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EXCEL - IDEA: XBRL DOCUMENT - XTREME GREEN ELECTRIC VEHICLES INC.Financial_Report.xls



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)


x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2011


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)

 

 

 

2191 Mendenhall Dr. Suite 101, North Las Vegas, NV

 

89081

(Address of principal executive offices)

 

(Zip Code)

 

 

 

Registrant's telephone number, including area code:

 

(702) 870-0700


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  x  No   ¨


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (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   ¨


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 October 28, 2011: 47,424,370  













1







INDEX


 

 

Page

PART I - Financial Information

 

3

 

 

 

Item 1: Financial Statements

 

3

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010

 

3

 

 

 

Condensed Consolidated Statements of Operations For the Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited)

 

4

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited)

 

5

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

6

 

 

 

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

 

          9  

 

 

 

Item 4:   Controls and Procedures

 

13

 

 

 

PART II - Other Information

 

13

 

 

 

Item 1: Legal Proceedings

 

13

 

 

 

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

 

13

 

 

 

Item 5: Other Information

 

13

 

 

 

Item 6: Exhibits

 

13

 

 

 

Signatures

 

14

 











2



g


XTREME GREEN PRODUCTS INC.

Consolidated Balance Sheets

September 30, 2011 and December 31, 2010

Unaudited


 

2011 

2010 

ASSETS

 

 

Current Assets:

 

 

Cash

$

13,195 

$

343,068 

Accounts receivable

77,351 

49,054 

Related party receivable

13,500 

Inventory

742,999 

623,054 

Other current assets

329,005 

64,407 

Total current assets

1,176,050 

1,079,583 

Property and equipment, net

242,514 

179,576 

 

 

 

Other assets

12,285 

36,186 

TOTAL ASSETS

$

1,430,849 

$

1,295,345 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

Current liabilities:

 

 

Accounts payable and accrued expenses

$

258,495 

$

172,948 

Accrued expenses- related parties

274,460 

190,769 

Line of credit

150,000 

150,000 

Convertible debt- related party

1,000,000 

1,000,000 

Customer deposits

250,000 

Current portion of long-term debt

48,547 

11,200 

Stockholder loans

117,206 

119,480 

Total current liabilities

2,098,708 

1,644,397 

 

 

 

Long-term debt, net of current portion

45,773 

17,267 

Commitments and contingencies

 

 

 

 

 

Stockholders' deficit:

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized; 47,424,370 and 44,966,370 shares issued and outstanding

4,741 

4,496 

Additional paid-in capital

5,249,933 

4,172,234 

Accumulated deficit

(5,968,306)

(4,543,049)

 

 

 

Total stockholders' deficit

(713,632)

(366,319)

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

1,430,849 

$

1,295,345 


See the accompanying notes to the financial statements.



3




 

 

 

 


XTREME GREEN PRODUCTS INC.

Consolidated Condensed Statements of Operations

For the Three and Nine Months Ended September 30, 2011 and 2010

(Unaudited)


 

 

 

 

 

 

Three Months

 

 

Nine Months

 

2011 

2010 

 

2011 

2010 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

Sales, net

$

239,023 

$

226,801 

 

$

1,525,238 

$

351,731 

 

 

 

 

 

 

Cost of sales

158,434 

131,895 

 

1,081,631 

230,570 

 

 

 

 

 

 

Gross margin

80,589 

94,906 

 

443,607 

121,161 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

  General and administrative

631,024 

564,358 

 

1,652,197 

1,371,342 

  Research and development

55,676 

 

113,063 

 

  Interest expense

29,794 

17,260 

 

103,558 

28,388 

 

 

 

 

 

 

Total costs and expenses

716,494 

581,618 

 

1,868,818 

1,399,730 

 

 

 

 

 

 

Net loss

$

(635,905)

$

(486,712)

 

$

(1,425,211)

$

(1,278,569)

 

 

 

 

 

 

Per share information - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

  Loss per common share

$

(0.01)

$

(0.01)

 

$

(0.03)

$

(0.03)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

47,307,537 

43,621,159 

 

46,807,726 

42,974,689 



See the accompanying notes to the financial statements.




