PINX:EVCA Evcarco Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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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 June 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 August 21, 2012, there were 11,080,322 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 Financial Statements
 
   
Consolidated Balance Sheets as of June 30, 2012 (Unaudited) and December 31, 2011
F-2
   
Consolidated Statements of Operations for the Three and the Six Months Ended June 30, 2012 and 2011 (Unaudited)
F-3
   
Consolidated Statement of Stockholders' Deficit for the Six Months Ended June 30, 2012 (Unaudited)
F-4
   
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011 (Unaudited)
F-5
   
Condensed Notes to Consolidated Financial Statements
F-6 to F-12
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-1

 
 
EVCARCO, Inc. and Subsidiary
 
Consolidated Balance Sheets
 
             
   
June 30, 2012
   
December 31, 2011
 
   
(Unaudited)
       
ASSETS
           
             
Current assets
           
             
Cash and cash equivalents
  $ 14,491     $ 26,046  
Accounts Receivable
    39,950       -  
Inventory
    131,348       165,778  
Other receivables
    14,777       21,045  
Prepaid expenses
    -       1,188  
                 
Total current assets
    200,566       214,057  
                 
Property and equipment
    621,702       32,807  
Accumulated depreciation
    (40,980 )     (13,470 )
                 
Property and equipment, net
    580,722       19,337  
                 
Other assets
    5,424       2,288  
                 
                 
TOTAL ASSETS
  $ 786,712     $ 235,682  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
Current liabilities
               
                 
Accounts payable
  $ 857,839     $ 606,527  
Accrued expenses
    1,008,485       197,070  
Accrued interest (related parties)
    6,417       14,978  
Deferred rent
    21,726       -  
Other payables
    9,323       4,247  
Convertible notes payable
    244,589       346,530  
Loans payable to shareholders
    540,238       710,633  
                 
Total current liabilities
    2,688,617       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
               
   9,580,322 and 1,336,930 shares
               
   issued and outstanding, respectively
    9,580       1,337  
Additional paid-in capital
    4,692,530       4,332,266  
Accumulated deficit
    (6,612,015 )     (5,979,406 )
                 
Total Stockholders' Deficit
    (1,901,905 )     (1,644,303 )
                 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 786,712     $ 235,682  
                 
                 
                 
The accompanying footnotes are an integral part of these financial statements.
         
 
 
F-2

 
 
EVCARCO, Inc. and Subsidiary
 
Consolidated Statements of Operations
 
                           
                           
                           
      For the Three Months Ended    
For the Six Months Ended
 
     
Jun. 30, 2012
   
Jun. 30, 2011
   
Jun. 30, 2012
   
Jun. 30, 2011
 
     
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                           
                           
Revenues
  $ 210,674     $ 230,695     $ 520,412     $ 349,095  
                                   
 
Total Revenues
    210,674       230,695       520,412       349,095  
                                   
Cost of goods sold
    185,155       211,836       465,590       327,388  
                                   
 
   Gross Profit
    25,519       18,859       54,822       21,707  
                                   
Sales and marketing expenses
    2,614       5,297       5,099       16,093  
General and administrative expenses
    327,454       466,950       581,621       1,151,032  
Depreciation and amortization
    22,107       1,826       23,677       3,633  
                                   
 
Total Operating Expenses
    352,175       474,073       610,397       1,170,758  
                                   
                                   
 
Operating Loss
    (326,656 )     (455,214 )     (555,575 )     (1,149,051 )
                                   
Other income/(loss)
                               
   Interest income
    -       -       -       37  
   Interest expense (related parties)
    (5,899 )     (7,123 )     (12,505 )     (14,184 )
   Interest expense
    (24,556 )     (57,323 )     (64,529 )     (86,251 )
                                   
 
Total Other Loss
    (30,455 )     (64,446 )     (77,034 )     (100,398 )
                                   
                                   
 
Loss before income taxes
    (357,111 )     (519,660 )     (632,609 )     (1,249,449 )
                                   
Income tax (expense) benefit
    -       -       -       -  
                                   
 
Net loss
  $ (357,111 )   $ (519,660 )   $ (632,609 )   $ (1,249,449 )
                                   
                                   
Basic and diluted loss per share
  $ (0.05 )   $ (2.05 )   $ (0.13 )   $ (5.69 )
                                   
Weighted average number of
    7,037,302       253,329       4,771,220       219,647  
   common shares outstanding
                               
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
The accompanying footnotes are an integral part of these financial statements.
         
