our shareholders can resell their
securities subject to all other applicable Rule 144 conditions. See "Market for
Common Equity and Related Stockholder Matters - Rule 144 Shares".
8
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This filing contains forward-looking statements about our business, financial
condition and prospects that reflect our management's assumptions and good faith
beliefs based on information currently available. We can give no assurance that
the expectations indicated by such forward-looking statements will be realized.
If any of our assumptions should prove incorrect, or if any of the risks and
uncertainties underlying such expectations should materialize, our actual
results may differ materially from those indicated by the forward-looking
statements.
The key factors that are not within our control and that may have a direct
bearing on operating results include, but are not limited to, acceptance of our
proposed services and the products we expect to market, our ability to establish
a customer base, managements' ability to raise capital in the future, the
retention of key employees and changes in the regulation of our industry.
There may be other risks and circumstances that management may be unable to
predict. When used in this filing, words such as, "believes," "expects,"
"intends," "plans," "anticipates," "estimates" and similar expressions are
intended to identify and qualify forward-looking statements, although there may
be certain forward-looking statements not accompanied by such expressions.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 3. LEGAL PROCEEDINGS
Since inception, none of the following occurred with respect to a present or
former director or executive officer of the Company: (1) any bankruptcy petition
filed by or against any business of which such person was a general partner or
executive officer either at the time of the bankruptcy or within two years prior
to that time; (2) any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses); (3) being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of any competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; and
(4) being found by a court of competent jurisdiction (in a civil action), the
SEC or the commodities futures trading commission to have violated a federal or
state securities or commodities law, and the judgment has not been reversed,
suspended or vacated.aware.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to shareholders for the year ended December 31, 2010.MINE SAFETY DISCLOSURES.
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIESSECURITIES.
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 quoted on the Over the Counter Bulletin Board.
HOLDERS
We have approximately 29 record holders of our common stock as of December 31,
2010.
9held in a "nominee" or "street" name.
13
DIVIDEND POLICY
We have nevernot declared or paid any cash dividends on our common shares,stock to date. We
anticipate that any future earnings will be retained as working capital and we do not
anticipateused
for business purposes. Accordingly, it is unlikely that we will declare or pay
any such dividends with respect to those securities in the foreseeable future.
Our current business plan is to retain any future
earnings to finance the expansion development of our business.SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN INFORMATION
STOCK OPTION PLAN
The Company, at the current time, has no stock option plan or any equity
compensation plans.PLANS
None
RECENT SALES OF UNREGISTERED SECURITIES
None
ITEM 6. SELECTED FINANCIAL DATA
Not required.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 RESULTSREULTS
OF OPERATION
Management's DiscussionOPERATIONS.
OVERVIEW
We caution you that reliance on any forward-looking statement involves risks and
Analysis contains various "forward looking
statements" withinuncertainties, and that although we believe the meaningassumptions on which our
forward-looking statements are based are reasonable, any of Section 21Ethose 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
Securities Exchange Actforward-looking statements. We do not undertake to release the results of 1934, as amended, regardingany
revisions of these forward-looking statements to reflect future events or
the future financial performancecircumstances. Some of the Companyfactors that involve risks and uncertainties. Certain statements included in
this S-1, including, without limitation, statements related to anticipated cash
flow sources and uses, and words including but not limited to "anticipates",
"believes", "plans", "expects", "future" and similar statements or expressions,
identify forward looking statements. Any forward-looking statements herein are
subject to certain risks and uncertainties in the Company's business, including
but not limited to, reliance on key customers and competition in its markets,
market demand, product performance, technological developments, maintenance of
relationships with key suppliers, difficulties of hiring or retaining key
personnel and any changes in current accounting rules, all of which may be
beyond the control of the Company. Management will elect additional changes to
revenue recognition to comply with the most conservative SEC recognition on a
forward going accrual basis as the model is replicated with other similar
markets (i.e. SBDC). The Company'scause actual results, coulddevelopments
and business decisions to differ materially from those anticipated in thesecontemplated 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
14
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 a result of certain
factors, including those set forth therein.
Management's Discussionthe increase in the size of the fleet and
Analysismanagement believes they have sufficient capacity to significantly grow the
fleet without increasing these costs substantially.
A change in estimate on the residual value of Resultsmotor vehicles reduced the amount
of Financial Conditiondepreciation 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 Resultsthe 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 Operations ("MD&A") shouldsecond 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
readcounterbalanced by the fact that vehicle depreciation is greatest in conjunction with the financial
statements included herein.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 COMPLETE OUR PUBLIC OFFERINGAND LIQUIDITY
Our plan of operation for 2013 is to continue to expand our business to meet
demand. We expect to complete our public offering within 180 days afterare currently in discussions that could realize $3.8m in new long
term car finance debt. Should we raise the effectiveness of our registration statement by the Securities and Exchange
Commissions. We intend to concentrate all our efforts on raising capital during
this period. We do not plan to begin business operations untilfull quantum we complete our
public offering.
10
DEVELOP OUR WEBSITE
Upon completion of our public offering, we will hire a web designer to design
our website. The timeline proposed by our web designer is approximately one
month to have a working website with online payment options and video
conferencing set up. Our website will be built for two purposes:
1) To promote and give potential clients an intro to the ease of doing
their taxes from the comfort of their home.
2) To allow the interaction to occur between client and accounting rep.
We intend to have the website created in a user friendly manner so that both
clients and accounting staff, (which will be comprised only of our sole Director
and Officer Mr. Leon Golden for the first year of operations), will be able to conduct businessgrow
our fleet by approximately 450 cars.
