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EX-31 - XTREME GREEN ELECTRIC VEHICLES INC. | v187185_ex31.htm |
EX-32 - XTREME GREEN ELECTRIC VEHICLES INC. | v187185_ex32.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended September 30, 2009
OR
¨
|
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 000-52502
XTREME
GREEN PRODUCTS INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
26-2373311
|
|
(State
or other jurisdiction of Incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
|
5475
Wynn Road, Suite 100, Las Vegas, Nevada
|
89118
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
Registrant's
telephone number, including area code:
|
(702)
233-4804
|
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. Yes ¨ No x
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 (Sec. 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). Yes ¨ No x
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 (Check one):
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
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).
Yes ¨ No x
The
number of shares outstanding of issuer's common stock, $0.001 par value as of
May 17, 2010: 43,243,225.
INDEX
Page
|
||
PART
I - Financial Information
|
3
|
|
Item
1: Financial Statements
|
3
|
|
Consolidated
Balance Sheets as of September 30, 2009 (Unaudited) and December 31,
2008
|
3
|
|
Consolidated
Statements of Operations For the Three and Nine Months Ended
September 30, 2009 and 2008 (Unaudited) and the period from Inception to
September 30, 2009 (Unaudited)
|
4
|
|
Consolidated
Statements of Cash Flows for the Nine Months Ended September 30, 2009 and
2008 (Unaudited) and the period from Inception to September 30, 2009
(Unaudited)
|
5
|
|
Notes
to Consolidated Financial Statements (Unaudited)
|
6
|
|
Item
2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
|
9
|
|
Item
4T:
Controls and Procedures
|
12
|
|
PART
II - Other Information
|
13
|
|
Item
1: Legal Proceedings
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13
|
|
Item
2: Unregistered Sales of Equity Securities and Use of
Proceeds
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13
|
|
Item
5: Other Information
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13
|
|
Item
6: Exhibits
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13
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Signatures
|
13
|
2
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements.
XTREME
GREEN PRODUCTS INC.
(A
Development Stage Company)
Consolidated
Balance Sheets
September 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 31,455 | $ | 20,341 | ||||
Loans
receivable
|
127 | 8,766 | ||||||
Accounts
receivable
|
65,250 | - | ||||||
Inventory
|
250,339 | - | ||||||
Prepaid
expense
|
45,883 | - | ||||||
Total
current assets
|
393,054 | 29,107 | ||||||
Property
and equipment
|
90,370 | - | ||||||
TOTAL
ASSETS
|
$ | 483,424 | $ | 29,107 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 101,895 | $ | 13,334 | ||||
Accrued
expenses
|
285,783 | 20,000 | ||||||
Due
to stockholders
|
121,288 | 107,993 | ||||||
Notes
payable - related party
|
250,398 | - | ||||||
Total
current liabilities
|
759,364 | 141,327 | ||||||
Stockholders'
deficit:
|
||||||||
Common
stock, $0.0001 par value, 100,000,000 shares authorized; 40,108,225 and
38,943,800 shares issued and outstanding, respectively
|
4,011 | 3,894 | ||||||
Additional
paid-in capital
|
1,820,374 | 1,234,754 | ||||||
Deficit
accumulated during the development stage
|
(2,100,325 | ) | (1,350,868 | ) | ||||
Total
stockholders' deficit
|
(275,940 | ) | (112,220 | ) | ||||
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$ | 483,424 | $ | 29,107 |
See the
accompanying notes to the financial statements.
3
XTREME
GREEN PRODUCTS INC.
