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EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULES 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934. - EVCARCO, INC.exhibit_31-1.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULES 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934. - EVCARCO, INC.exhibit_31-2.htm
EX-32 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C., SECTION 1350. - EVCARCO, INC.exhibit_32.htm

 
UNITED STATES 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 September 30, 2010

o           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________________ to ________________

Commission file number 333-158293
 
 
EVCARCO, INC.

(Exact name of registrant as specified in its charter)

Nevada
 5012
26-3526039
(State or other jurisdiction of
incorporation or organization)
 (Primary Standard Industrial
Classification Code Number)
(IRS Employer
Identification No.)
 
7703 Sand Street
 Fort Worth, Texas 76118
(Address of principal executive offices) (Zip Code)

(817) 595-0710
(Registrant’s telephone number, including area code)
 
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

 
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.   x Yes    o 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 (§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).   o Yes  o 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.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yes     x No
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 22, 2010, there were 72,771,266 shares of Common Stock, $0.001 par value; and 2,500,000 shares of Class A Convertible Preferred Stock, $0.001 par value.
 
 
 
 

 
1

 


 
EVCARCO, INC.
 
TABLE OF CONTENTS
 
 
Index
Page Number
     
PART I
FINANCIAL INFORMATION
 
     
ITEM 1.
Financial Statements
F-1
     
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
3
     
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk 
5
     
ITEM 4.
Controls and Procedures
5
     
PART II
OTHER INFORMATION
 
     
ITEM 1.
Legal Proceedings
6
     
ITEM 1A.
Risk Factors 
6
     
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
6
     
ITEM 3.
Defaults Upon Senior Securities
6
     
ITEM 4.
(Removed and Reserved)
6
     
ITEM 5.
Other Information
6
     
ITEM 6.
Exhibits
7
     
SIGNATURES
 
7
 
 
 
 
 
 

 
2

 

 
 
PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
EVCARCO, INC.
 
INDEX TO FINANCIAL STATEMENTS
 
Financial Statements
 
   
Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009
F-2
   
Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009 (Unaudited), and  from Inception (October 14, 2008) to September 30, 2010 (Unaudited)
F-3
   
Statement of Stockholders' Equity/(Deficit) from Inception (October 14, 2008) through September 30, 2010 (Unaudited)
F-4
   
Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009 (Unaudited), and from Inception (October 14, 2008) to September 30, 2010 (Unaudited)
F-5
   
Notes to Financial Statements
F-6 to F-9
 
 
 
 
 
 
 
 
 
 
F-1

 
 
EVCARCO, Inc.
 
(A Development Stage Company)
 
Balance Sheets
 
   
   
Sep. 30, 2010
   
Dec. 31, 2009
 
   
(Unaudited)
       
ASSETS
           
             
Current assets
           
             
Cash
  $ 37,408     $ 48,634  
Inventory (see Note 4)
    240,347       10,546  
Other receivables
    16,386       4,213  
Prepaid expenses (see Note 5)
    747,552       136,667  
                 
Total current assets
    1,041,693       200,060  
                 
Property and equipment
    38,962       7,654  
Accumulated depreciation
    (6,197 )     (1,933 )
Other assets
    2,687       3,252  
                 
                 
TOTAL ASSETS
  $ 1,077,145     $ 209,033  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
               
                 
Current liabilities
               
                 
Accounts payable
  $ 370,883     $ 18,739  
Accrued expenses
    40,713       30,726  
Accrued interest (related parties)
    6,887       334  
Other payables
    27,566       6,308  
Note payable (see Note 6)
    -       88,910  
Convertible notes payable (see Note 7)
    65,972       -  
Loans payable (related parties) (see Note 8)
    538,415       271,280  
                 
Total current liabilities
    1,050,436       416,297  
                 
Total liabilities
    1,050,436       416,297  
                 
Commitments and contingencies
               
                 
Stockholders' equity/(deficit) (see Note 11)
               
                 
15,000,000 shares Class A Preferred Convertible
               
   Stock Authorized at $0.001/par value, none issued
    -       -  
180,000,000 shares Common Stock
               
   Authorized at $0.001/par value
               
   70,871,266 and 61,125,500 shares
               
   issued and outstanding, respectively
    70,871       61,126  
Additional paid-in capital
    3,295,626       891,964  
Treasury stock, at cost, 13,625,900 and 0 respectively
    (178,000 )     -  
Deficit accumulated during development stage
    (3,161,788 )     (1,160,354 )
                 
Total stockholders' equity/(deficit)
    26,709       (207,264 )
                 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
  $ 1,077,145     $ 209,033  
                 
                 
                 
                 
                 
The accompanying footnotes are an integral part of these financial statements.
         
