10-Q 1 g7103.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Mark One [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 2013 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File No. 333-165391 EARN-A-CAR, INC. (Name of small business issuer in its charter) Nevada (State or other jurisdiction of incorporation or organization) Office 1 The Falls Centre, Corner Great North and Webb, Northmead, Benoni 1522, South Africa (Address of principal executive offices) +27 011-425-1666 (Issuer's telephone number) Securities registered pursuant to Name of each exchange on Section 12(b) of the Act: which registered: ------------------------- ----------------- None NA Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.0000001 Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ] Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] Applicable Only to Issuers Involved in Bankruptcy Proceedings During the Preceding Five Years. N/A Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] Applicable Only to Corporate Registrants The number of shares outstanding of each of the issuer's common stock, as of August 31, 2013 was 112,250,000 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EARN-A-CAR, INC. CONSOLIDATED BALANCE SHEETS (unaudited) AUGUST 31, 2013 AND FEBRUARY 28, 2013

~~May~~August 31, ~~2013~~ February 28, 2013 2013 ------------ ------------~~-----~~ ASSETS Current Assets Cash and cash equivalents $ ~~365~~219,~~147~~216 $ 682,096 Receivables, net ~~187~~337,~~672~~923 418,707 ------------ ------------ Total Current Assets ~~552~~557,~~819~~139 1,100,803 ------------ ------------ Property and equipment, net 24,~~460~~265 24,958 ------------ ------------ Revenue-earning vehicles, net 4,~~508~~607,~~883~~122 4,858,545 ------------ ------------ Other Assets Loan receivable 6,~~065~~343 7,037 Deferred Costs ~~121~~95,~~409~~940 67,283 ------------ ------------ Total Other Assets ~~127~~102,~~474~~283 74,320 ------------ ------------ TOTAL ASSETS $ 5,~~213~~290,~~636~~809 $ 6,058,626 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Current Liabilities Accounts payable $ ~~277~~334,~~198~~103 $ 510,994 Accrued expenses 2521,~~048~~592 51,154 Deferred Income ~~529~~528,~~271~~553 569,876 Current portion of leases payable ~~473~~624,~~799~~010 714,948 Current portion of loans payable ~~842~~808,~~414~~936 731,271 ------------ ------------ Total Current Liabilities 2,~~147~~317,~~730~~194 2,578,243 ------------ ------------ Long-term Debt Loans from shareholders 0 0 Leases payable ~~914~~1,~~605~~200,773 634,885 Loans payable 1,~~394~~072,~~787~~889 2,031,641 ------------ ------------ Total Long-term Debt 2,~~309~~273,~~392~~662 2,666,526 ------------ ------------ Total Liabilities 4,~~457~~590,~~122~~856 5,244,769 ------------ ------------ Stockholders' Equity Common stock, $0.0000001 par value, 250,000,000 shares authorized, 112,250,000 shares issued and outstanding 11 11 Additional paid in capital 5,423 5,423 Accumulated other comprehensive (loss) (~~312~~307,~~246~~794) (214,695) Retained earnings 1,~~063~~002,~~326~~313 1,023,118 ------------ ------------ Total Stockholders' Equity ~~756~~699,~~514~~953 813,857 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,~~213~~290,~~636~~809 $ 6,058,626 ============ ============

See accompanying notes to financial statements. 2 EARN-A-CAR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2013 AND AUGUST 31, 2012