(A
Development Stage Company)
Consolidated
Statements of Operations - Unaudited
For the
|
||||||||||||||||||||
Period From
|
||||||||||||||||||||
May 21, 2007
|
||||||||||||||||||||
(Inception)
|
||||||||||||||||||||
Through
|
||||||||||||||||||||
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
September 30,
|
||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
||||||||||||||||
Sales
|
$ | 76,650 | $ | - | $ | 76,650 | $ | - | $ | 76,650 | ||||||||||
Cost
of sales
|
42,298 | - | 42,298 | - | 42,298 | |||||||||||||||
Gross
profit
|
34,352 | - | 34,352 | - | 34,352 | |||||||||||||||
Costs
and expenses:
|
||||||||||||||||||||
General
and administrative
|
547,909 | 46,975 | 783,809 | 158,997 | 1,509,677 | |||||||||||||||
Impairment
of investment in Belarus Capital Corp.
|
- | - | - | - | 625,000 | |||||||||||||||
Total
costs and expenses
|
547,909 | 46,975 | 783,809 | 158,997 | 2,134,677 | |||||||||||||||
Net
loss
|
$ | (513,557 | ) | $ | (46,975 | ) | $ | (749,457 | ) | $ | (158,997 | ) | $ | (2,100,325 | ) | |||||
Per
share information - basic and diluted:
|
||||||||||||||||||||
Loss
per common share
|
$ | (0.01 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.00 | ) | ||||||||
Weighted
average common shares outstanding
|
40,047,573 | 38,653,017 | 39,580,821 | 38,476,701 |
See the
accompanying notes to the financial statements.
4
XTREME
GREEN PRODUCTS INC.
(A
Development Stage Company)
Consolidated
Statements of Cash Flows - Unaudited
For
the
|
||||||||||||
Period
From
|
||||||||||||
May
21, 2007
|
||||||||||||
(Inception)
|
||||||||||||
Through
|
||||||||||||
Nine
Months Ended September 30,
|
September
30,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
cash used in operating activities
|
$ | (743,594 | ) | $ | (142,000 | ) | $ | (1,088,246 | ) | |||
Cash
flows from investing activities:
|
||||||||||||
Purchase
of property and equipment
|
(90,370 | ) | - | (90,370 | ) | |||||||
Cash
used in acquisition of Belarus Capital Corp.
|
- | - | (125,000 | ) | ||||||||
Net
cash used in investing activities
|
(90,370 | ) | - | (215,370 | ) | |||||||
Cash
flows from financing activities:
|
||||||||||||
Common
stock issued for cash
|
567,000 | 240,000 | 949,000 | |||||||||
Proceeds
from notes payable - related party
|
250,000 | - | 250,000 | |||||||||
Proceeds
from loans payable
|
30,000 | - | 30,000 | |||||||||
Loans
from stockholders, net of repayments
|
(1,922 | ) | (4,097 | ) | 106,071 | |||||||
Net
cash provided by financing activities
|
845,078 | 235,903 | 1,335,071 | |||||||||
Net
increase in cash
|
11,114 | 93,903 | 31,455 | |||||||||
Cash
- beginning of period
|
20,341 | 5,909 | - | |||||||||
Cash
- end of period
|
$ | 31,455 | $ | 99,812 | $ | 31,455 | ||||||
Supplemental
Cash Flow Information:
|
||||||||||||
Value
of common stock issued as consideration in acquisition of Belarus Capital
Corp.
|
$ | - | $ | - | $ | 500,000 |
See the
accompanying notes to the financial statements.
5
XTREME
PRODUCTS, INC.
NOTES TO
CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
(1)
|
Basis
Of Presentation
|
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles (GAAP) for
interim financial information and Rule 8.03 of Regulation SX. They do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation have been included.
The
results of operations for the periods presented are not necessarily indicative
of the results to be expected for the full year. For further
information, refer to the consolidated financial statements of the Company as of
and for the year ended December 31, 2008 on Form 10-K, including notes
thereto.
(2)
|
Earnings
Per Share
|
The
Company calculates net income (loss) per share as required by Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
260, "Earnings per Share." Basic earnings (loss) per share is calculated by
dividing net income (loss) by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share is calculated by
dividing net income (loss) by the weighted average number of common shares and
dilutive common stock equivalents outstanding. During periods when anti-dilutive
common stock equivalents are not considered in the computation.