4





XTREME GREEN PRODUCTS INC.

Consolidated Condensed Statement of Cash Flows

For the Nine Months Ended September 30, 2011 and 2010

(Unaudited)


 

2011 

2010 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net cash used in operating activities

$

(1,315,498)

$

(1,861,582)

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchase of property and equipment

(97,610)

(100,868)

 

 

 

 

 

Net cash used in investing activities

(97,610)

(100,868)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

  Common stock issued for cash

1,031,500 

1,191,323 

 

  Repayment of long term debt

(28,467)

 

  Proceeds from Loans Payable

81,350 

1,000,000 

 

  Stockholders loans, net

(1,148)

(38,350)

 

 

 

 

 

Net cash provided by financing activities

1,083,235 

2,152,973 

 

 

 

 

 

Net increase in cash

(329,873)

(190,522)

 

Cash - beginning of period

343,068 

73,700 

 

 

 

 

 

Cash - end of period

$

13,195 

$

264,222 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

Cash paid for interest

$

92,357 

$

14,427 

 

Cash paid for income taxes

$

$

 

 

 

 

 

Non Cash Investing and Financing Activities:

 

 

 

Conversion of related party note to common stock

$

250,000 

 

Issuance of common stock for inventory

10,000 

 

 

See the accompanying notes to the financial statements.

 

 

 




5






XTREME PRODUCTS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

September 30, 2011(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, 2010, included in the Company’s 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 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 loss from operations as a result of its investment necessary to achieve its operating plan, which is long-range in nature. The Company incurred net losses through September 30, 2011, aggregating $5,968,306 and has working capital and stockholder deficits of $922,658 and $710,824 respectively.

The Company’s ability to continue as a going concern is contingent upon its ability to secure additional financing, increase ownership equity and develop profitable operations. 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 expand its revenue base. Failure to secure such financing or to raise additional equity capital and to expand 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.


(4)

Inventory


Inventory consisted of finished goods and parts.


(5)

Other current assets


Other current assets consisted of $168,178 in prepaid expenses and deposits and $160,827 in commission advances.

 

6)

Line of Credit


During December 2009 the Company secured a line of credit with a financial institution for $150,000 bearing interest at 6% per annum maturing during December 2011. The line is secured by certain assets of a related party. The balance of the line at September 30, 2011 was $150,000.



6




(7)       Stockholder loans


During prior years the Company borrowed funds from three of its founding stockholders. These loans were utilized for general working capital purposes and to fund in part, the cash portion of the purchase of Belarus. At December 31, 2010 a balance of $119,480 was outstanding. As of September 30, 2011, $7,270 was borrowed and $9,544 has been repaid leaving a balance of $117,206. The loans are due on demand and bear interest at 4%.


On June 22, 2010, a family trust of which a shareholder is a trustee agreed to lend to the Company an aggregate of $1,000,000 at an annual interest rate of 12% in three tranches. The first tranche of $250,000 was advanced on July 9, 2010.  The second tranche in the amount of $500,000 was funded on August 9, 2010. The balance was funded on September 9, 2010.  The loans were scheduled to be repaid on September 8, 2011. The parties agreed to extend the loan through September 8, 2012, on the same terms with exception of the early prepayment option. At any time prior to that date, at the option of the lender the loan is convertible into common stock at $0.40 per share. Upon conversion, the lender will also receive warrants to purchase 7,500,000 shares of common stock, 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.  


(8)       Stockholders’ (Deficit)


During the period ended March 31, 2011, the Company issued 1,470,000 shares of common stock for cash aggregating $610,000.


During the three month period ended June 30, 2011, the Company issued 30,000 shares of common stock for cash aggregating $15,000.


