UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2014

OR

For the transition period from ______________ to ______________

Commission File Number 000-52502

XTREME GREEN ELECTRIC VEHICLES INC.

(Exact name of registrant as specified in its charter)

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):

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 August 12, 2014:  41,070,000.

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INDEX

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PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements

XTREME GREEN ELECTRIC VEHICLES INC.

Condensed Consolidated Balance Sheets

June 30, 2014 and December 31, 2013

(Unaudited)

See the accompanying notes to the financial statements.

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XTREME GREEN ELECTRIC VEHICLES INC.

Condensed Consolidated Statements of Operations

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

See the accompanying notes to the consolidated financial statements.

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XTREME GREEN ELECTRIC VEHICLES INC.

Condensed Consolidated Statements of Cash flows

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

See the accompanying notes to the consolidated financial statements.

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XTREME GREEN ELECTRIC VEHICLES INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2014

(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, 2013, on Form 10-K, including notes thereto.

(2)

Chapter 11 Proceedings

On August 22, 2013 (the Petition Date), Xtreme Green Products, Inc. (the “Company”) filed a voluntary petition (the “Chapter 11 Case”) for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Nevada (the “Bankruptcy Court”). The Chapter 11 Case was administered under Case No. BK-S-13-17266-MKN.

On January 29, 2014 (the “Confirmation Date”), the Bankruptcy court entered an Order Confirming the company’s First Amended Plan of reorganization (the “Plan”) under Chapter 11 of the Bankruptcy Code. The Bankruptcy Court ordered the Chapter 11 closed as of February 28, 2014.

(3)

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 are calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding.

(4)

Basis of Reporting

The Company’s financial statements have been prepared in accordance with Financial Accounting Standards Board (FASB), Accounting standards codification (ASC) Topic 852, “Reorganizations”, which requires that financial statements for periods subsequent to the Chapter 11 bankruptcy proceedings distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the company’s business. Accordingly, certain income, expenses, realized gains and losses and provisions for losses that were realized or incurred in the Chapter 11 bankruptcy are recorded as reorganization items on our statement of operations.

On February 28, 2014, the effective date of the emergence from bankruptcy, we did not meet the requirements under ASC Topic 852 to adopt fresh start accounting. Fresh start accounting requires the debtor to use current fair values in its balance sheet for both assets and liabilities and to eliminate all prior earnings or deficits. The two requirements to fresh start accounting are:

·

The organization value of the debtor’s assets immediately before the date of confirmation of the plan or reorganization is less than the total of all post-petition liabilities and allowed claims; and

·

The holders of existing voting shares immediately before confirmation of the plan of reorganization receive less than 50% of the voting shares upon emergence.

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These requirements are referred to as the “fresh start applicability test”.  At February 28, 2014, our fresh start calculation indicated that we did not meet the requirements to adopt fresh start accounting because the reorganization value of the company’s assets exceeded the total of post-petition liabilities and allowed claims and the holders of existing voting shares immediately before confirmation of the plan of reorganization received more than 50% of the voting shares upon emergence.

The Company incurred net losses from inception through June 30, 2014; aggregating $11,833,155and has working capital and stockholder equity of $658,766 and $925,267 at June 30, 2014.

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 actively pursuing financing for its operations and seeking additional private investments. In addition, the Company is seeking to expand its revenue base and product distribution. 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.

(5)

Inventory

Inventory is principally determined by using the average cost method that approximates the First-In, First-Out (FIFO) method of accounting for inventory. Inventory consists of finished vehicles, vehicles in process, and parts. The Company’s management monitors the inventory for excess and obsolete items and makes necessary valuation adjustments when required.

(6)

Other Current Assets

(7)

Stock Holder Loans

Under the terms of the Plan, all stockholder loans and other unsecured debt obligations that were previously reported on the Company’s financial statements were converted into equity on the Confirmation Date. As a result, no such loans remained outstanding on June 30, 2014.

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The following table summarizes the components of liabilities subject to compromise. The Bankruptcy Court ordered the Chapter 11 closed as of February 28, 2014 and all liabilities subject to compromise were extinguished.

Liabilities subject to compromise refers to prepetition obligations which were impacted by the Chapter 11 reorganization process. These amounts represent the debtors’ prepetition obligations that were resolved in connection with the Chapter 11 Bankruptcy Case. Substantially nearly all of the company’s debt has been classified as liabilities subject to compromise.

(8)

Line of Credit

 On April 21, 2012 the Company’s line of credit with a financial institution for $150,000 was converted to a term loan bearing interest at 6% per annum, maturing April 21, 2016. The line is secured by certain assets of a related party.  The balance of the Company’s term loan in the amount of $81,670 was paid in full during the quarter ended June 30, 2014.