(3)
|
Basis
of Reporting
|
The
Company’s condensed consolidated financial statements are presented on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business.
The
Company has experienced a significant loss from operations as a result of its
investment necessary to achieve its operating plan, which is long-term in
nature. From inception to September 30, 2009, the Company incurred net losses of
$2,100,325. In addition, the Company has a working capital deficit of $366,310
at September 30, 2009. The Company has no significant revenue generating
operations.
The
Company’s ability to continue as a going concern is contingent upon its ability
to attain profitable operations and secure financing. In addition, the Company’s
ability to continue as a going concern must be considered in light of the
problems, expenses and complications frequently encountered by entrance into
established markets and the competitive environment in which the Company
operates.
The
Company is pursuing financing for its operations and seeking additional private
investments. In addition, the Company is seeking to establish its revenue base.
Failure to secure such financing or to raise additional equity capital and to
establish its revenue base may result in the Company depleting its available
funds and not being able pay its obligations.
The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
6
XTREME
PRODUCTS, INC.
NOTES TO
CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
(4)
|
Notes
Payable – Related Party
|
During
the three months ended September 30, 2009, a director loaned the Company an
aggregate of $250,000 with interest at 4.0% per annum. The note is
due on demand. From inception through September 30, 2009, $398 of interest was
added to the note balance.
On March
25, 2010, the principal amount of the note ($250,000) was converted into 500,000
shares of the Company’s common stock. In addition, the Company
granted the director warrants to purchase additional shares as
follows:
·
|
Three
year warrant to purchase 500,000 shares of common stock at $0.50 per
share.
|
·
|
Four
year warrant to purchase 500,000 shares of common stock at $0.75 per
share.
|
·
|
Five
year warrant to purchase 500,000 shares of common stock at $0.85 per
share.
|
(5)
|
Stockholders’
(Deficit)
|
During
the nine months ended September 30, 2009, the Company issued 1,134,000 shares of
common stock pursuant to a private placement at a price of $0.50 per share and
received cash proceeds of $567,000.
In
addition during the nine months ended September 30, 2009, the Company issued an
aggregate of 30,426 shares of common stock for services rendered and recorded
stock based compensation of $15,213. The value ascribed to these shares of $0.50
per share was based on the price at which the Company had sold shares pursuant
to a private placement.
(6)
|
Stock
Options
|
During
September 2009, the Company granted options to employees and consultants to
purchase 505,000 shares of common stock, at a price of $0.50 per share, which
was the fair value of the underlying common shares at the grant date based on
sales of common shares for cash. The options expire in September
2014. These options vest over the stated term.
During
September 2009, the company granted options to Directors to purchase 300,000
shares of common stock, at a price of $0.50 per share, which was the fair value
of the underlying common shares at the grant date based on sales of common
shares for cash. The options expire in September 2019. These options
vest in equal annual amounts on the first three anniversary dates of the
grant.
The fair
value of each option award is estimated on the date of grant using the
Black-Scholes option valuation model, using the assumptions noted in the
following table. Expected volatility is based on the historical volatility of
the Company’s stock, and other factors. Because the shares of the Company are
not traded, volitality was estimated as 40 - 60%. The risk-free rates used to
value the options are based on the U.S. Treasury yield curve in effect at the
time of grant.
7
XTREME
PRODUCTS, INC.
NOTES TO
CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
The cost
recognized for the period ended September 30, 2009 was $3,526, which was
recorded as general and administrative expenses.
