UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
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ACT OF 1934
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For the quarterly period ended:
September 30, 2010
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
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ACT OF 1934
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For the transition period from: _____________ to _____________
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Commission File Number: 333-142704
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ELECTRIC CAR COMPANY, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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20-8317658
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(State of Incorporation
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(I.R.S. Employer Identification No.)
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1903 North Barnes Avenue
Springfield, MO 65803
(Address of Principal Executive Office) (Zip Code)
(417) 866-6565
(Registrant’s telephone number, including area code)
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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
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required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Yes
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No
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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
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and post such files).
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Yes
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No
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller
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Smaller reporting company
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reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Yes
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No
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class
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Shares Outstanding as of October 15, 2010
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Common Stock, $0.0001 Par Value Per Share
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6,815,829,982
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ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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September 30,
2010
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December 31,
2009
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ASSETS
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Current Assets
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Cash
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$
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69,290
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$
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45,694
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Account receivable
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55,001
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330,694
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Inventory
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152,166
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187,815
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Other current assets
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434,153
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407,981
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Total Current Assets
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710,610
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972,184
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Customer lists, net of amortization of $71,250 and $37,500 at
September 30, 2010 and December 31, 2010, respectively
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153,750
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187,500
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Other Assets
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36,724
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38,937
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TOTAL ASSETS
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$
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901,084
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$
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1,198,621
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LIABILITIES AND SHAREHOLDERS’ DEFICIT
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Current Liabilities
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Accounts payable and accrued expenses
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$
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297,109
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$
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588,374
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Notes payable, current portion
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594,744
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1,517,957
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Other current liabilities
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143,455
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113,000
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Total Current Liabilities
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1,052,337
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2,219,331
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Notes Payable, Long Term
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802,074
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—
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TOTAL LIABILITIES
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1,837,382
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2,219,331
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Shareholders’ Deficit
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Preferred stock, A, $0.001 par value, 10,000,000 shares authorized:
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500,000 shares and 0 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively
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500
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Preferred stock, B, $0.001 par value, 10,000,000 shares authorized: 115 shares and 0 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively
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Common Stock, $0.00001 par value, 25,000,000 shares authorized:
5,462,351,382 shares and 114,681,176 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively
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1,381,010
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114,681
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Additional paid-in capital
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2,539,719
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1,477,915
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Accumulated deficit
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(4,857,527
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(2,613,306
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Total Shareholders’ Deficit
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(936,298
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(1,020,710
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TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT
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$
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901,084
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$
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1,198,621
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1
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
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Three Months Ended
September 30
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Nine Months Ended
September 30
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2010
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2009
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2010
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2009
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Revenues, net
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$
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273,523
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$
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420,875
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$
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954,213
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$
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650,375
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Cost of revenues
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421,006
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441,095
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1,243,122
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652,595
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Gross profit (loss)
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(147,483
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(20,220
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(288,909
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(2,220
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Operating expenses:
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Selling and marketing
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48,689
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61,739
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124,790
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92,552
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General and administrative
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435,301
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571,712
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809,387
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725,768
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Bad debt expense
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—
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—
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304,274
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—
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Total operating expenses (income)
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(483,990
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633,451
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1,238,451
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818,320
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Loss from operations
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(631,473
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(653,671
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(1,527,360
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(820,540
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Interest expense
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(43,935
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—
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(680,841
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—
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Other, net
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(12,148
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—
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(36,024
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(8,363
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Loss before income taxes
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(687,556
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(653,671
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(2,244,225
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(828,903
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Provision for income taxes
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—
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—
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—
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—
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Net Loss
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$
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(687,556
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$
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(653,671
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$
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(2,244,225
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$
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(828,903
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Net loss per common share – basic and diluted
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$
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(0.00
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$
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(0.00
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$
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(0.00
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$
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(0.00
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Weighted average shares outstanding – basic and diluted
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3,418,796,573
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100,679,817
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2,788,516,279
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95,579,404
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2
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
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Nine Months Ended
September 30,
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2010
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2009
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Cash Flows from Operating Activities
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Net loss
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$
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(2,244,225
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$
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(828,903
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Adjustments to reconcile net income in net cash used in
operating activities:
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Depreciation and amortization
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33,750
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146,834
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Impairment of intangibles
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—
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64,694
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Shares issued for services
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55,000
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46,185
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Interest paid in shares
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116,653
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—
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Note Discount
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719,650
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—
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Changes in operating assets and liabilities:
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Accounts receivable
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275,693
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(330,638
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Inventory
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35,649
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(338,091
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Prepaid expenses and other current assets
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(26,172
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(9,580
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Other current
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2,213
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—
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Accounts payable and accrued expenses
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(260,764
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183,009
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Other
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—
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57,830
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Net cash (used in) provided by continuing operating activities
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(1,292,546
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(1,008,661
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Loss from discontinued operations
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—
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8,363
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Net cash (used in) provided by operating activities
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(1,292,546
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(1,000,298
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Cash Flows from Investing Activities:
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Investment and advances
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—
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(239,739
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Notes receivable acquired
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—
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(16,653
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Acquisition of subsidiary
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—
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(1,299
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Security deposits
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—
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(10,000
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Net cash provided by (used in) investing activities
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—
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(267,691
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)
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Cash Flows from Financing Activities:
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Proceeds from notes
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646,000
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1,295,008
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Notes issued for services
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676,142
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—
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Cost of Raising Capital
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(6,000
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)
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—
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Net cash provided by financing activities
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1,316,142
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1,295,008
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Increase (decrease) in cash
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23,596
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27,019
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Cash, Beginning of Period
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45,694
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75
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Cash, End of Period
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$
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69,290
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$
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27,094
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Supplemental Information:
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Cash paid for interest
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$
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—
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$
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—
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Cash paid for taxes
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$
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—
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$
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—
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Conversion of convertible notes into common stock
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$
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—
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$
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—
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Noncash transactions:
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Stock issued to acquire subsidiary
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—
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61,200
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Stock issued for conversion of convertible notes into common stock
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1,151,768
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—
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Series A preferred stock issued in settlement of accrued expenses
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$
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106,000
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$
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—
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3
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 1 - DESCRIPTION OF BUSINESS
Electric Car Company, Inc. (“ELCR”, “we”, “our” or “the Company”) was formed as a Delaware corporation on December 29, 2006 initially to produce and market our unique line of historical costumes and reenactment clothing lines through our website with the registered domain name of WorldWideRelics.Com.