 

 
 
F-2

 
 
EVCARCO, Inc.
 
(A Development Stage Company)
 
Statements of Operations
 
   
                                 
                             
Inception
 
                             
(Oct. 14, 2008)
 
      For the Three Months Ended     For the Nine Months Ended    
Through
 
     
Sep. 30, 2010
   
Sep. 30, 2009
   
Sep. 30, 2010
   
Sep. 30, 2009
   
Sep. 30, 2010
 
     
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                                 
                                 
Revenues
  $ 196,092     $ 379,151     $ 574,263     $ 703,601     $ 1,508,599  
                                           
 
Total Revenues
    196,092       379,151       574,263       703,601       1,508,599  
                                           
Cost of goods sold
    172,782       392,821       543,489       719,703       1,482,467  
                                           
 
   Gross Profit/(Loss)
    23,310       (13,670 )     30,774       (16,102 )     26,132  
                                           
Sales and marketing expenses
    11,606       48,358       91,275       67,621       201,810  
General and administrative expenses
    614,181       297,250       1,849,574       573,093       2,777,678  
Inventory adjustment
    -       -       27,800       -       110,653  
Depreciation and amortization
    2,212       603       5,077       1,742       7,887  
                                           
 
Total Operating Expenses
    627,999       346,211       1,973,726       642,456       3,098,028  
                                           
                                           
 
Operating Loss
    (604,689 )     (359,881 )     (1,942,952 )     (658,558 )     (3,071,896 )
                                           
Other income/(loss)
                                       
   Loss on asset dispositions, net
    (714 )     -       (607 )     -       (607 )
   Interest income
    -       3       37       195       326  
   Interest expense (related parties)
    (6,281 )     (2,051 )     (14,100 )     (3,242 )     (19,961 )
   Interest expense
    (19,681 )     (10,847 )     (43,812 )     (14,995 )     (69,650 )
                                           
 
Total Other Loss
    (26,676 )     (12,895 )     (58,482 )     (18,042 )     (89,892 )
                                           
                                           
 
Loss Before Taxes
    (631,365 )     (372,776 )     (2,001,434 )     (676,600 )     (3,161,788 )
                                           
Income tax (expense) benefit
    -       -       -       -       -  
                                           
 
Net Loss
  $ (631,365 )   $ (372,776 )   $ (2,001,434 )   $ (676,600 )   $ (3,161,788 )
                                           
                                           
Basic and diluted loss per share
  $ (0.01 )   $ (0.01 )   $ (0.03 )   $ (0.01 )        
                                           
Weighted average number of
                                       
   common shares outstanding
    73,470,083       54,284,761       66,912,404       53,193,469          
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
The accompanying footnotes are an integral part of these financial statements.
                 

 
 
F-3

 
 
EVCARCO, Inc.
 
(A Development Stage Company)
 
Statement of Stockholders' Equity/(Deficit)
 
Inception (October 14, 2008) Through September 30, 2010
 
                                     
                           
Deficit
       
                           
accumulated
       
               
Additional
         
during the
       
   
Common stock
   
paid-in
   
Treasury
   
development
       
   
Shares
   
Amount
   
capital
   
stock
   
stage
   
Total
 
                                     
Founders' stock issued @ $0.0003/sh. Oct. 2008
    46,500,000     $ 46,500     $ (31,000 )   $ -     $ -     $ 15,500  
Stock issued for services @ $0.0003/sh. Oct. 2008
    5,100,000       5,100       (3,400 )                     1,700  
Stock issued for cash @ $0.1667/sh. Oct. 2008
    306,000       306       50,694                       51,000  
Stock issued for cash @ $0.1667/sh. Nov. 2008
    612,000       612       101,388                       102,000  
Stock issued for cash @ $0.1667/sh. Dec. 2008
    12,000       12       1,988                       2,000  
                                                 
Net loss
                                    (91,060 )     (91,060 )
                                                 
                                                 
Balance December 31, 2008
    52,530,000     $ 52,530     $ 119,670     $ -     $ (91,060 )   $ 81,140  
                                                 
