Xtreme Green Electric Vehicles (XGEV) 10-Q 2009 Q2 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2009

OR

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

For the transition period from ______________ to ______________

Commission File Number 000-52502

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  o  No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act (Check one): 

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

The number of shares outstanding of issuer's common stock, $0.001 par value as of March 2, 2010: 42,643,225.

INDEX

	Page
PART I - Financial Information	1
Item 1: Financial Statements	1
Consolidated Balance Sheets June 30, 2009 (Unaudited) and December 31, 2008	1
Consolidated Statements of Operations For the Three and Six Months Ended June 30, 2009 and 2008 (Unaudited) and the period from Inception to June 30, 2009 (Unaudited)	2
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008 (Unaudited) and the period from Inception to June 30, 2009 (Unaudited)	3
Notes to Consolidated Financial Statements (Unaudited)	4
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations	6
Item 4T:  Controls and Procedures	9
PART II - Other Information	10
Item 1: Legal Proceedings	10
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 5: Other Information	10
Item 6: Exhibits	10
Signatures	11

i

PART I. FINANCIAL INFORMATION

XTREME GREEN PRODUCTS INC.

(A Development Stage Company)

Consolidated Balance Sheets

	June 30,			December 31,
	2009			2008
	(Unaudited)
ASSETS
Current assets:
Cash	$	39,441		$	20,341
Inventory		90,797			8,766
Prepaid expenses		14,845			-
		145,083			29,107
Property and equipment		62,418			-
TOTAL ASSETS	$	207,501		$	29,107
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	27,764		$	13,334
Customer deposits		5,200			-
Accrued expenses		140,000			20,000
Due to stockholders		123,209			107,993
Total current liabilities		296,173			141,327
Stockholders' deficit:
Common stock, $0.0001 par value, 100,000,000 shares authorized; 39,762,225 and 38,943,800 shares issued and outstanding, respectively		3,976			3,895
Additional paid-in capital		1,643,885			1,234,753
Deficit accumulated during the development stage		(1,736,533	)		(1,350,868	)
Total stockholders' deficit		(88,672	)		(112,220	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	207,501		$	29,107

See the accompanying notes to the financial statements.

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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 June 30,						Six Months Ended June 30,						June 30,
	2009			2008			2009			2008			2009
Sales	$	-		$	-		$	-		$	-		$	-
Cost of sales		-			-			-	��		-			-
Gross profit		-			-			-			-			-
Costs and expenses:
General and administrative		220,688			95,764			370,453			112,022			739,673
General and administrative - stock based compensation		15,213			-			15,213			-			371,860
Purchased research and development		-			-			-			-			625,000
Total costs and expenses		235,901			95,764			385,666			112,022			1,736,533
Net loss	$	(235,901	)	$	(95,764	)	$	(385,666	)	$	(112,022	)	$	(1,736,533	)
Per share information - basic and diluted:
Loss per common share	$	(0.01	)	$	(0.00	)	$	(0.01	)	$	(0.00	)
Weighted average common shares outstanding		39,547,863			38,480,877			39,343,578			38,364,064

See the accompanying notes to the financial statements.

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XTREME GREEN PRODUCTS INC.

(A Development Stage Company)

Consolidated Statements of Cash Flows – Unaudited

							For the
							Period From
							May 21, 2007
							(Inception)
							Through
	Six Months Ended June 30,						June 30,
	2009			2008			2009
Cash flows from operating activities:
Net loss	$	(385,666	)	$	(112,022	)	$	(1,736,533	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		15,213			-			371,860
Purchased research and development		-			-			625,000
Changes in operating assets and liabilities:
(Increase) in prepaid expenses		(14,845	)					(14,845	)
(Increase) inventory		(82,031	)		(2,000	)		(90,796	)
Increase (decrease) in accounts payable		14,430			(1,100	)		27,764
Increase in accrued expenses		120,000			10,000			140,000
Increase in customer deposits		5,200			-			5,200
Net cash used in operating activities		(327,699	)		(105,122	)		(672,350	)
Cash flows from investing activities:
Purchase of property and equipment		(62,418	)		-			(62,418	)
Cash used in acquisition of Belarus Capital Corp.		-			-			(125,000	)
Net cash used in investing activities		(62,418	)		-			(187,418	)
Cash flows from financing activities:
Common stock issued for cash		394,000			135,000			776,000
Loans from stockholders, net of repayments		15,217			(6,903	)		123,209
Net cash provided by financing activities		409,217			128,097			899,209
Net increase in cash		19,100			22,975			39,441
Cash - beginning of period		20,341			5,909			-
Cash - end of period	$	39,441		$	28,884		$	39,441
Supplemental Cash Flow Information:
Value of common stock issued as consideration in acquisition of Belarus Capital Corp.	$	-		$	-		$	500,000
Cash paid for interest	$	-		$	-		$	-
Cash paid for income taxes	$	-		$	-		$	-

See the accompanying notes to the financial statements.

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XTREME GREEN PRODUCTS INC.

NOTES TO FINANCIAL STATEMENTS

June 30, 2009

(UNAUDITED)

(1)           Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and Rule 8.03 of Regulation S-X. 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 financial statements of the Company as of and for the year ended December 31, 2008, including notes thereto.

(2)           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 in which the Company incurs losses, 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 significant loss from operations as a result of its investment necessary to achieve its operating plan, which is long-range in nature. From inception to June 30, 2009, the Company has incurred a cumulative net loss of $1,736,533 and has a working capital deficit of $151,090 at June 30, 2009. In addition, the Company has no 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.