For the three For the ~~Three~~three For the six For the six months ~~Three~~ended months ended months ended ~~May~~months ended August 31, ~~2013~~August ~~May~~31, August 31, August 31, 2013 2012 2013 2012 ------------ ------------ ------------ ------------ (Restated) (Restated) Revenues Vehicle rentals $ ~~886~~745,~~607~~854 $ ~~624~~965,~~797~~758 $ 1,632,461 $ 1,590,553 Other 280,~~185~~151 1,~~936~~452 82,336 3,388 ------------ ------------ ------------ ------------ Total Revenues ~~888~~826,~~792~~005 ~~626~~967,~~733~~210 1,714,797 1,593,941 ------------ ------------ ------------ ------------ Operating Expenses Direct vehicle and operating ~~138~~361,~~582~~426 ~~247~~311,~~334~~340 500,008 427,939 Vehicle depreciation ~~210~~and lease charges 199,~~502~~559 ~~174~~205,~~924~~753 410,061 380,677 Selling, general and administrative ~~367~~193,~~746~~721 ~~110~~126,~~350~~126 561,467 367,210 Interest expense ~~131~~93,~~754~~544 64109,~~226~~719 225,298 173,945 ------------ ------------ ------------ ------------ Total Operating Expenses 848,~~584~~250 ~~596~~752,938 1,696,834 1,349,771 ------------ ------------ ------------ ------------ Operating Income 40(Loss) (22,~~208~~245) 29214,~~899~~272 17,963 244,170 Other Income (Expense) Interest income 03,883 018,888 3,883 18,888 Gain on asset disposal (42,651) 847 (42,651) 847 ------------ ------------ ------------ ------------ Net Income (Loss) Before Provision for Income Taxes 40(61,~~208~~013) 29234,~~899~~007 (20,805) 263,905 Provision for Income Taxes 0 0 0 0 ------------ ------------ ------------ ------------ Net Income (Loss) $ 40(61,~~208~~013) $ 29234,~~899~~007 $ (20,805) $ 263,905 ============ ============ ============ ============ Earnings (Loss) per Share $ (0.00) $0,00 $ (0.000) $ 0.00 ============ ============ ============ ============ Weighted Average Common Shares Outstanding 112,250,000 112,250,000 112,250,000 112,250,000 ============ ============ ============ ============

See accompanying notes to financial statements. 3 EARN-A-CAR, INC. CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) (unaudited) FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2013 AND AUGUST 31, 2012

See accompanying notes to financial statements. 4 EARN-A-CAR, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (unaudited) AS OF AUGUST 31, 2013

Accumulated Common Stock Additional Other ------------------- Paid-in Comprehensive Retained Shares Amount Capital Loss Earnings Total ------ ------ ------- ---- -------- ----- Balance, ~~February~~March 281, 2011 500 $ 60 $ -- $ (5,792) $ 437,767 $ 432,035 Loss on currency translation -- -- -- (23,750) -- (23,750) Reorganization adjustment 233,749,500 (35) 5,409 -- -- 5,374 Cancellation of stock (121,500,000) (14) 14 -- -- -- Net income -- -- -- -- 60,792 60,792 ------------ ------- -------- ---------- ----------- ---------- Balance, February 29, 2012 ~~(Restated)~~ 112,250,000 $ 11 $ 5,423 $ (29,542) $ 498,559 $ 474,451 Gain (Loss) on currency translation -- -- -- (185,153) -- (185,153) Net income -- -- -- -- 524,559 524,559 ------------ ------- -------- ---------- ----------- ---------- Balance, February 28, 2013 112,250,000 11 5,423 (214,695) 1,023,118 813,857 Gain (Loss) on currency translation -- -- -- (9793,~~551~~099) -- (9793,~~551~~099) Net ~~income~~loss -- -- -- -- 40(20,~~208~~805) 40(20,~~208~~805) ------------ ------- -------- ---------- ----------- ---------- Balance, ~~May~~August 31, 2013 112,250,000 $ 11 $ 5,423 $ (~~312~~307,~~246~~794) $ 1,~~063~~002,~~236~~313 $ ~~756~~699,~~514~~953 ============ ======= ======== ========== =========== ==========

See accompanying notes to financial statements. 5 EARN-A-CAR, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) FOR THE SIX MONTHS ENDED AUGUST 31, 2013 AND AUGUST 31, 2012