In February 2009, the Company’s Board of Directors approved the spin-off of our wholly owned subsidiary, World Wide Relics, Inc., a Nevada corporation, to shareholders of record on November 1, 2008 (the “Record Date”). Shareholders as of the Record Date received one share of World Wide Relics, Inc. for each two shares held in the Company on the Record Date. At the time of the spin-off, World Wide Relics had an immaterial amount of assets, liabilities and equity and no revenues and expenses.
In April 2009, we began to execute a new business plan wherein, the Company began operations as a marketer and distributor of automobiles, small buses, specialty vehicles, limousines and custom vehicles. In connection with this change in our business model, in August 2009, the Company acquired Imperial Coachworks, Inc. and its wholly owned subsidiary, Imperial Coachbuilders, Inc. whose assets and liabilities consisted of a database, website and assumption of a note payable.
In October 2009, we changed our name from Classic Costume Company, Inc. to Electric Car Company, Inc.
The consolidated financial statements contained in this report reflect the operations of Electric Car Company, Inc., our parent company and, since April 2009, the operations of our wholly owned subsidiaries Imperial Coachworks, Inc. and Imperial Coachbuilders, Inc. The operations of World Wide Relics, Inc., inclusive through February 2009, were immaterial to our operations. All intercompany transactions were eliminated in consolidation.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a limited operating history and has not generated sufficient revenues to achieve profitability. Additionally, the Company’s ongoing expenses, primarily operational losses and legal and accounting costs, have been paid through funds advanced to it by certain shareholders. The Company intends to resolve its liquidity problems through pursuing a merger or combination with a profitable third party, obtaining additional financing or locating additional investors. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Due to our financial condition, the report of our independent registered public accounting firm on our December 31, 2009 consolidated financial statements includes an exploratory paragraph indicating that these conditions raise substantial doubt about our ability to continue as a going concern.
4
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3 – BASIS OF PRESENTATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting of interim financial information. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. Accordingly, these statements do not include all the disclosures normally required by accounting principles generally accepted in the United States for annual financial statements and should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report and the audited financial statements and notes thereto for the year ended December 31, 2009 included in our Annual Report on Form 10-K. The accompanying consolidated condensed balance sheet as of December 31, 2009 has been derived from our audited financial statements. The condensed consolidated statements of operations and cash flows for the nine months ended September 30, 2010 are not necessarily indicative of the results to be expected for any future period or for the year ending December 31, 2010.
In the opinion of management, the accompanying unaudited interim consolidated condensed financial statements contain all adjustments (consisting of only normally recurring adjustments) necessary to present fairly the financial position and results of operations as of the dates and for the periods presented.
In July 2009, our Board of Directors authorized and implemented a seven for one (7:1) forward stock split of our common shares. All share and per-share information in the report has been retroactively restated, where applicable, to reflect the forward split.
Liquidity
The accompanying consolidated condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate continuation as a going concern. We have sustained substantial losses from operations since our inception, and such losses have continued through September 30, 2010. At September 30, 2010, we had an accumulated deficit of approximately $4.8 million. These matters, among others, raise substantial doubt about the ability of the Company to continue as a going concern. Accordingly, the report of our registered public accounting firm on our financial statements for the year ended December 31, 2009, contained an explanatory paragraph regarding our ability to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.
While there can be no assurance, we intend to improve our financial position through a potential merger, increased revenues and external debt and equity funding.
For the remainder of 2010, our cash and cash equivalents will primarily be used to fund our ongoing operations including expanding our sales and marketing capabilities on a global basis as well as for general working capital. We believe our cash, cash equivalents and anticipated revenues will be sufficient to support our planned operations for at least the next twelve months.