During the three month period ended September 30, 2011, the Company issued 938,000 shares of common stock for cash aggregating $406,500. In addition, the Company issued 20,000 shares of common stock in exchange for inventory valued at $10,000.


(9)       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 and 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, volatility was estimated at 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.


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%


During the period ended March 31, 2011, the Company granted options to employees to purchase 175,000 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 2015 and vest over the stated term.



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, volatility was estimated at 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.


The fair value of the options was $40,013 and will be amortized over the term of the options starting on April 1, 2011.




7






In valuing the options issued, the following assumptions were used:

 

 

Expected volatility

40 - 60%

Expected dividends

0%

Expected term (in years)

4.0

Risk-free rate

2.33%


A summary of option activity under the Plan during the period ended September 30, 2011, is presented below



Options


Shares

Weighted-Average

Exercise Price

Weighted-Average

Remaining Contractual

Term

Intrinsic

Value

Outstanding at December 31, 2010

805,000

$0.50

5.5

$0.00

Granted

175,000

$0.50

4.5

$0.00

Outstanding at June 30, 2011

980,000

$0.50

4.9

$0.00


The following table summarizes information about fixed price stock options at September 30, 2011:

Exercise Price

 

 

Number

Outstanding

 

 

Weighted

Average

Contractual Life

 

 

Weighted

Average

Exercise Price

 

 

Number

Exercisable

 

 

Exercise

Price

 

$

0.50

 

 

 

980,000

 

 

 

 4.9

 

 

$

0.50

 

 

 

396,250

 

 

$

0.50

 


The expense of these warrants for the three and nine months ended September 30, 2011 were $12,932 and $36,442 respectively. The expense of these warrants for the three and nine months ended September 30, 2010 were $10,578 and $31,734, respectively.


(10)          Concentrations


During the period ended September 30, 2011, the Company derived approximately 62% of its revenue from a single customer and as of September 30, 2011, no accounts receivable were due from this customer.


(11)       Subsequent Events


None

 



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.


Recent Developments


We are an eco-vehicle company that designs, develops and manufactures revolutionary, green, 100% electric powered products such as Personal Mobility Vehicles (PMVs), Motorcycles & Scooters, (ATVs) All Terrain Vehicles, (UTVs) and Utility Terrain Vehicles.  Designed with proprietary energy management systems and electric propulsion systems, these products are expected to have the power and ability of gas powered engines, but without the particulate pollution or noise pollution. Xtreme aims for its Xtreme Green products to become the new wave and standard in environmentally conscious green 100% electric specialty vehicles.  Most of the parts used in our vehicles are manufactured in China. Final assembly takes place primarily in North Las Vegas, Nevada.



In the past nine months, we have added new vehicles including a 7’ Hydraulic dump all electric Utility Truck, an emergency medical services vehicle, and a right hand drive UTV for parking departments. Our distributor, Alexander Motors based in Tennessee, opened the first Xtreme Green store, and is presently looking for additional locations in four additional states. We have also added two new sales managers on the east coast, as well as two new distributors.  Over 20 new municipal and university accounts have been added to our sales book during the quarter ended June 30, 2011. We have also completed all testing and paperwork for the European Union certification and expect to this certification to be finalized during the fourth quarter, at which time we will commence developing European distributors.


Results of Operations


Comparison of three months ended September 30, 2011 to the three months ended September 30, 2010


Sales for the three months ended September 30, 2011 were $239,023 compared to $226,801 for the three months ended, September 30, 2010. Although demand and order commitments during the three months ended September 30, 2011 continue to be strong, sales were delayed while the company works to secure working capital to purchase needed inventory.


Cost of sales for the three months ended September 30, 2011 was $158,434 which resulted in a gross profit of $80,589 compared to cost of sales of $131,895 and a gross profit of $94,906 for the comparable prior year period.


General and administrative expenses were $631,024 for the three months ended September 30, 2011 compared to $564,358 for the three months ended September 30, 2010.  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, and (iv) general expenses such as rent and insurance. The overall increase in general and administrative expenses is primarily attributable to higher marketing and travel expenses and higher warranty costs. We had 22 full time employees during the three months ended September 30, 2011 compared to 14 for the comparable prior year period.


