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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, 2011

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).    x  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 10, 2011, there were 445,413,557 shares of Common Stock, $0.001 par value; and 1,500,000 shares of Class B 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 
4
     
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)
7
     
ITEM 5.
Other Information
7
     
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, 2011 (Unaudited) and December 31, 2010
F-2
   
Statements of Operations for the Three and the Nine Months Ended September 30, 2011 and 2010 (Unaudited), and  from Inception (October 14, 2008) to September 30, 2011 (Unaudited)
F-3
   
Statement of Stockholders' Equity/(Deficit) from Inception (October 14, 2008) through September 30, 2011 (Unaudited)
F-4 - F-6
   
Statements of Cash Flows for the Three and the Nine Months Ended September 30, 2011 and 2010 (Unaudited), and from Inception (October 14, 2008) to September 30, 2011 (Unaudited)
F-7 - F-8
   
Condensed Notes to Financial Statements
F-9 to F-17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-1

 
 
 
EVCARCO, Inc.
 
(A Development Stage Company)
 
Balance Sheets
 
             
             
   
September 30, 2011
   
December 31, 2010
 
   
(Unaudited)
       
ASSETS
           
             
Current assets
           
             
Cash and cash equivalents
  $ 17,377     $ 77,680  
Inventory
    136,500       180,150  
Other receivables
    19,577       21,386  
Prepaid expenses
    2,079       305,053  
                 
Total current assets
    175,533       584,269  
                 
Facilities and equipment
    37,865       37,865  
Accumulated depreciation
    (13,181 )     (7,702 )
                 
Facilities and equipment, net
    24,684       30,163  
                 
Other assets
    2,288       2,288  
                 
                 
TOTAL ASSETS
  $ 202,505     $ 616,720  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
Current liabilities
               
                 
Accounts payable
  $ 504,741     $ 569,215  
Accrued expenses
    200,065       81,312  
Accrued interest (related parties)
    6,795       2,818  
Other payables
    1,858       26,118  
Convertible notes payable
    358,850       95,443  
Loans payable to shareholders
    609,094       531,150  
                 
Total current liabilities
    1,681,403       1,306,056  
                 
Commitments and contingencies
               
                 
Stockholders' deficit
               
                 
15,000,000 shares Class A Convertible Preferred Stock
               
   Authorized at $0.001/par value ($1.00 liquidation preference),
               
   0 and 2,500,000 shares issued and outstanding
    -       2,500  
20,000,000 shares Class B Convertible Preferred Stock
               
   Authorized at $0.001/par value ($5.00 liquidation preference),
               
   1,500,000 and 0 shares issued and outstanding
    1,500       -  
450,000,000 shares Common Stock
               
   Authorized at $0.001/par value
               
   186,935,399 and 78,769,799 shares
               
   issued and outstanding, respectively
    186,935       78,770  
Additional paid-in capital
    3,987,675       3,259,574  
Deficit accumulated during development stage
    (5,655,008 )     (4,030,180 )
                 
Total stockholders' deficit
    (1,478,898 )     (689,336 )
                 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 202,505     $ 616,720  
                 
                 
                 
                 
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, 2011
   
Sep. 30, 2010
   
Sep. 30, 2011
   
Sep. 30, 2010
   
Sep. 30, 2011
 
     
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                                 
                                 
Revenues
    $ 120,745     $ 198,642     $ 469,840     $ 576,813     $ 2,208,948  
                                           
 
Total Revenues
    120,745       198,642       469,840       576,813       2,208,948  
                                           
Cost of goods sold
    111,823       176,332       439,211       547,039       2,144,204  
Inventory impairment
    -       -       -       27,800       185,408  
                                           
 
   Gross Profit/(Loss)
    8,922       22,310       30,629       1,974       (120,664 )
                                           
Sales and marketing expenses
    1,634       11,625       17,726       91,294       221,095  
General and administrative expenses
    290,076       616,925       1,441,072       2,064,530       5,190,448  
Gain on extinguishment of liabilities
    -       -       -       (212,400 )     (212,400 )
Depreciation and amortization
    1,846       2,024       5,479       5,077       15,281  
                                           
 
Total Operating Expenses
    293,556       630,574       1,464,277       1,948,501       5,214,424  
                                           
                                           
 
Operating Loss
    (284,634 )     (608,264 )     (1,433,648 )     (1,946,527 )     (5,335,088 )
                                           
Other income/(loss)
                                       
   Loss on asset disposition, net
    -       (714 )     -       (607 )     (1,356 )
   Interest income
    -       -       -       37       326  
   Interest expense (related parties)
    (6,881 )     (6,281 )     (21,065 )     (14,100 )     (47,057 )
   Interest expense
    (83,864 )     (19,681 )     (170,115 )     (40,816 )     (271,833 )
                                           
 
Total Other Loss
    (90,745 )     (26,676 )     (191,180 )     (55,486 )     (319,920 )
                                           
                                           
 
Loss before income taxes
    (375,379 )     (634,940 )     (1,624,828 )     (2,002,013 )     (5,655,008 )
                                           
Income tax (expense) benefit
    -       -       -       -       -  
                                           
 
Net loss
  $ (375,379 )   $ (634,940 )   $ (1,624,828 )   $ (2,002,013 )   $ (5,655,008 )
                                           