                                                 
Stock issued for cash @ $0.1667/sh. Jan. 2009
    123,000       123       20,377                       20,500  
Stock issued for services @ $0.1667/sh. Feb. 2009
    6,000       6       994                       1,000  
Stock issued for property @ $0.19/sh. Jul. 2009
    1,406,000       1,406       265,734                       267,140  
Stock issued for cash @ $0.50/sh. Jul. 2009
    1,500       2       748                       750  
Stock issued for services @ $0.50/sh. Jul. 2009
    600,000       600       299,400                       300,000  
Founders' stock issued @ $0.0003/sh. Oct. 2009
    6,000,000       6,000       (4,000 )                     2,000  
Stock issued for loan @ $0.1667/sh. Oct. 2009
    120,000       120       19,880                       20,000  
Stock issued for services @ $0.50/sh. Oct. 2009
    90,000       90       44,910                       45,000  
Stock issued for cash @ $0.50/sh. Oct. 2009
    105,000       105       52,395                       52,500  
Stock issued for cash @ $0.50/sh. Nov. 2009
    14,000       14       6,986                       7,000  
Stock issued for cash @ $0.50/sh. Dec. 2009
    130,000       130       64,870                       65,000  
                                                 
Net loss
                                    (1,069,294 )     (1,069,294 )
                                                 
                                                 
Balance December 31, 2009
    61,125,500     $ 61,126     $ 891,964     $ -     $ (1,160,354 )   $ (207,264 )
                                                 
                                                 
Stock issued for cash @ $0.25/sh. Jan. 2010
    40,000       40       9,960                       10,000  
Stock issued for cash @ $0.50/sh. Feb. 2010
    64,000       64       31,936                       32,000  
Stock issued for cash @ $0.21/sh. Feb. 2010
    100,000       100       20,900                       21,000  
Stock issued for services @ $0.45/sh. Feb. 2010
    2,600,000       2,600       1,167,400                       1,170,000  
Stock issued for services @ $0.25/sh. Mar. 2010
    200,000       200       49,800                       50,000  
Stock issued for cash @ $0.50/sh. Jun. 2010
    14,000       14       6,986                       7,000  
Stock issued for cash @ $0.50/sh. Jun. 2010
    60,000       60       29,940                       30,000  
Stock issued for cash @ $0.21/sh. Jun. 2010
    200,000       200       41,800                       42,000  
Stock issued for services @ $0.06/sh. Jun. 2010
    1,000,000       1,000       54,000                       55,000  
Stock issued for services @ $0.04/sh. Jun. 2010
    6,427,000       6,427       250,723                       257,150  
Stock issued for services @ $0.04/sh. Jul. 2010
    5,500,000       5,500       219,500                       225,000  
Stock issued for note conv. @ $0.012/sh. Aug. 2010
    7,166,666       7,166       79,507                       86,673  
Proceeds received for shares to be issued Jan.-Mar.
                    300,000                       300,000  
Proceeds received for shares to be issued Apr. 2010
                    80,000                       80,000  
Beneficial conversion features
                    47,584                       47,584  
Stock buyback @ $0.013/sh. Aug. 2010
    (13,625,900 )     (13,626 )     13,626       (178,000 )             (178,000 )
                                                 
Net loss
                                    (2,001,434 )     (2,001,434 )
                                                 
                                                 
Balance September 30, 2010 (Unaudited)
    70,871,266     $ 70,871     $ 3,295,626     $ (178,000 )   $ (3,161,788 )   $ 26,709  
                                                 
The accompanying footnotes are an integral part of these financial statements.
                         

 
 
 
F-4

 
 
EVCARCO, Inc.
 