Research and development expense for the three month period ended September 30, 2011 was $55,676. There was no research & development expense for the comparable prior year period.


Interest expense for the three months ended September 30, 2011 was $29,794 compared to interest of $17,260 for the comparable prior year period.  Interest expense consists primarily of amounts due under a note payable to one of our directors and interest incurred under various short term lines of credit.   


Our net loss for the three months ended September 30, 2011 was $635,905 or $0.01 per share compared to a net loss of $486,712 or $0.01 per share for the comparable prior year period.  



9




Comparison of nine months ended September 30, 2011 to the nine months ended September 30, 2010


Sales nine months ended September 30, 2011 were $1,525,238 compared to $351,731 for the nine months ended September 30, 2010.


Cost of sales for the nine months ended September 30, 2011 was $1,081,631 which resulted in a gross profit of $443,607 compared to cost of sales of $230,570 and a gross profit of $121,161 for the comparable prior year period. The increase in the gross margin results from our higher sales volume coupled with improved productivity.


General and administrative expenses were $1,652,197 for the nine months ended September30, 2011 compared to $1,371,342 for the nine months ended September 30, 2010.  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, and (iv) general expenses such as rent and insurance. The overall increase in general and administrative expenses is primarily attributable to our significant increase in sales resulting in added costs primarily in marketing, travel, administrative staff, and warranty costs. We had 24 full time employees during the nine months ended June 30, 2011 compared to 14 for the comparable prior year period.


Interest expense for nine months ended September 30, 2011 was $103,558 compared to interest of $28,388 for the comparable prior year period. Interest expense consists primarily of amounts due under a note payable to one of our directors and interest incurred under various short term lines of credit.


Research and development expense for the nine month period ended September 30, 2011 was $113,063. There was no Research & development expense for the comparable prior year period.


Our net loss for the nine months ended June 30, 2011 was $1,425,211 or $0.03 per share compared to a net loss of $1,278,569 or $0.03 per share for the comparable prior year period.






 



Liquidity and Capital Resources


Since our inception on May 21, 2007, we have financed the costs associated with our operational and investing activities primarily 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, 2011, we have incurred a cumulative net loss of $5,968,306. The notes to our financial statements include language that raises doubt about our ability to continue as a going concern.  At September 30, 2011, we had cash of $13,195, net working capital deficit of $922,658 and we owed our stockholders an aggregate of $1,391,666.  Of the total due to stockholders, $117,206 is due on demand to stockholders who are also officers and/or directors of our Company and bear interest at 4.0%. A $1,000,000 convertible loan is due September 8, 2012, or can be converted into common stock at any time prior to the due date.  


During the nine months ended September 30, 2011, we sold 563,000 shares of restricted common stock at a price of $0.50 per share and 1,875,000 shares of restricted common stock at a price of $0.40 per share and received cash proceeds of $1,031,500.


On June 22, 2010, a family trust of which one of our shareholder’s is a trustee (“the lender”) agreed to lend us an aggregate of $1,000,000 at an annual interest rate of 12% in three tranches. The first tranche of $250,000 was advanced on July 9, 2010. The second tranche in the amount of $500,000 was funded on August 9, 2010. The balance was funded on September 9, 2010. The loans were scheduled to be repaid on September 8, 2011. Prior to the expiration date the parties agreed to extend the loan through September 8, 2012. At any time prior to that date, at the option of the lender the loan is convertible into common stock at $0.40 per share.  Upon conversion, the lender will also receive warrants to purchase 7,500,000 shares of common stock, 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.


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 has had an adverse impact on our liquidity, activities and operations. Until we successfully generate additional working capital, we may not be in a position to create a level of revenues that will enable us to 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.



10




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. 



 













11




 

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. 


Stock-Based Compensation


We account for stock based compensation in accordance with ASC 718 Stock Compensation. 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.