For the six For the ~~Three~~six months ~~Three~~ended months ended ~~ended~~August ~~May~~ 31, ~~2013~~August ~~May~~ 31, 2013 2012 ------------ ------------ (Restated) CASH FLOWS FROM OPERATING ACTIVITIES Net income for the period $ 40(20,~~208~~805) $ 29263,~~899~~905 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation ~~210~~410,~~502~~061 ~~174~~380,~~924~~677 Net gains (losses) from disposition of revenue-earning vehicles 042,651 0(847) Change in Assets and Liabilities: (Increase) decrease in receivables ~~231~~80,~~035~~784 76(89,~~624~~263) (Increase) decrease in deferred costs (5428,~~126~~657) ~~846~~(29,557) Increase (decrease) in accounts payables (~~233~~176,~~796~~891) ~~(90~~20,~~061)~~690 Increase (decrease) in accrued expenses (2629,~~106~~562) 9(2,~~010~~724) Increase (decrease) in deferred income (4041,~~605~~323) (4120,~~595)~~996 ------------ ------------ ~~NET~~Net ~~CASH~~Cash ~~PROVIDED~~Provided BYby ~~OPERATING~~Operating ~~ACTIVITIES~~Activities ~~127~~236,~~112~~258 ~~196~~663,~~647~~877 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES ~~Purchase of revenue~~Revenue-earning vehicles: ~~139~~Purchases (201,~~160~~289) (~~188~~1,~~464~~333,720) ~~Purchase~~Proceeds offrom ~~property~~sales 0 42,435 Property, equipment and software ~~498~~Purchases 0 (19,~~463~~673) Proceeds from sales of693 ~~revenue-earning vehicles~~ 0 ~~321,834~~(Increase) ~~Collections~~decrease ofin loans extended ~~972~~694 ~~1,249~~993 ------------ ------------ ~~NET~~Net ~~CASH~~Cash ~~PROVIDED~~Used BYby ~~INVESTING~~Investing ~~ACTIVITIES~~Activities ~~140~~(199,~~630~~902) ~~133~~(1,~~156~~299,965) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Additional paid in capital, due to merger 0 0 Proceeds from (Payments on) leases payable (net) 38474,~~571~~950 (~~238~~856,~~121~~676) Proceeds from (Payments on) loans payable (net) (~~525~~881,~~711~~087) ~~(93~~2,~~715)~~463,291 Proceeds from (Payments on) shareholder loans (net) 0 (1,000) ------------ ------------ ~~NET~~Net ~~CASH~~Cash ~~USED~~Provided BY(Used) ~~FINANCING~~by ~~ACTIVITIES~~Financing Activities (~~487~~406,~~140~~137) ~~(332~~1,~~836)~~605,615 ------------ ------------ Exchange rate effect on cash and cash equivalents (9793,~~551~~099) (6577,~~316~~191) ----------------------------------------------------- ------------ ~~NET~~------------ ~~INCREASE~~Net INIncrease ~~CASH~~in ~~AND~~Cash ~~CASH~~and ~~EQUIVALENTS~~Cash Equivalents (~~316~~462,~~949~~880) ~~(68~~892,~~349)~~336 Cash, beginning of period 682,096 171,354 ------------ ------------ Cash, end of period $ ~~365~~219,~~147~~216 $ ~~103~~1,~~005~~063,690 ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ ~~131~~225,~~754~~298 $ 64,226 ============ ============ Cash paid for income taxes $ 0 $ 0 ============ ============