                                           
Basic and diluted loss per share
  $ (0.00 )   $ (0.01 )   $ (0.01 )   $ (0.03 )        
                                           
Weighted average number of
    156,149,205       77,470,083       125,434,990       66,912,404          
   common shares outstanding
                                       
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
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, 2011
 
                                                       
                                             
Deficit
       
                                             
accumulated
       
               
Class A Convertible
   
Class B Convertible
   
Additional
   
during the
       
   
Common stock
   
Preferred stock
   
Preferred stock
   
paid-in
   
development
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
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.-Dec. 2008
    930,000       930       -       -       -       -       154,070               155,000  
                                                                         
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.-Dec. 2009
    249,000       249       -       -       -       -       124,251               124,500  
                                                                         
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  
 
F-4

 
 
Statement of Stockholders' Equity/(Deficit) - continued
 
                                                            Deficit          
                                                            accumulated          
                    Class A Convertible     Class B Convertible     Additional     during the          
    Common stock     Preferred stock     Preferred stock     paid-in     development          
    Shares     Amount     Shares     Amount     Shares     Amount     capital     stage     Total  
                                                                         
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  
Stock buyback @ $0.013/sh. Aug. 2010
    (13,625,900 )     (13,626 )     -       -       -       -       (164,374 )             (178,000 )
Stock issued for loan @ $0.04/sh. Oct. 2010
    -       -       2,500,000       2,500       -       -       97,500               100,000  
Stock issued for cash @ $0.20/sh. Oct. 2010
    1,900,000       1,900       -       -       -       -       378,100               380,000  
Stock issued for note conv. @ $0.0044/sh. Dec. 2010
    2,272,727       2,273       -       -       -       -       7,727               10,000  
Stock issued for note conv. @ $0.0031/sh. Dec. 2010
    3,225,806       3,226       -       -       -       -       6,774               10,000  
Stock issued for services @ $0.0033/sh. Dec. 2010
    500,000       500       -       -       -       -       1,150               1,650  
Beneficial conversion features
                                                    78,281               78,281  
                                                                         
Net loss
                                                            (2,869,826 )     (2,869,826 )
                                                                         
                                                                         
Balance December 31, 2010
    78,769,799     $ 78,770       2,500,000     $ 2,500       -     $ -     $ 3,259,574     $ (4,030,180 )   $ (689,336 )
                                                                         
                                                                         
Stock issued for note conv. @ avg. $0.00196/sh. Jan. 2011
    11,198,413       11,198       -       -       -       -       10,802               22,000  
Stock issued for services @ $0.0048/sh. Feb. 2011
    500,000       500       -       -       -       -       1,900               2,400  
Stock exchange Feb. 2011
    (15,000,000 )     (15,000 )     -       -       1,500,000       1,500       13,500               -  
Stock issued for note conv. @ avg. $0.00268/sh. Feb. 2011
    7,623,689       7,624       -       -       -       -       12,776               20,400  
Stock issued for debt conv. @ $0.0104/sh. Feb. 2011
    4,800,000       4,800       -       -       -       -       45,200               50,000  
Stock issued for services @ $0.073/sh. Feb. 2011
    500,000       500       -       -       -       -       36,000               36,500  
Stock issued for note conv. @ $0.0018/sh. Feb. 2011
    18,000,000       18,000       -       -       -       -       14,400               32,400  
Stock issued for debt conv. @ $0.0152/sh. Mar. 2011
    3,290,000       3,290       -       -       -       -       46,710               50,000  
Stock issued for debt conv. @ $0.01/sh. Mar. 2011
    3,177,200       3,177       -       -       -       -       28,595               31,772  
Stock issued for debt conv. @ $0.014/sh. Apr. 2011
    3,560,000       3,560       -       -       -       -       46,440               50,000  
Stock issued for services @ $0.019/sh. Apr. 2011
    1,500,000       1,500       -       -       -       -       27,000               28,500  
Stock issued for note conv. @ $0.011/sh. May 2011
    4,835,087       4,835       -       -       -       -       48,165               53,000  
Stock issued for debt conv. @ $0.0147/sh. May 2011
    3,400,000       3,400       -       -       -       -       46,600               50,000  
Stock issued for debt conv. @ $0.0089/sh. May 2011
    3,664,607       3,665       -       -       -       -       28,950               32,615  
Stock issued for debt conv. @ $0.0073/sh. May 2011
    3,880,086       3,880       -       -       -       -       24,445               28,325  
Stock issued for debt conv. @ $0.0074/sh. Jun. 2011
    6,770,000       6,770       -       -       -       -       43,230               50,000  
Stock conversion Jun. 2011
    10,000,000       10,000       (2,500,000 )     (2,500 )     -       -       (7,500 )             -  
Stock buyback @ $0.0098/sh. Jun. 2011
    (8,102,500 )     (8,103 )     -       -       -       -       (70,897 )             (79,000 )
 
F-5

 
 
Statement of Stockholders' Equity/(Deficit) - continued
 
                                              Deficit        
                                              accumulated        
                Class A Convertible     Class B Convertible     Additional     during the        
    Common stock     Preferred stock     Preferred stock     paid-in     development        
    Shares     Amount     Shares     Amount     Shares     Amount     capital     stage     Total  
                                                                         