Principles of Consolidation and Presentation
The consolidated financial statements include the accounts of Electric Car Company, Inc. and its wholly owned operating subsidiaries Imperial Coach Builders, Inc. (“ICB”) and Imperial Coach Works, Inc. (“ICW”). All significant intercompany balances and transactions have been eliminated in consolidation.
5
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3 - BASIS OF PRESENTATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments and other short-term investments with a maturity of three months or less, when purchased, to be cash equivalents.
Accounts Receivable
Accounts receivable are reported at net realizable value. The Company establishes an allowance for doubtful accounts based on factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts are written-off when it is determined that the amounts are uncollectible. At September 30, 2010 and December 31, 2009, the Company had recognized an allowance for doubtful accounts of $-0- and $900, respectively.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the FIFO method. To ensure inventories are carried at the lower of cost or market, the Company periodically evaluates the carrying value of its inventories. The Company also periodically performs an evaluation of inventory for excess and obsolete items. Such evaluations are based on management’s judgment and use of estimates. Such estimates incorporate inventory quantities on-hand, aging of the inventory, sales forecasts for particular product groupings, planned dispositions of product lines and overall industry trends.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets (primarily three to five years). Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life. Costs of maintenance and repairs are charged to expense as incurred. Currently, the bulk of our manufacturing equipment is owned by our landlord under an operating lease agreement tied to our production facility. Accordingly, this equipment, consisting primarily of small tools, is not carried or depreciated in the Company records.
Stock Based Compensation
We account for the grant of stock options and restricted stock awards in accordance with ASC Topic 718, “
Share-Based Payment, an Amendment of FASB Statement No. 123
”. The Topic requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation. Such compensation amounts are amortized over the respective vesting periods of the options granted. At September 30, 2010 and December 31, 2009, the Company had no common stock purchase options outstanding.
6
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3 - BASIS OF PRESENTATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recoverability of Long-Lived Assets
The Company reviews the recoverability of its long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Property and equipment to be disposed of by sale is carried at the lower of the then current carrying value or fair value less estimated costs to sell. Intangible assets with indefinite useful lives are tested for impairment annually or more frequently if an event indicates that the asset might be impaired. In accordance with ASC Topic 350,
“Goodwill and Other Intangible Assets”
, the fair value of these intangible assets is determined based on a discounted cash flow methodology.
Revenue Recognition
Revenues from services are recognized in accordance with the provisions of ASC Topic 605, “
Revenue Recognition
”. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.
In circumstances when these criteria are not met, revenue recognition is deferred until resolution occurs. With regard to our custom vehicles, revenue is recognized when the vehicle is delivered and accepted by our customer. Advances by customers are carried as a current liability of the Company until the revenue process is completed.
Income Taxes
The Company accounts for income taxes under ASC Topic 740,
“Accounting for Income Taxes”
. The Topic requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax loss carry-forwards. The topic additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
Earnings (Loss) Per Share of Common Stock
The Company presents basic earnings (loss) per share and, if appropriate, diluted earnings per share in accordance with ASC Topic 260,
“Earnings Per Share”
. Under this topic basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of shares outstanding during the period. Diluted net income per share is computed by dividing net income for the period by the weighted-average number of common share equivalents during the period, including potentially issuable shares. At September 30, 2010, there were no options outstanding. Potentially issuable shares under convertible debt agreements were not considered in diluted earnings per share as their inclusion was anti-dilutive.
7
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3 - BASIS OF PRESENTATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash, accounts receivable and payables approximate fair value based on the short-term maturity of these instruments.
Fair value of certain of the Company’s financial instruments including cash and cash equivalents, inventory, account payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820,
“Fair Value Measurements
and Disclosure”
defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.
Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1 –
Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2 –
Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 –
Unobservable inputs for the asset or liability that are supported by little or no market activity and that are significant to the fair values.
Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.
Intangible Assets
The Company accounts for intangible assets in accordance with the provisions of ASC Topic 350,
“Goodwill and Other Intangible Assets,”
which requires intangible assets with indefinite useful lives not be amortized, but be tested for impairment annually or whenever indicators or impairments arise. Intangible assets that have finite lives continue to be amortized over their estimated useful lives.
8
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3 - BASIS OF PRESENTATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Shipping and Handling Costs
The Company accounts for shipping and handling costs as a component of “Cost of Sales.”
Recent Issued Accounting Standards
In August 2010, the FASB issued Accounting Standard Updates No. 2010-21 (ASU No. 2010-21) “Accounting for Technical Amendments to Various SEC Rules and Schedules” and No. 2010-22 (ASU No. 2010-22) “Accounting for Various Topics – Technical Corrections to SEC Paragraphs”. ASU No 2010-21 amends various SEC paragraphs pursuant to the issuance of Release no. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies. ASU No. 2010-22 amends various SEC paragraphs based on external comments received and the issuance of SAB 112, which amends or rescinds portions of certain SAB topics. Both ASU No. 2010-21 and ASU No. 2010-22 are effective upon issuance. The amendments in ASU No. 2010-21 and No. 2010-22 will not have a material impact on the Company’s financial statements.
NOTE 4 - EQUITY TRANSACTIONS
The Company was incorporated on December 29, 2006. The Company is authorized to issue the following:
Preferred Stock –
10,000,000 $.001 par value shares.