(4)           Inventory

Inventory consists principally of parts, supplies and finished goods which are valued at the lower of cost or market on a first in – first out basis.

(5)           Property and Equipment

During the period ended June 30, 2009, the Company purchased property and equipment aggregating $62,418 consisting principally of production equipment which it will begin depreciating when it is placed in service during July 2009.

(6)           Stockholders’ (Deficit)

During the six months ended June 30, 2009, the Company issued 788,000 shares of common stock pursuant to a private placement at a price of $0.50 per shares and received cash proceeds of $394,000.

During the six months ended June 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.

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(7)           Subsequent Events

Subsequent to June 30, 2009, the Company issued 381,000 shares of common stock pursuant to a private placement at a price of $0.50 per shares and received cash proceeds of $190,500.

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 remaining shares were issued at the second closing that occurred on March 1, 2010.

In connection with the purchase this individual was elected to the board of directors and was granted 5 year options to purchase 150,000 shares at $.50 per share.

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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.

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 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.

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.

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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.

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.

Results of Operations

Three months ended June 30, 2009 compared to the three months ended June 30, 2008

Revenue

We did not generate any revenue in the three month periods ended June 30, 2009 or 2008.

Costs and expenses

General and administrative expenses were $220,688 for the three months ended June 30, 2009 compared to $95,674 for the three months ended June 30, 2008.  Our general and administrative expenses consist primarily of (i) salaries and wages; (ii) product design and other related product development costs and; (iii) professional fees such as legal and accounting fees related to our organizational activities and our merger with Belarus in November 2008.

During the three months ended June 30, 2009, we incurred stock based compensation expense of $15,213 related to issuance of 30,426 shares of our restricted common stock to two consultants in exchange for services rendered.  The fair market value ascribed to these shares of $0.50 per share was based on the price at which we had recently sold shares pursuant to a private placement.  We did not incur stock based compensation expense during the three months ended June 30, 2008.

Net loss

Our net loss for the three months ended June 30, 2009 was $235,901 or $0.01 per share compared to a net loss of $95,674 or $0.00 per share for the three months ended June 30, 2008.

Six months ended June 30, 2009 compared to the six months ended June 30, 2008

Revenue

We did not generate any revenue in the six month periods ended June 30, 2009 or 2008.

 Costs and expenses

General and administrative expenses were $370,453 for the six months ended June 30, 2009 compared to $112,022 for the six months ended June 30, 2008.  Our general and administrative expenses consist primarily of (i) salaries and wages; (ii) product design and other related product development costs and; (iii) professional fees such as legal and accounting fees related to our organizational activities and our merger with Belarus in November 2008.

During the six months ended June 30, 2009, we incurred stock based compensation expense of $15,213 related to issuance of 30,426 shares of our restricted common stock to two consultants in exchange for services rendered.  The fair market value ascribed to these shares of $0.50 per share was based on the price at which we had recently sold shares pursuant to a private placement.  We did not incur stock based compensation expense during the six months ended June 30, 2008.

Net loss

Our net loss for the six months ended June 30, 2009 was $385,666 or $0.01 per share compared to a net loss of $112,022 or $0.00 per share for the six months ended June 30, 2008.

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Liquidity and Capital Resources

Since our inception (May 21, 2007) and through June 30, 2009, we have incurred a cumulative net loss of $1,736,533. The notes to our unaudited financial statements include language that raises doubt about our ability to continue as a going concern.  At June 30, 2009, we had cash of $39,441, a net working capital deficit of $151,090 and we owed our stockholders an aggregate of $123,209. Of this total, $80,000 was due in full on December 31, 2009. The remaining stockholder loan is due on demand.

Our ability to continue as a going concern is contingent upon our ability to secure additional financing, increase ownership equity and develop profitable operations. 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 establish our revenue base. Failure to secure such financing or to raise additional equity capital and to establish our revenue base may cause us to deplete our available funds and not be able to pay our 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 to continue as a going concern.

During the six months ended June 30, 2009, we sold 788,000 shares of restricted common stock and received proceeds $394,000.  These proceeds were used for general working capital purposes. Subsequent to June 30, the Company issued 381,000 shares of common stock pursuant to a private placement at a price of $0.50 per shares and received cash proceeds of $190,500.

On January 28, 2010, we entered into and consummated a transaction under a Subscription Agreement with one investor. Under the terms of the Agreement, we 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 remaining shares were issued at a second closing that occurred on March 1, 2010.

To date we have generated no revenues. 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 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.

Since our inception, 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. 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. 

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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 June 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.

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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

In April 2009, we sold 104,000 shares of restricted common stock at a price of $0.50 per share to four investors and received total cash consideration of $52,000.

In May 2009, we sold 200,000 shares of restricted common stock at a price of $0.50 per share to five investors and received total cash consideration of $100,000.

In June 2009, we sold 216,000 shares of restricted common stock at a price of $0.50 per share to twelve investors and received total cash consideration of $108,000.

The above securities were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, under Section 4(2) thereunder, 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: March 4, 2010		/s/ Sanford Leavitt
		Sanford Leavitt
		Chief Executive Officer (Principal Executive Officer)
Date: March 4, 2010		/s/ Neil Roth
		Neil Roth
		Chief Financial Officer (Principal Financial and Accounting Officer)

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