(A Development Stage Company)
 
Statements of Cash Flows
 
   
               
Inception
 
   
For the Nine
   
For the Nine
   
(Oct. 14, 2008)
 
   
Months Ended
   
Months Ended
   
Through
 
   
Sep. 30, 2010
   
Sep. 30, 2009
   
Sep. 30, 2010
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                   
Cash flows used in operating activities:
                 
                   
Net loss
  $ (2,001,434 )   $ (676,600 )   $ (3,161,788 )
Adjustments to reconcile net loss to net cash
                       
used in operating activities:
                       
Depreciation and amortization
    5,077       1,742       7,887  
Consulting expenses (stock)
    1,146,265       113,500       1,357,298  
Beneficial conversion feature amortization
    18,556       -       18,556  
Loss on asset dispositions
    607       -       607  
                         
Change in operating assets and liabilities:
                       
Inventory
    (229,801 )     (109,915 )     (240,347 )
Other receivables
    (12,173 )     -       (16,386 )
Other assets
    -       -       (4,129 )
Accounts payable
    352,144       72,253       370,883  
Accrued expenses
    9,987       16,632       40,713  
Accrued interest (related parties)
    6,553       158       6,887  
Other payables
    21,258       (868 )     27,566  
                         
Net cash used in operating activities
    (682,961 )     (583,098 )     (1,592,253 )
                         
                         
Cash flows used in investing activities:
                       
                         
Purchase of property and equipment
    (35,414 )     (2,069 )     (43,068 )
Proceeds from sales of property and equipment
    2,829       -       2,829  
                         
Net cash used in investing activities
    (32,585 )     (2,069 )     (40,239 )
                         
                         
Cash flows from financing activities:
                       
Payments of notes payable
    (2,237 )     (58,588 )     (135,827 )
Proceeds from notes payable
    -       167,500       222,500  
Proceeds from convertible notes payable
    95,000       -       95,000  
Net change in loans payable (related parties)
    124,557       198,453       395,837  
Issuance of common stock
    142,000       288,390       747,390  
Proceeds from common stock not yet issued
    380,000       -       380,000  
Purchase Treasuary Stock
    (35,000 )     -       (35,000 )
                         
Net cash flows provided by financing activities
    704,320       595,755       1,669,900  
                         
Increase/(decrease) in cash
    (11,226 )     10,588       37,408  
                         
Cash at beginning of period
    48,634       22,467       -  
                         
Cash at end of period
  $ 37,408     $ 33,055     $ 37,408  
                         
                         
Cash paid for:
                       
                         
Interest
  $ 22,537     $ 13,781     $ 48,375  
Interest (related parties)
  $ 7,547     $ 3,084     $ 13,074  
                         
Non-cash activities:
                       
                         
Stock issued for prepaid services
  $ 610,885     $ 187,500     $ 747,552  
Stock issued for loans
  $ 86,673     $ -     $ 106,673  
Stock buyback for balance of shareholder advances
  $ 143,000     $ -     $ 143,000  
Debt discount from beneficial conversion feature
  $ 47,584     $ -     $ 47,584  
                         
The accompanying footnotes are an integral part of these financial statements.
         

 
F-5

 
EVCARCO, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2010

NOTE 1.   ORGANIZATION AND DESCRIPTION OF BUSINESS

EVCARCO, Inc. (“The Company”) was incorporated under the laws of the State of Nevada on October 14, 2008.  The Company sells “green” automobiles, offering the latest technology electric vehicles, pre-owned vehicles converted to various green technologies, and a comprehensive financial package to complement the sales.  The Company is in the development stage, having only begun operations recently.


NOTE 2.   BASIS OF PRESENTATION

The Financial Statements are unaudited. As permitted under the Securities and Exchange Commission (“SEC”) requirements for interim reporting, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. We believe that these financial statements include all necessary and recurring adjustments for the fair presentation of the interim period results. These financial statements should be read in conjunction with the Financial Statements and related notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2009. The results of operations for the three and nine months ended September 30, 2010 are not necessarily indicative of the results to be expected for the year ending December 31, 2010.

Certain reclassifications to the 2009 Financial Statements have been made to conform to the 2010 presentation.

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 the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Subsequent actual results may differ from those estimates.


NOTE 3.   FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amounts of certain of our financial instruments, including accounts receivable, other receivables, accounts payable, and other payables approximate fair value due to their short maturities. Carrying value of note payable and convertible notes payable approximate fair values as they approximate market rates of interest. None of our financial instruments are held for trading purposes.


NOTE 4.  INVENTORY

At each period end, respectively, the Company had the following inventory:
 
   
Sep. 30, 2010
   
Dec. 31, 2009
 
             
New vehicles
  $ 159,027     $ -  
Pre-owned vehicles
    46,950       3,550  
Other items
    34,370       6,996  
                 
Total inventory
  $ 240,347     $ 10,546  
 
During the first quarter of 2010, the Company had additional impairment relating to the vehicles that were devalued at the end of 2009.  The impairment, in the amount of $27,800, is reflected as inventory adjustment on the statements of operations.