Common Stock –
25,000,000,000 $.00001 par value shares.
In April 2009, the Company filed with the Secretary of the State of Delaware to increase the authorized capital of the Corporation to 205,000,000 (Two Hundred Five Million) shares, consisting of 200,000,000 (Two Hundred Million) shares of common stock, par value of $0.001 and 5,000,000 (Five Million) shares of preferred stock, par value of $0.001 per share.
In May 2009, the Company issued 1,408,051 restricted common shares to a consultant for assistance provided in securing additional capital resources. The Company recognized an expense in the quarter of $46,185 or $0.0328 per share, which management considers its fair value based on a previous private transaction of similar restricted shares.
On July 1, 2009, the shares of common stock currently issued was split forward at a ratio of seven (7) new shares for each one (1) old share, with the par value remaining at $.001 per share.
On September 1, 2009 the Company issued 1,000,000 common shares to a consultant to provide sales and marketing services for 90 days. The Company recognized an expense of $150,000 or $0.15 per share, which management considers its fair value based on our market price in similar trades at that date.
On October 1, 2009 the Company issued 1,000,000 common shares to a consultant to provide business sales and design support services for 1 year. The Company recognized an expense of $30,000 or $0.03 per share, which management considers its fair value based on our market price in similar trades at that date.
On November 5, 2009 the Company issued 1,000,000 common shares to a consultant to provide merger and acquisition services for 90 days. The Company recognized an expense of $49,000 or $0.049 per share, which management considers its fair value based on our market price in similar trades at that date.
On December 1, 2009 the Company issued 10,000,000 common shares to a consultant to provide electric car conversion and franchising of systems services for 3 years. The agreement provides that the shares become vested over the contract period commencing after completing the first year of service. Accordingly, the Company is recognizing $50,000 in consulting expense per quarter until fully earned. The value of the shares at grant date is
9
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4 – EQUITY TRANSACTIONS (CONTINUED)
$400,000 or $0.04 per share which management considers its fair value based on our market price in similar trades at that date.
On December 29, 2009 the Company issued 2,000,000 common shares to a consultant to provide sales and marketing services for 90 days. The Company recognized an expense of $74,000 or $0.037 per share, which management considers its fair value based on our market price in similar trades at that date.
Effective September 7, 2010, the Company filed an amendment to its certificate of incorporation with the Delaware Secretary of State increasing its authorized common stock to 25,000,000,000 (twenty-five billion). The amendment was approved by the Company’s board of directors and holders of a majority of its outstanding capital stock.
During the nine months ended September 30, 2010, the Company issued:
·
5,612,767,111 common shares related to the conversions of note obligations totaling approximately $1,151,719;
·
863,508,912 common shares issued in payment of $116,653 in note related accrued interest;
·
1,500,000 common shares in payment of legal fees with a fair value of $0.03 per share;
·
1,000,000 common shares to provide sales and marketing services with a fair value of $0.01 per share;
·
12,000,000 common shares issued into a third party escrow account relating to a pending financing. These shares, with a fair value of $0.01 per share on the date of issuance, were recognized as a contra-equity transaction pending release of the shares. Subsequent to the quarter ending March 31, 2010, the planned financing was cancelled and we intend to return the shares to the treasury;
·
2,000,000 issued in connection with a previous consulting agreement were cancelled;
In March 2010, the Company also issued 500,000 shares of Series A Convertible Preferred Stock to our Chief Executive Officer in settlement of $106,000 owed to the President and Chief Executive Officers in accrued salary and loans. The holder of record of the shares of the preferred stock shall have the right at any time to convert all (but not part) of such preferred shares into that number of fully paid and non-assessable shares of common stock as shall be 40% of the Company’s common stock on a fully diluted basis.
On August 16, 2010, the Company issued an aggregate of 115 shares of preferred stock designated as Series B Preferred Stock (the “Series B Preferred Stock”) to three consultants as consideration for consulting services provided to the Company in connection with the Company’s joint venture with Liberty. Each holder of Series B Preferred Stock shall have the right to convert all or part of his or her shares of Series B Preferred Stock into shares of the Company’s common stock such that each ten (10) shares of the Series B Preferred Stock shall convert into that number of fully paid and non-assessable shares of Common Stock as shall be 1% of the Company’s common stock on a fully diluted basis on the date of conversion (whereby in the event all of the Series B Preferred Stock is converted, the Company shall issue that number of fully paid and non-assessable shares of Common Stock as shall be 11.5% of the Company’s common stock). The shares of Series B Preferred Stock shall vote together with the Company’s Common Stock and Series A Preferred Stock, except as otherwise required by law. The number of votes for the Series B Preferred Stock shall be the same number as the amount of shares of Common Stock that would be issued upon conversion. The Series B Preferred Stock is not entitled to dividends or preference upon liquidation. The Company relied upon exemptions provided for in Sections 4(2) of the Securities Act of 1933, as amended. The consultants had access to current information concerning the Company and the certificates representing the Series B Preferred Stock contain legends restricting transferability absent registration or applicable exemption
The Company has accounted for the issuance of these preferred shares as equity instruments under the provisions of ASC 815,
Derivatives and Hedging
. The Series A Preferred shares do contain a provision that ultimate settlement of
10
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4 – EQUITY TRANSACTIONS (CONTINUED)
the financial instrument is indexed to and settled in our own common stock. However, the preferred shares contain no provision which would provide for a potential net cash settlement. Further, the related provisions provide:
·
No requirement settlement be made in registered shares,
·
No registration requirements for the underlying shares or related penalty,
·
No counter party rights superior to shareholder rights, and
·
No collateral was required.
