UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

 

(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, 2015

 

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 ELECTRIC VEHICLES, 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)
3010 East Alexander Rd, Las Vegas, NV		89030
(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 November 10, 2015: 42,676,000.

 

 

 

INDEX

 

		Page
PART I - Financial Information		3
Item 1: Financial Statements		3
Condensed Balance Sheets as of September 30, 2015 (Unaudited) and December 31, 2014		3
Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2015 and 2014 (Unaudited)		4
Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014 (Unaudited)		5
Notes to Consolidated Financial Statements (Unaudited)		6
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3: Controls and Procedures		16
PART II - Other Information		17
Item 1: Legal Proceedings		17
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds		17
Item 5: Other Information		17
Item 6: Exhibits		18
Signatures		19

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

XTREME GREEN ELECTRIC VEHICLES, INC.

Condensed Balance Sheets 

 

		September 30, 2015				December 31, 2014
		(Unaudited)
ASSETS
Current assets:
Cash		$	18,946			$	11,104
Accounts receivable			174,971				36,667
Inventory			759,001				559,403
Prepaid expenses and deposits (note 9)			154,105				115,256
Total current assets			1,107,023				722,430
Property and equipment, net (note 7)			360,679				299,070
Deposit on lease			88,750				88,750
TOTAL ASSETS		$	1,556,452			$	1,110,250
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	170,743			$	194,638
Customer deposits			40,790				44,524
Current portion of long-term debt			46,158				33,252
Stockholder loans (note 10)			710,000				180,000
Total current liabilities			967,691				452,414
Deferred rent			26,914				33,370
Notes payable			161,005				155,143
Warranty reserves			27,057				22,599
Total Liabilities			1,182,667				663,526
Stockholders’ equity (deficit):
Common stock, $0.001 par value, 100,000,000 shares authorized; 42,626,000 and 41,546,000 shares issued and outstanding, respectively			42,626				-
Common Stock Payable			-				41,546
Additional paid-in capital			14,346,796				13,267,876
Accumulated deficit			(14,015,639	)			(12,862,698	)
Total stockholders’ equity			373,784				446,724
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,556,452			$	1,110,250

 

The accompanying notes are an integral part of these condensed financial statements.

 

 

XTREME GREEN ELECTRIC VEHICLES, INC.

Condensed Statements of Operations

For the Nine Months Ended September 30, 2015 and 2014

(Unaudited)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2015				2014				2015				2014
Sales, net		$	159,959			$	256,717			$	774,776			$	804,393
Cost of sales			114,051				247,217				654,329				898,006
Gross margin (loss)			45,908				9,500				120,447				(93,613	)
Costs and expenses:
General and administrative			354,998				284,380				1,048,272				1,043,727
Sales and marketing			66,135				56,909				204,267				218,932
Research & Development			2,015				19,437				7,920				19,437
Total costs and expenses			423,148				360,726				1,260,459				1,282,096
Net loss from operations			(377,240	)			(351,226	)			(1,140,012	)			(1,375,709	)
Other income (expense)
Gain from equipment sales			14,599				-				20,241				-
Interest expense			(8,378	)			(832	)			(20,929	)			(16,217	)
Fund raising expense			(6,638	)			(16,588	)			(12,240	)			(16,588	)
Total other income (expense)			(417	)			(17,420	)			(12,928	)			(32,805	)
Expenses and fees related to Chapter 11 filing:
Gain realized from Chapter 11 Reorganization			-				100				-				562,927
Professional fees			-				-				-				(33,565	)
Net loss before provision for income taxes		$	(377,657	)		$	(368,546	)		$	(1,152,941	)		$	(879,152	)
Provision for income taxes			-				-				-				-
Net loss		$	(377,657	)		$	(368,546	)		$	(1,152,941	)		$	(879,152	)
Per share information - basic and diluted:
Loss per common share		$	0.01			$	0.01			$	0.03			$	0.02
Weighted average common shares outstanding			42,016,261				41,052,143				42,112,930				43,987,714

 

The accompanying notes are an integral part of these condensed financial statements.

 

 

XTREME GREEN ELECTRIC VEHICLES, INC.

