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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, 2012

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: 000-53978
 
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

 
 
 
1

 
 


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 December 14, 2012, there were 74,626,970 shares of Common Stock, $0.001 par value; and 8,000,000 shares of Class B Convertible Preferred Stock, $0.001 par value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 


 
 
 
2

 
 



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
4
     
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk 
6
     
ITEM 4.
Controls and Procedures
6
     
PART II
OTHER INFORMATION
 
     
ITEM 1.
Legal Proceedings
7
     
ITEM 1A.
Risk Factors 
7
     
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
7
     
ITEM 3.
Defaults Upon Senior Securities
7
     
ITEM 4.
Mine Safety Disclosures
7
     
ITEM 5.
Other Information
7
     
ITEM 6.
Exhibits
8
     
SIGNATURES
 
8
 
 

 
 
3

 
 
 
 
PART I - FINANCIAL INFORMATION
 
 
ITEM 1. FINANCIAL STATEMENTS
 
EVCARCO, INC. AND SUBSIDIARY
 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
Consolidated Condensed Financial Statements
 
   
Consolidated Condensed Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011
F-2
   
Consolidated Condensed Statements of Operations for the Three and the Nine Months Ended September 30, 2012 and 2011 (Unaudited)
F-3
   
Consolidated Statement of Stockholders' Deficit for the Nine Months Ended September 30, 2012 (Unaudited)
F-4 to F-5
   
Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011 (Unaudited)
F-6
   
Condensed Notes to Consolidated Financial Statements
F-7 to F-15
 
 
 

 

 
 

 
 

 
F-1

 

EVCARCO, Inc. and Subsidiary
 
Consolidated Balance Sheets
 
   
   
September 30, 2012
   
December 31, 2011
 
   
(Unaudited)
       
ASSETS
           
             
Current assets
           
             
Cash and cash equivalents
 
$
14,109
   
$
26,046
 
Accounts Receivable
   
28,801
     
-
 
Inventory
   
111,508
     
165,778
 
Other receivables
   
19,177
     
21,045
 
Prepaid expenses
   
3,333
     
1,188
 
                 
Total current assets
   
176,928
     
214,057
 
                 
Property and equipment
   
616,028
     
32,807
 
Accumulated depreciation
   
(87,602
)
   
(13,470
)
                 
Property and equipment, net
   
528,426
     
19,337
 
                 
Other assets
   
12,435
     
2,288
 
                 
                 
TOTAL ASSETS
 
$
717,789
   
$
235,682
 
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
Current liabilities
               
                 
Accounts payable
 
$
912,818
   
$
606,527
 
Accrued expenses
   
715,329
     
197,070
 
Accrued interest (related parties)
   
4,992
     
14,978
 
Straight line rent
   
19,690
     
-
 
Other payables
   
11,021
     
4,247
 
Convertible notes payable
   
1,182,597
     
346,530
 
Loans payable to shareholders
   
129,788
     
710,633
 
                 
Total current liabilities
   
2,976,235
     
1,879,985
 
                 
Commitments and contingencies
               
                 
Stockholders' deficit
               
                 
15,000,000 shares Class A Convertible Preferred Stock
               
   Authorized at $0.001/par value ($1.00 liquidation preference),
               
   no shares issued and outstanding
   
-
     
-
 
75,000,000 shares Class B Convertible Preferred Stock
               
   Authorized at $0.001/par value ($5.00 liquidation preference),
               
   8,000,000 and 1,500,000 shares issued and outstanding, respectively
   
8,000
     
1,500
 
900,000,000 shares Common Stock
               
   Authorized at $0.001/par value
               
   42,208,894 and 1,336,930 shares
               
   issued and outstanding, respectively
   
42,210
     
1,337
 
Additional paid-in capital
   
5,310,295
     
4,332,266
 
Accumulated deficit
   
(7,618,951
)
   
(5,979,406
)
                 
Total Stockholders' Deficit
   
(2,258,446
)
   
(1,644,303
)
                 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
717,789
   
$
235,682
 
                 
The accompanying footnotes are an integral part of these consolidated financial statements.
         
 
 
 
 
 
F-2

 
 

 
EVCARCO, Inc. and Subsidiary
 
Consolidated Statements of Operations
 
   
                           
                           
     
For the Three Months Ended
   
For the Nine Months Ended
 
     
Sep. 30, 2012
   
Sep. 30, 2011
   
Sep. 30, 2012
   
Sep. 30, 2011
 
     
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                           
                           
Revenues
   
$
241,412
   
$
120,745
   
$
761,824
   
$
469,840
 
                                   
 
Total Revenues
   
241,412
     
120,745
     
761,824
     
469,840
 
                                   
Cost of goods sold
   
214,911
     
111,823
     
680,501
     
439,211
 
                                   
 
Gross Profit
   
26,501
     
8,922
     
81,323
     
30,629
 
                                   
Sales and marketing expenses
   
1,139
     
1,634
     
6,238
     
17,726
 
General and administrative expenses
   
415,927
     
290,076
     
997,548
     
1,441,072
 
Depreciation and amortization
   
49,422
     
1,846
     
73,099
     
5,479
 
                                   
 
Total Operating Expenses
   
466,488
     
293,556
     
1,076,885
     
1,464,277
 
                                   
                                   
 
Operating Loss
   
(439,987
)
   
(284,634
)
   
(995,562
)
   
(1,433,648
)
                                   
Other income/(loss)
                               