Also, the Company has adequate authorized, but unissued, shares to meet the conversion obligations under the Series A Preferred shares. Accordingly, the Company has categorized the issuance as equity in its financial reporting.
NOTE 5 – RELATED PARTY TRANSACTIONS
In March 2010, the Company also issued 500,000 shares of Series A Convertible Preferred Stock to our Chief Executive Officer in settlement of $106,000 owed to the President and Chief Executive Officers in accrued salary and loans. The holder of record of the shares of the preferred stock shall have the right at any time to convert all (but not part) of such preferred shares into that number of fully paid and non-assessable shares of common stock as shall be 40% of the Company’s common stock on a fully diluted basis.
NOTE 6 - INVENTORY
Inventory consisted of the following at September 30, 2010 and December 31, 2009, respectively:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials, less reserve for obsolescence
|
|
$
|
55,817
|
|
$
|
50,227
|
|
|
Work in progress
|
|
|
91,369
|
|
|
132,588
|
|
|
Finished product
|
|
|
5,000
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
Total inventory
|
|
$
|
152,166
|
|
$
|
187,815
|
|
Raw materials
consist of unassembled parts and components used in the assembly of a finished vehicle.
Work in process
consists of chassis under assembly but not yet complete.
Finished product
consists of completed vehicles ready for sale.
Management evaluated the inventory at September 30, 2010 and December 31, 2009 for damaged or obsolete items and recognized an allowance for obsolescence of $8,982 at September 30, 2010.
11
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 7 – OTHER ASSETS
Other assets consisted of the following at September 30, 2010 and December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
Web site
|
|
$
|
14,739
|
|
$
|
14,739
|
|
|
Less: amortization
|
|
|
(4,668
|
)
|
|
(2,457
|
)
|
|
Notes receivable – Legacy Limo
|
|
|
16,653
|
|
|
16,653
|
|
|
Security deposits
|
|
|
10,000
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
36,724
|
|
$
|
38,937
|
|
Legacy Limo
is a customer of the Company that was provided supplemental financing to facilitate the sale of one of its vehicles. The primary financing was provided to the customer by Integrated Leasing (“Integrated”). Through an arrangement with Integrated, the Company purchased a portion of the financing from Integrated, which facilitated the vehicle sale to Legacy Limo. The Company’s participation arrangement with Integrated provides that the first three years of payments are credited to Integrated and the last two years of payments are credited to the Company. Integrated provides all debt service and payment processing functions.
Security deposits
, the Company deposited $10,000 on behalf of Imperial Coach Builders as a deposit on a chassis for future delivery.
NOTE 8 – NOTES PAYABLE
Notes payable, was comprised of the following at:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
The Joseph Rosen Foundation, Inc. 20% note
|
|
$
|
—
|
|
$
|
200,000
|
|
|
Shareholder Notes
|
|
|
6,992
|
|
|
256,200
|
|
|
Electric Vehicle Conversion Consultant
|
|
|
90,729
|
|
|
102,921
|
|
|
SEC Administration Consultant
|
|
|
61,220
|
|
|
37,039
|
|
|
Francine’s Closet
|
|
|
184,639
|
|
|
37,039
|
|
|
American Settlements, LLC
|
|
|
598,239
|
|
|
—
|
|
|
Other
|
|
|
729,812
|
|
|
771,457
|
|
|
Total notes payable
|
|
|
1,671,631
|
|
|
1,517,957
|
|
|
Less: Note discounts
|
|
|
(274,813
|
)
|
|
—
|
|
|
Current portion
|
|
|
(594,744
|
)
|
|
(1,517,957
|
)
|
|
Notes payable, long-term portion
|
|
$
|
802,074
|
|
$
|
—
|
|
The Joseph Rosen Foundation, Inc. 20% note
dated April 16, 2009 was issued to provide working capital for the Company. The note was secured and accrued interest at 20%, which was initially payable at maturity on August 16, 2009. The note was in default at December 31, 2009. The note was guaranteed by an officer of the Company and provided for the issuance of 400,000 warrants at an exercise price of $0.30, exercisable for 5 years. The warrants were restricted and could not be exercised before April 15, 2010. The warrants were valued at $126,856 at the grant date, based on the Black-Scholes-Merton model. Accordingly, the Company recorded the value of the warrants issued as debt discount and amortized the discount over the life the note, which resulted in $51,640 of additional interest expense in Q3 2009 and $0 of unamortized debt discount remaining.