Stock issued for services @ $0.026/sh. Jul. 2011
    500,000       500       -       -       -       -       12,500               13,000  
Stock issued for debt conv. @ $0.0059/sh. Aug. 2011
    7,001,367       7,001       -       -       -       -       33,999               41,000  
Stock issued for note conv. @ $0.0058/sh. Aug. 2011
    2,068,966       2,069       -       -       -       -       9,931               12,000  
Stock issued for note conv. @ $0.0026/sh. Aug. 2011
    10,181,818       10,182       -       -       -       -       14,218               24,400  
Stock issued for note conv. @ $0.0023/sh. Sep. 2011
    4,347,826       4,348       -       -       -       -       5,652               10,000  
Stock issued for note conv. @ $0.0019/sh. Sep. 2011
    5,263,158       5,263       -       -       -       -       4,737               10,000  
Stock issued for debt conv. @ $0.00085/sh. Sep. 2011
    14,705,883       14,706       -       -       -       -       (2,206 )             12,500  
Stock issued for services @ $0.0024/sh. Sep. 2011
    500,000       500       -       -       -       -       700               1,200  
Beneficial conversion features
                                                    252,254               252,254  
                                                                         
Net loss
                                                            (1,624,828 )     (1,624,828 )
                                                                         
                                                                         
Balance September 30, 2011 (Unaudited)
    186,935,399     $ 186,935       -     $ -       1,500,000     $ 1,500     $ 3,987,675     $ (5,655,008 )   $ (1,478,898 )
                                                                         
                                                                         
                                                                         
The accompanying footnotes are an integral part of these financial statements.
                   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-6

 
 
EVCARCO, Inc.
 
(A Development Stage Company)
 
Statements of Cash Flows
 
                   
               
Inception
 
   
For the Nine
   
For the Nine
   
(October 14, 2008)
 
   
Months Ended
   
Months Ended
   
Through
 
   
Sep. 30, 2011
   
Sep. 30, 2010
   
Sep. 30, 2011
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                   
Operating activities:
                 
                   
Net loss
 
$
(1,624,828
)
 
$
(2,002,013
)
 
$
(5,655,008
)
Adjustments to reconcile net loss to net cash flows
                       
used in operating activities:
                       
Depreciation and amortization
   
5,479
     
5,077
     
15,281
 
Consulting expenses (stock)
   
386,653
     
1,146,265
     
2,188,100
 
Interest expense (stock)
   
3,800
     
-
     
3,800
 
Beneficial conversion feature amortization
   
162,469
     
15,560
     
208,193
 
Loss on asset dispositions
   
-
     
607
     
1,356
 
Gain on extinguishment of debt
   
-
     
(212,400
)
   
(212,400
)
Inventory received in consideration
                       
  for stock issuance
   
-
     
-
     
267,140
 
                         
Change in operating assets and liabilities:
                       
Inventory
   
43,650
     
(226,250
)
   
(136,500
)
Other receivables
   
1,809
     
(12,173
)
   
(19,577
)
Prepaid expenses
   
(2,079
)
   
-
     
(2,079
)
Other assets
   
-
     
-
     
(3,792
)
Accounts payable
   
331,738
     
352,144
     
900,953
 
Accrued expenses
   
142,345
     
9,987
     
223,657
 
Accrued interest (related parties)
   
3,977
     
6,553
     
6,795
 
Other payables
   
(24,260
)
   
21,283
     
1,858
 
                         
Net cash flows used in operating activities
   
(569,247
)
   
(895,360
)
   
(2,212,223
)
                         
                         
Investing activities:
                       
                         
Purchase of facilities and equipment
   
-
     
(35,414
)
   
(43,068
)
Proceeds from sales of property and equipment
   
-
     
2,829
     
2,829
 
                         
Net cash flows used in investing activities
   
-
     
(32,585
)
   
(40,239
)
                         
                         
Financing activities:
                       
Payments on notes payable
   
-
     
(2,237
)
   
(63,327
)
Proceeds from loans payable
   
-
     
-
     
170,000
 
Proceeds from convertible notes payable
   
200,000
     
95,000
     
348,000
 
Net change in loans payable (related parties)
   
308,944
     
336,956
     
1,009,916
 
Issuance of common stock
   
-
     
142,000
     
840,250
 
Proceeds from common stock not yet issued
   
-
     
380,000
     
-
 
Common stock buyback
   
-
     
(35,000
)
   
(35,000
)
                         

 
 
F-7

 
 
Statements of Cash Flows - continued
 
               
Inception
 
   
For the Nine
   
For the Nine
   
(October 14, 2008)
 
   
Months Ended
    Months Ended    
Through
 
   
Sep. 30, 2011
   
Sep. 30, 2010
   
Sep. 30, 2011
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                         
Net cash flows provided by financing activities
   
508,944
     
916,719
     
2,269,839
 
                         
Increase/(decrease) in cash and cash equivalents
   
(60,303
)
   
(11,226
)
   
17,377
 
                         
Cash and cash equivalents at beginning of period
   
77,680
     
48,634
     
-
 
                         
Cash and cash equivalents at end of period
 
$
17,377
   
$
37,408
   
$
17,377
 
                         
                         
Cash paid for:
                       
                         
Interest
 
$
2,000
   
$
22,537
   
$
54,374
 
Interest (related parties)
 
$
17,088
   
$
7,547
   
$
40,262
 
                         
Non-cash activities:
                       
                         
Stock issued for property
 
$
-
   
$
-
   
$
267,140
 
Stock issued for services
 
$
81,600
   
$
1,757,150
   
$
2,188,100
 
Stock issued for loans and accounts payable
 
$
580,412
   
$
86,673
   
$
807,085
 
Stock buyback for balance of shareholder advances
 
$
79,000
   
$
143,000
   
$
222,000
 
Debt discount from beneficial conversion feature
 
$
252,254
   
$
47,584
   
$
330,535
 
                         
The accompanying footnotes are an integral part of these financial statements.
                 