   Loss on asset disposition, net
   
(675
)
   
-
     
(675
)
   
-
 
   Loss on debt default
   
(32,750
           
(32,750
       
   Interest expense (related parties)
   
(715
)
   
(6,881
)
   
(13,220
)
   
(21,065
)
   Interest expense
   
(532,809
)
   
(83,864
)
   
(597,338
)
   
(170,115
)
                                   
 
Total Other Loss
   
(566,949
)
   
(90,745
)
   
(643,983
)
   
(191,180
)
                                   
                                   
 
Loss before income taxes
   
(1,006,936
)
   
(375,379
)
   
(1,639,545
)
   
(1,624,828
)
                                   
Income tax (expense) benefit
   
-
     
-
     
-
     
-
 
                                   
 
Net loss
 
$
(1,006,936
)
 
$
(375,379
)
 
$
(1,639,545
)
 
$
(1,624,828
)
                                   
                                   
Basic and diluted loss per share
 
$
(0.05
)
 
$
(1.20
)
 
$
(0.17
)
 
$
(6.48
)
                                   
Weighted average number of
   
18,867,877
     
312,298
     
9,504,404
     
250,870
 
   common shares outstanding - basic and diluted
                               
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
The accompanying footnotes are an integral part of these consolidated financial statements.
         

 

 
F-3

 
 
EVCARCO, Inc. and Subsidiary
 
Consolidated Statement of Stockholders' Deficit - continued
 
                                           
               
Class B Convertible
   
Additional
             
   
Common stock
   
Preferred stock
   
paid-in
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
deficit
   
Total
 
                                           
Balance December 31, 2011
    1,336,930     $ 1,337       1,500,000     $ 1,500     $ 4,332,266     $ (5,979,406 )   $ (1,644,303 )
Stock issued for note conv. @ $0.00009/sh. Jan. 2012
    88,889       89       -       -       3,911               4,000  
Stock issued for note conv. @ $0.00005/sh. Jan. 2012
    76,000       76       -       -       1,824               1,900  
Stock issued for note conv. @ $0.000045/sh. Jan. 2012
    216,000       216       -       -       4,644               4,860  
Stock issued for note conv. @ $0.00007/sh. Jan. 2012
    42,857       43       -       -       1,457               1,500  
Stock issued for debt conv. @ $0.000065/sh. Jan. 2012
    153,846       154       -       -       4,846               5,000  
Stock issued for note conv. @ $0.00012/sh. Feb. 2012
    86,667       86       -       -       5,114               5,200  
Stock issued for note conv. @ $0.000045/sh. Feb. 2012
    72,000       72       -       -       1,548               1,620  
Stock issued for note conv. @ $0.00009/sh. Feb. 2012
    22,667       22       -       -       998               1,020  
Stock issued for note conv. @ $0.0001/sh. Feb. 2012
    100,000       100       -       -       4,900               5,000  
Stock issued for note conv. @ $0.000065/sh. Feb. 2012
    400,000       400       -       -       12,600               13,000  
Stock issued for note conv. @ $0.00013/sh. Feb. 2012
    200,000       200       -       -       12,800               13,000  
Stock issued for note conv. @ $0.00016/sh. Feb. 2012
    43,750       44       -       -       3,456               3,500  
Stock issued for note conv. @ $0.0001/sh. Feb. 2012
    100,000       100       -       -       4,900               5,000  
Stock issued for loan @ $0.0021/sh. Feb. 2012
    -       -       3,500,000       3,500       3,850               7,350  
Stock issued for note conv. @ $0.00013/sh. Mar. 2012
    100,000       100       -       -       6,400               6,500  
Stock issued for settlement Mar. 2012
    36,212       36       -       -       (36 )             -  
Stock issued for note conv. @ $0.00005/sh. Mar. 2012
    430,000       430       -       -       10,320               10,750  
Stock issued for note conv. @ $0.000065/sh. Mar. 2012
    800,000       800       -       -       25,200               26,000  
Stock issued for note conv. @ $0.00008/sh. Mar. 2012
    85,000       85       -       -       3,315               3,400  
Stock issued for note conv. @ $0.000065/sh. Apr. 2012
    400,000       400       -       -       12,600               13,000  
Stock issued for note conv. @ $0.00005/sh. Apr. 2012
    330,000       330       -       -       7,920               8,250  
Stock issued for note conv. @ $0.00008/sh. Apr. 2012
    205,000       205       -       -       7,995               8,200  
Stock issued for loan @ $0.0021/sh. Feb. 2012
    -       -       2,000,000       2,000       800               2,800  
Stock issued for note conv. @ $0.00005/sh. May 2012
    320,000       320       -       -       7,680               8,000  
Stock issued for note conv. @ $0.00007/sh. May 2012
    200,000       200       -       -       6,800               7,000  
Stock issued for settlement May 2012
    5,000       5       -       -       (5 )             -  
Stock issued for note conv. @ $0.000065/sh. May 2012
    400,000       400       -       -       12,600               13,000  
Stock issued to acquire subsidiary, May 2012
    3,329,504       3,330       1,000,000       1,000       163,145               167,475  
Proceeds received for shares to be issued, May 2012
                    -       -       2,500               2,500  
 
 
 
F-4

 
 
Consolidated Statement of Stockholders' Deficit - continued
 
 
EVCARCO, Inc. and Subsidiary  
Consolidated Statement of Stockholders' Deficit  
                                           
                Class B Convertible     Additional              
    Common stock     Preferred stock     paid-in     Accumulated        
    Shares     Amount     Shares     Amount     capital     deficit     Total  
                                           