See accompanying notes to financial statements. 6 EARN-A-CAR, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business - Earn-A-Car, Inc. (formerly Victoria Internet Services, Inc.) was incorporated in the State of Nevada on October 9, 2009. The company was organized to operate as an online tax preparation service in the North American market. On December 7, 2011, prior to commencing those operations, the company has opted to change its business focus to the daily rental of vehicles in the South African market. On December 7, 2011, a simultaneous execution and closing was held under an Agreement and Plan of Reorganization (the Plan"), by and among Victoria Internet Services, Inc. (the "Company" "us" "we" ), Leon Golden (our then principal shareholder) ("Golden") and Earn-A-Car (PTY), LTD., a corporation organized under the laws of the Republic of South Africa ("EAC") and Depassez Investments Ltd, a Seychelles corporation ("DPL"), owned by Graeme Hardie (our new principal shareholder) ("Hardie"). Under the Plan DPL acquired 78,500,000 shares of our common stock from Golden for $150,000 and the balance of Golden's 205,000,000 shares were submitted to the transfer agent for cancellation and DPI contributed all of the shares of EAC to the Company so that EAC became a wholly owned subsidiary of the Company and the business of the Company is now the business of EAC. Mr. Golden also resigned as an officer and director of the Company and John Storey ("Storey") and Hardie were elected as directors and Storey was appointed CEO and President with Hardie being appointed Chairman of the board. On February 10, 2012 the Company filed an amendment with the Secretary of State for Nevada to gain permission to change its name from Victoria Internet Services, Inc. to Earn-A-Car, Inc. In conjunction with the name change the Company also filed to have a new symbol on the Over The Counter Bulletin Board (OTCBB). As of March 8, 2012 the Company no longer is listed with the symbol VRIS, and is now listed on the OTCBB as EACR. Earn-A-Car (Pty) Ltd - The wholly owned subsidiary was incorporated in South Africa on July 2, 2005, and is primarily engaged in the business of the daily rental of vehicles to business and leisure customers through company-owned stores in the country of South Africa. On July 18, 2011, its name was changed from "EasyCars Rental and Sales (PTY) Ltd." to "Earn-A-Car (PTY) Ltd.". Earn-A-Car Assets 1 Pty. Ltd. - the wholly owned subsidiary Earn-A-Car (Pty) Ltd. purchased a wholly owned subsidiary in June 2012, the name of this purchased entity is Earn-A-Car Assets 1 Pty. Ltd. The function of this entity is to hold title to vehicles that are purchased through financing which requires specific assets to be held as collateral for those loans. All of the assets and liabilities of this entity are consolidated and included in the presented financial statements according to generally accepted accounting principles of the United States. Basis of Presentation- The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and are presented in U.S. Dollars. In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The Company has selected a February 28 year end. Estimates - The preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results could differ materially from those estimates. 7 EARN-A-CAR, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 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 August 31, 2013 and February 28, 2013 the Company had $219,216 and $682,096 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 August 31, 2013 and February 28, 2013 the Company had $30,023 and $7,444 in impaired receivables, respectively. The allowance for these impaired receivables was $80,606 and $14,359 for periods ending August 31, 2013and February 28, 2013 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 8 EARN-A-CAR, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Long-Lived Assets - The Company reviews the value of long-lived assets, including software, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable based upon estimated future cash flows and records an impairment charge, equaling the excess of the carrying value over the estimated fair value, if the carrying value exceeds estimated future cash flows. Foreign Currency Translation - The Company's functional currency is the South African Rand, however the translation into US dollars is the presentation bases of these financial statements. Foreign assets and liabilities are translated into US$ using the exchange rate in effect at the balance sheet date, and results of operations are translated using an average rate for the period. Translation adjustments are accumulated and reported as a component of accumulated other comprehensive income or loss. Revenue Recognition - Revenues from vehicle rentals are recognized as earned on a daily basis under the related rental contracts with customers. The upfront administration fee is non-refundable. However the company defers its upfront administration fee income received at the inception of the rental contract over the average rental period. Simultaneously the company defers direct, incremental selling costs related to the rental of the vehicle over the same average rental period. This is a change in accounting policy and the new basis has been used to calculate revenue in 2013. The 2012 numbers have been restated to reflect the new policy. See Note 11. Advertising Costs - Advertising costs are primarily expensed as incurred. During the six months ended August 31, 2013 and August 31, 2012, the Company incurred advertising expense of $34,735 and $34,615, respectively. Income Taxes - The Company has provided for income taxes on its separate taxable income or loss and other tax attributes. Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. The Company has no tax liability in the United States. Earnings Per Share - Basic earnings per share ("EPS") is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is based on the combined weighted average number of common shares and common share equivalents outstanding which include, where appropriate, the assumed exercise of options. There were no such common stock equivalents outstanding at August 31, 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 SFAS No. 123 and 123R (ASC 718). To date, the Company has not adopted a stock option plan and has not granted any stock options. 9 EARN-A-CAR, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) New Accounting Standards - The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position or cash flow. 2. REVENUE-EARNING VEHICLES Revenue-earning vehicles consist of the following: August 31, 2013 February 28, 2013 --------------- ----------------- Revenue-earning vehicles $ 5,912,208 $ 6,212,677 Less accumulated depreciation (1,305,086) (1,354,132) ----------- ----------- Revenue-earning vehicles, net $ 4,607,122 $ 4,858,545 =========== =========== 3. PROPERTY AND EQUIPMENT Major classes of property and equipment consist of the following: August 31, 2013 February 28, 2013 --------------- ----------------- Computer equipment $ 25,529 $ 23,353 Computer software 5,043 2,368 Other fixed assets including signage 8,484 8,664 ----------- ----------- Subtotal 39,056 34,385 Less accumulated depreciation (14,791) (9,427) ----------- ----------- Property and equipment, net $ 24,265 $ 24,958 =========== =========== For the three months ended August 31, 2013 and 2012, the Company recorded depreciation of $199,559 and $205,753 respectively. 4. LOANS RECEIVABLE At August 31, 2013 and February 28, 2013, the Company has a receivable due under a settlement agreement with a former employee with a balance of $6,343 and $7,037, respectively. This loan is to be repaid with interest of 10% in 48 equal installments of approximately $425; the payments began in March, 2011. 10 EARN-A-CAR, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2013 5. DEBT AND OTHER OBLIGATIONS Debt and other obligations consist of the following:

~~May~~August 31, 2013 February 28, 2013 --------------- ----------------- Loan payable - individual - unsecured, interest bearing, no fixed repayment terms $ 2019,~~218~~414 $ 22,625 Loan payable - individual - unsecured, interest bearing, no fixed repayment terms 109,~~109~~707 11,312 Loan payable - individual - unsecured, interest bearing, no fixed repayment terms 5048,~~545~~536 56,562 Loan payable - individual - unsecured, interest bearing, no fixed repayment terms 3329,~~612~~364 41,008 Loan payable - other - unsecured, interest bearing, no fixed repayment terms 5649,~~241~~637 68,027 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 1,~~895~~617,~~432~~872 2,356,765 Loan payable - other - unsecured, interest bearing, no fixed repayment terms ~~118~~55,~~584~~816 151,181 Loan payable - other - unsecured, interest bearing, no fixed repayment terms 2423,~~970~~979 27,943 Loan payable - other - unsecured, interest bearing, no fixed repayment terms 27,~~490~~500 27,489 ---------- ---------- Total $21,~~237~~881,~~201~~825 $2,762,912 Current portion of loans payable ~~842~~808,~~414~~936 731,271 ---------- ---------- Long-term portion of loans payable $1,~~394~~072,~~787~~889 $2,031,641 ========== ==========