At the end of 2009 we had made a decision to impair inventory in the amount of $82,853.  $37,976 was a mark down of inventory to market.  $44,877 of the impairment related to five SMART cars, that were not received under the contract to exchange cash and stock for thirty five pre-owned vehicles.  The contract is essentially settled and completed, and the Company will not be able to recover those cars.
 

 
F-6

 
EVCARCO, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2010
 
NOTE 5.  PREPAID EXPENSES

Most of the balance of the prepaid expenses represents the unearned portion of stock compensation issued under consulting agreements, terms of which vary, and are up to one year in length.

The table below outlines details of the activity by quarter, including scheduled future amortization:

Quarter ending
 
Stock compensation issued
   
Amortization
   
Other prepaid items
   
Balance of prepaid expenses
 
September 30, 2009
  $ 250,000     $ (62,500 )         $ 187,500  
December 31, 2009
    20,000       (70,833 )           136,667  
March 31, 2010
    1,177,500       (178,280 )   $ 5,557       1,141,444  
June 30, 2010
    281,250       (401,042 )     4,613       1,026,265  
September 30, 2010
    185,000       (453,543 )     (10,170 )   $ 747,552  
                                 
December 31, 2010
            (442,499 )                
March 31, 2011
            (275,053 )                
June 30, 2011
            (30,000 )                
    $ 1,913,750     $ (1,913,750 )   $ -          
 
 
NOTE 6.  NOTE PAYABLE

From June of 2009, through August of 2010, the Company received $150,000 of advances from RGTK, an unrelated entity.   The note was unsecured, due upon demand and accrued interest at the end of each month on the then outstanding balance at the rate of 36% per annum.  As of December 31, 2009, the principal balance of the note was $88,910.  Interest paid under the note in 2010 and 2009, respectively, was $19,580 and $16,051.  On August 23, 2010, the note balance of $86,673 was converted into 7,166,666 shares of Company’s common stock.
 
 
NOTE 7.  CONVERTIBLE NOTES PAYABLE

On June 7, 2010, the Company issued a convertible promissory note in the amount of $60,000, bearing interest at a rate of 8% per annum. The note is unsecured and matures on March 2, 2011. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price. The Company recorded $24,251 related to the deemed beneficial conversion feature of this note, of which $8,083 and $10,778 have been amortized to interest expense in the accompanying statements of operations for the three and nine months ended September 30, 2010, respectively.  As of September 30, 2010, the balance of interest accrued under the note was $1,517.

On August 25, 2010, the Company issued a convertible promissory note in the amount of $35,000, bearing interest at a rate of 34.29% per annum. The note is unsecured and matures on February 24, 2011. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price. The Company recorded $23,333 related to the deemed beneficial conversion feature of this note, of which $7,778 has been amortized to interest expense in the accompanying statement of operations for the three months ended September 30, 2010.  As of September 30, 2010, the balance of interest accrued under the note was $1,203.
 

 
F-7

 
EVCARCO, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2010
 
NOTE 8.  RELATED PARTY TRANSACTIONS

On August 25, 2010, Mr. Dale Long resigned from his position of President/CEO, as well as the Board of Directors of the Company.  Under the terms of Separation and Buy-Back Agreement, the Company purchased 13,625,900 shares of its common stock, held by Mr. Long for $178,000, of which $35,000 was paid in cash and $143,000 was offset against advances made to Mr. Long.  $196,400 of accrued compensation, and $16,000 of related accrued payroll taxes were cancelled as part of the same agreement, and were credited against the  general and administrative expenses for the current quarter.

For the nine months ended September 30, 2010 and 2009, the Company accrued $242,000 and $204,570, respectively, in salaries payable to its three officers and major shareholders (excluding compensation to Mr. Long, described in the paragraph above).  For the period since inception (October 14, 2008) through September 30, 2010, the Company accrued $520,770.

As of September 30, 2010 and December 31, 2009, the balances of shareholder notes were $538,415 and $271,280, respectively.  The balances included accrued salaries, along with various advances to and from the Company.  The notes are unsecured, due upon demand and accrue interest at the end of each month on the then outstanding balance at the rate of 5.00% per annum.  Accrued interest payable on the notes at each respective quarter end was $6,887 and $334.  Interest paid during the corresponding nine month periods was $7,547 and $3,084, respectively.  These notes payable do not approximate fair value, as they are with related parties, and do not bear market rates of interest.