Stock issued for Public Relations Services @ $0.02/sh. July 2012
    500,000       500                   9,500             10,000  
                                                   
Stock issued for note conv. @ $0.005/sh. July 2012
    500,000       500                   2,000             2,500  
Stock issued for note conv. @ $0.005/sh. August 2012
    500,000       500                   2,000             2,500  
                                                   
Stock issued for note conv. @ $0.002/sh. August 2012
    500,000       500                   500             1,000  
                                                   
Stock issued for note conv. @ $0.001/sh. August 2012
    500,000       500                   -             500  
Stock issued for note conv. @ $0.00105 sh. August 2012
    500,000       500                   25             525  
Stock issued for note conv. @ $0.001/sh. August 2012
    500,000       500                   -             500  
                                                   
Stock issued for note conv. @ $0.0014/sh. September 2012
    535,714       536                   214             750  
Stock issued for note conv. @ $0.001/sh. September 2012
    500,000       500                   -             500  
                                                   
Stock issued for Accrued Wages payment @ $0.0021/sh. September 6, 2012
    11,904,762       11,905                   13,095             25,000  
Stock issued for Accrued Wages payment @ $0.0021/sh. September 2012
    11,904,762       11,905                   13,095             25,000  
Stock issued for note conv. @ $0.001/sh. September 2012
    1,800,000       1,800                   (400 )           1,400  
Stock issued for note conv. @ $0.001/sh. September 2012
    1,400,000       1,400                   -             1,400  
Stock issued for note conv. @ $0.0012/sh. September 2012
    541,667       542                   108             650  
                                                   
Stock issued for note conv. @ $0.0012/sh. September 2012
    541,667       542                   108             650  
Beneficial conversion features
                                603,702             603,702  
                                                   
Net loss
                                        (1,639,545 )     (1,639,545 )
                                                     
                                                     
Balance September 30, 2012 (Unaudited)
    42,208,894     $ 42,210       8,000,000     $ 8,000     $ 5,310,295     $ (7,618,951 )   $ (2,258,446 )
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
The accompanying footnotes are an integral part of these consolidated financial statements.
                                         
 
 
 
 
 
 
F-5

 
 
 
EVCARCO, Inc. and Subsidiary
 
Consolidated Statements of Cash Flows
 
   
             
   
For the nine
   
For the nine
 
   
months ended
   
months ended
 
   
September 30, 2012
   
September 30, 2011
 
   
(Unaudited)
   
(Unaudited)
 
             
Operating activities:
           
             
Net loss
 
$
(1,639,545
)
 
$
(1,624,828
)
Adjustments to reconcile net loss to net cash flows
               
used in operating activities:
               
Depreciation and amortization
   
73,099
     
5,479
 
Consulting expenses (stock)
   
-
     
386,653
 
Interest expense (stock)
   
8,235
     
3,800
 
Beneficial conversion feature amortization
   
567,985
     
162,469
 
Loss on asset dispositions
   
675
     
-
 
Loss on debt default
   
32,750
     
-
 
                 
Change in operating assets and liabilities:
               
Accounts receivable
   
(28,801
)
   
-
 
Inventory
   
54,270
     
43,650
 
Other receivables
   
1,868
     
1,809
 
Prepaid expenses
   
7,855
     
(2,079
)
Other assets
   
(4,812
)
   
-
 
Accounts payable
   
228,173
     
331,738
 
Accrued expenses
   
374,700
     
142,345
 
Accrued interest (related parties)
   
(13,956
)
   
3,977
 
Straight line rent
   
710
     
-
 
Other payables
   
1,774
     
(24,260
)
                 
Net cash flows used in operating activities
   
(335,020
)
   
(569,247
)
                 
                 
Financing activities:
               
Proceeds from convertible notes payable
   
102,000
     
200,000
 
Net change in loans payable (related parties)
   
221,083
     
308,944
 
                 
Net cash flows provided by financing activities
   
323,083
     
508,944
 
                 
Increase/(decrease) in cash and cash equivalents
   
(11,937
)
   
(60,303
)
                 
Cash and cash equivalents at beginning of period
   
26,046
     
77,680
 
                 
Cash and cash equivalents at end of period
 
$
14,109
   
$
17,377
 
                 
                 
Cash paid for:
               
                 
Interest
 
$
402
   
$
2,000
 
Interest (related parties)
 
$
11,457
   
$
17,088
 
                 
Non-cash activities:
               
                 
Stock issued to acquire subsidiary
 
$
167,475
   
$
-
 
Stock issued for services
 
$
10,000
   
$
81,600
 
Stock issued for loans and accounts payable
 
$
191,725
   
$
580,412
 
Stock buyback for balance of shareholder advances
 
$
-
   
$
79,000
 
Debt discount from beneficial conversion feature
 
$
603,702
   
$
252,254
 
Stock issued for wages
 
$
50,000
   
$
-
 
Reclass of shareholder loans to convertible notes
 
$
906,774
   
$
-
 
                 
The accompanying footnotes are an integral part of these consolidated financial statements.
 
 
 
 
 
 
F-6

 
EVCARCO, INC. AND SUBSIDIARY
Unaudited Condensed Notes to Consolidated Financial Statements
For the three and nine months ended September 30, 2012 and 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 and other pre-owned vehicles.
 