The board will continually seek additional financing opportunities which it
believes are in an efficientthe best interests of the Company and effective manner.
ESTABLISH OUR OFFICE
Whenits shareholders. If we do
not generate sufficient cash from our website is operational, we plan to set up a new officeintended financing activities and acquire the
necessary equipment we need to begin operations. We believe that it will cost
$2,500 to $4,000 to set up and obtain the necessary equipment to begin
operations. Our sole officer and director will handle our administrative duties.
Office Requirements:
Computer $1,200
Furnishings $350
Filing $350
Print/Scan/Fax $400-$1,200
Phone $100
Misc $100-$800
COMMENCE MARKETING CAMPAIGN
Once our website is operational and an office is established,sales,
we will beginbe unable to marketoperate our services. Initially, our sole officer and director, Leon Golden, will
look for potential customers. We intend to use other marketing strategies, such
as web advertisements, direct mailing, and phone calls to potential customers.
Marketing is an ongoing matter that will continue during the life of our
operations. We also expect to get new clients from "word of mouth" advertising
where our potential clients from Mr. Golden's current clientele and new clients
will refer their colleagues to us. We will encourage such advertising by
rewarding person who refer new clients to us. We intend to spend from $3,000 to
$5,000 on marketing efforts during the first year.
11
COMMENCE OPERATIONS
During the initial 3 month marketing champagnebusiness at expanded levels which management
expects clients to
begin using the online services provided by Victoria Internet Services Inc.
Initially our sole Director and Officer, Leon Golden, will be responsible for
tax preparation and consultation.believes would benefit shareholders. If we are successful in our marketing campaignable to arrange debt or equity
financing it may become necessarybe on terms that are not beneficial to hire accounting staff to help withour shareholders. Any
financing that we do receive may dilute the workload. This
is not expected until after the initial 5 months following the closinginterests of our financing.
PROJECTED REVENUES
THE INFORMATION PROVIDED UNDER THIS HEADING IS FORWARD LOOKING INFORMATION AND
IS SUBJECT TO CHANGE.
We expect an average individual client to take approximately 30 minutes per
meeting while a small business client will take an average of 2 hours.
Associated revenues will be approximately $80 and $400, respectively. These
expected timeframes and associated revenues are based on Mr. Golden's own
experience as a CPA practicing in New York City.
Assuming an average work day of 8 hours Mr. Golden can see 16 individual clients
or 4 small business clients. Associated daily revenues are $1,280 and $1,600.
These numbers are pro-forma in nature and are meant to showcurrent
shareholders. Other than the capacity of the
Company without hiring additional employees and not a guarantee of future
revenues. Mr. Leon Golden, our sole Director and Officer has only committed 20
hours per week to Victoria Internet Services until such a time when demand
requires him to commit additional hours. BasedAVIS US$0.3m which is available on a 20 hour work week Associated
daily revenues would be $640revolving
basis and $800 respectively.
PROJECTED EXPENSES
The information provided under this heading is forward looking information and
is subject to change.
Using the same assumptions as discussed in "Pro-Forma Revenues" section the only
real variable costs will be the labor costs associated with Mr. Leon Golden's
time. Assuming a wage of $4,000.00 per month (or 180 per working day) gross
profits before deducting fixed costs, interests, taxes and amortization will be
approximately $1,100 and $1,420 based on individual and small business clients.
Wages are used to show actual economic costs of a typical employee however our
sole Director and Officer Mr. Leon Golden will only be accepting a salary when
the Company achieves profitability. As shown in the "Use of Proceeds" table
$10,000 in annual salary has been budgetedterm sheet for if $50,000 is raised and no
salary has been budgeted if $25,000 is raised.
SUMMARY
In summary, we are still in the process of raising funds from our most recent
offering and have not begun operations. We will not begin operations until we
have completed raising funds. Until we have reached a high and sustainable level
of clientele we do not believe our operations will be profitable. If we are
12
unable to attract new clients to pay for our services we may have to suspend or
cease operations. If we cannot generate sufficient revenues to continue
operations, we will suspend or cease operations. If we cease operations, we do
not know what we will do and$2.2m (final contracts outstanding), we do not have
any plansagreements 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 anything else.
Leon Golden,not believe that our presidentbusiness will be devoting approximately 20 hoursseasonal to any material extent.
CRITICAL ACCOUNTING POLICIES
Financial Reporting Release No. 60 of the SEC encourages all companies to
include a weekdiscussion 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 our
operations. Once we begin operations,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 are able to attract moreassumptions that affect the reported amounts of
assets and more
clients, Mr. Golden has agreed to commit more time as required. Because Mr.
Golden will only be devoting limited time to our operations, our operations may
be sporadicliabilities and occurdisclosure of contingent assets and liabilities at
times which are convenient to him. As a result,
operations may be periodically interrupted or suspended which could result in a
lackthe date of the financial statements and the reporting amounts of revenues and
a cessation of operations.
LIMITED OPERATING HISTORY; NEED FOR ADDITIONAL CAPITAL
There is no historical financial information about us upon which to base an
evaluation of our performance. We are a start-up company and have not generated
any substantial revenues. We cannot guarantee success of our business
operations. Our business is subject to risks inherent in the establishment of a
new business enterprise, including limited capital resources and possible cost
overruns due to price and cost increases in services and products.
We have no assurance that future financing will be available to us on acceptable
terms. If financing is not available on satisfactory terms, we may be unable to
continue, develop or expand our operations. Equity financing could result in
additional dilution to existing shareholders.