In
valuing the options issued, the following assumptions were used;
Expected
volatility
|
40 - 60 | % | ||
Expected
dividends
|
0 | % | ||
Expected
term (in years)
|
5.0 – 10.0 | |||
Risk-free
rate
|
2.33 – 3.38 | % |
A summary
of option activity under the Plan during the period ended September 30, 2009 is
presented below:
Options
|
Shares
|
Weighted-Average
Exercise
Price
|
Weighted-Average
Remaining Contractual
Term
|
Intrinsic
Value
|
||||||||||||
Outstanding
at December 31, 2008
|
- | - | - | - | ||||||||||||
Granted
|
805,000 | $ | 0.50 | 6.9 | $ | 0.00 | ||||||||||
Outstanding
at September 30, 2009
|
805,000 | $ | 0.50 | 6.9 | $ | 0.00 |
The
following table summarizes information about fixed price stock options at
September 30, 2009:
Exercise
Price
|
Number
Outstanding
|
Weighted
Average
Contractual Life
|
Weighted
Average
Exercise Price
|
Number
Exercisable
|
Exercise
Price
|
||||||||||||||||
$ |
0.50
|
805,000
|
6.9
|
$
|
0.50
|
—
|
$
|
—
|
|||||||||||||
|
|
(7)
|
Subsequent
Events
|
Subsequent
to September 30, 2009, the Company issued 135,000 shares of common stock
pursuant to a private placement at a price of $0.50 per share and received cash
proceeds of $67,500.
The
Company also issued 2,500,000 shares of common stock pursuant to a private
placement at a price of $0.40 per share and received cash proceeds of
$1,000,000. These shares were sold to a director of the
Company. In addition, the Company granted the director warrants to
purchase additional shares as follows:
·
|
Three
year warrant to purchase 2,500,000 shares of common stock at $0.40 per
share.
|
·
|
Four
year warrant to purchase 2,500,000 shares of common stock at $0.65 per
share.
|
·
|
Five
year warrant to purchase 2,500,000 shares of common stock at $0.75 per
share.
|
8
Item
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Forward-Looking
Statements
The
information herein contains forward-looking statements. All statements other
than statements of historical fact made herein are forward looking. In
particular, the statements herein regarding industry prospects and future
results of operations or financial position are forward-looking statements.
These forward-looking statements can be identified by the use of words such as
“believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,”
“projects,” “expects,” “may,” “will,” or “should” or other variations or similar
words. No assurances can be given that the future results anticipated by the
forward-looking statements will be achieved. Forward-looking statements reflect
management’s current expectations and are inherently uncertain. Our actual
results may differ significantly from management’s expectations.
The
following discussion and analysis should be read in conjunction with our
financial statements, included herewith. This discussion should not be construed
to imply that the results discussed herein will necessarily continue into the
future, or that any conclusion reached herein will necessarily be indicative of
actual operating results in the future. Such discussion represents only the best
present assessment of our management.
Overview
Xtreme
Green Products Inc. (“Xtreme”, “we”, “our”, “us”) was incorporated under the
laws of the State of Nevada on May 21, 2007. We are a development stage company
and as such, we have not generated any significant revenue since our
inception. We have developed a line of electric powered products such as
personal mobility vehicles, motor scooters, light trucks (UTV) and ATVs. We also
intend to develop additional products such as, people movers and golf cars. Our
product line will be based on our proprietary “green” energy management system
and electric propulsion system. These products will have the power and ability
of gas powered engines, but without the particulate pollution or noise
pollution.
Pursuant
to the terms of a Share Purchase Agreement dated August 16, 2007, we purchased
5,000,000 shares of common stock of Belarus Capital Corp. (“Belarus” or the
“Company”) in a private purchase transaction in exchange for $125,000 in cash
and 1,000,000 shares of our common stock. At the time of the closing of this
transaction, the 5,000,000 shares represented 100% of the issued and outstanding
shares of common stock of Belarus. We funded the cash portion of the purchase
cost through a combination of a $40,000 loan from one of our founding
stockholders and from the proceeds of a private placement of 184,000 shares of
our common stock at $0.50 per share. The value ascribed to the 1,000,000 shares
of Xtreme stock issued in this transaction was $500,000 ($0.50 per share) which
resulted in a total purchase cost of $625,000 related to the purchase of the
Belarus shares. As a result of this transaction, Belarus became a wholly-owned
subsidiary of Xtreme.