The Third Stone Corporation (“The Subsidiary”), a wholly owned subsidiary of EVCARCO, Inc., was incorporated in the State of Wyoming on September 27, 2011. The Subsidiary is currently producing consumer software applications in sports, social media, finance and home automation sectors.
 
 
NOTE 2.   BASIS OF PRESENTATION
 
The consolidated 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 consolidated 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 consolidated 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, 2011. The results of operations for the nine months ended September 30, 2012 are not necessarily indicative of the results to be expected for the year ending December 31, 2012.
 
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.
 
On June 12, 2012, the Company effectuated a 1-for-500 reverse stock split of its issued and outstanding common stock.  All amounts of shares reflected on these consolidated financial statements are on post-split basis.
 
 
NOTE 3.   ACQUISITION
 
Acquisition of Third Stone Corporation
 
On May 23, 2012 (“the acquisition date”), the Company acquired 100% of the outstanding common and preferred shares of The Third Stone Corporation in exchange for 3,329,504 shares of its common stock and 1,000,000 shares of Class B convertible preferred stock, valued at $167,475 based on the closing share price on May 23, 2012.  The results of the Subsidiary’s operations have been included in the consolidated financial statements since the acquisition date.
 
 
F-7

 
EVCARCO, INC. AND SUBSIDIARY
Unaudited Condensed Notes to Consolidated Financial Statements
For the three and nine months ended September 30, 2012 and 2011

 
NOTE 3.   ACQUISITION - continued
 
Acquisition of Third Stone Corporation - continued
 
The following table summarizes the values of the assets acquired and liabilities assumed at the acquisition date.
 
 
Property and equipment, net
  $ 30,538  
Deposits
    3,136  
Total identifiable assets acquired
    33,674  
Total current liabilities
    (420,724 )
Net identifiable assets acquired
    (387,050 )
Internally developed software
    554,525  
Net assets acquired
    167,475  
 
The table below presents pro forma consolidated income statement information as if the Subsidiary had been included in our consolidated results for the entire periods reflected.  The pro forma information has been prepared using the purchase method of accounting, giving effect to The Third Stone Corporation acquisition is if the acquisition had been completed on September 27, 2011 (date of incorporation for the Subsidiary). The pro forma information is not necessarily indicative of our results of operations had the merger been completed on the above date, nor is it necessarily indicative on our future results. The pro forma information includes adjustments to record the assets and liabilities of the Subsidiary at their respective fair values based on available information.
 
 
   
For the three months ended September 30,
   
For the nine months ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
Revenues
 
$
241,412
   
$
120,745
   
$
764,069
   
$
469,840
 
Operating loss
   
(439,987
)
   
(284,634
)
   
(1,396,690
)
   
(1,433,648
)
Net loss
   
(1,006,936
)
   
(375,379
)
   
(2,044,940
)
   
(1,624,828
)
                                 
 
Pro forma revenues reflect combined Company and Subsidiary. Pro forma operating and net losses reflect combined Company and Subsidiary, with the following pro forma adjustment: amortization on the Subsidiary’s internally developed software has been added.
 
Deposit on Equity Investment in American Rodsmith
 
On July 3, 2012, EVCARCO, Inc. entered into a stock purchase agreement to acquire 75% of the outstanding common shares of American Rodsmiths, Inc., a Texas corporation in exchange for $850,000, combination of cash, stock and loan.   As of the date of this report, the acquisition has not been completed. As of September 30, 2012, the Company has made an initial payment $7,011 towards the total amount.
 
 
 
F-8

 
EVCARCO, INC. AND SUBSIDIARY
Unaudited Condensed Notes to Consolidated Financial Statements
For the three and nine months ended September 30, 2012 and 2011

 
NOTE 4.   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 5.  INVENTORY
 
At each period end, respectively, the Company had the following inventory:
 
   
September 30, 2012
   
December 31, 2011
 
             
New vehicles
  $ 52,500     $ 52,500  
Pre-owned vehicles
    29,880       84,150  
Other items
    29,128       29,128  
                 
Total inventory
  $ 111,508     $ 165,778  
 
 
 
NOTE 6.  PREPAID EXPENSES
 
As of September 30, 2012, the balance included prepaid investor relations of $3,333 and as of December 31, 2011, the balance of prepaid insurance expense was $1,188. As of September 30, 2012, the amount in prepaid expense represented the unearned portion of stock compensation issued under a consulting agreement, determined as follows:

Nature of Services
Term of Contract
 
Number of Shares Issued
   
Fair Value Assigned
   
Expensed
   
Unearned Portion
 
Investor Relations
08/01/12 - 10/31/12
    500,000     $ 10,000     $ 6,667     $ 3,333  

 
NOTE 7.  CONVERTIBLE NOTES PAYABLE
 
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, all of which has been amortized as of maturity date. On February 27, 2011, $32,400 of the principal outstanding under the note was converted into 36,000 shares of common stock of the Company.  As of September 30, 2012 and December 31, 2011, both, principal balance of note was $2,600.
 
