African Discovery Group Inc (AFDG)

[dffhogs]

NET INCOME

Net Income increased from US$60,792 in FY ended 2/29/12 to US$524,559 in FY ended 2/28/13. As we expand our vehicle rental fleet, increased revenues may be counterbalanced by the fact that vehicle depreciation is greatest in the early years of the lease.

Our 2013 accounts include a change in accounting policy necessitated due to the difference between our subsidiary reporting and US GAAP. The accounting policy for revenue recognition was changed. The upfront non-refundable administration fee has now been deferred over the average rental period of client contracts rather than taken in full. Simultaneously the company defers direct, incremental selling costs related to the rental over the same average rental period.

The net effect was to defer income of $502,593 into future years. Had this deferral not been made, current year earnings would have been US$778,274 and EPS US$0.007.