11 EARN-A-CAR, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2013 5. DEBT AND OTHER OBLIGATIONS (CONTINUED) Expected maturities of debt and other obligations outstanding at August 31, 2013 are as follows: Loan Amounts Lease Amounts Total ------------ ------------- ---------- August 31, 2014 $ 808,936 $ 624,010 $1,432,945 August 31, 2015 $ 836,436 $ 624,042 $1,460,478 August 31, 2016 $ 202,234 $ 506,585 $ 708,820 August 31, 2017 $ 0 $ 70,145 $ 70,145 August 31, 2018 $ 0 $ 0 $ 0 Thereafter 34,219 $ 0 $ 34,219 ---------- ---------- ---------- Total $1,881,825 $1,824,782 $3,706,607 ========== ========== ========== Installment sales and lease contracts are secured by finance lease agreements over revenue generating vehicles, having 2013 carrying values of $1,974,808. These lease contracts are repayable in monthly installments for 2013 of $8,661. 6. PROVISION FOR INCOME TAXES The Company has no obligation for any federal or state income taxes in the United States. Further, no provision has been made for taxes in South Africa, which has a corporate income tax rate of 28%, for the three months ended August 31, 2013 and 2012 because our taxable losses and loss carryovers exceed the income in those periods. At August 31, 2013 and February 28, 2013, respectively, the Company had net losses of approximately $0 and $524,559 available in South Africa that can be carried forward to offset future taxable income. Due to the uncertainty of future taxable income, the Company has recorded a valuation allowance of 100% of the deferred tax asset, so that our deferred tax asset at both August 31, 2013 and February 28, 2013 was $0. 7. EQUITY On November 14, 2011 the Company filed a certificate of amendment to the articles of incorporation which caused a 50 for 1 forward common stock split and an increase in authorized common shares to 250,000,000. On January 19, 2012 the Company cancelled 121,500,000 shares of common stock that were held by Leon Golden, the former owner of Victoria Internet Services, Inc. As of February 28, 2013 and February 29, 2012 there were 112,250,000 and 500 common shares outstanding, respectively. The Company is authorized to issue 20,000,000 preferred shares of stock. As of February 28, 2013 and February 29, 2012 there were no (0) shares outstanding. 12 EARN-A-CAR, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2013 8. COMMITMENTS AND CONTINGENCIES Operating Leases The Company operates from various leased premises under operating leases with terms up to 5 years. Some of the leases contain renewal options. No contingent rent is payable. Expenses incurred under operating leases for the period were as follows: August 31, 2013 August 31, 2012 --------------- --------------- Operating leases: Premises $ 27,694 $ 28,507 -------- -------- $ 27,694 $ 28,507 ======== ======== Future minimum rentals and fees under non-cancelable operating leases for the 12 month periods are presented in the following table: August31, 2014 $ 0 August 31, 2015 $ 0 August 31, 2016 $ 0 August 31, 2017 $ 0 August 31, 2018 $ 0 We currently operate under a month to month lease requiring a monthly payment of $4,615 and we believe that if we decide to move to another location our occupancy costs would remain materially the same. At August 31, 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:

~~Previously~~August ~~May~~ 31, ~~2012~~2013 ~~Financial~~February ~~Statements~~28, ~~Line~~2013 ~~Item Corrected Stated~~ --------------- ------------------ Loans payable to shareholders/related parties: G. Hardie $ 0 $ 4,000 --------- --------- ~~------~~Total ~~Balance~~loans ~~Sheet~~payable ~~Deferred~~to ~~Income~~related $parties ~~569,876~~ $ 0 ~~Balance Sheet Deferred Costs~~ $ 674,~~283~~000 $======== 0======== ~~Balance~~Compensation ~~Sheet~~paid ~~Retained~~to ~~earnings~~directors ~~$1,023,118~~G. ~~$806,882~~Hardie ~~Statement of Operations Rental Income~~ $ ~~624~~1,~~797~~000 $~~656~~ 1,~~150~~000 ~~Statement~~John ofStorey ~~Operations~~0 ~~Direct motor vehicle costs $ 247~~6,~~334~~787 ~~$254,877~~-------- ~~Statement~~-------- ofTotal ~~Other~~compensation ~~comprehensive~~paid ~~Income~~to ~~Net~~directors ~~Income~~ $ 291,~~899~~000 $ 5310,~~709~~787 ~~Cash~~======== ~~Flows Net cash provided by operating activities $ 196,647 $131,331~~========

10. SUBSEQUENT EVENTS The Company has analyzed its operations subsequent to August 31, 2013 through the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose. 13 EARN-A-CAR, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2013 11. CORRECTION TO ACCOUNTING POLICY FOR US GAAP The Company has restated certain operating and cash flow amounts for the three and six months ended August 31, 2012, to correctly account for the recognition of revenue on up-front income in terms of US GAAP. Per US GAAP, the Company has now deferred the non-refundable up-front income it receives in the first month of the rental contract over the company's average rental period of 20 months. Simultaneously the company deferred direct, incremental selling costs related to the rental of the vehicle over the same average rental period. The company used to account for all the up-front non-refundable income once it was due and payable as this is the accounting policy for the subsidiaries. For the three and six months ended August 2012 a portion of selling and administrative costs were allocated to direct and operating costs. These figures have now been restated to become consistent with the three and six months ended August 2013. The balances for the three months ended August 31, 2012 have been restated to correct the presentation of the deferred income and deferred costs and to correct the errors from 2012 detailed above.