 
 

 
F-8

 
EVCARCO, INC.
(A Development Stage Company)
Condensed Notes to Financial Statements
September 30, 2011

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.  The Company is in the development stage.


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, 2010. The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the year ending December 31, 2011.

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 other receivables, accounts payable, accrued expenses, and other payables approximate fair value due to their short maturities. Carrying value of 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, 2011
   
Dec. 31, 2010
 
             
New vehicles
  $ 69,272     $ 84,272  
Pre-owned vehicles
    38,100       66,750  
Other items
    29,128       29,128  
                 
Total inventory
  $ 136,500     $ 180,150  

At the end of 2010, we made a decision to write down to market our inventory of Wheegos.  Impairment of $74,755, related to seven 2010 Whips, with cost between $16,000 and $20,000. Each was written down to $7,500, in line with the price offered by the manufacturer at that time.
 
 
 

 
F-9

 
EVCARCO, INC.
(A Development Stage Company)
Condensed Notes to Financial Statements
September 30, 2011
 
NOTE 4.  INVENTORY - continued
 
During the first quarter of 2010, the Company had additional impairment related to the vehicles that were devalued at the end of 2009.  The impairment, in the amount of $27,800 related to ECM model that became inoperable and the manufacturer was out of business, and includes some repair and transportation costs.

At the end of 2009, we made a decision to impair inventory in the amount of $82,853.  $37,976 was 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.

For the period from Inception (October 14, 2008) through September 30, 2011, total impairments of $185,408 are reflected as inventory impairment on the accompanying statements of operations.


NOTE 5.  PREPAID EXPENSES

As of September 30, 2011 and December 31, 2010, balances of prepaid expenses were $2,079 and $305,053, respectively. Balance at September 30, 2011 represented prepaid insurance. Balance as December 31, 2010 represented the unearned portion of stock compensation issued under consulting agreements, determined as follows:

 
Nature of services
 
Term of the contract
 
Number of shares issued
   
Fair value assigned
   
Expensed
   
Unearned portion
 
                             
Amortization
            $ -     $ 136,667     $ (136,667 )
Legal and investor relationship services
 
01/01/10 - 06/30/10
    300,000       54,070       54,070       -  
International business development and legal services
 
02/26/10 - 02/25/11
    2,600,000       1,170,000       983,280       186,720  
Marketing, investor relationships, business and strategy consulting
 
05/15/10 - 05/14/11
    6,000,000       240,000       150,000       90,000  
Public relations
 
07/28/10 - 01/28/11
    4,000,000       170,000       141,667       28,333  
Various public relations, marketing, business and technical services
 
6 months or less
    3,327,000       124,730       124,730       -  
 
2010 Totals
        16,227,000     $ 1,758,800     $ 1,590,414     $ 305,053  
                                     
                                     
Amortization
              $ -     $ 305,053     $ (305,053 )
Various public relations, marketing, business and technical services
 
6 months or less
    3,500,000       81,600       81,600       -  
Nine Months Ended
September 30, 2011 Totals
        3,500,000     $ 81,600     $ 386,653     $ -  
                                     


 
F-10

 
EVCARCO, INC.
(A Development Stage Company)
Condensed Notes to Financial Statements
September 30, 2011

NOTE 6.  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 was unsecured and matured 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, with 39% discount to the market price, at the point of conversion. The Company recorded $24,251 related to the deemed beneficial conversion feature of this note, of which $22,455 has been amortized during 2010, and $1,796 has been amortized to interest expense in the accompanying statements of operations for the nine months ended September 30, 2011.  During December of 2010, $20,000 of the principal outstanding under the note was converted into 5,498,533 shares of common stock of the Company.  As of December 31, 2010, the balance of the note was $40,000, and the balance of interest accrued under the note was $2,705. During January and February of 2011, the remaining note balance, including $2,400 of accrued interest, was converted into 18,822,102 shares of common stock of the Company.

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 was unsecured and matured 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, with 40% discount to the market price, at the point of conversion. The Company recorded $23,333 related to the deemed beneficial conversion feature of this note, of which $16,448 has been amortized during 2010, and $6,885 has been amortized to interest expense in the accompanying statements of operations for the nine months ended September 30, 2011. On February 27, 2011, $32,400 of the principal outstanding under the note was converted into 18,000,000 shares of common stock of the Company.  As of September 30, 2011 and December 31, 2010, principal balance of note was $2,600 and $35,000, respectively. Interest paid under the note for the nine months ended September 30, 2011, was $1,755.