RESULTS OF OPERATIONS FOR THE PERIOD ENDING DECEMBER 31, 2010
We did not earn any revenues from the fiscal year ending December 31 2010. Our
net loss for the fiscal year ended December 31, 2010 was ($29,922) compared to a
net loss of ($12,513) in 2009 and a net loss of $(42,435)expenses during the period from
inception (October 9, 2009)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 December 31, 2010. General and administrative
expenses incurred during the fiscal year ended December 31, 2010 were generally
related to corporate overhead, financialestimated
useful lives of oil and administrative contracted services,
such as legalgas properties; income tax rate, income tax provision,
deferred tax assets and accounting,valuation allowance of deferred tax assets; foreign
currency exchange rate and developmental costs.
We have not attained profitable operations and are dependent upon obtaining
financing to continue with our business plan. For these reasons, there is
substantial doubtthe assumption that wethe Company will be able to continue as a
going concern. AsThose 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 our fiscal year end December 31, 2010, our currentleast 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 $68consummated 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 our
total liabilitiesdisclosure 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
$15,753,ascribed, for each of the periods for which resultedincome 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 working capital deficit of
($15,685). Asdaily 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 fiscalinception 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 December 31, 2010, currentFebruary 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 were comprisedare translated into US$ using the
exchange rate in effect at the balance sheet date, and results of $9,163 in loans from a shareholder and $6,590 in accrued
expenses.
Stockholders' equity decreased from $7,487 at December, 2009 to ($15,685) at
December 31, 2010.
We have not generated positive cash flows from operating activities. For the
fiscal year ended December 31, 2010, net cash flows used in operating activities
was ($29,322) .We have financed our operations primarily from either
advancements or the issuance of equity and debt instrumentsare
translated using an average rate for the fiscal year
ended December 31, 2010. Forperiod. 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 period from inception (October 9, 2009)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 13
December 31, 2010,section 260-10-45 of
the FASB Accounting Standards Codification. Basic net cash providedincome (loss) per common
share is computed by financing activities was $35,913
received from saledividing 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 advancespotentially outstanding
shares of common stock during the period to reflect the potential dilution that
could occur from Director. During the fiscal
year ending December 31, 2010 net cash flow provided by financing activities was
$8,750 received from loans from a shareholder and 6,750 from sale of equity.
RESULTS OF OPERATIONS FOR PERIOD ENDING DECEMBER 31, 2009
We earned $400 in revenues from our incorporation on October 9, 2009 to December
31, 2009. We incurred operating expenses in the amount of $12,913common shares issuable through contingent shares issuance
arrangement, stock options or warrants.
There were no potentially outstanding dilutive shares for the period
from our inception on October 9, 2009 through August 31, 2009. These operating
expenses were comprised of development and offering expenses.
We have not attained profitable operations and are dependent upon obtaining
financing to continue with our business plan. For these reasons, there is
substantial doubt that we will be able to continue as a going concern.year ended
February 28, 2013 or February 29, 2012.
19
OFF-BALANCE SHEET ARRANGEMENTS
We havedo not entered intohave 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 and would be consideredthat is material to investors. Certain officers and directors of the Company have
provided personal guarantees to our various lenders as required for the
extension of credit to the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKRISK.
Not required.applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATADATA.
Our audited financial statements together withfor the Reportyears ended February 28, 2013 and February 29,
2012, and the reports thereon of Silberstein Ungar, PLLC, independent certified public accountants, are included elsewhere in Item 15 as F-1 through F-10.following
the signature page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
We have had no disagreements on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures with
our accountants for the year ended December 31, 2010 or any interim period.
We have not had any other changes in nor have we had any disagreements, whether
or not resolved, with our accountants on accounting and financial disclosures
during our two recent fiscal years or any later interim period.DISCLOSURE.
None.
ITEM 9A.9A(T). CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
(ITEM 9A(T))
a) EvaluationWe 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 Disclosure Controlsthe design and Procedures
Our Chief Executive Officeroperation of
our disclosure controls and Chief Financial Officer, evaluatedprocedures 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 as of the end of the
period covered by this report. Based on that evaluation, Chief Executive Officer
14
and Chief Financial Officer concluded thatwas completed, our disclosure controls and
procedures as of the end of the period covered by this report were not effective such thatto satisfy the information required to be disclosed by us in reports filed underobjectives for which they are
intended.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Section 404 of the Securities ExchangeSarbanes-Oxley Act of 1934 is (i) recorded, processed, summarized2002 requires that management document
and reported within the time periods specified in the SEC's rules and forms and (ii)
accumulated and communicated to the Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding disclosure. A
controls system cannot provide absolute assurance, however, that the objectives
of the controls system are met, and no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within a company have been detected.
Our Chief Executive Officer and Chief Financial Officer are responsible for
establishing and maintaining adequate internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance of achieving
their control objectives. Furthermore, smaller reporting companies face
additional limitations. Smaller reporting companies employ fewer individuals and
find it difficult to properly segregate duties. Often, one or two individuals
control every aspect of the Company's operation and are in a position to
override any system of internal control. Additionally, smaller reporting
companies tend to utilize general accounting software packages that lack a
rigorous set of software controls.
Our Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness oftest the Company's internal control over financial reporting as of
December 31, 2010. In makingand include in
this Annual Report on Form 10-K a report on management's assessment our Chief Executive Officer and
Chief Financial Officer used the criteria set forth by the Committee of
Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control
-- Integrated Framework. Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer, concluded that, aseffectiveness of December 31, 2010, our
internal control over financial reporting were not effective.
b) Changes in Internal Control over Financial Reporting.