NOTE 9.  OPERATING SEGMENTS

During the period from inception through September 30, 2010 the Company operated as a single business segment.


NOTE 10.  GOING CONCERN
 
The Company has sustained operating losses since inception and had an accumulated deficit of approximately $3.2 million as of September 30, 2010. This deficit has been funded primarily through stock issuances, debt and cash generated from operations.

The Company will need additional capital to continue to maintain and expand its operations and will endeavor to raise funds through the issuance of stock and debt, and revenues from operations, but despite our efforts we may not generate revenues from operations or obtain sufficient capital on acceptable terms, if at all. If the Company cannot obtain such capital or generate such operating revenues it would have an adverse impact on our financial position and results of operations and ability to continue as a going concern. The Company’s operating capital and capital expenditure requirements will vary based on a number of factors, including the level of sales and marketing activities for our services and products and there can be no assurance that additional private or public financings, including debt or equity financing, will be available as needed, or, if available, on terms favorable to us. To the extent we use debt financing, if available, we will have to pay interest and the Company may have to agree to restrictive covenants that could impose limitations on our operating flexibility. If the Company cannot successfully obtain additional future funding it may jeopardize our ability to continue our business and operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  These financial statements have been prepared on a going concern basis, and do not reflect any adjustments if the Company is unable to continue as a going concern.
 
 

 
F-8

 
EVCARCO, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2010
 
NOTE 11.  STOCKHOLDERS’ EQUITY/DEFICIT

Effective April 29, 2009, the Company filed an amendment with the Nevada Secretary of State to increase authorized shares of common stock from 25,000,000 to 60,000,000; and to authorize Class A convertible preferred stock in the amount of 15,000,000 shares at $0.001 par value.

On July 10, 2009, the Company effectuated a 3-for-1 forward stock split of its issued and outstanding common stock.  All amounts of shares reflected on these financial statements are on a post-split basis.

During the first four months of 2010, the Company received $380,000 of cash for shares of common stock to be issued.

On August 25, 2010, the Company re-purchased and cancelled 13,625,900 shares of common stock from Mr. Dale Long, for $178,000, relating to his departure from the Company.  Of that amount, $35,000 was paid in cash and $143,000 was offset against advances made to Mr. Long.


NOTE 12.  SUBSEQUENT EVENTS

On October 11, 2010, the Company issued 2,500,000 shares of Class A convertible preferred stock to Mr. Nikolay Frolov (CFO and Director), for the amount of $100,000, as partial satisfaction of the loan payable to the shareholder.
 
On October 14, 2010, under the terms of original agreement, the Company issued 1,900,000 shares of common stock for $380,000 received in the early part of 2010.

On November 3, 2010, the Company issued a convertible promissory note in the amount of $53,000, bearing interest at a rate of 8% per annum. The note is unsecured and matures on July 25, 2011. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price.

 
 
 
 

 
F-9

 

 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains statements which, to the extent they do not recite historical fact, constitute "forward looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements by the use of words like "may," "will," "could," "should," "project," "believe," "anticipate," "expect," "plan," "estimate," "forecast," "potential," "intend," "continue," and variations of these words or comparable words. Forward looking statements do not guarantee future performance and involve risks and uncertainties. Actual results may differ substantially from the results that the forward looking statements suggest for various reasons, including those discussed under the caption "Risks Related to Our Business" in our Annual Report on Form 10-K. These forward looking statements are made only as of the date of this report. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based. This discussion should be read together with the financial statements and other financial information included in this Form 10-Q.

The following discussion contains forward-looking statements that are subject to significant risks and uncertainties. There are several important factors that could cause actual results to differ materially from historical results and percentages and results anticipated by the forward-looking statements. The Company has sought to identify the most significant risks to its business, but cannot predict whether or to what extent any of such risks may be realized nor can there be any assurance that the Company has identified all possible risks that might arise. Investors should carefully consider all of such risks before making an investment decision with respect to the Company's stock.

Overview

EVCARCO, Inc. is a development stage company that was incorporated on October 14, 2008 in the State of Nevada.  We have begun our business operations and we currently have minimal revenue and no significant assets, as a result, we face substantial liquidity risk and uncertainty, near-term and otherwise, which threatens our ability to continue.  EVCARCO, Inc has never declared bankruptcy, has never been in receivership, and has never been involved in any illegal action or proceedings.