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, with 39% discount to the market price, at the point of conversion. The Company recorded $30,697 related to the deemed beneficial conversion feature of this note, of which $6,822 has been amortized during 2010, and $23,875 has been amortized to interest expense in the accompanying statements of operations for the nine months ended September 30, 2011.  In May of 2011, the balance outstanding under the note was converted into 4,835,087 shares of common stock of the Company.

On February 3, 2011, the Company issued a convertible promissory note in the amount of $35,000, bearing interest at a rate of 8% per annum. The note is unsecured and matures on October 24, 2011. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 39% discount to the market price, at the point of conversion. The Company recorded $22,377 related to the deemed beneficial conversion feature of this note, all of which has been amortized to interest expense in the accompanying statements of operations for the nine months ended September 30.  In August of 2011, the balance outstanding under the note, including $1,400 of accrued interest, was converted into 12,250,784 shares of common stock of the Company.

On March 1, 2011, 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 November 28, 2011. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 39% discount to the market price, at the point of conversion. The Company recorded $38,361 related to the deemed beneficial conversion feature of this note, of which $32,676 has been amortized to interest expense in the accompanying statements of operations for the nine months ended September 30, 2011. In September of 2011, the $20,000 of the principal balance outstanding under the note was converted into 9,610,984 shares of common stock of the Company. As of September 30, 2011, the principal balance was $40,000. Subsequent to quarter end, in October of 2011, the balance outstanding under the note, including $2,400 of accrued interest, was converted into 66,434,921 shares of common stock of the Company.
 
 
 
 
 
F-11

 
EVCARCO, INC.
(A Development Stage Company)
Condensed Notes to Financial Statements
September 30, 2011

NOTE 6.  CONVERTIBLE NOTES PAYABLE - continued
 
On April 21, 2011, the Company issued a convertible promissory note in the amount of $37,500, bearing interest at a rate of 8% per annum. The note is unsecured and matures on January 2, 2012. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 39% discount to the market price, at the point of conversion. The Company recorded $23,975 related to the deemed beneficial conversion feature of this note, of which $14,208 has been amortized to interest expense in the accompanying statements of operations for the nine months ended September 30, 2011.  As of September 30, 2011, the principal remained unchanged. Subsequent to quarter end, in October and November of 2011, $35,000 of the principal balance outstanding under the note was converted into 88,500,000 shares of common stock of the Company.

On May 27, 2011, the Company issued a convertible promissory note in the amount of $32,500, bearing interest at a rate of 8% per annum. The note is unsecured and matures on February 16, 2012. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 39% discount to the market price, at the point of conversion. The Company recorded $20,779 related to the deemed beneficial conversion feature of this note, of which $9,240 has been amortized to interest expense in the accompanying statements of operations for the nine months ended September 30, 2011.  As of September 30, 2011, the principal remained unchanged.

On July 26, 2011, the Company issued a convertible promissory note in the amount of $35,000, bearing interest at a rate of 8% per annum. The note is unsecured and matures on April 17, 2012. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 39% discount to the market price, at the point of conversion. The Company recorded $22,377 related to the deemed beneficial conversion feature of this note, of which $4,974 has been amortized to interest expense in the accompanying statements of operations for the nine months ended September 30, 2011.  As of September 30, 2011, the principal remained unchanged.


NOTE 7.  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 reflected as gain on extinguishment of liabilities on the accompanying statements of operations.

For the nine months ended September 30, 2011, the Company accrued $338,800 in salaries payable to its three officers and major shareholders. For the period since inception (October 14, 2008) through September 30, 2011, the Company accrued $949,570 to those individuals (excluding compensation to Mr. Long, described in the paragraph above).

On May 15, 2011, Mr. Scott O’Neal resigned from his position of COO, as well as the Board of Directors of the Company.  Under the terms of Separation Agreement of May 23, 2011, Mr. O’Neal surrendered 8,102,500 in exchange for $79,000, (at a price per share representing 35% discount to the closing price on May 20, 2011).  On May 24, 2011, the Company has executed a Convertible Note payable in the amount of $310,000 for the compensation accrued to Mr. O’Neal to the date of resignation. The Note matures on February 28, 2012; carries 5% interest; and contains conversion rights at 35% discount to then current market price, as defined in the agreement.  The Company recorded $124,385 related to the deemed beneficial conversion feature of this note, of which $46,437 has been amortized to interest expense in the accompanying statements of operations for the nine months ended September 30, 2011. As of September 30, 2011, the principal balance remained the same, and was reflected in the balance of convertible notes payable, on the accompanying balance sheets, as Mr. O’Neal is no longer considered a related party.  As of the same date, the balance of interest accrued under the note was $5,465.
 
 
 
F-12

 
EVCARCO, INC.
(A Development Stage Company)
Condensed Notes to Financial Statements
September 30, 2011

NOTE 7.  RELATED PARTY TRANSACTIONS - continued
 
As of September 30, 2011 and December 31, 2010, the balances of shareholder notes were $609,094 and $531,150, 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 September 30, 2011, and December 31, 2010, was $6,795 and $2,818, respectively.  Interest paid during the nine months ended September 30, 2011, was $17,088.  These notes payable do not approximate fair value, as they are with related parties, and do not bear market rates of interest.