During the Quarter ended December 31, 2010, there was no change in our internal
control over financial reporting (as such term is defined in Rule 13a-15(f)
under the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, 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
None.
15INFORMATION.
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 certain information with respect tothe name, age and position of each of our
directors and executive officers and key employees.officers.
Name Age Position
---- --- --------
Leon Golden 38Graeme Thomas Hardie 68 Chairman of the Board, Director (since
November 2011)
John Clifford Storey 51 President and CEO Secretary, Treasurer,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 Director
Leon Golden - PRESIDENT, CHIEF EXECUTIVE OFFICER, SECRETARY, TREASURER, CHIEF
FINANCIAL OFFICER, PRINCIPAL ACCOUNTING OFFICER AND OUR SOLE DIRECTOR.
Since October 9, 2009, Mr. Goldenrecent
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 ourChairman 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 Chief Executive
Officer, Secretary, Treasurer, Chief Financial Officer, Principal Accounting
Officer and soleCEO 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 our Boardthe Institute of Directors. ForBankers
in South Africa, has a Master of Business Administration and Institute of
Marketing Management Diploma
BRUCE DUNNINGTON: CFO
Bruce Dunnington has held the past three years, Mr.
Golden has had his own CPA practice in New York City, and priorposition of CFO of Earn-A-Car Inc. since December
of 2011. Prior to that, he
worked asMr. Dunnington was the Managing Director of Automated
Outsourcing Services Limited (South African company) a public accountant for Brian L. Friendman CPA PC, a New York City CPA
firm for fifteen years. Mr. Golden serves onlarge, high volume
administrator.
Bruce Dunnington holds the boardfollowing professional certifications; South African
Chartered Accountant and Member of directorsSouth Africa Institute of Sunrise
Energy Resources Inc. (OTCBB:SEYR and Victoria Industries Inc. (OTCBB-VIIN). Mr.
Golden holds a B.S. degree in Accounting from Brooklyn College.
Mr. Golden has been chosen to serve as our director based on his experience as a
CPA as well as his business ownership experience in the industry of accounting
as well as his public company experience from positions currently held.
Mr. Golden devotes approximately 20 hours per week to our operations, and will
devote additional time as required. Mr. Leon Golden is the Chief Financial
Officer of Victoria Industries, Inc. (OTCBB: VIIN) and an independent director
of Sunrise Energy Resources, Inc. (OTCBB: SEYR)
During the past five years, Mr. Golden has not been the subjectChartered
Accountants, Fellow member of the following
events:
1. Any bankruptcy petition filed by or against any businessChartered Institute of which Mr.
Golden was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time.
2. Any conviction in a criminal proceeding or being subject to a pending
criminal proceeding.
3. An order, judgment, or decree, not subsequently reversed, suspended or
vacated, or any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting Mr. Golden's
involvement in any type of business, securities or banking activities.
4. Found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Future Trading
Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended or vacated.
16Management Accountants
22
COMPENSATION OF DIRECTORS
We do not pay ourThe Board of Directors any fees in connection withmay compensate directors for their roleservices as memberssuch. The
Board of our Board. Directors are not paidmay also provide for meetings attended at our corporate
headquarters or for telephonic meetings. Our Directors are reimbursed forthe payment of all travel and
out-of-pocket expenses in connection with Directors' attendance at Board
meetings. Each board member serves for a one yearone-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 reimbursesmay reimburse
all Directors for their expenses in connection with their activities as
directors of the Company.
Directors of the Company who are also employees of the Company will
not receive additional compensation for their services as directors.
FAMILY RELATIONSHIPS
There are no family relationships on the Board of Directors.amongst our management and directors, except
that Graeme Hardie is John Storey's uncle.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
ToOur directors, executive officers and control persons have not been involved in
any of the best of our knowledge,following events during the past five years, none of the following
occurred with respect to a present or former director or executive officer of
the Company: (1)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;
(2)* any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3)* being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of any competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; and (4)or
* being found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the commodities
futures trading commissionCommodity Futures
Trading Commission to have violated a Federalfederal 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
SUMMARY COMPENSATION TABLECOMPENSATION.
The following table sets forth for the fiscal year ended December 31, 2010,Summary Compensation Table shows the compensation awarded to, paid to or
earned by our Chief Executive Officer and our Chief Technology Officer whose total compensation was zero.
17
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
Change in
Pension
Value and
Non-Equity Nonqualified
Name and Incentive Deferred
Name andPrincipal Stock Option Plan Compensation All Other
Principal Salary Bonus Awards Awards Compensation Earnings Compensation Total
Position Year ($Salary($) ($Bonus($) ($Awards($) ($Awards($) ($Compensation($) ($Earnings($) ($Compensation($) ($Totals($)
-------- ---- --- --- --- --- --- --- --- ------------ -------- --------- --------- --------------- ----------- --------------- ---------
Leon Golden 2010 -- -- -- -- -- -- -- --John Storey 2012 [1] 6,787 0 0 0 0 0 6,787
President & CEO
Secretary,
Treasurer,Bruce Dunnington 2012 [1] 6,787 0 0 0 0 0 6,787
CFO
and Director
----------
[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.
18
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 MATTERSMATTERS.