 
 
F-9

 
EVCARCO, INC. AND SUBSIDIARY
Unaudited Condensed Notes to Consolidated Financial Statements
For the three and nine months ended September 30, 2012 and 2011

 
NOTE 7.  CONVERTIBLE NOTES PAYABLE - continued
 
On May 24, 2011, the Company issued a convertible note payable in the amount of $310,000, for the compensation accrued to Mr. O’Neal, former COO and Director, to the date of his resignation on May 15, 2011. The note matured 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, all of which has been amortized as of maturity date. During November and December of 2011, $2,540 of principal and $8,780 of accrued interest, outstanding under the note, was converted into 200,000 shares of common stock of the Company.  Between January and March of 2012, $85,258 of principal and $3,392 of accrued interest, outstanding under the note, was converted into 2,516,667 shares of common stock of the Company. Between April and June of 2012, $40,776 of principal and $1,474 of accrued interest, outstanding under the note, was converted into 1,450,000 shares of common stock of the Company. Between July and September of 2012, $10,825 of principal, outstanding under the note, was converted into 6,700,000 shares of common stock of the Company. As of September 30, 2012 and December 31, 2011, the principal balance was $176,271 and $307,460, respectively. As of the same dates, balance of interest accrued under the note was $2,959 and $670, respectively.
  
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 matured 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, all of which has been amortized as of maturity date.  In December of 2011, $8,000 of the principal balance outstanding under the note was converted into 126,191 shares of common stock of the Company. Between January and March of 2012, $17,600 of the principal balance outstanding under the note was converted into 347,163 shares of common stock of the Company. In April of 2012, $6,900 of the principal and $1,300 of accrued interest outstanding under the note was converted into 205,000 shares of common stock of the Company. As of September 30, 2012 and December 31, 2011, the principal balance was $0 and $24,500, respectively.
 
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 matured 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, all of which has been amortized as of the maturity date of the note. In May of 2012, $7,000 of the principal balance outstanding under the note was converted into 200,000 shares of common stock of the Company.  On August 16, 2012 the Company defaulted on the note and recorded a debt default penalty of $14,000, pursuant to the same conversion terms as stated above. Accordingly, the Company recorded $8,951 related to the deemed beneficial conversion feature of this penalty, of which $8,951 has been amortized to interest expense in the accompanying statements of operations for the three months ended September 30, 2012. In September of 2012, $2,050 of the principal balance outstanding under the note was converted into 1,619,048 shares of common stock of the Company. As of September 30, 2012 and December 31, 2011, the principal balance was $39,950 and $35,000, respectively.
 
On November 1, 2011, the Company issued a convertible promissory note in the amount of $20,000, bearing interest at a rate of 5% per annum. The note is unsecured and matures on August 31, 2012. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 35% discount to the market price, at the point of conversion. The Company recorded $10,769 related to the deemed beneficial conversion feature of this note, all of which  has been fully amortized as of the maturity date of the note. As of September 30, 2012, the principal remained unchanged.  As of September 30, 2012, balance of interest accrued under the Note was $928.
 
 
 
F-10

 
EVCARCO, INC. AND SUBSIDIARY
Unaudited Condensed Notes to Consolidated Financial Statements
For the three and nine months ended September 30, 2012 and 2011

 
NOTE 7.  CONVERTIBLE NOTES PAYABLE - continued
 
On April 15, 2012, the Company signed a convertible note agreement. Under the agreement, the Company can borrow up to $100,000, at discretion of the Holder.  The note is bearing interest at a rate of 24% per annum. It is unsecured and matures on January 15, 2013. The entire principal and accrued interest on the note are convertible into common stock of the Company at a 45% discount to the market price, at the point of conversion. During April and May of 2012, the Company received $32,000 in advances under the note. The Company recorded $26,182 related to the deemed beneficial conversion feature of this note, of which $8,664 has been amortized to interest expense in the accompanying statements of operations for the three months ended September 30, 2012.  As of September 30, 2012, the principal remained unchanged.  As of September 30, 2012, balance of interest accrued under the Note was $3,265.
 
On July 13, 2012, 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 will mature on April 17, 2013. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 58% discount to the market price, at the point of conversion. The Company recorded $27,155 related to the deemed beneficial conversion feature of this note, of which $7,717 has been amortized to interest expense in the accompanying statements of operations for the three months ended September 30, 2012. On August 16, 2012 the Company defaulted on the note and recorded a debt default penalty of $18,750, pursuant to the same conversion terms as stated above. Accordingly, the Company recorded $13,578 related to the deemed beneficial conversion feature of this penalty, of which $2,504 has been amortized to interest expense in the accompanying statements of operations for the three months ended September 30, 2012. As of September 30, 2012, all of the principal balance of $56,250 was outstanding.
 
On September 19, 2012, the Company issued a convertible promissory note in the amount of $27,500, bearing interest at a rate of 8% per annum. The note is unsecured and will mature on June 21, 2013. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 41% discount to the market price, at the point of conversion. The Company recorded $39,573 related to the deemed beneficial conversion feature of this note, of which $1,583 has been amortized to interest expense in the accompanying statements of operations for the three months ended September 30, 2012. As of September 30, 2012, all of the principal balance of $27,500 was outstanding.
 
 
NOTE 8.  RELATED PARTY TRANSACTIONS
 
For the three months ended September 30, 2012 and 2011, the Company accrued $163,403 and $120,000 in salaries payable to its officers.
 
On March 27, 2012, Mr. Edouard Prous resigned from the Board of Directors and his position of Chief Technical Officer. Compensation accrued to Mr. Prous during his employment, in the amount of $455,000, will remain in place, and continue to accrue interest of 5% per year, and is convertible into common stock of the Company at a variable conversion price, with 35% discount to the market price, at the point of conversion, in according to the original agreement. The Company recorded $245,000 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 three months ended September 30, 2012. As he is no longer considered an insider, the balance owed, which was previously included in the balance of shareholder notes, is now reported as part of the convertible notes payable on the accompanying consolidated balance sheet as of September 30, 2012. Accrued interest payable on the note at September 30, 2012 was $11,778.