Recent
Developments
On
November 12, 2008, the shareholders of Xtreme entered into a Share Exchange
Agreement (the “Exchange Agreement”) with Belarus pursuant to which Belarus
purchased from the Xtreme shareholders 37,837,800 shares of Xtreme common stock
which represented approximately 97.43% of the then issued and outstanding shares
of Xtreme in exchange for the issuance of 37,837,800 shares of common stock of
Belarus. In connection with the Exchange Agreement, Xtreme surrendered to
Belarus for cancellation, all 5,000,000 shares of common stock of Belarus that
it owned and as a result, Xtreme became a subsidiary of Belarus and Belarus
succeeded to the business of Xtreme as its sole business. Subsequently, Belarus
changed its name to Xtreme Green Products Inc.
Results
of Operations
Comparison
of three months ended September 30, 2009 to the three months ended September 30,
2008
Sales for
the three months ended September 30, 2009 were $76,650. We did not
generate any sales in the three month period ended September 30,
2008.
Cost of
sales for the three months ended September 30, 2009 was $42,298 which resulted
in a gross profit of $34,352 or 44.8%.
General
and administrative expenses were $547,909 for the three months ended September
30, 2009 compared to $46,975 for the three months ended September 30,
2008. Our general and administrative expenses consist primarily of
(i) salaries and wages, (ii) product design and other related product
development costs, (iii) professional fees such as legal and accounting fees,
(iv) general expenses such as rent and insurance and (v) stock based
compensation. The overall increase in general and administrative
expenses is attributable to the fact that we commenced manufacturing operations
during the first half of 2009.
9
During
the three months ended September 30, 2009, we incurred stock based compensation
expense of $3,526 compared to $25,000 for the three months ended September 30,
2008. Stock based compensation expense for the three months ended
September 30, 2009 was related to the fair value of 805,000 stock options which
were issued to various employees, consultants and directors in September
2009. These options have an exercise price of $0.50 per share and
terms ranging from 5 to 10 years. Vesting periods range from 3 to 4
years. We determined the fair value of these options using the
Black-Scholes model and the following assumptions: expected future volatility
40-60%; expected dividends 0%, expected holding period of 5-10 years and a
risk-free interest rates ranging from 2.33-3.38%.
Stock
based compensation expense of $25,000 for the three months ended September 30,
2008 was related to the issuance of 50,000 shares of our restricted common stock
to a consultant in exchange for services rendered. These shares were
valued at $0.50 per share which was the price at we which we sold shares for
cash during the same period.
Our net
loss for the three months ended September 30, 2009 was $513,557 or $0.01 per
share compared to a net loss of $46,975 or $0.00 per share for the three months
ended September 30, 2008.
Comparison
of nine months ended September 30, 2009 to the nine months ended September 30,
2008
Sales for
the nine months ended September 30, 2009 were $76,650. We did not
generate any sales in the nine month period ended September 30,
2008.
Cost of
sales for the nine months ended September 30, 2009 was $42,298 which resulted in
a gross profit of $34,352 or 44.8%.
General
and administrative expenses were $783,809 for the nine months ended September
30, 2009 compared to $158,997 for the nine months ended September 30,
2008. Our general and administrative expenses consist primarily of
(i) salaries and wages, (ii) product design and other related product
development costs, (iii) professional fees such as legal and accounting fees,
(iv) general expenses such as rent and insurance and (v) stock based
compensation. The overall increase in general and administrative
expenses is attributable to the fact that we commenced manufacturing operations
during the first half of 2009.
During
the nine months ended September 30, 2009, we incurred stock based compensation
expense of $18,739 compared to $25,000 for the nine months ended September 30,
2008. Stock based compensation expense for the nine months ended
September 30, 2009 was related to (i) the fair value of 805,000 stock options
which were issued to various employees, consultants and directors in September
2009 and, (ii) the issuance of 30,425 shares of restricted common stock in
exchange for services rendered.