The following table sets forth certain information regarding beneficial ownership of theour
common stock as of December 31, 2010,February 29, 2012 by (i) eachany person who is
known by the Company to own beneficiallyor group with more than
5% of the any classesclass of outstanding Stock,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, (iii) each officerOffice 1 The
Falls Centre, Corner Great North and (iv) all directorsWebb, Northmead, Benoni 1522, Union of
South Africa. Except as indicated in the footnotes to this table and executive officers ofsubject to
applicable community property laws, the Company as a group.
The numberpersons named in the table to our
knowledge have sole voting and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 and 13d-5 of the Exchange Act, and the information is
not necessarily indicative of beneficial ownership for any other purpose. We
believe that each individual or entity named has sole investment and voting power with respect to theall shares of
securities indicatedshown as beneficially owned by them,
subject to community property laws, where applicable, except where otherwise
noted. Unless otherwise stated, the addressthem..
26
Name and Address Amount and Nature of each person is 2 East Congress
St., Suite 900 Tucson, AZ 85701.
Name, Title and Percent
of Class
Address of Amount of --------------------
Beneficial Owner Office Beneficial Before After
Title OfOwner of Class
------------------- ------ ---------------- --------
John Storey Director, CEO, 0 0%
President
Graeme Hardie Chairman of Shares Ownership Offering Offering
-------------- --------- --------- -------- --------
Common Stock Leon Golden 4,000,000 100% 84.5%
President, CEO,78,750,000(1) 70.0% (1)
210 Rutgers Place the Board and
Nutley, New Jersey 07110 a Director,
Secretary,
Treasurer
CFO,Bruce Dunnington COO 0 0%
Depassez Investments Ltd -- 78,750,000 (1) 70.0% (1)
All Officers and DirectorDirectors
as a group (3 Persons) 78,750,000 (1) 70.0% (1)
----------
(1) Based on 4,675,000 issuedDepassez Investments Ltd is a Seychelles corporation and outstandingholds these
shares. Mr. Hardie owns all of the shares of common stock.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
There have been no material transactions duringINDEPENDENCE.
During the past two years between us
and any officer, director or any stockholder owning greater than 5%year ended, February 29, 2012, we acquired our present business from
Graeme Hardie for 78,500,000 shares of our outstanding shares, norcommon 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 immediate family members.share ownership or employment.
ITEM 14. PRINCIPAL ACCOUNTINGACCOUNTANT FEES AND SERVICESSERVICES.
AUDIT FEES
The following table sets forthaggregate fees related to services performedbilled by Silberstein
Ungar, PLLC in 2010 and Fees related to services performed by Silberstein Ungar,
PLLC in 2009 were as follows:
19
2010 2009
Silberstein Silberstein
Ungar, Ungar,
PLLC PLLC
------- -------
Audit Fees $ 9,450 $ 4,250
Audit-Related Fees (2) 0 0
Tax Fees (3) 0 0
All Other Fees (4) 0 0
------- -------
Total $12,718 $ 4,250
======= =======
The Board of Directors has reviewed and discussed with the Company's management
and independent registered public accounting firm the audited financial
statements of the Company containedauditors for professional services
rendered in the Company's Annual Report on Form 10-K
for the Company's 2008 fiscal year. The Board has also discussedconnection with the
auditors the matters required to be discussed pursuant to SAS No. 114
(Codification of Statements on Auditing Standards, AU Section 380), which
includes, among other items, matters related to the conduct of the audit of the Company's annual financial
statements.
The Board has receivedstatements for the year ended February 28, 2013 in the Company's Form 10-K and
reviewedreviews of the written disclosuresfinancial statements included in the Company's Form 10-Q or
services that are normally provided by the accountant in connection with
statutory and the letter from
theregulatory filings or engagements was US$37,425 to Silberstein
Ungar, PLLC, our current independent registered public accounting firm required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
and has discussed with its auditors its independence from the Company.firm.
27
TAX COMPLIANCE SERVICES
The Board
has considered whether the provision of services other than audit services is
compatible with maintaining auditor independence.
Based on the review and discussions referred to above, the Board approved the
inclusion of the audited financial statements be included in the Company's
Annual Report on Form 10-K for its 2010 fiscal year for filing with the SEC.
PRE-APPROVAL POLICIES
The Board's policy is now to pre-approve all audit services and all permitted
non-audit services (including theaggregate fees and terms thereof) to be providedbilled by the Company's independent registered public accounting firm;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 however,
pre-approval requirements for non-audit servicesthe policies and
procedures are not required if alldetailed as to the particular service, the audit
committee is informed of each service, and such services (1)policies and
procedures do not aggregateinclude delegation of the audit committee's
responsibilities to more than five percentmanagement.
We do not have an audit committee, however our board of total revenuesdirectors 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 Company to its accountant in the fiscal year when services are provided;
(2) were not recognized as non-audit services at the time of the engagement; and
(3) are promptly brought to the attention of the Board and approved prior to the
completion of the audit.
The Board pre-approved all fees described above.
20
Independent Auditor
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULESSTATEMENT SCHEDULES.
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation, (1)incorporated by reference to like
numbered exhibit filed with the Registrant's registration statement
on Form S-1 filed March 11, 2010.
3.2 By-laws (1)
23.1 ConsentArticles of auditors.(2)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)/15d- 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 and Chief Financial Officer (2)
31.2 Rule 13a-14(a)/15d-14(a)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 Executive Officer
and Chief Financial Officer (2)
32.1pursuant to 18 U.S.C.
Section 1350, Certificationas Adopted Pursuant to Section 906 of the
Chief Executive Officer and Chief
Financial Officer (2)Sarbanes-Oxley Act of 2002
101* Interactive Data Files pursuant to Rule 405 of Regulation S-T.