 
F-11

 
EVCARCO, INC. AND SUBSIDIARY
Unaudited Condensed Notes to Consolidated Financial Statements
For the three and nine months ended September 30, 2012 and 2011

 
NOTE 8.  RELATED PARTY TRANSACTIONS - continued
 
As of September 30, 2012 and December 31, 2011, the balances of note payable to Mr. Frolov, our past CFO, and then Director and major shareholder, were $451,774 and $328,243, respectively.  The balances included accrued salary, along with various advances to and from the Company.  The note is unsecured, due upon demand and accrues interest at the end of each month on then outstanding balance at the rate of 5% per annum. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 35% discount to the market price, at the point of conversion. The Company recorded $243,263 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 three months ended September 30, 2012. Accrued interest payable on the note at September 30, 2012, and December 31, 2011, was $4,464 and $3,674, respectively. As he is no longer considered an insider, the balance owed, which was previously included in the balance of shareholder notes, is now reported as part of the convertible notes payable on the accompanying consolidated balance sheet as of September 30, 2012.
 
As of September 30, 2012, the balance of note payable to Mr. Speck, Executive VP, who became Director and major shareholder in August of 2012, was $129,788.  The balance includes various advances made to the Subsidiary.  The note is unsecured, due upon demand and accrues interest at the end of each month on then outstanding balance at the rate of 8% per annum.  Accrued interest payable on the note at September 30, 2012 was $4,992.
 
 
NOTE 9.  OPERATING SEGMENTS
 
EVCARCO, Inc. and Subsidiary operate two business segments: auto dealership and software, under separate legal entities.  The tables below set forth financial information by segment.  The software business was acquired on May 23, 2012, and its results below reflect information for the period from May 24, 2012 to September 30, 2012.

   
Auto Dealership
   
Software
   
Total
 
Three Months Ended September 30, 2012
                 
Revenues
 
$
760,668
   
$
1,156
   
$
761,824
 
Cost of goods sold
   
680,501
     
-
     
680,501
 
Sales and marketing expenses
   
4,750
     
1,488
     
6,238
 
Depreciation and amortization
   
23,284
     
49,815
     
73,099
 
                         
As of September 30, 2012
                       
Total current assets
 
$
176,748
   
$
180
   
$
176,928
 
Property and equipment, net
   
12,876
     
515,550
     
528,426
 
 
 
 
 

 
F-12

 
EVCARCO, INC. AND SUBSIDIARY
Unaudited Condensed Notes to Consolidated Financial Statements
For the three and nine months ended September 30, 2012 and 2011

 
NOTE 10.  GOING CONCERN
 
The consolidated financial statements 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 consolidated entity had negative working capital of $2,799,307 and an accumulated deficit of $7,618,951 at September 30, 2012.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  The consolidated 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 11.  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. 125 shares of Class A stock can be converted into 1 share of common stock at any time, upon demand from of the holder.
 
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. 50 shares of Class B stock can be converted into 1 share of common stock at any time, upon demand from of the holder.
 
Effective November 30, 2011 the Company filed an amendment with the Nevada Secretary of State to increase authorized shares of Class B convertible preferred stock from 20,000,000 to 980,000,000.
 
On February 22, 2012, the Company issued 3,500,000 shares of Class B convertible preferred stock to a former officer and director for $7,350 in partial satisfaction of the loan payable to such former officer and director. The number of Class B shares was determined by applying a discount, for the lack of marketability and liquidity, of approximately 30% to the market price of common stock, divided by fifty, which represents conversion rights of a Class B share into common stock.
 
 
 
F-13

EVCARCO, INC. AND SUBSIDIARY
Unaudited Condensed Notes to Consolidated Financial Statements
For the three and nine months ended September 30, 2012 and 2011
 
 
NOTE 11.  CONVERTIBLE PREFERRED STOCK - continued
 
On April 20, 2012, the Company issued 2,000,000 shares of Class B convertible preferred stock to a former officer and director for $2,800 in partial satisfaction of the loan payable to such former officer and director. The number of Class B shares was determined by applying a discount, for the lack of marketability and liquidity, of approximately 30% to the market price of common stock, divided by fifty, which represents conversion rights of a Class B share into common stock.
 
On May 23, 2012, the Company issued 1,000,000 shares of Class B convertible preferred stock in exchange for 100% of issued and outstanding preferred stock of the Third Stone Corporation.
 
Effective June 12, 2012 the Company filed an amendment with the Nevada Secretary of State to decrease authorized shares of Class B convertible preferred stock from 980,000,000 to 75,000,000.
 
On August 7, 2012, Mr. Walter Speck, Executive VP, acquired controlling interest in the Company by purchasing 7,000,000 shares of the Class B convertible preferred stock from Mr. Nikolay Frolov, former CFO of the Company.
 
 
NOTE 12.  COMMON STOCK
 
On January 25, 2012, the Company issued 153,846 shares of common stock in satisfaction of $5,000 owed under a consulting agreement. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.
 
Between January and September of 2012, the Company issued 10,666,667 shares of common stock in partial satisfaction of outstanding balance under the convertible note payable, originated on May 24, 2011, in the total amount of $141,725, which included $4,866 of interest. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.
 