 
 
F-3

 
 
 
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
 
                                           
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. @ $0.0450/sh. Jan. 2012
    88,889       89       -       -       3,911               4,000  
Stock issued for note conv. @ $0.0250/sh. Jan. 2012
    76,000       76       -       -       1,824               1,900  
Stock issued for note conv. @ $0.0225/sh. Jan. 2012
    216,000       216       -       -       4,644               4,860  
Stock issued for note conv. @ $0.0350/sh. Jan. 2012
    42,857       43       -       -       1,457               1,500  
Stock issued for debt conv. @ $0.0325/sh. Jan. 2012
    153,846       154       -       -       4,846               5,000  
Stock issued for note conv. @ $0.0600/sh. Feb. 2012
    86,667       86       -       -       5,114               5,200  
Stock issued for note conv. @ $0.0225/sh. Feb. 2012
    72,000       72       -       -       1,548               1,620  
Stock issued for note conv. @ $0.0450/sh. Feb. 2012
    22,667       22       -       -       998               1,020  
Stock issued for note conv. @ $0.0500/sh. Feb. 2012
    100,000       100       -       -       4,900               5,000  
Stock issued for note conv. @ $0.0325/sh. Feb. 2012
    400,000       400       -       -       12,600               13,000  
Stock issued for note conv. @ $0.0650/sh. Feb. 2012
    200,000       200       -       -       12,800               13,000  
Stock issued for note conv. @ $0.0800/sh. Feb. 2012
    43,750       44       -       -       3,456               3,500  
Stock issued for note conv. @ $0.0500/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. @ $0.0650/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. @ $0.0250/sh. Mar. 2012
    430,000       430       -       -       10,320               10,750  
Stock issued for note conv. @ $0.0325/sh. Mar. 2012
    800,000       800       -       -       25,200               26,000  
Stock issued for note conv. @ $0.0400/sh. Mar. 2012
    85,000       85       -       -       3,315               3,400  
Stock issued for note conv. @ $0.0325/sh. Apr. 2012
    400,000       400       -       -       12,600               13,000  
Stock issued for note conv. @ $0.0250/sh. Apr. 2012
    330,000       330       -       -       7,920               8,250  
Stock issued for note conv. @ $0.0400/sh. Apr. 2012
    205,000       205       -       -       7,995               8,200  
Stock issued for loan @ $0.0014/sh. Feb. 2012
    -       -       2,000,000       2,000       800               2,800  
Stock issued for note conv. @ $0.0250/sh. May 2012
    320,000       320       -       -       7,680               8,000  
Stock issued for note conv. @ $0.0350/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. @ $0.0325/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  
Beneficial conversion features
    -       -       -       -       26,182               26,182  
                                                         
Net loss
                                            (632,609 )     (632,609 )
                                                         
                                                         
Balance March 31, 2012 (Unaudited)
    9,580,322     $ 9,580       8,000,000     $ 8,000     $ 4,692,530     $ (6,612,015 )   $ (1,901,905 )
                                                         
The accompanying footnotes are an integral part of these financial statements.
           
 
 
F-4

 
 
EVCARCO, Inc. and Subsidiary
 
Consolidated Statements of Cash Flows
 
             
             
   
For the Six
   
For the Six
 
   
Months Ended
   
Months Ended
 
   
June 30, 2012
   
June 30, 2011
 
   
(Unaudited)
   
(Unaudited)
 
             
Operating activities:
           
             
Net loss
  $ (632,609 )   $ (1,249,449 )
Adjustments to reconcile net loss to net cash flows
               
used in operating activities:
               
Depreciation and amortization
    23,677       3,633  
Consulting expenses (stock)
    -       363,328  
Interest expense (stock)
    6,166       -  
Beneficial conversion feature amortization
    49,107       83,880  
                 
Change in operating assets and liabilities:
               
Accounts receivable
    (39,950 )     -  
Inventory
    34,430       47,300  
Other receivables
    6,268       5,709  
Prepaid expenses
    1,188       (2,970 )
Accounts payable
    175,770       241,739  
Accrued expenses
    221,380       101,272  
Accrued interest (related parties)
    1,048       910  
Deferred rent
    2,746       -  
Other payables
    75       (10,049 )
                 
Net cash flows used in operating activities
    (150,704 )     (414,697 )
                 
                 
Financing activities:
               
Proceeds from convertible notes payable
    32,000       165,000  
Net change in loans payable (related parties)
    107,149       221,447  
                 
Net cash flows provided by financing activities
    139,149       386,447  
                 
Increase/(decrease) in cash and cash equivalents
    (11,555 )     (28,250 )
                 
Cash and cash equivalents at beginning of period
    26,046       77,680  
                 
Cash and cash equivalents at end of period
  $ 14,491     $ 49,430  
                 
                 
Cash paid for:
               