Since becoming incorporated, EVCARCO, Inc. has not made any significant purchases or sale of assets, nor has it been involved in any mergers, acquisitions or consolidations. EVCARCO, Inc is not a blank check registrant as that term is defined in Rule 419(a) (2) of Regulation C of the Securities Act of 1933, since it has a specific business plan or purpose.

Neither EVCARCO, Inc nor its officers, directors, promoters, or affiliates has had preliminary contact or discussions with, nor do we have any present plans, proposals, arrangements, or understandings with any representatives of the owners of any business or company regarding the  possibility of an acquisition or merger.

Our independent auditors have expressed doubt about our ability to continue as a going concern, indicating the possibility that we may not be able to continue to operate. No adjustment has been made in the accompanying financial statements to the amounts and classification of assets and liabilities which could result should we be unable to continue as a going concern.

In July of 2010, management of the Company and the Board of Directors made the decision to close one of our two locations, and to vacate the premises at 6124 Denton Drive in Dallas, Texas. This location, which has been in operation since May of 2010, was unable to generate sufficient revenues to cover the fixed expenses of the facility.

On August 25, 2010, Mr. Dale Long resigned from the Company’s Board of Directors, and his position of President/CEO.  As of the time of this filing, positions of President and CEO remain vacant.

On October 18, 2010, Mr. Joshua D. Spivey was appointed as Chief Investment Officer and elected to the Board of Directors.


Plan of Operation

Over the next twelve months, we will concentrate on the following six areas to grow our operations:

·           Capital and Funding – Seek to obtain capital from all available sources.

·           Advertising and Marketing – Utilize all available marketing venues and public relations opportunities to promote the Company and its products.

·           Sales – Grow sales to 15-20 new cars, and 100-125 pre-owned cars per quarter.

 
3

 
 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
·           Product Development – Continue to work with existing manufacturers and search for new manufacturers.

·           Franchise Development – Begin marketing the EVCARCO franchise concept and licensing of Company’s Trademarks, with the short term objective of securing several territories and establishing five to ten Dealer Development Candidates during 2011. Several candidates in various states have already been identified for dealer development.

·           Product Research and Development – Continue working on identifying and testing products and vehicles from U.S. companies, as well as foreign manufacturers, which can provide cleaner, safer, faster, and more economical forms of transportation, by utilizing the latest developments in the alternative fuel area

Maintaining an adequate inventory of automobiles requires significant capital.  Given the Company’s liquidity limitations its inventory levels may be adversely impacted.


Operating Environment
 
The Company continues to operate in a tough economic climate, tight equity and credit markets, which caused significant decline in automobile sales and put many dealers out of business.  This challenging operating environment also presents tremendous opportunity for our concept: decrease in competition, rise of fuel prices, consumers becoming more cost conscious, and environmental issues gaining a lot of traction, are making our products a lot more attractive alternative to traditional transportation solutions.

 
Operating Results

Since inception through September 30, 2010, we have generated revenues of $1,508,599 and incurred cumulative net losses of $3,161,788.

For the quarterly periods ended September 30, 2010 and 2009, gross revenues were $196,092 and $379,151, gross profit/(loss) was $23,310 and ($13,670), respectively. Higher sales in the third quarter of 2009 include liquidation of a lot of SMART cars acquired in exchange for shares of common stock.  Lower sales in the corresponding quarter of 2010 reflect general slow down of activity in the used car market, but show significant improvement in the operating margins.  Net losses for the same quarterly periods were $631,365 and $372,776, each of them including approximately $100,000 of accrued compensation to the officers and major shareholders of the Company.  Loss for the quarter ended September 30, 2010, includes $212,400 reduction to general and administrative expenses, related to departure of Mr. Long from the company, and cancellation of compensation accrued to him, along with corresponding accrued payroll taxes.

For the nine month periods ended September 30, 2010 and 2009, gross revenues were $574,263 and $703,601, gross profit/(loss) was $30,774 and ($16,102), respectively. Net losses for the same periods were $2,001,434 and $676,600, each of them including approximately $134,000 (after cancellation of Mr. Long’s compensation) and $298,000, respectively, of accrued compensation to the officers and major shareholders of the Company.  The losses included $1,146,265 and $113,500 of stock based compensation for consulting services.