For the nine months ended September 30, 2011, the Company accrued $105,000 in salaries payable to two officers and directors, who joined the Company in the last quarter of 2010. As of September 30, 2011, and December 31, 2010, balance of accrued expenses included $145,800 and $32,400, respectively, of compensation and related payroll taxes for those individuals.


NOTE 8.  OPERATING SEGMENTS

During the period from inception through September 30, 2011 the Company operated as a single business segment.


NOTE 9.  GOING CONCERN

The financial statements of the Company have been prepared on the basis of accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had negative working capital of $1,505,870 and an accumulated deficit of $5,655,008 at September 30, 2011.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts, or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
 
The Company has primarily funded its operations through the net proceeds received from the Company's issuance of stock and convertible debt.  The Company plans to issue additional equity and/or debt to fund its future operations.
 
Based on the Company’s current liquidity position, the Company will need to raise additional capital through debt or equity funding within the next twelve months.  There is no assurance that any such financing will be available on acceptable terms or at all.  Should continuing funding requirements not be met, the Company’s operations may cease to exist.


NOTE 10.  CONVERTIBLE PREFERRED STOCK

Effective April 29, 2009 the Company filed an amendment with the Nevada Secretary of State to authorize Class A convertible preferred stock in the amount of 15,000,000 shares at $0.001 par value.  Class A shares have no dividend rights, except as may be declared by the Board of Directors in its sole discretion. Class A stock is ranked senior and prior to the Corporation’s common stock as to dividends and upon liquidation. Class A shares have liquidation rights of $1 per share, and are entitled to 4 votes each, on any matters requiring shareholders’ vote. One share of Class A stock can be converted into 4 shares of common stock at any time, upon demand from of the holder.
 
 
 
 
 
F-13

 
EVCARCO, INC.
(A Development Stage Company)
Condensed Notes to Financial Statements
September 30, 2011
 
NOTE 10.  CONVERTIBLE PREFERRED STOCK - continued
 
On October 11, 2010, the Company issued 2,500,000 shares of Class A convertible preferred stock to an officer and director for $100,000 in partial satisfaction of the loan payable to such officer and director. The number of Class A shares was determined by applying a discount, for the lack of marketability and liquidity, of approximately 30% to the market price of common stock, multiplied by four, which represents conversion rights of a Class A share into common stock. On June 10, 2011, the holder of these Class A shares converted all of them into 10,000,000 shares of common stock.

Effective February 11, 2011 the Company filed an amendment with the Nevada Secretary of State to authorize Class B convertible preferred stock in the amount of 20,000,000 shares at $0.001 par value.  Class B shares have no dividend rights, except as may be declared by the Board of Directors in its sole discretion. Class B stock is ranked senior and prior to the Corporation’s Class A convertible preferred stock and to the Corporation’s common stock as to dividends and upon liquidation. Class B shares have liquidation rights of $5 per share, and are entitled to 1,000 votes each, on any matters requiring shareholders’ vote. One share of Class B stock can be converted into 10 shares of common stock at any time, upon demand from of the holder.

In February of 2011, the Board of Directors approved an exchange for the three officers, directors and major shareholders - Mr. O’Neal, Mr. Prous and Mr. Frolov.  The exchange resulted in cancellation of 15,000,000 shares of common stock, in total, held by the individuals, and issuance of 1,500,000 shares of Class B convertible preferred stock, based on 1:10 conversion rights attached to Class B shares.  On June 10, 2011, relating to his separation from the Company, Mr. O’Neal exchanged 500,000 shares of Class B convertible preferred stock, with Mr. Frolov, for 5,000,000 shares of common stock.


NOTE 11.  COMMON STOCK

At inception on October 14, 2008, the Company issued 46,500,000 shares of common stock to founders for a cash consideration of $15,500.

From the inception on October 14, 2008 through December 31, 2008, the Company issued 930,000 shares of common stock to various investors for a cash consideration of $155,500.

From the inception on October 14, 2008 through December 31, 2008, the Company issued 5,100,000 shares of common stock for professional services.

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.

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 post-split basis.

On July 14, 2009, the Company issued 1,406,000 shares of common stock for property, in the form of pre-owned vehicles.  We acquired thirty five pre-owned SMART cars in exchange for 1,406,000 shares of common stock and $47,000 of cash. Most of those cars were sold within two months of acquisition, and since at the time, there was no public market for our stock, we determined that proceeds realized from the sales were more reliable indication of value, than the value placed on private placement transactions at that time. Based on average selling price of the cars, we determined the value of the lot to be $314,140, and consequently, the value of the stock - $267,140, or approximately $0.19 per share.
 
 
 
 
 
F-14

 
EVCARCO, INC.
(A Development Stage Company)
Condensed Notes to Financial Statements
September 30, 2011
 
NOTE 11.  COMMON STOCK - continued
 
On October 27, 2009, the Company issued 6,000,000 shares of common stock to founders for a cash consideration of $2,000.  This issue represents correction of an accounting error. It was our intention to record these shares as a stock subscription at the time the original founders’ shares were issued. The correction was not material enough to the financial statements to require restatement.

On October 27, 2009, the Company issued 120,000 shares of common stock to settle a note payable in the amount of $20,000.  We were able to negotiate a settlement of $20,000 advance, received in April of 2009 from unrelated party, in exchange for stock.  Negotiated price per share was equivalent to the prices received in private placement transaction around the time of the advance (considering the stock split which occurred in July of 2009).