----------
(1) Incorporated* To be provided by referenceamendment
29
SIGNATURES
Pursuant to the Form. S-1 filed with the Securities and
Exchange Commission on October 14, 2009.
(2) Filed herein.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1933,1934, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form 10-K and authorizedduly caused this registration
statementreport to be signed on its behalf by the
undersigned, on the 29st day of
March 2011.thereunto duly authorized.
EARN-A-CAR, INC.
June 13, 2013 By: /s/ Leon Golden
------------------------------------
Leon Golden President, CEO,
Secretary, Treasurer, CFO, Director
In accordance withJohn 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 1933,1934, this registration statement wasreport
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates stated:
Signatures Title Date
---------- ----- ----
By: /s/ Leon Golden President, Chief Executive Officer, Secretary, March 29, 2011
------------------------------- Treasurer, Chief Financial Officer, Director
Leon Golden
21indicated.
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
VICTORIA INTERNET SERVICES CORP
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 2010EARN-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
of
Victoria Internet Services,Earn-A-Car, Inc.
Brooklyn, New YorkBenoni, South Africa
We have audited the accompanying balance sheets of Victoria Internet Services,
Inc. (the "Company")Earn-A-Car, Inc as of
December 31, 2010February 28, 2013 and 2009,February 29, 2012, and the related statements of
operations, other comprehensive income (loss), stockholders' equity, (deficit), and cash
flows for the periods ended December 31, 2010 and 2009 and the period from October 9, 2009
(Date of Inception) through December 31, 2010.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 also includes examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements,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 Victoria Internet Services,Earn-A-Car, Inc. as of December 31, 2010February
28, 2013 and 2009February 29, 2012, and the results of its operations and its
cash flows
for the periodsyears then ended, and the period from October 9, 2009 (Date
of Inception) through December 31, 2010 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has limited working capital, has received
limited revenue from sales of products or services, and has incurred losses from
operations. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans with regard to these matters are
described in Note 2. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
-----------------------------------------------------------------------------
Silberstein Ungar, PLLC
Bingham Farms, Michigan
March 17, 2011June 12, 2013
F-1
VICTORIA INTERNET SERVICES,EARN-A-CAR, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 2010FEBRUARY 28, 2013 AND 2009FEBRUARY 29, 2012
December 31, December 31,
2010 2009
-------- --------February 28, 2013 February 29, 2012
----------------- -----------------
(Restated)
ASSETS
Current Assets
Cash and cash equivalents $ 68682,096 $ 13,900
-------- --------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 $ 686,058,626 $ 13,900
======== ========3,358,260
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
LiabilitiesLIABILITIES
Current Liabilities
Accounts payable $ 510,994 $ 292,447
Accrued expenses $ 6,590 $ 6,000
Loan51,154 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 shareholder 9,163 413
-------- --------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 15,753 6,413
-------- --------5,244,769 2,883,809
----------- -----------
Stockholders' Equity
(Deficit)
Common stock, $0.0000001 par value, $0.0000001; 100,000,000250,000,000 shares authorized,
4,675,000 and 4,000,000112,250,000 shares issued and outstanding as of December 31, 2010 and 2009, respectively 1 111 11
Additional paid in capital 26,749 19,999
Deficit accumulated during the development stage (42,435) (12,513)
-------- --------5,423 5,423
Accumulated other comprehensive (loss) (214,695) (29,542)
Retained earnings 1,023,118 498,559
----------- -----------
Total Stockholders' Equity (Deficit) (15,685) 7,487
-------- --------
Total Liabilities and Stockholders' Equity (Deficit)813,857 474,451
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 686,058,626 $ 13,900
======== ========3,358,260
=========== ===========
See accompanying notes to financial statements.
F-2
VICTORIA INTERNET SERVICES,EARN-A-CAR, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE PERIODSYEARS ENDED DECEMBER 31, 2010FEBRUARY 28, 2013 AND 2009
PERIOD FROM OCTOBER 9, 2009 (INCEPTION) TO DECEMBER 31, 2010FEBRUARY 29, 2012
For the period
from October 9, 2009
YearFor the
year ended Periodyear ended
(Inception) to
December 31, December 31, December 31,
2010 2009 2010
---------- ---------- ----------February 28, 2013 February 29, 2012
----------------- -----------------
(Restated)
REVENUESRevenues
Vehicle rentals $ 03,478,025 $ 400 $ 400
---------- ---------- ----------
OPERATING EXPENSES
Professional fees 16,362 6,000 22,362
Consulting fees 14,000 5,000 19,000
Web Development (1,500) 1,500 0
Incorporation costs 0 413 413
General2,186,705
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 1,060 0 1,060
---------- ---------- ----------
TOTAL OPERATING EXPENSES 29,922 12,913 42,835
---------- ---------- ----------
NET LOSS FROM OPERATIONS (29,922) (12,513) (42,435)
PROVISION FOR INCOME TAXES949,260 537,333
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
0
---------- ---------- ----------
NET LOSS------------ ------------
Net Income $ (29,922)524,559 $ (12,513)60,792
============ ============
Earnings per Share $ (42,435)
========== ========== ==========
NET LOSS PER SHARE: BASIC AND DILUTED0.005 $ (0.01) $ (0.01)
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
BASIC AND DILUTED 4,195,411 1,831,325
========== ==========0.00
============ ============
Weighted Average Common Shares Outstanding 112,250,000 41,435,997
============ ============
See accompanying notes to financial statements.