The balances for the six months ended August 31, 2012 have been restated to correct the presentation of the deferred income and deferred costs and to correct the errors from 2012 detailed above.

14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION MANAGEMENTS DISCUSSION AND ANALYSIS FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains "forward-looking" statements as such term is defined in the Private Securities Litigation Reform Act of 1995 and information relating to the Company that is based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this report, the words "anticipate," "believe," "estimate," "expect" and "intend" and words or phrases of similar import, as they relate to the Company or Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitations, competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein and in other filings made by the Company with the Securities and Exchange Commission. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements. RESULTS OF OPERATIONS OVERVIEW The past 3 months has been one of consolidation and review with a number of our cost of sales items in particular needing attention. Gross Profit reduced markedly and required attention. We are addressing these margin issues and are adapting our model to cover same. While these changes will take a while to be visible in our income statement they will soon be implemented in all new sales. Once we have fully addressed the margins we will return our focus to growing the fleet. QUARTER ENDED AUGUST 31, 2013 V. QUARTER ENDED AUGUST 31, 2012 Revenues decreased from $967,210 in Q2 of FY 2013 to $826,005 in Q2 of FY 2014 a decrease of $141,205 or 14 %. Our operating expenses went from $311,340 in Q2 of FY 2013 to $361,426 in Q2 of FY 2014 an increase of $50,086 or 16%. Repairs and insurance costs were much higher than previously experienced and negatively affected our gross profits. Thus net income decreased from $234,007 in Q2 of FY 2013 to ($61,013) in Q2 of FY 2014. These costs have necessitated changes in our terms and pricing and we are in the process of changing the servicing and bad driving parts of our business model and terms to deal with this. LIQUIDITY AND CAPITAL RESOURCES We had total current assets of $557,139 at August 31, 2013. The bulk of our assets being $4,607,122 are invested in revenue earning vehicles. The business has good cash flows and these are all reinvested into new vehicles. All cash generated or borrowed is invested in growing the fleet of revenue earning vehicles or used to settle debt as we have no other investment needs. We currently have access to approximately $1.5m in revolving vehicle finance. We expect to have invested this in new vehicles by the end of the year and will 15 begin looking for new funding early next year. Management does not expect to have to dilute the 112,500,000 issued shares in the near future. Instead we intend to continue to make use of asset based financing to grow our fleet of rental cars. CRITICAL ACCOUNTING POLICIES Financial Reporting Release No. 60 of the SEC encourages all companies to include a discussion of critical accounting policies or methods used in the preparation of the financial statements. There are no current revenue generating activities that give rise to significant assumptions or estimates. Our financial statements filed as part of our Current Report on Form 10-K, dated June 17, 2013, include a summary of the significant accounting policies and methods used in the preparation of our financial statements. OFF-BALANCE SHEET ARRANGEMENTS We have never entered into any off-balance sheet financing arrangements and have not formed any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information called for by this item is not required as we are a smaller reporting company. ITEM 4T. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As of August 31, 2013, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Principal Financial Officer concluded that our disclosure controls and procedures are effective in enabling us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period. 16 (b) Changes in Internal Controls There were no changes in our internal controls and procedures in internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We continue to rely on the members of the Board of Directors to provide assurance that our entity-level controls remain effective and we believe our process-level controls remain effective. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not currently a party to any legal proceedings. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS The following documents are filed as part of this Report. Exhibit Number Exhibit Description ------ ------------------- 31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101 Interactive data files pursuant to Rule 405 of Regulation S-T. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on October 14, 2013. Earn-A-Car, Inc. By: /s/ John Storey -------------------------------------------- John C Storey Chief Executive Officer (Principal Executive Officer) By: /s/ Bruce J Dunnington -------------------------------------------- Bruce J Dunnington Chief Financial Officer (Principal Financial and Accounting Officer) 18

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