During 2009, the Company issued 373,500 shares of common stock to various investors for a cash consideration of $145,750.

During 2009, the Company issued 696,000 shares of common stock for professional services.

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.

In August of 2010, the Company issued 7,166,666 shares of common stock in complete satisfaction of note payable with outstanding principal and interest balance of $86,673. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.

In December of 2010, the Company issued 5,498,533 shares of common stock in partial satisfaction of principal of convertible note payable, originated on June 7, 2010, in the amount of $20,000. During January and February of 2011, the Company issued 18,822,102 shares of common stock in complete satisfaction of this convertible note payable, in the amount of $42,400. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.

During 2010, the Company issued 2,378,000 shares of common stock to various investors for a cash consideration of $522,000, based on the price negotiated in each individual, private agreement.

During 2010, the Company issued 16,227,000 shares of common stock for professional services, valued at $1,758,800, based on the market price at the time of issuance.

On February 1, 2011, the Company issued 500,000 shares of common stock for professional services, valued at $2,400, based on the market price at the time of issuance.

On February 10, 2011, the Company issued 4,800,000 shares of common stock in satisfaction of $50,000 owed under a consulting agreement.

On February 18, 2011, the Company issued 500,000 shares of common stock for professional services, valued at $36,500, based on the market price at the time of issuance.

On February 27, 2011, the Company issued 18,000,000 shares of common stock in partial satisfaction of principal of convertible note payable, originated on August 25, 2010, in the amount of $32,400.

 
 
 
 
F-15

 
EVCARCO, INC.
(A Development Stage Company)
Condensed Notes to Financial Statements
September 30, 2011
 
NOTE 11.  COMMON STOCK - continued
 
On March 29, 2011, the Company issued 3,290,000 shares of common stock in satisfaction of $50,000 owed under a consulting agreement.

On March 30, 2011, the Company issued 3,177,200 shares of common stock in satisfaction of trade payables in the amount of $31,772.

On April 21, 2011, the Company issued 3,560,000 shares of common stock in satisfaction of $50,000 owed under a consulting agreement.

On April 27, the Company issued 1,500,000 shares of common stock for professional services, valued at $28,500, based on the market price at the time of issuance.

In May of 2011, the Company issued 4,835,087 shares of common stock in full satisfaction of convertible note payable, originated on November 3, 2010, in the amount of $53,000. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.

In May of 2011, the Company issued 7,544,693 shares of common stock in satisfaction of trade payables in the amount of $60,940.

On May 12, 2011, the Company issued 3,400,000 shares of common stock in satisfaction of $50,000 owed under a consulting agreement.

On June 16, 2011, the Company issued 6,770,000 shares of common stock in satisfaction of $50,000 owed under a consulting agreement.

On June 10, 2011, the Company issued 10,000,000 shares of common stock due to conversion by, the holder, of 2,500,000 shares of Class A convertible preferred stock.

On June 10, 2011, the Company re-purchased and cancelled 8,102,500 shares of common stock from Mr. Scott O’Neal, for $79,000, relating to his departure from the Company. The amount was offset against advances made to Mr. O’Neal.

Effective June 22, 2011 the Company filed an amendment with the Nevada Secretary of State to increase authorized shares of common stock from 180,000,000 to 450,000,000.

On July 14, 2011, the Company issued 500,000 shares of common stock for professional services, valued at $13,000, based on the closing price on May 2, 2011, at which date the stock compensation was due.

In August of 2011, the Company issued 7,001,367 shares of common stock in satisfaction of trade payables in the amount of $41,000.

In August of 2011, the Company issued 12,250,784 shares of common stock in complete satisfaction of convertible note payable, originated on February 3, 2011, with the principal amount of $35,000, and accrued interest of $1,400.

In September of 2011, the Company issued 9,610,984 shares of common stock in partial satisfaction of convertible note payable, originated on March 1, 2011, in the amount of $20,000. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.

In September of 2011, the Company issued 14,705,883 shares of common stock in satisfaction of trade payables in the amount of $12,500.

On September 30, 2011, the Company issued 500,000 shares of common stock for professional services, valued at $1,200, based on the market price at the time of issuance.
 
 
 
 
F-16

 
EVCARCO, INC.
(A Development Stage Company)
Condensed Notes to Financial Statements
September 30, 2011
 
NOTE 12.  SUBSEQUENT EVENTS

In October of 2011, the Company issued 66,434,921 shares of common stock in complete satisfaction of remaining principal balance outstanding under the convertible note payable, originated on March 1, 2011 in the amount of $40,000, and accrued interest of $2,400.

In October and November of 2011, the Company issued 88,500,000 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on April 21, 2011, in the amount of $35,000.

During October 2011, and through the date of this filing, the Company issued 103,543,237 shares of common stock in satisfaction of trade payables in the amount of $42,500.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
F-17

 

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.

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.


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.
 
·           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.
 
 
 
 
 
 

 
3

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
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, 2011, we have generated revenues of $2,208,948 and incurred cumulative net losses of $5,655,008. The losses include approximately $950,000 of accrued salaries, and approximately $2,188,000 of stock based compensation to consultants. Limited financial resources have affected our ability to acquire inventory, and our financial statements reflect very sporadic purchasing and sales activity, which may continue until we are able to raise the sufficient capital.