(9)

Stock Options

The Company’s 2008 Incentive Stock Option Plan was terminated on February 28, 2014 under the terms of the Chapter 11 Plan. All options outstanding there under the plan were terminated as of that date.

(10)

Subsequent Events

On July 25, 2014 the Company sold 75,000 shares of its Common Stock to a private investor at a purchase price of $1.00 per share. A total of $75,000 was received on that date.

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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

As previously discussed, on August 22, 2013 (the “Petition Date”), the Company filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Nevada (the “Chapter 11 Case”). The Chapter 11 Case was administered under Case No. BK-S-13-17266-MKN. The Company’s plan of reorganization was confirmed by the Bankruptcy Court on January 29, 2014.  The terms of the plan as confirmed were detailed in the Company’s Current Report on Form 8-K that was filed on February 4, 2014.

On January 29, 2014 (the “Confirmation Date”), the Bankruptcy court entered an Order Confirming the company’s First Amended Plan Of Reorganization under Chapter 11 of the Bankruptcy Code. The Bankruptcy court ordered the Chapter 11 case closed on February 28, 2014.

Results of Operations

As a result of the Chapter 11 Case and associated restructuring of operations, no meaningful comparison is possible between the results for prior periods and results for the quarter ended June 30, 2014 that occurred following confirmation of the Plan.

Comparison of three months ended June 30, 2014 to the three months ended June 30, 2013

Revenue - Sales for the three months ended June 30, 2014 were $204,945. There were no sales during the three months ended June 30, 2013. The increase in sales is a result of the Company’s restructure of its financial condition and ability to secure additional equity funding.

Cost of Sales - Cost of sales for the three months ended June 30, 2014 was $295,397 which resulted in a negative operating gross margin of $90,452. There were no comparable cost of sales for the comparable prior year period. Due to insufficient inventory to meet sales demand, fixed operating costs, and $14,000 in warranty costs, the Company experienced significant losses for the three month period ended June 30, 2014.

General and administrative – General and administrative expenses were $371,832 for the three months ended June 30, 2014 compared to $37,680 for the three months ended June 30, 2013. The Company was not active during the prior three months period ended June 30, 2013. Our general and administrative expenses for the three months ended June 30, 2014 consist primarily of salaries, insurance expense, legal and professional fees, and general operating costs. We had 23 full-time employees during the three months ended June 30, 2014.

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Sales & marketing – The cost of sales and marketing for the three months ended June 30, 2014 was $88,839.

Sales and marketing costs for the same comparable period in 2013 was $1,500. The Company was not active during the prior six month period. The increase in sales and marketing is a result of our emergence from bankruptcy reorganization, and recommencing our marketing program.

Interest expense - Interest expense for the three months ended June 30, 2014 was $1,987 compared to interest of $80,579 for the comparable prior year period.  Interest expense consists primarily of amounts due under various notes payable to shareholders and equipment financing. The reduction of interest expense is due to the extinguished notes payable as a result of the Chapter 11 Reorganization.

Loss from operations – We incurred a loss from operations of $553,110 for the three months ended June 30, 2014 compared to a loss of $110,380 for the comparable prior year period. The increase in the loss from operations is a result of the Company’s emergence from Chapter 11 Reorganization, restructuring of production capabilities, and increases in sales and marketing efforts.

Comparison of six months ended June 30, 2014 to the six months ended June 30, 2013

Revenue - Sales for the six months ended June 30, 2014 were $547,676 compared to $31,709 for the comparable prior year period. A reasonable comparison of sales is not possible since the Company was not active during the majority of the prior six month period. The increase in sales is a result of the Company’s ability to restructure its financial condition and secure additional equity funding.

Cost of Sales - Cost of sales for the six months ended June 30, 2014 was $650,809 which resulted in a negative operating margin of $103,133. Due to insufficient inventory to meet sales demand, fixed operating costs, warranty costs of $56,031 and a write off of scrapped inventory of $18,695, the Company experienced a significant loss for the six month period ended June 30, 2014. There were no comparable cost of sales figures for the comparable prior year period.

General and administrative – General and administrative expenses were $759,328 for the six months ended June 30, 2014 compared to $176,383 for the six months ended June 30, 2013. The Company was not active during the majority of the prior six month period ended June 30, 2013. Our general and administrative expenses for the six months ended June 30, 2014 consist primarily of salaries, insurance expense, legal and professional fees, and general operating costs. We had 23 full-time employees during the six months ended June 30, 2014.

 Sales & marketing – The cost of sales and marketing for the six months ended June 30, 2014 was $162,023.