12
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 8 – NOTES PAYABLE (CONTINUED)
The
Shareholder Notes
at December 31, 2009 represent a series of unsecured advances over the past 2 fiscal quarters that are due 90 days after the advance and bear interest at 10%, payable at maturity. No repayments have been made during 2009 and approximately $163,400 of the notes were past due at December 31, 2009. During Q1 2010, the notes were renegotiated and extended for six months from their previous maturity date.
The
Electric Vehicle Conversion Consultant
notes at December 31, 2009 represent a series of unsecured advances made to or on behalf of the Company over the prior two fiscal quarters that were due 90 days after each advance and bear interest at 10%, payable at maturity. No repayments have been made during 2009 and approximately $66,200 of the notes were past due at December 31, 2009. During Q1 2010, the notes were renegotiated and extended for six months from their previous maturity date. These amended notes bear interest at 15% per annum. The primary consultant is a shareholder of the Company.
The
SEC Administration Consultant
notes at December 31, 2009 represent a series of unsecured advances made to or on behalf of the Company over the prior two fiscal quarters that were due 90 days after each advance and bear interest at 10%, payable at maturity. No repayments have been made during 2009 and approximately $102,400 of the notes were past due at December 31, 2009. During Q1 2010, the notes were renegotiated and extended for six months from their previous maturity date and $5,000 of the existing debt was converted into 4,000,000 shares of common stock at $0.00125 per share.
The
Francine’s Closet
note at December 31, 2009 represents an unsecured advance made to the Company on December 1, 2008, which was due one year after the advance and carried an interest rate of 10%, payable at maturity. No repayments had been made during 2009 and the note was past due at December 31, 2009. During Q1 2010, the note was renegotiated and extended for six months from its original maturity date.
NOTE 9 – OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
Customer deposits
|
|
$
|
143,455
|
|
$
|
113,000
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
143,455
|
|
$
|
113,000
|
|
NOTE 10 – SUBSEQUENT EVENTS
We have evaluated events and transactions that occurred subsequent to September 30, 2010, through the date the financial statements were issued for potential recognition or disclosure in the accompanying condensed consolidated financial statements.
Subsequent to September 30, 2010, several of the Company’s then outstanding notes payable were converted into shares of the Company’s common stock. As a result of these negotiated conversions, the Company issued approximately 2,677,000
shares of its common stock in settlement of approximately $135,000 in debt. The conversion ratios under the notes range from a 25% discount to market price of the Company’s common stock to a 75% discount to market price for the Company’s common stock.
13
ELECTRIC CAR COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 10 – SUBSEQUENT EVENTS (CONTINUED)
On October 18, 2010, the Company announced the execution of a letter of intent with NEAH Power Systems, Inc. for a proposed strategic partnership. The proposed partnership is subject to the execution of a definitive agreement and each party’s completion of due diligence, necessary consents and approvals.
In October, 2010, the Company and Liberty Electric Cars, USA LLC, an Illinois limited liability company (“Liberty”), entered into a series of agreements to form a joint venture for the primary purpose of producing zero emission, electric vehicles. Liberty is a clean technology company based in Oxford, UK, and with offices in Chicago. Liberty has developed a patented electric propulsion system for SUVs, MPVs and 4x4s. The technology enables Liberty to convert large 4x4s and similar vehicles so that they are zero-emission. Initial funding of the joint venture was $10,000.
Other than the disclosures shown, we did not identify any events or transactions through November
14, 2010 that should be recognized or disclosed in the accompanying consolidated condensed financial statements.
14
ITEM 2:
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains 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. These forward-looking statements are based on our management’s beliefs, assumptions and expectations and on information currently available to our management. Generally, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements, which generally are not historical in nature. All statements that address operating or financial performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation our expectations with respect to product sales, future financings, or the commercial success of our products. We may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Our management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made. We do not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by federal securities laws and the rules of the Securities and Exchange Commission (the “SEC”). We may not actually achieve the plans, projections or expectations disclosed in our forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, including without limitation those described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K filed with the SEC on April 15, 2010, and those described from time to time in our future reports filed with the SEC.
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
We prepare our financial statements in accordance with accounting principles generally accepted in the United States. We are required to make estimates and judgments in preparing our financial statements that affect the reported amounts of our assets, liabilities, revenue and expenses. We base our estimates on our historical experience to the extent practicable and on various other assumptions that we believe are reasonable under the circumstances and at the time they are made. If our assumptions prove inaccurate or if our future results are not consistent with our historical experience, we may be required to make adjustments in our policies that affect our reported results. Our most critical accounting policies and estimates include: revenue recognition, inventory capitalization and intangibles. We also have other key accounting policies that are less subjective and, therefore, their application would not have a material impact on our reported results of operations. The following is a discussion of our most critical policies, as well as the estimates and judgments involved.
Revenue Recognition
Revenues from services are recognized in accordance with the provisions of ASC Topic 605,
Revenue Recognition.
In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.
In circumstances when these criteria are not met, revenue recognition is deferred until resolution occurs. Accordingly, we recognize revenues related to our vehicles when the vehicle has been completed to our customer’s specifications and is delivered to and accepted by our customer.