As of September 30, 2011, the Company had assets of $202,505, and total liabilities of $1,681,403.  As of December 31, 2010, the Company had assets of $616,720, and total liabilities of $1,306,056.

For the quarterly periods ended September 30, 2011 and 2010, gross revenues were $120,745 and $198,642, gross profit was $8,922 and $22,310, respectively. Net losses for the same quarterly periods were $375,379 and $634,940, including approximately $120,000 and $94,000, respectively, of accrued compensation to the officers of the Company.

For the nine month periods ended September 30, 2011 and 2010, gross revenues were $469,840 and $576,813, gross profit was $30,629 and $1,974, respectively. Net losses for the same periods were $1,624,828 and $2,002,013, including approximately $444,000 and $313,000, respectively, of accrued compensation to the officers of the Company.

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.

 
Liquidity and Capital Resources
 
As of September 30, 2011, the Company had no significant cash reserves or other liquid assets.

As of September, 2011, working capital deficiency amounted to $1,505,870.

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.
 

Other Items and Conditions

As of September 30, 2011, the Company had $1,681,403 of current liabilities outstanding.  That amount included $609,094 owed to the two officers and major shareholders of the Company (primarily for accrued compensation), and $358,850 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.

 
4

 


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 Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2011. Based on that evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2011. During the quarter ended on September 30, 2011, 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 unregistered sales not included in previous reports:
 
               
Exemption
   
               
from
 
Terms of
Date
             
regulation
 
conversion
Sold
 
Amount
 
Securities Sold
 
Consideration *
 
claimed **
 
or exercise
09/02/11
 
4,347,826
 
Common Stock
 
Debt Conversion - $10,000
 
 Reg. D
 
None
09/27/11
 
5,263,158
 
Common Stock
 
Debt Conversion - $10,000
 
 Reg. D
 
None
 09/30/11
 
14,705,883
 
Common Stock
 
Debt Conversion - $12,500
 
 Reg. D
 
 None
09/30/11
 
500,000
 
Common Stock
 
Services
 
 Reg. D
 
None
10/06/11
 
7,777,778
 
Common Stock
 
Debt Conversion - $7,000
 
 Reg. D
 
None
10/10/11
 
7,500,000
 
Common Stock
 
Debt Conversion - $6,000
 
 Reg. D
 
None
10/10/11
 
22,727,273
 
Common Stock
 
Debt Conversion - $12,500
 
 Reg. D
 
None
10/12/11
 
7,857,143
 
Common Stock
 
Debt Conversion - $5,500
 
 Reg. D
 
None
10/14/11
 
10,491,803
 
Common Stock
 
Debt Conversion - $6,400
 
 Reg. D
 
None
10/17/11
 
7,500,000
 
Common Stock
 
Debt Conversion - $4,500
 
 Reg. D
 
None
10/18/11
 
7,500,000
 
Common Stock
 
Debt Conversion - $4,500
 
 Reg. D
 
None
10/20/11
 
7,500,000
 
Common Stock
 
Debt Conversion - $4,500
 
 Reg. D
 
None
10/21/11
 
8,000,000
 
Common Stock
 
Debt Conversion - $4,000
 
 Reg. D
 
None
10/21/11
 
31,250,000,
 
Common Stock
 
Debt Conversion - $12,500
 
 Reg. D
 
None
10/24/11
 
5,074,161
 
Common Stock
 
Debt Conversion - $2,600
 
 Reg. D
 
None
10/24/11
 
12,800,000
 
Common Stock
 
Debt Conversion - $6,400
 
 Reg. D
 
None
10/24/11
 
13,000,000
 
Common Stock
 
Debt Conversion - $6,500
 
 Reg. D
 
None
10/25/11
 
13,000,000
 
Common Stock
 
Debt Conversion - $6,500
 
 Reg. D
 
None
10/31/11
 
12,500,000
 
Common Stock
 
Debt Conversion - $5,000
 
 Reg. D
 
None
11/01/11
 
17,500,000
 
Common Stock
 
Debt Conversion - $4,375
 
 Reg. D
 
None
11/02/11
 
12,500,000
 
Common Stock
 
Debt Conversion - $5,000
 
 Reg. D
 
None
11/03/11
 
12,500,000
 
Common Stock
 
Debt Conversion - $5,000
 
 Reg. D
 
None
11/03/11
 
16,500,000
 
Common Stock
 
Debt Conversion - $4,125
 
 Reg. D
 
None
11/07/11
 
12,500,000
 
Common Stock
 
Debt Conversion - $3,500
 
 Reg. D
 
None
11/08/11
 
12,500,000
 
Common Stock
 
Debt Conversion - $3,500
 
 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.

 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.
 
 
 

 
 
6

 

ITEM 4.  (REMOVED AND RESERVED)

None.

 
ITEM 5.  OTHER INFORMATION

None.


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: November 21, 2011
By:
/s/  Mack Sanders
   
Mack Sanders
   
Principal Executive Officer

Date: November 21, 2011
By:
/s/  Nikolay Frolov
   
Nikolay Frolov
   
Chief Financial Officer
(Principal Financial and Accounting Officer)

 
 
 
 
 

 
 
7