The
options have an exercise price of $0.50 per share and terms ranging from 5 to 10
years. Vesting periods range from 3 to 4 years. We
determined the fair value of these options using the Black-Scholes model and the
following assumptions: expected future volatility 40-60%; expected dividends 0%,
expected holding period of 5-10 years and a risk-free interest rates ranging
from 2.33-3.38%.
The
30,425 shares of restricted common stock that were issued in exchange for
services were valued at $0.50 per share which was the price at we which we sold
shares for cash during the same period. Accordingly we recorded
$15,213 of stock based compensation. Stock based compensation expense
of $25,000 for the nine months ended September 30, 2008 was related to the
issuance of 50,000 shares of our restricted common stock to a consultant in
exchange for services rendered. These shares were valued at $0.50 per
share which was the price at we which we sold shares for cash during the same
period.
Our net
loss for the nine months ended September 30, 2009 was $749,457 or $0.02 per
share compared to a net loss of $158,997 or $0.00 per share for the nine months
ended September 30, 2008.
10
Liquidity
and Capital Resources
Since our
inception on May 21, 2007, we have financed the costs associated with our
operational and investing activities through (i) the sale of shares of our
common stock pursuant to private placements, and (ii) loans from certain of our
stockholders. From inception through September 30, 2009, we have
incurred a cumulative net loss of $2,100,325. The notes to our unaudited
financial statements include language that raises doubt about our ability to
continue as a going concern. At September 30, 2009, we had cash of
$31,455, a net working capital deficit of $366,310 and we owed our stockholders
an aggregate of $371,686. These stockholders are also officers and
directors of our Company. Of the total due to stockholders,
$83,265 was due in full on December 31, 2009, and $250,000 was converted into
500,000 shares of common stock on March 25, 2010. The remaining
stockholder loans are due on demand.
During
the nine months ended September 30, 2009, we sold 1,134,000 shares of restricted
common stock at a price per share of $0.50 per share and received proceeds
$567,000. These proceeds were used for general working capital
purposes. Subsequent to September 30, 2009 and through December 31, 2009 we sold
an additional 35,000 shares of common stock pursuant to a private placement at a
price of $0.50 per shares and received cash proceeds of $17,500.
On
January 28, 2010, the Company entered into and consummated the transaction
contemplated under a Subscription Agreement with one investor. Under the terms
of the Agreement, the Company agreed to issue 2,500,000 shares of its common
stock at $0.40 per share and warrants to purchase an additional 7,500,000 shares
in three tranches, as follows: a three year warrant to purchase 2,500,000 shares
of common stock at $0.40 per share; a four year warrant to purchase 2,500,000
shares at $0.65 per share; and a five year warrant to purchase 2,500,000 shares
of common stock at $0.75 per share. One half of the securities were issued on
January 28, 2010 for a purchase price of $500,000. The remainder was issued at a
second closing that occurred on March 1, 2010.
We
commenced selling our products during the quarter ended September 30, 2009,
however, we are not profitable. The resulting lack of available cash
from our operations may have an adverse impact on our liquidity, activities and
operations. Until we successfully develop, manufacture, market and sell our
products, we will not generate significant revenues and we may not be
successful. There can be no assurances that we will achieve sufficient revenues
during the next twelve months or at all. If we cannot generate sufficient
revenues to continue operations, we may be forced to suspend or cease
operations.
To the
extent that it becomes necessary to raise additional cash in the future, we may
seek to raise it though the sale of debt or equity securities or from additional
loans from our stockholders. There can be no assurances that we will
be able to continue to sell shares of our common stock or borrow additional
funds from any of our stockholders or third parties in order to fund the costs
associated with our future operating and investing activities.