F-3
VICTORIA INTERNET SERVICES,EARN-A-CAR, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTSTATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
PERIOD FROM OCTOBER 9, 2009 (INCEPTION) TO DECEMBER 31, 2010OTHER COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED FEBRUARY 28, 2013 AND FEBRUARY 29, 2012
Deficit
Accumulated
Common stock Additional DuringFor the ----------------------- Paid-in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----For the
year ended year ended
February 28, 2013 February 29, 2012
----------------- -----------------
(Restated)
Inception, October 9, 2009 --Net Income $ --524,559 $ -- $ -- $ --
Shares issued for cash at
$0.005 per share 4,000,000 1 19,999 -- 20,000
Net loss for the period
ended December 31, 2009 -- -- -- (12,513) (12,513)60,792
--------- ---------
Foreign Currency Translation
Change in cumulative translation adjustment (185,153) (23,750)
--------- ---------
---------
Balance, December 31, 2009 4,000,000 1 19,999 (12,513) 7,487
Shares issued for cash at
$0.01 per share 675,000 0 6,750 -- 6,750
Net loss for the year
ended December 31, 2010 -- -- -- (29,922) (29,922)
--------- --------- --------- --------- ---------
Balance, December 31, 2010 4,675,000Total $(185,153) $ 1 $ 26,749 $ (42,435) $ (15,685)
========= ========= =========(23,750)
========= =========
See accompanying notes to financial statements.
F-4
VICTORIA INTERNET SERVICES,EARN-A-CAR, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTSSTATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31, 2010 AND 2009
PERIOD FROM OCTOBER 9, 2009 (INCEPTION) TO DECEMBER 31, 2010STOCKHOLDERS' EQUITY
AS OF FEBRUARY 28, 2013
Period from
October 9, 2009
Year ended Period ended (Inception) to
December 31, December 31, December 31,
2010 2009 2010Accumulated
Common Stock Additional Other
------------------- Paid-in Comprehensive Retained
Shares Amount Capital Loss Earnings Total
------ ------ ------- ---- -------- -------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
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 lossincome for the period $(29,922) $(12,513) $(42,435)
Changes in assets and liabilities:
Increase in accrued expenses 590 6,000 6,590year 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
------------ ------- -------- --------
CASH FLOWS USED IN OPERATING ACTIVITIES (29,332) (6,513) (35,845)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 6,750 20,000 26,750
Loan from shareholder 8,750 413 9,163
-------- -------- --------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 15,500 20,413 35,913
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (13,832) 13,900 68
Cash, beginning of period 13,900 0 0
-------- -------- --------
CASH, END OF PERIOD---------- ----------- ----------
Balance, February 28, 2013 112,250,000 $ 6811 $ 13,9005,423 $ 68(214,695) $ 1,023,118 $ 813,857
============ ======= ======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 0 $ 0 $ 0
======== ======== ========
Income taxes paid $ 0 $ 0 $ 0
======== ======== ================== =========== ==========
See accompanying notes to financial statements.
F-5
VICTORIA INTERNET SERVICES,EARN-A-CAR, INC.
(A DEVELOPMENT STAGE COMPANY)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 THE FINANCIAL STATEMENTS
DECEMBER 31, 2010
NOTE 1FEBRUARY 28, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - ORGANIZATION AND NATURE OF BUSINESSEarn-A-Car, Inc. (formerly Victoria Internet Services,
Inc.) was incorporated in the State of Nevada on October 9, 2009. We intendThe company
was organized to commence operations in the business ofoperate as an online tax preparation service in the North
American market. To date,On December 7, 2011, prior to commencing those operations, the
only operations wecompany 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 are the development of a business plan and the registration of the domaindaily
rental of vehicles to business and leisure customers through company-owned
stores in the country of South Africa. On July 18, 2011, its name (www.victoriainternetservices.com)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 our new websitethose loans. All of the assets and
provided
services for one client.
NOTE 2 - GOING CONCERN
Theliabilities of this entity are consolidated and included in the presented
financial statements have been prepared on a going concern basis which
assumesaccording to generally accepted accounting principles of
the Company will be able to realize its assets and discharge its
liabilities in the normal courseUnited States.
Basis of business for the foreseeable future. The
Company has incurred losses since inception resulting in an accumulated deficit
of $42,435 as of December 31, 2010 and further losses are anticipated in the
development of its business raising substantial doubt about the Company's
ability to continue as a going concern. The ability to continue as a going
concern is dependent upon the Company generating profitable operations in the
future and/or to obtain the necessary financing to meet its obligations and
repay its liabilities arising from normal business operations when they come
due. Management intends to finance operating costs over the next twelve months
with existing cash on hand and loans from directors and or private placement of
common stock.
NOTE 3 - SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES
Development Stage CompanyPresentation- The accompanying financial statements have been prepared
in accordance with generally accepted accounting principles related to development stage companies.
A development-stage company is one in which planned principal operations have
not commenced or if its operations have commenced, there has been no significant
revenues there from.
Basis of Presentation
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States
of America and are presented in US dollars.
Accounting BasisU.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 useshas selected a February 28 year end.
Estimates - The preparation of the accrual basis of accounting andCompany's consolidated financial statements
in conformity with accounting principles generally accepted in the United States
of America ("GAAP" accounting). The
Company has adopted a December 31 fiscal year end.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities
of three months or less to be cash equivalents. The Company had $68 and $13,900
of cash as of December 31, 2010 and 2009, respectively.