                 
Interest
  $ 402     $ 1,755  
Interest (related parties)
  $ 11,457     $ 13,274  
                 
Non-cash activities:
               
                 
Stock issued to acquire subsidiary
  $ 167,475     $ -  
Stock issued for services
  $ -     $ 67,400  
Stock issued for loans and accounts payable
  $ 178,850     $ 470,512  
Stock buyback for balance of shareholder advances
  $ -     $ 79,000  
Debt discount from beneficial conversion feature
  $ 26,182     $ 229,877  
Reclassification of shareholder loan to accrued expenses
  $ 455,000     $ -  
                 
The accompanying footnotes are an integral part of these financial statements.
 
 
 

 
F-5

 
EVCARCO, INC. AND SUBSIDIARY
Condensed Notes to Consolidated Financial Statements
June 30, 2012

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 financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. We believe that these consolidated 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 six months ended June 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 reverse split basis.


NOTE 3.   ACQUISITION

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.

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  



 
F-6

 
EVCARCO, INC. AND SUBSIDIARY
Condensed Notes to Consolidated Financial Statements
June 30, 2012
 
NOTE 3. ACQUISITION - continued
 
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 as 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 June 30,
   
For the Six Months Ended June 30,
 
   
2012
   
2011
   
2012
   
2011
 
Revenues
  $ 210,875     $ 230,695     $ 522,657     $ 349,095  
Operating loss
    (400,745 )     (455,214 )     (880,580 )     (1,149,051 )
Net loss
    (434,489 )     (519,660 )     (961,881 )     (1,249,449 )
                                 
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: depreciation on the Subsidiary’s internally developed software has been eliminated.


 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:

   
Jun. 30, 2012
   
Dec. 31, 2011
 
             
New vehicles
  $ 52,500     $ 52,500  
Pre-owned vehicles
    49,720       84,150  
Other items
    29,128       29,128  
                 
Total inventory
  $ 131,348     $ 165,778  
 
 
NOTE 6.  PREPAID EXPENSES

As of June 30, 2012 and December 31, 2011, balances of prepaid insurance expense were $0 and $1,188, respectively.

 
 

 
F-7

 
EVCARCO, INC. AND SUBSIDIARY
Condensed Notes to Consolidated Financial Statements
June 30, 2012
 
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 June 30, 2012 and December 31, 2011, both, principal balance of note was $2,600.

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. As of June 30, 2012 and December 31, 2011, the principal balance was $182,095 and $307,460, respectively. As of the same dates, balance of interest accrued under the note was $917 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 June 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, of which $2,481 has been amortized to interest expense in the accompanying statements of operations for the three months ended June 30, 2012.  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. As of June 30, 2012 and December 31, 2011, the principal balance was $28,000 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, of which $3,590 has been amortized to interest expense in the accompanying statements of operations for the three months ended June 30, 2012.  As of June 30, 2012, the principal remained unchanged.  As of June 30, 2012, balance of interest accrued under the Note was $672.
 
 
 
F-8

 
EVCARCO, INC. AND SUBSIDIARY
Condensed Notes to Consolidated Financial Statements
June 30, 2012
 
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 $7,273 has been amortized to interest expense in the accompanying statements of operations for the three months ended June 30, 2012.  As of June 30, 2012, the principal remained unchanged.  As of June 30, 2012, balance of interest accrued under the Note was $1,302.
 
 
NOTE 8.  RELATED PARTY TRANSACTIONS

For the three months ended June 30, 2012 and 2011, the Company accrued $75,000 in salaries payable to its officers. For the period from May 24, 2012 (the acquisition date) to June 30, 2012, the Subsidiary accrued $49,451 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, according to the original agreement. As he 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 accrued expenses on the accompanying consolidated balance sheet as of June  30, 2012.

As of June 30, 2012 and December 31, 2011, the balances of note payable to Mr. Frolov, CFO, and then Director and major shareholder, were $415,294 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 5.00% per annum.  Accrued interest payable on the note at June 30, 2012, and December 31, 2011, was $1,426 and $3,674, respectively.  Interest paid during the three months ended June 30, 2012 and 2011, was $5,228 and $1,549, respectively.  This note payable does not approximate fair value, as it is with related party, and does not bear market rates of interest.

As of June 30, 2012, the balance of note payable to Mr. Speck, Executive VP, who became Director and major shareholder in August of 2012, was $124,943.  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 June 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 June 30, 2012.
 