If we are
successful at raising additional equity capital, it may be on terms which would
result in substantial dilution to existing shareholders. If our costs and
expenses prove to be greater than we currently anticipate, or if we change our
current business plan in a manner that will increase our costs, we may be forced
to suspend or cease operations.
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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. As the number of variables and assumptions affecting the
probable future resolution of the uncertainties increase, these judgments become
even more subjective and complex. Actual results may differ from these
estimates.
We have
identified the following critical accounting policies, described below, that are
the most important to the portrayal of our current financial condition and
results of operations.
11
Stock-Based
Compensation
In
December 2004, the FASB issued SFAS 123 (revised 2004) "Share-Based Payment".
This Statement requires that the cost resulting from all share-based
transactions be recorded in the financial statements. The Statement establishes
fair value as the measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair-value-based measurement
in accounting for share-based payment transactions with employees. The Statement
also establishes fair value as the measurement objective for transactions in
which an entity acquires goods or services from non-employees in share-based
payment transactions. The Statement replaces SFAS 123 "Accounting for
Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for
Stock Issued to Employees". The provisions of this Statement were effective for
the Company beginning with its fiscal year ending December 31,
2007.
Going
Concern
The
Company’s condensed consolidated financial statements are presented on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business.
The
Company has experienced a significant loss from operations as a result of its
investment necessary to achieve its operating plan, which is long-term in
nature. From inception to September 30, 2009, the Company incurred net losses of
$2,100,325. In addition, the Company has a working capital deficit of $366,310
at September 30, 2009. The Company has no significant revenue generating
operations.
The
Company’s ability to continue as a going concern is contingent upon its ability
to attain profitable operations and secure financing. In addition, the Company’s
ability to continue as a going concern must be considered in light of the
problems, expenses and complications frequently encountered by entrance into
established markets and the competitive environment in which the Company
operates.
The
Company is pursuing financing for its operations and seeking additional private
investments. In addition, the Company is seeking to establish its revenue base.
Failure to secure such financing or to raise additional equity capital and to
establish its revenue base may result in the Company depleting its available
funds and not being able pay its obligations.
The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
Off-Balance Sheet
Arrangements
We do not
have any off balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, revenues, results of
operations, liquidity or capital expenditures.
Item
4T. Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in
the reports that we file under the Exchange Act is accumulated and communicated
to our management, including our principal executive and financial officers, as
appropriate to allow timely decisions regarding required
disclosure.
The
Company’s management, under the supervision and with the participation of the
Company's Chief Executive Officer and Chief Financial (and principal accounting)
Officer, carried out an evaluation of the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as defined in
Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30,
2009. Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company’s disclosure controls and
procedures were ineffective as of the end of the period covered by this
report.
The
Company continues to improve procedures with regard to its disclosure controls
and procedures.
(b)
Changes in Internal Controls.
There was
no change in our internal controls over financial reporting that has materially
affected, or is reasonable likely to materially affect, our internal
control over financial reporting during the quarter covered by this
Report.
12
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings
From time
to time, we may become involved in various lawsuits and legal proceedings which
arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. Except as described below,
we are currently not aware of any such legal proceedings that we believe will
have, individually or in the aggregate, a material adverse affect on our
business, financial condition or operating results.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
During
the nine months ended September 30, 2009, we sold 1,134,000 shares of restricted
common stock at a price per share of $0.50 per share and received proceeds
$567,000. These proceeds were used for general working capital
purposes.
Item
5. Other Information
None.
Item
6. Exhibits
31
|
Certifications
of the Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(a)
|
32
|
Certifications
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
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.
Xtreme Green Products Inc.
(Registrant)
|
||
Date:
June 3, 2010
|
/s/ Sanford Leavitt
|
|
Sanford
Leavitt
|
||
Chief
Executive Officer
(Principal
Executive Officer)
|
||
Date:
June 3, 2010
|
/s/ Neil Roth
|
|
Neil
Roth
|
||
Chief
Financial Officer
(Principal
Financial and Accounting
Officer)
|
13