Sales and marketing cost for the comparable period in 2013 was $1,500. The Company was not active during the 2013 six month period. The increase in sales and marketing is a result of our emergence from chapter 11 bankruptcy reorganization, and recommencing our marketing program.

Interest expense - Interest expense for the six months ended June 30, 2014 was $15,385 compared to interest of $154,385 for the comparable prior year period.  Interest expense consists primarily of amounts due under various notes payable to shareholders and equipment financing. The reduction of interest expense is due to the extinguished notes payable as a result of the Chapter 11 Case.

Loss from operations – We incurred a loss from operations of $1,039,869 for the six months ended June 30, 2014 compared to a loss of $296,224 for the comparable prior year period. The increase in the loss from operations is a result of the Company’s emergence from Chapter 11 Reorganization, restructuring of production capabilities, and recommencement of sales and marketing efforts post plan confirmation.

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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 June 30, 2014, we have incurred a cumulative net loss of $11,833,155.  The notes to our financial statements include language that raises doubt about our ability to continue as a going concern. 

On August 22, 2013, following the filing of our voluntary petition for relief under Chapter 11 of the Bankruptcy Code, our controlling shareholder and affiliates provided the Company with $2,000,000 in post-petition court approved financing. The Debtor in Possession (DIP) loan was secured by all of the Company’s assets and had priority over any and all administrative expenses of the kind specified in the Bankruptcy Code. The DIP Financing Creditor received 19,600,000 shares of “Non-Locked Up Stock”.

Prior to January 29, 2014, the Confirmation date of the Company’s Reorganization Plan under Chapter 11 of the Bankruptcy Code, the Company had issued and outstanding 48,463,370 shares of common stock. Immediately following the cancellations and issuances pursuant to the Plan, there will be issued and outstanding approximately 40,000,000 shares of common stock. The number of shares the Company is authorized to issue remains unchanged.

On March 14, 2014 the Company agreed in a private offering to sell 500,000 shares of common stock, par value $.001 per share to a private investor at a purchase price of $1.00 per share. In addition the company issued three year warrants expiring March 31, 2017 to purchase an additional 750,000 shares of common stock at a purchase price of $1.00 per share. The aggregate investment was $500,000 for 500,000 shares of Common Stock and 750,000 Warrants. The Company received $250,000 in March 2014 and $250,000 in April 2014.

On March 14, 2014 the Company privately sold 250,000 shares of common stock, par value $.001 per share to a private investor at a purchase price of $1.00 per share. The total amount received as of March 31, 2014 was $250,000. An additional option was granted to invest $250,000 for 250,000 additional shares of common stock on or before December, 31, 2014. If exercised, on or before the expiration date, the investor shall be issued, in addition to the Option Shares, Warrants to purchase 750,000 shares of Common Stock at $1.00 per share, expiring March 31, 2017.

On April 14, 2014 the Company privately sold 10,000 shares of common stock to a Company Director at a purchase price of $1.00 per share.  The total amount received as of April 14, 2014 was $10,000.00.

On April 24, 2014 the Company privately sold 100,000 shares of common stock to a private investor at a purchase price of $1.00 per share. The total amount received as of April 24, 2014 was $100,000.

On April 29, 2014 the Company privately sold 20,000 shares of common stock to a private investor at a purchase price of $1.00 per share. The total amount received as of April 29, 2014 was $20,000.

On June 20, 2014 the Company privately sold 15,000 shares of common stock to a private investor at a purchase price of $1.00 per share. The total received as of June 20, 2014 was $15,000.

On June 27, 2014 the Company privately sold 100,000 shares of common stock to a private investor at a purchase price of $1.00 per share. The total amount received as of June 27, 2014 was $100,000.

On July 25, 2014 the Company privately sold 75,000 shares of its Common Stock to a private investor at a purchase price of $1.00 per share. A total of $75,000 was received on that date.

We are currently investigating various opportunities to raise additional capital through the sale of equity securities and from debt financing.  There can be no assurances that we will be able to continue to sell shares of our common stock or borrow funds from any of our stockholders or third parties to finance 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 curtail or cease operations. 

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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.

There was no stock-based compensation during the six month period ended June 30, 2014.

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 ability to operate profitably will depend on increasing our revenue, lowering our costs, reducing our liabilities and obtaining sufficient financing or other capital to operate successfully.

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 June 30, 2014 we have incurred a cumulative net loss totaling $11,833,155 and have working capital and stockholder equity of $658,766 and $925,267at June 30, 2014.  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 actively 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.

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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.

Item 3. 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 June 30, 2014.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of the end of the period covered by this report.

(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.

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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

None

Item 5. Other Information

None.

Item 6. Exhibits

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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.

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