Between January and April of 2012, the Company issued 552,163 shares of common stock in complete satisfaction of principal balance outstanding under the convertible note payable, originated on May 27, 2011, in the amount of $25,800, which included $1,300 of interest. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.
 
Between May and September of 2012, the Company issued 1,819,048 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on July 26, 2011, in the amount of $9,050. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.
 
 
 
 
 
 
 
 
 
F-14

EVCARCO, INC. AND SUBSIDIARY
Unaudited Condensed Notes to Consolidated Financial Statements
For the three and nine months ended September 30, 2012 and 2011
 
NOTE 12.  COMMON STOCK - continued
 
In March and May of 2012, the Company issued 41,212 shares of common stock for a negotiated settlement relating to several private purchases of our stock in late 2010 and early 2011.
 
On May 23, 2012, the Company issued 3,329,504 shares of common stock in exchange for 100% of issued and outstanding common stock of the Third Stone Corporation.
 
On June 12, 2012, the Company effectuated a 1-for-500 reverse stock split of its issued and outstanding common stock.  All amounts of shares reflected on these financial statements are on post-split basis.
 
On June 12, 2012, the Company filed an amendment with the Nevada Secretary of State to increase authorized shares of common stock from 10,000,000 to 900,000,000.
 
On July 25, 2012, the Company issued 500,000 shares of common stock in satisfaction of $10,000 owed under a consulting agreement. The number of shares was computed based on agreed upon the market price of the shares at the time of the issuance.
 
On September 6, 2012, the Company issued 23,809,524 shares of common stock in satisfaction of $50,000 owed for accrued wages to our President and our Chief Executive Officer. The number of shares was computed based on agreed upon the market price of the shares at the time of the issuance.
 
 
NOTE 13.  SUBSEQUENT EVENTS
 
Management has evaluated subsequent events after the balance sheet date, through the issuance of the financial statements, for appropriate accounting and disclosure. The Company has determined that there were no such events that warrant disclosure or recognition in the financial statements, except for the below:
 
Stock Conversions
 
Between October and November of 2012, the Company issued 10,618,308 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on May 24, 2011, in the amount of $6,900. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.
 
In November 2012, the Company issued 3,281,250 shares of common stock in partial satisfaction of principal balance outstanding under the convertible note payable, originated on July 12, 2011, in the amount of $4,150. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.
 
On November 13, 2012, the Company issued 37,037,036 shares of common stock in satisfaction of $100,000 owed for accrued wages to our President and our Chief Executive Officer. The number of shares was computed based on agreed upon the market price of the shares at the time of the issuance.
 
 
 

 
 
 
F-15

 
 
 
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 consolidated 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. 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. 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.

On May 23, 2012 (“the acquisition date”), the Company acquired 100% of the outstanding common and preferred shares of The Third Stone Corporation in exchange for 3,329,504 shares of its common stock and 1,000,000 shares of Class B Convertible preferred stock, valued at $167,475 based on the closing share price on May 23, 2012.  The Third Stone Corporation (“The Subsidiary”) was incorporated in the State of Wyoming on September 27, 2011. The Subsidiary is currently producing consumer software applications in sports, social media, finance and home automation sectors. The results of the Subsidiary’s operations have been included in the consolidated financial statements since the acquisition date.  In connection with acquisition, the Board made some changes to the management team:  Mr. Gary Easterwood was appointed as President and Chief Executive Officer, Mr. Mack Sanders became Chief Operating Officer, and Mr. Walter Speck was appointed as an Executive Vice President.

On June 12, 2012, the Company effectuated a 1-for-500 reverse stock split of its issued and outstanding common stock.  All amounts of shares reflected in this report and on the accompanying consolidated financial statements are on post-split basis.  On the same day, the Company increased its authorized common stock to 900,000,000 shares, and decreased its authorized Class B Convertible preferred stock to 75,000,000 shares.

On August 7, 2012, Mr. Water Speck acquired a controlling interest in the Company by purchasing 7,000,000 shares of Class B Convertible preferred stock from Mr. Nikolay Frolov, CFO and Director. Mr. Speck became Chairman of the Board of the Company, Mr. Easterwood was appointed Director, and Mr. Frolov resigned from the Board.

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 consolidated 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.


 
 
 
 
4

 
 
 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Plan of Operation

Over the next twelve months, we will concentrate on the following 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 80-100 pre-owned cars per quarter. Get the software sales and app revenues to the level of $20,000 - $30,000 per month.
 
· 
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.  Finalize development of several significant software projects and begin their distribution through variety of sales channels.  Continue developing mobile apps relating to both out automotive and software business.
 
· 
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 one to three Dealer Development Candidates during 2012.

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

Limited financial resources have affected our ability to acquire inventory, and our consolidated financial statements reflect very sporadic purchasing and sales activity, which may continue until we are able to raise the sufficient capital.

For the quarterly periods ended September 30, 2012 and 2011, gross revenues were $241,412 and $120,745, gross profit was $26,501 and $8,922, respectively. Net losses for the same quarterly periods were $1,006,936 and $375,379, including approximately $163,394 and $120,000, respectively, of accrued compensation to the officers of the Company.

For the nine month periods ended September 30, 2012 and 2011, gross revenues were $761,824 and $469,840, gross profit was $81,323 and $30,629, respectively. Net losses for the same quarterly periods were $1,639,545 and $1,624,828, including approximately $407,084 and $443,800, respectively, of accrued compensation to the officers of the Company.