Amounts for revenues and gross margins reflect sporadic operations of the development stage company, affected by limited financial resources. The trend in losses reflects the rise in business activity and increasing efforts in realizing the Company’s business plan and starting normal business operations.  Major areas of increasing expenditures include: legal and professional fees relating to compliance and reporting; consulting services (mainly paid for by stock issuances) relating to marketing, business development, investor and public relationships; travel and related expenses.

 
Liquidity and Capital Resources
 
At the end of the current quarter, the Company had no significant cash reserves or other liquid assets.

In an effort to raise additional capital and/or borrow funds the Company filed a Registration Statement under the Securities Act of 1933, for 61,225,000 shares common stock, $0.001 Par Value, by filing Form S-1.  The registration will not be effective until declared by the Securities and Exchange Commission. The Company is currently working to answer comments from the staff in order to have in declared effective, to help facilitate operational funding, growth capital, and inventory lines of credit.

Meeting future liquidity needs will require sales of dealership franchises, as well as income from new and pre-owned auto sales and service. We estimate it will take an estimated $165,000 per Company dealership location in addition to a line of credit of $1.2 million for floor plans at each location. This means as a company in an early stage of development, our ability to proceed with our plan of operation will continually be a function of our ability to raise sufficient capital to continue our operations.

 
4

 
 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Other Items and Conditions

As of September 30, 2010, the Company had $1,050,436 of current liabilities outstanding.  That amount included $538,415 owed to the three officers and major shareholders of the company (mostly accrued compensation), and $65,972 of convertible debt.

The Company has no off balance sheet arrangements, or significant obligations under any contracts.

 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

 
ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Operating Officer (COO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2010. Based on that evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2010. During the quarter ended on September 30, 2010, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 

 
5

 


PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority against us. None of our directors, officers or affiliates are (i) a party adverse to us in any legal proceedings, or (ii) have an adverse interest to us in any legal proceedings.


ITEM 1A.  RISK FACTORS

Not required.


ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
Information regarding sales after the second quarter of 2010:
 
               
Exemption
   
               
from
 
Terms of
Date
             
regulation
 
conversion
Sold
 
Amount
 
Securities Sold
 
Consideration *
 
claimed **
 
or exercise
07/16/10
 
1,000,000
 
Common Stock
 
Services
 
 Reg. D
 
None
07/16/10
 
500,000
 
Common Stock
 
Services
 
 Reg. D
 
None
07/28/10
 
4,000,000
 
Common Stock
 
Services
 
 Reg. D
 
None
08/25/10
 
7,166,666
 
Common Stock
 
Debt Conversion - $86,673
 
 Reg. D
 
None
10/11/10
 
2,500,000
 
Class A Convertible Preferred Stock
 
Debt Conversion - $100,000
 
 Reg. D
 
None
10/14/10
 
1,900,000
 
Common Stock
 
Cash - $380,000
 
 Reg. D
 
None

* For per share price, see Statement of Stockholders’ Equity.  No commissions or discounts were paid.

** The company relied on information from purchasers that they were accredited investors and/or such investors were provided adequate information and were otherwise determined to be suitable.  In all cases, there was no public solicitation.

During the period from January through April of 2010, the Company received $380,000 in investment funds, for which the shares of common stock were issued on October 14, 2010, at $0.20 per share, based on the original agreement.

 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.  (REMOVED AND RESERVED)

None.

 
ITEM 5.  OTHER INFORMATION

On July 27, 2010, the Company filed a Registration Statement under the Securities Act of 1933 for its Common stock, $0.001 Par Value, by filing Form S-1.  The registration will not be effective until declared by the Securities and Exchange Commission.

On August 25, 2010, the Company re-purchased and cancelled 13,625,900 shares of common stock from Mr. Dale Long, for $178,000, relating to his departure from the Company.


 
6

 


ITEM 6.  EXHIBITS

 
 

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.

 
EVCARCO, INC.
     
Date: December 6 , 2010
By:
/s/  Nikolay Frolov
   
Nikolay Frolov
   
Principal Executive Officer Pro Tem

Date: December 6 , 2010
By:
/s/  Nikolay Frolov
   
Nikolay Frolov
   
Chief Financial Officer
(Principal Financial and Accounting Officer)

 
 
 
 
 

 
 
7