15
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the FIFO method. To ensure inventories are carried at the lower of cost or market, the Company periodically evaluates the carrying value of its inventories. The Company also periodically performs an evaluation of inventory for excess and obsolete items. Such evaluations are based on management’s judgment and use of estimates. Such estimates incorporate inventory quantities on-hand, aging of the inventory, sales forecasts for particular product groupings, planned dispositions of product lines and overall industry trends.
Intangible Assets
The Company accounts for intangible assets in accordance with the provisions of ASC Topic 350,
“Goodwill and Other Intangible Assets,”
which requires intangible assets with indefinite useful lives not be amortized, but be tested for impairment annually or whenever indicators or impairments arise. Intangible assets that have finite lives continue to be amortized over their estimated useful lives.
Overview
During the second quarter of 2009, the Company began operations as a marketer and distributor of customized automobiles, small buses, specialty vehicles, limousines, electric autos, including conversion of conventional vehicles to electric power and utility vehicles. Our revenue recognition policy, consistent with the provisions of FASB ASC Topic 605 –
Revenue Recognition,
dictates that we recognize revenue when a vehicle is delivered and ultimately accepted by our customers. Accordingly, revenue for any given reporting period is heavily dependent upon the number of vehicles delivered. As our vehicle related activities began in the second quarter 2009, a quarter over quarter comparison with the prior year provides limited insight into our operational trends.
Going Concern
We have generated minimal revenues since inception. Our revenues alone are insufficient to pay our operating expenses and our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet our obligations and repay our current and future liabilities when they become due until such time, if ever, that we are able to generate sufficient revenues to attain profitable operations. We have experienced losses and negative cash flows from operations since inception and at September 30, 2010 we have an accumulated deficit of approximately $4.5 million. The report of our independent registered public accounting firm on our financial statements for fiscal 2009 contained an explanatory paragraph regarding our ability to continue as a going concern. There can be no assurance that acceptable financing to fund our ongoing operations can be obtained on suitable terms, if at all. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. In that event, we may be forced to cease operations and our stockholders could lose their entire investment in our company.
Results of Operations
Three months and nine months ended September 30, 2010 and 2009
Revenues for the third quarter 2010 were up sharply from the third quarter 2009. Revenues during the quarter totaled $954,213, a 47% increase over the third quarter 2009. Revenues for the nine months ended September 30, 2010 totaled $954,213 compared to $650,375 for the three quarters of 2009. These increases both for the three month and nine month periods over the prior year, reflect an increase in the number of vehicles completed and delivered to our customers. The Company’s revenue recognition policy, consistent with ASC Topic 605, requires that no revenue is recognized on any vehicle until it is completed and accepted by our customers.
Cost of revenues, as a percentage of total revenues, for both the three month and nine month periods ended September 30, 2010, increased over the comparable periods of the preceding year. We believe this increase is not indicative of a trend, but rather reflects the often unique requests by our customers, which vary by project vehicle. We anticipate that, as revenues continue to improve, direct costs of revenues will decline, as a percentage of sales, to profitable levels.
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During the second quarter 2010, certain accruals, and including certain notes payables, related consulting fees, were forgiven by the consultants to aid the Company during its formative development stage. These transactions totaled $343,750. Absent these renegotiated obligations, the Company would have reflected a loss of approximately $1,100,654 and $1,900,422 for the three month period and nine month period ending September 30, 2010, respectively. As the Company began its vehicle based operations in April 2009, inter period comparisons regarding growth rate and related margins are of little value. However, while there can be no assurances, the Company anticipates revenues relating to our vehicle modifications will continue to improve for the foreseeable future.
During the second quarter of 2010, the Company wrote-off as uncollectable, a note totaling $304,271. The note was originally recorded to reflect funds advanced to Imperial Body & Design. Imperial was hired by the Company to manufacture vehicles; unfortunately Imperial defaulted on their contract and lost their location to provide these services. Imperial Body & Design ceased operations in the 2
nd
quarter 2009 and management has determined the note as uncollectable.
The sharp increase in interest expenses for the quarter ended and nine months ended September 30, 2010 over the prior year was primarily attributable to recognition of the reduction in the notes payable discount resulting from recognition of a beneficial conversion feature on convertible notes payable. As these notes were paid through conversion during the quarter, interest expense was recognized on the unamortized portion of discounts for those notes converted.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support current and future operations, satisfy it obligations and otherwise operate on an ongoing basis.
The Company has operated at a loss with a negative cash flow since its inception. At September 30, 2010, the Company had cash on hand of $69,290 and a working capital deficit of $(341,727). During the second quarter of 2010, working capital was significantly enhanced through the renegotiation of terms or transfer of several notes payables resulting in their reclassification from short-term to long-term. The current portion of notes payable declined from $1,517,957 at December 31, 2009 to $594,744 at September 30, 2010. This reclassification contributed $923,213 to our working capital balances.