 
 
 
 
 
F-9

 
EVCARCO, INC. AND SUBSIDIARY
Condensed Notes to Consolidated Financial Statements
June 30, 2012
 
NOTE 9. OPERATING SEGMENTS - continued
 
   
Auto Dealership
   
Software
   
Total
 
Three Months Ended June 30, 2012
                 
Revenues
  $ 210,322     $ 352     $ 210,674  
Cost of goods sold
    185,155       -       185,155  
Sales and marketing expenses
    1,335       1,279       2,614  
Depreciation and amortization
    1,570       20,537       22,107  
                         
As of June 30, 2012
                       
Total current assets
  $ 200,520     $ 46     $ 200,566  
Property and equipment, net
    16,197       564,525       580,722  


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 $2,488,051 and an accumulated deficit of $6,612,015 at June 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.
 
 
 
 
F-10

 
EVCARCO, INC. AND SUBSIDIARY
Condensed Notes to Consolidated Financial Statements
June 30, 2012
 
NOTE 11. CONVERTIBLE PREFERRED STOCK - continued
 
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 an officer and director for $7,350 in partial satisfaction of the loan payable to such 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 April 20, 2012, the Company issued 2,000,000 shares of Class B convertible preferred stock to an officer and director for $2,800 in partial satisfaction of the loan payable to such 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.


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 June of 2012, the Company issued 3,966,667 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 $130,900, 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.

In May of 2012, the Company issued 200,000 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 $7,000. The number of shares was computed based on agreed upon discount to market price of the shares at the time of the conversion.

In 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.
 
 
 
 
F-11

 
EVCARCO, INC. AND SUBSIDIARY
Condensed Notes to Consolidated Financial Statements
June 30, 2012
 
NOTE 12. COMMON STOCK - continued
 
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 reverse 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.


NOTE 13.  SUBSEQUENT EVENTS

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.

On July 31, 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 matures 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 42% discount to the market price, at the point of conversion.

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, CFO of the Company.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
F-12

 

 
 
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 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 decrease 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 accompanying consolidated 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 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.
 
 
 
4

 
 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
 
· 
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 our 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 June 30, 2012 and 2011, gross revenues were $210,674 and $230,695, gross profit was $25,519 and $18,859, respectively. Net losses for the same quarterly periods were $357,111 and $519,660, including approximately $124,450 and $143,800, respectively, of accrued compensation to the officers of the Company.

For the six month periods ended June 30, 2012 and 2011, gross revenues were $520,412 and $349,095, gross profit was $54,822 and $21,707, respectively. Net losses for the same quarterly periods were $632,609 and $1,249,449, including approximately $243,690 and $194,230, respectively, of accrued compensation to the officers of the Company.

As of June, 2012, the Company had assets of $786,712, and total liabilities of $2,688,617.  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.

 
Liquidity and Capital Resources
 
As of June 30, 2012 and December 31, 2011, the Company had no significant cash reserves or other liquid assets.

As of June 30, 2012 and December 31, 2011, working capital deficiency amounted to $2,488,051 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 June 30, 2012, the Company had $2,688,617 of current liabilities outstanding.  That amount included approximately $777,000 of compensation and related taxes accrued to the officers of the Company; approximately $583,000 of other accrued compensation and related taxes; $131,438 of shareholder advances; and $240,589 of convertible debt.
 
 
 
 
5

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

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 June 30, 2012. Based on that evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2012. During the quarter ended on June 30, 2012, 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



 
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
04/20/12
 
2,000,000
 
Class B Convertible Preferred Stock
 
Debt Conversion - $2,800
 
 Reg. D
 
None
05/23/12
 
400,000
 
Common Stock
 
Debt Conversion - $13,000
 
 Reg. D
 
None
07/30/12
 
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

* 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

 
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 *
 
* Pursuant to Rule 405(a)(2) of Regulation S-T, the Company will furnish the XBRL Interactive Data Files with detailed footnote tagging as Exhibit 101 in an amendment to this Form 10-Q within the permitted 30-day grace period for the first quarterly period in which detailed footnote tagging is required after the filing date of this Form 10-Q.

 
 

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: August 31, 2012
By:
/s/  Gary Easterwood
   
Gary Easterwood
   
Principal Executive Officer

Date: August 31, 2012
By:
/s/  Nikolay Frolov
   
Nikolay Frolov
   
Chief Financial Officer
(Principal Financial and Accounting Officer)

 
 
 
 
 

 
 
8

PINX:EVCA Evcarco Inc Quarterly Report 10-Q Filling

Evcarco Inc PINX:EVCA Stock - Get Quarterly Report SEC Filing of Evcarco Inc PINX:EVCA stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

PINX:EVCA Evcarco Inc Quarterly Report 10-Q Filing - 6/30/2012
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