Condensed Statements of Cash flows

For the Nine Months Ended September 30, 2015 and 2014

(Unaudited)

 

		2015				2014
Cash flows from operating activities:
Net income (loss)		$	(1,152,941	)		$	(879,152	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation			68,390				59,064
Gain realized from Chapter 11 Reorganization			-				(562,927	)
Gain from sale of equipment			(20,241	)			-
Discount on Loan			9,144				-
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			(138,304	)			76,573
(Increase) decrease in inventory			(199,598	)			(150,899	)
(Increase) in other current assets			(38,849	)			(27,012	)
Decrease in accounts payable and accrued expenses			(5,582	)			219,835
Decrease in accrued expenses - related party			(28,584	)			(279	)
Increase (decrease) in accrued interest - related party			7,068				(22,869	)
(Decrease) Increase in warranty reserve			-				(13,707	)
(Decrease) Increase in extended warranty			4,458				19,139
(Decrease) Increase in deferred rent			(6,456	)			-
Decrease in customer deposits			(3,734	)			(31,400	)
Net cash used in operating activities			(1,525,003	)			(1,313,605	)
Cash flows from investing activities:
Proceeds from sale of equipment			99,035				-
Leasehold Improvements			(57,996	)			-
Purchases of property and equipment			(146,106	)			(256,929	)
Net cash used in investing activities			(105,067	)			(256,929	)
Cash flows from financing activities:
Proceeds from issuance of common stock			1,080,000				1,170,000
Proceeds from Bridge Loan-short term			-				75,000
Proceeds from long-term debt			146,106				191,457
Proceeds from Stockholder loans			562,000				50,000
Repayment of convertible debt			-				(15,371	)
Repayment of long-term debt			(118,194	)			-
Repayment of Stockholder’s loan			(32,600	)			(67,500	)
Net cash provided by financing activities			1,637,912				1,403,586
Net increase (decrease) in cash			7,842				(166,948	)
Cash - beginning of period			11,104				261,436
Cash - end of period		$	18,946			$	94,488
Supplemental Cash Flow information:
Cash paid for interest			5,723				16,217
Cash paid for taxes
Non-cash financing and investing activities exchanged for stock:
Accounts payable and accrued expenses exchanged for stock							515,391
Convertible debt – related party exchanged for stock							4,069,432
Customer deposits exchanged for stock							70,356
Long-term debt exchanged for stock							137,750
Stockholder loans to be exchanged for stock							354,991
Accrued expenses – related party exchanged for stock							654,301
Accrued interest – exchanged for stock							377,555
Purchase of fixed assets			(146,106	)
Disposal of fixed assets			93,035
Proceeds from notes/loans payable			146,106
Repayment of loans payable			(93,035	)

 

The accompanying notes are an integral part of these condensed financial statements.

 

 

XTREME GREEN ELECTRIC VEHICLES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

September 30, 2015

(Unaudited)

 

(1) Basis of Presentation

 

The accompanying unaudited condensed 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 condensed financial statements of the Company as of and for the year ended December 31, 2014, 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

 

During the Chapter 11 Case, the Company operated as a “debtor in possession.” On January 29, 2014, the Bankruptcy Court entered an Order Confirming the Company’s First Amended Plan of Reorganization under the Chapter 11 of the Bankruptcy Code. The Bankruptcy court ordered the Chapter 11 closed as of February 28, 2014.

 

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) Reclassification

 

Certain reclassifications have been made to the three and nine months ended September 30, 2015 financial statement amounts and disclosures to conform to the three and nine months ended September 30, 2015 presentation. In previous periods certain expenses were not included in general and administrative, sales and marketing, and research and development, but were listed as other income and fees. Amounts in previous periods have been reclassified to present costs directly associated with operating expenses.

 

 

(6) Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a net loss of $1,152,941 for the nine month period ended September 30, 2015 and accumulated deficit of $14,015,639. It is likely that the Company will continue to have negative cash flows through June 30, 2016 after which time the Company is expected to have a positive cash flow as a result of the implementation of its business and marketing plans.

 

These conditions give rise to doubt about the company’s ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported assets amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to obtain additional financing or sale of its common stock as may be required and ultimately to attain profitability.

 

(7) Property and Equipment

 

Property and equipment is recorded at cost. Expenditures for major improvements and additions are added to property and equipment, while replacements, maintenance and repairs which do not extend the useful lives are expenses. Depreciation is computed using the straight line method over the estimated useful lives of the assets of 5 years.