F-6
VICTORIA INTERNET SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2010
NOTE 3 - SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents and
amounts due to shareholder. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or interest rates that
approximate prevailing market rates unless otherwise disclosed in these
financial statements.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset
and liability method, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the currently enacted tax rates and laws.
A valuation allowance is provided for the amount of deferred tax assets that,
based on available evidence, are not expected to be realized.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities atdisclosures in the date theconsolidated financial statements and the
reported amount of revenues and expenses during the reporting period.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 Company recognizesupfront
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 when products are fully delivered or servicesin 2013. The 2012 numbers have been provided and collection is reasonably assured.restated to reflect the
new policy.
Advertising Costs The Company's policy regarding advertising is to expense advertising when- Advertising costs are primarily expensed as incurred. TheDuring
the years ended February 28, 2013 and February 29, 2012, the Company incurred
advertising expense of $0$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 periods
ended December 31, 2010period. Diluted EPS is based on the combined weighted average number
of common shares and 2009.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
Topic 718. To date, the Company has not adopted a stock
option plan and has not granted any stock options.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company's net loss
applicable to common shareholders by the weighted average number of common
shares during the period. Diluted earnings per share is calculated by dividing
the Company's net income available to common shareholders by the diluted
weighted average number of shares outstanding during the year.New Accounting Standards - The diluted
weighted average number of shares outstanding is the basic weighted number of
shares adjusted for any potentially dilutive debt or equity. There are no such
common stock equivalents outstanding as of December 31, 2010.
F-7
VICTORIA INTERNET SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2010
NOTE 3 - SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income
The Company has which established standards for reporting and display of
comprehensive income, its components and accumulated balances. When applicable,
the Company would disclose this information on its Statement of Stockholders'
Equity. Comprehensive income comprises equity except those resulting from
investments by owners and distributions to owners. The Company has not had any
significant transactions that are required to be reported in other comprehensive
income.
Recent Accounting Pronouncements
Victoria Internet Services 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.
NOTE 4 - ACCRUED EXPENSES
Accrued expenses at December 31, 2010F-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 2009 consistedequipment consist of amounts owed to the Company's outside independent auditorsfollowing:
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 lawyers for services rendered for
periods reported on in these financial statementsequipment, net $ 24,958 $ 14,242
======== ========
For the years ended 2013 and a consultant for 2010
services.
NOTE 5 - LOAN FROM SHAREHOLDER
On October 9, 2009, the sole Director and President Leon Golden loaned2012, the Company $413. Therecorded 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 unsecured, non-interest bearing,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 due on demand.
The director loaned an additional $8,750 during the year ended December 31,
2010. The new loans are also unsecured, non-interest bearing and due on demand.
The balance due to the shareholder was $9,163 and $413 as of December 31, 2010
and 2009, respectively.
NOTE 6 - COMMON STOCK
The authorized capitalother obligations consist of the Company is 100,000,000 common shares with a par
value of $ 0.0000001 per share.
In November 2009, the Company issued 4,000,000 shares of common stock at a price
of $0.005 per share for total cash proceeds of $20,000.
During the year ended December 31, 2010, the Company issued 675,000 shares of
common stock for cash at $0.01 per share for total cash proceeds of $6,750.
There were 4,675,000 shares of common stock issued and outstanding as of
December 31, 2010.
F-8following:
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
VICTORIA INTERNET SERVICES,EARN-A-CAR, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2010
NOTE 7 - COMMITMENTSFEBRUARY 28, 2013
5. DEBT AND CONTINGENCIESOTHER 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 neither owns nor leases any real or personal property. An officer
has provided office services without charge. There is no obligation for the
officer to continue this arrangement. Such costs are immaterial to the financial
statements and accordingly are not reflected herein. The officers and directors
are involved in other business activities and most likely will become involved
in other business activitiesany federal or state income taxes in the
future.
NOTE 8 - INCOME TAXES
AsUnited States. Further, no provision has been made for taxes in South Africa,
which has a corporate income tax rate of December 31, 2010,28%, 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 operating loss carry forwardslosses of approximately $42,435$524,559 and $379,175
available in South Africa that maycan be availablecarried forward to reduceoffset future years'taxable
income. Due to the uncertainty of future taxable income, through 2030. Future tax benefits which may arise as a result of these
losses have not been recognized in these financial statements, as their
realization is determined not likely to occur and accordingly, the Company has
recorded a valuation allowance forof 100% of the deferred tax asset, relatingso 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 these tax
loss carry-forwards.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 provision for Federal income tax consistsCompany 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 following:
December 31, December 31,
2010 2009leases 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
-------- --------
Federal income tax benefit attributable to:
Current OperationsOperating leases:
Premises $ 10,17352,526 $ 4,254
Less: valuation allowance (10,173) (4,254)13,872
-------- --------
Net provision$ 52,526 $ 13,872
======== ========
Future minimum rentals and fees under non-cancelable operating leases for Federal income taxesthe 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
======== ========
The cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount is as follows:
December 31, December 31,
2010 2009
-------- --------
Deferred tax asset attributable to:
Net operating loss carryover $ 14,427 $ 4,254
Less: valuation allowance (14,427) (4,254)
-------- --------
Net deferred tax asset $ 0 $ 0
======== ========
NOTE 9 -F-13
EARN-A-CAR, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2013
10. SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) theThe Company has analyzed its operations subsequent to December 31, 2010 to March 17, 2011,February 28, 2013 through
the date these financial statements were issued, and has determined that it does
not have any material subsequent events to disclosedisclose.
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 these financial statements.
F-9
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-14