As of September 30, 2012, the Company had assets of $717,789, and total liabilities of $2,976,235.  As of December 31, 2011, the Company had assets of $235,682, and total liabilities of $1,879,985.

Amounts for revenues and gross margins reflect sporadic operations of the 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.

 
 
 
 
 
 
 
 
5

 
 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Liquidity and Capital Resources
 
As of September 30, 2012 and December 31, 2011, the Company had no significant cash reserves or other liquid assets.

As of September 30, 2012 and December 31, 2011, working capital deficiency amounted to $2,799,307 and $1,665,928, respectively.

Meeting future liquidity needs will require sales of dealership franchises, as well as income from new and pre-owned auto sales and service, and software revenues. 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 that 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, 2012, the Company had $2,976,235 of current liabilities outstanding.  That amount included approximately $218,186 of compensation and related taxes accrued to the officers of the Company; approximately $176,607 of other accrued compensation and related taxes; $129,788 of shareholder advances; and $1,182,597 of convertible debt.
 
As of December 31, 2011, the Company had $1,879,985 of current liabilities outstanding.  That amount included $725,611 owed to the two officers and major shareholders of the Company (primarily for accrued compensation), and $346,530 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

Disclosure Controls and Procedures
 
With the participation of our Chief Financial Officer and Chief Executive Officer we have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based upon such evaluation, our Chief Financial Officer and Chief Executive Officer have concluded that, as of the end of such periods, our disclosure controls and procedures were effective in ensuring that (i) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
Changes in Internal Control over Financial Reporting
 
With the participation of our Chief Financial Officer and Chief Executive Officer, we have concluded that there were no changes to our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q (the fiscal quarter ended September 30, 2012). As we reported on a Form 8-K filed on September 17, 2012 our former Chief Financial Officer, Nikolay Frolov, was terminated on September 12, 2012, due to failure to meet fiduciary responsibilities to the corporation in his capacity as Chief Financial Officer, and we have not yet filled the position. The functions previously performed by Mr. Frolov are being performed on an interim basis by Walter Speck, Chairman of the Board and Executive Vice-President.
 
 
 

 

 
 
 
6

 
 


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
07/25/12
 
500,000
 
Common Stock
 
P/R Services  - $10,000
 
 Sec 4(2)
 
 None
07/30/12
 
500,000
 
Common Stock
 
Debt Conversion - $2,500
 
 Reg. D
 
 None
08/08/12
 
500,000
 
Common Stock
 
Debt Conversion - $2,500
 
 Reg. D
 
None
08/15/12
 
500,000
 
Common Stock
 
Debt Conversion - $1,000
 
 Reg. D
 
None
08/21/12
 
500,000
 
Common Stock
 
Debt Conversion - $500
 
 Reg. D
 
None
08/27/12
 
500,000
 
Common Stock
 
Debt Conversion - $525
 
 Reg. D
 
None
08/29/12
 
500,000
 
Common Stock
 
Debt Conversion - $500
 
 Reg. D
 
None
09/04/12
 
535,714
 
Common Stock
 
Debt Conversion - $750
 
 Reg. D
 
None
09/05/12
 
500,000
 
Common Stock
 
Debt Conversion - $500
 
 Reg. D
 
None
09/06/12
 
23,809,524
 
Common Stock
 
Debt Conversion - $50,000
 
 Reg. D
 
None
09/14/12
 
1,800,000
 
Common Stock
 
Debt Conversion - $1,400
 
 Reg. D
 
None
09/18/12
 
1,400,000
 
Common Stock
 
Debt Conversion - $1,400
 
 Reg. D
 
None
09/18/12
 
541,667
 
Common Stock
 
Debt Conversion - $650
 
 Reg. D
 
None
09/21/12
 
541,667
 
Common Stock
 
Debt Conversion - $650
 
 Reg. D
 
None
10/23/12
 
8,848,585
 
Common Stock
 
Debt Conversion - $5,750
 
 Reg. D
 
None
10/25/12
 
1,769,723
 
Common Stock
 
Debt Conversion - $1,150
 
 Reg. D
 
None
11/13/12
 
37,037,036
 
Common Stock
 
Debt Conversion - $100,000
 
 Reg. D
 
None
11/21/12
 
531,250
 
Common Stock
 
Debt Conversion - $850
 
 Reg. D
 
None
11/27/12
 
2,750,000
 
Common Stock
 
Debt Conversion - $3,300
 
 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.


ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable

 
ITEM 5.  OTHER INFORMATION

None.



 
 
 
7

 
 




 
ITEM 6.  EXHIBITS

Exhibit Number
Exhibit
 
31.1
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934.
 
     
31.2
Certification of Chief Financial Officer pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934.
 
     
32
Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C., Section 1350.
 
 
101.INS 
XBRL Instance Document
   
101.SCH
XBRL Taxonomy Extension Schema Document
   
101.CAL
XBRL Taxonomy Calculation Linkbase Document
   
101.DEF 
XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB
XBRL Taxonomy Label Linkbase Document
   
101.PRE
XBRL Taxonomy Presentation Linkbase Document
 
 
 

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 18, 2012
By:
/s/  Gary Easterwood
   
Gary Easterwood
   
Principal Executive Officer

Date: December 18, 2012
By:
/s/ Walter Sepck
   
Walter Speck
   
Chief Financial Officer
(Principal Financial and Accounting Officer)

 
 
 
 
 

 
 
8


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