Revenue Recognition

  

In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for our various revenues streams:


Revenue is recognized at the time the product is delivered or the service is performed. Provision for sales returns is estimated based on our historical return experience.


Deferred revenue is recorded for amounts received in advance of the time at which services are performed and included in revenue at the completion of the related services.


Going Concern

 

Our 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.

 

We have 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, 2011, we have incurred a cumulative net loss totaling $5,968,306 and have working capital and stockholder deficits of $922,658 and $710,824 respectively. Our ability to continue as a going concern is contingent upon our ability to attain profitable operations and secure financing.  In addition, our 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 we operate.

 

We are pursuing financing for our operations and we are seeking additional private investments.  In addition, we are seeking to grow our revenue base.  Failure to secure such financing, raise additional equity capital and establish our revenue base may result in the depletion of available funds and as a result, we may not be able pay our obligations.

 

Our 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 inability to continue as a going concern.

 

Recent Accounting Pronouncements


The Company does not believe that any recent accounting pronouncements will have a material effect on its financial statements.

 


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.





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Item 4. 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.

Company 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, 2011.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. This conclusion was based on the Company’s ability to now meet filing deadlines and the appointment of a Chief Financial (and principal accounting) Officer with a strong financial reporting background. As a result, the Company’s management has implemented effective disclosure controls and procedures. 


(b) Changes in Internal Controls.


During the three month period ended September 30, 2011 the company’s newly appointed Chief Financial Officer has established improved internal controls over financial reporting.

 





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 three months ended September 30, 2011, we sold 625,000 shares of restricted common stock at a price per share of $0.40 per share and 313,000 shares of restricted common stock at a price per share of $0.50 per share receiving total proceeds $406,500. These proceeds were used for general working capital purposes.


These securities were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended under Section 4 (2) there under, as they were issued in reliance on the recipients’ representation that they were accredited (as such term is defined in Regulation D), without general solicitation and represented by certificates that were imprinted with a restrictive legend. In addition, all recipients were provided with sufficient access to Company information.


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

 













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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:  November 14, 2011

 

/s/ Sanford Leavitt

 

 

Sanford Leavitt

 

 

Chief Executive Officer

(Principal Executive Officer)

 

 

 

Date:   November 14, 2011

 

/s/ Ken Sprenkle

 

 

Ken Sprenkle

 

 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 





 



14





Exhibit 31


CHIEF EXECUTIVE OFFICER CERTIFICATION


I, Sanford Leavitt, certify that:


1. I have reviewed this quarterly report on Form 10-Q of Xtreme Green Products Inc.:


2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report.


3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation and cash flows of the registrant as of, and for, the periods presented in this report.


4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d) Disclosed in this report any change in the registrant's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):


a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information: and


b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date:   November 14, 2011

/s/ Sanford Leavitt

 

Sanford Leavitt

 

Chief Executive Officer

 

 

 













15




 

 

CHIEF FINANCIAL OFFICER CERTIFICATION


I, Ken Sprenkle, certify that:


1. I have reviewed this quarterly report on Form 10-Q of Xtreme Green Products Inc.:


2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report.


3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation and cash flows of the registrant as of, and for, the periods presented in this report.


4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d) Disclosed in this report any change in the registrant's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):


a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information: and


b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date:  November 14, 2011

/s/ Ken Sprenkle

 

Ken Sprenkle

 

Chief Financial Officer

 

 

 





 

 



16





Exhibit 32


CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002


In connection with the quarterly report of Xtreme Green Products Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Sanford Leavitt, Chief Executive Officer, and Ken Sprenkle, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:


(1) This report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Sanford Leavitt

 

Sanford Leavitt

 

Chief Executive Officer

 

 

 

Date: Date:  November 14, 2011

 

 

/s/ Ken Sprenkle

 

Ken Sprenkle

 

Chief Financial Officer

 

 

 

Date: Date:  November 14, 2011

 

 

 

 





 




17