Currently, and in the past, the Company has been dependent on officers and shareholders of the Company to advance funds to meet operational needs, as well as a number of borrowings in the form of notes issued under varying terms. While there can be no assurance, we anticipate improved sales levels, which is expected to improve the Company’s cash flow position. However, even at anticipated improved sales levels, it will be necessary for us to seek additional funding through private or public offerings of equity securities, debt or convertible debt securities or other sources. Many, if not all, of these transactions would prove dilutive to our common stock. The Company has also entered into preliminary discussions with U.S. and non U.S. companies to joint venture or otherwise contract to use our facility and expertise for the gasoline vehicle to electric vehicle conversion process.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in interest rates, foreign exchange rates and commodity prices. Changes in these factors could cause fluctuations in our results of operations and cash flows.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s Principal Executive Officer/Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving the Company’s disclosure control objectives. The Company’s Principal Executive Officer/Principal Accounting Officer has concluded that the Company’s disclosure controls and procedures are, in fact, effective at this reasonable assurance level as of the end of period covered by this report.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II.–OTHER INFORMATION
ITEM 1A.
RISK FACTORS
In addition to the information set forth in this report, you should carefully consider the risk factors discussed in Item 1A – Risk Factors in our Annual Report on Form 10-K filed on April 15, 2010.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the nine months ended September 30, 2010, as discussed in the notes to the Company’s consolidated condensed financial statements, certain promissory notes previously issued by the Company to ten note holders were converted into shares of the Company’s common stock. The conversion ratios under the notes range from a 25% discount to market price of the Company’s common stock to a 75% discount to market price for the Company’s common stock. As a result of these conversions, the Company issued 5,612,767,111 shares of its common stock to ten note holders in satisfaction of approximately $1,151,719 due under the notes. In addition, the Company issued
286,576,831 common shares in payment of $55,689 in accrued interest relating to our outstanding notes.
On March 30, 2010, the Company authorized the designation and issuance of 500,000 shares of Series A Convertible Preferred Stock to its executive officer, Gary Spaniak. The preferred shares were issued in consideration of Mr. Spaniak forgiving approximately $106,000 of his accrued salary and loans. The preferred shares contain super voting rights and certain anti-dilution provisions. Each holder of record of shares of the preferred stock shall have the right to convert all (but not part) of such preferred shares into that number of fully paid and non-assessable shares of common stock as shall be 40% of the Company’s common stock on a fully diluted basis. The shares of preferred stock shall vote together with the Company’s common stock, except as otherwise required by law. The number of votes for the preferred stock shall be the same number as the amount of shares of common stock that would be issued upon conversion.
On January 12, 2010 the Company issued 1,500,000 shares of common stock in payment of legal fees. The shares are valued at $0.03 per share.
On January 22, 2010, the Company issued 1,000,000 shares of common stock to a consultant in consideration of shares and marketing services. The shares are valued at $0.01 per share.
The securities above were issued under the exemption from registration provided by Section 4(2) of the Securities Act. The shareholders had access to information concerning the Company.
ITEM 5.
OTHER INFORMATION
Subsequent to the period covered by this report the Company has issued an aggregate of 2,677,272,820 shares of its common stock pursuant to the conversion of certain outstanding promissory notes to eight note holders. The conversion ratios under the notes range from a 25% discount to market price of the Company’s common stock to a 75% discount to market price for the Company’s common stock. As a result of the conversions the Company reduced its debt by approximately $135,000.
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ITEM 6.
EXHIBITS
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Exhibit
Number
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Description
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3.1
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Articles of Incorporation (1)
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3.2
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Amendment to Articles of Incorporation, dated April 7, 2009(2)
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3.3
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Amendment to Articles of Incorporation, dated January 23, 2010 (3)
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3.4
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Amendment to Articles of Incorporation and Designation of Series A Preferred Stock (5)
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3.5
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Amendment to Articles of Incorporation and Designation of Series B Preferred Stock (5)
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3.6
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Bylaws of Electric Car Company, Inc. (1)
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10.1
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G & S Tech, Inc Consulting Agreement (4)
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10.2
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Aquavolt, LLC Consulting Agreement (4)
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10.3
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EVPC, LLC Consulting Agreement (4)
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10.4
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Marina View Investments, Inc. Consulting Agreement (4)
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10.5
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Harbour View Investments, Inc. Consulting Agreement (4)
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10.6
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Electric Vehicle Car Consultants Consulting Agreement (4)
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10.7
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SEC Administration Consultants Consulting Agreement (4)
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31.1
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Certification of Chief Executive Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act*
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31.2
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Certification of Chief Financial Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act *
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32.1
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
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32.2
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Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
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———————
*
Filed herewith
(1)
Incorporated by reference to the registration statement on Form SB-2 as filed on May 8, 2007
(2)
Incorporated by reference to the registration statement on Form SB-2 as filed on May 8, 2007
(3)
Incorporated by reference to Form 8-K filed February 11, 2010
(4)
Incorporated by reference for Form 10-K Annual Report for the year ended December 31, 2009 filed April 15, 2010
(5)
Incorporated by reference for Form 10-Q Quarterly Report for the period ended June 30, 2010 filed August 20, 2010
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SIGNATURES
In accordance with 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.
Date: November 24, 2010
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ELECTRIC CAR COMPANY, INC.
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By:
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/s/ GARY SPANIAK
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Gary Spaniak,
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Chief Executive Officer
(Principal Financial Officer)
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Chief Financial Officer
(Principal Financial Officer)
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20
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