 

Property and equipment consists of the following as of September 30, 2015 and December 31, 2014:

 

		September 30, 2015				December 31, 2014
Manufacturing equipment		$	199,061			$	125,730
Vehicles for demonstration			181,335				155,455
Other equipment			26,907				23,020
Leasehold improvements			53,782				13,722
Automotive equipment			136,604				202,659
			597,689				520,586
Accumulated depreciation			(237,010	)			(221,516	)
		$	360,679			$	299,070

 

Depreciation expense for the three and nine months ended September 30, 2014 was $18,523 and $59,064 respectively. The depreciation expense for the three and nine months ended September 30, 2015 was $21,957 and $68,391 respectively.

 

 

(8) Inventory

 

The value of inventory is determined by using the average cost method of accounting which calculates the cost of ending inventory and cost of goods sold for a period on the basis of the weighted average cost per unit. 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. The Company has recorded a reserve for obsolete inventory at September 30, 2015 of $5,338. The reserve for period ended December 31, 2014 was $0.00.

 

(9) Prepaid expenses and deposits:

 

		September 30, 2015				December 31, 2014
Prepaid inventory		$	29,636			$	28,969
Prepaid insurance			101,914				67,387
Other prepaid expenses			22,555				18,900
TOTAL		$	154,105			$	115,256

 

 

(10) Shareholder Loans

 

As of September 30, 2015 there was a loan balance due to the Company’s largest stockholder and CEO of $460,000 and an additional $250,000 due to another stockholder. The total balance due on the loans at September 30, 2015 and December 31, 2014 is $710,000 and $180,000 respectively. The loans are due upon receipt, and bear interest at 3.0% per annum.

 

(11) Long Term Debt

 

The carrying value as of September 30, 2015 of the portion of notes payable due after twelve months for truck and manufacturing equipment loans and debt settlement is $161,005 compared to $155,143 at year ended 2014.

 

On January 29, 2014 the Company entered into a debt settlement agreement in the amount of $104,461. The settlement shall be repaid in equal payments of $20,892 over 5 years. There remains a balance due at September 30, 2015 of $83,569.

 

On February 4, 2015 the Company entered into a lease purchase agreement for the acquisition of manufacturing equipment. The amount of the loan is $65,144 and is payable in 33 installments of $2,412 including sales tax. The loan is guaranteed by the Company’s largest stockholder. There remains a balance due at June 30, 2015 of $53,463.

 

On August 6, 2015 the Company entered into a lease purchase agreement for the acquisition of a 2015 Ford Fusion. The amount of the loan was $32,224 and is payable in 72 installments of $448 including sales tax. The loan is unsecured. There remains a balance due at September 30, 2015 of $31,339.

 

On August 6, 2015 the Company entered into a lease purchase agreement for the acquisition of 2015 Ford F-250. The amount of the loan was $48,738 and is payable in 60 installments of $944 including sales tax. The loan is unsecured. There remains a balance due at September 30, 2015 of $48,037.

 

 

(12) Equity Transactions

 

On January 16, 2015 the Company privately sold 75,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On February 6, 2015 the Company privately sold 75,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On February 12, 2015 the Company privately sold 100,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On March 16, 2015 the Company privately sold 100,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On April 14, 2015 the Company privately sold 100,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On May 7, 2015 the Company privately sold 250,000 additional shares of its common stock to an existing 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 250,000 shares of common stock at a purchase price of $1.00 per share.

 

On July 30, 2015 the Company privately sold 50,000 additional shares of its common stock to an existing private investor at a purchase price of $1.00 per share.

 

On July 31, 2015 the Company privately sold 50,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On August 5, 2015 the Company privately sold 250,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On August 24, 2015 the Company privately sold 30,000 additional shares of its common stock to an existing private investor at a purchase price of $1.00 per share.

 

(13) Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our financial statements and have not yet determined the method by which we will adopt the standard in 2017.

 

 

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern. The provisions of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently assessing the impact of this ASU on the Company’s consolidated financial statements.

 

(14) Subsequent Events

 

On October 23, 2015 the Company privately sold 50,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On October 28, November 2, 5 and 9, 2015 our major shareholder and CEO loaned a total of $115,000 in additional funds to the company, bringing the total loan balance due to him to $575,000 as of November 9, 2015.

 

 

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

 

On January 21, 2015 the Company was granted a tax abatement by the Governor’s Office of Economic Development (GOED). The agreement was effective December 31, 2013 and includes a sales and use tax abatement of 6.1%, a sales and use tax deferral of 2%, modified business tax abatement of 50% of the levied tax for a period of 4 years, and personal property tax abatement of 50% of the levied tax for a period of 10 years.

 

On February 4, 2015 the Company entered into a lease purchase agreement for the purchase of manufacturing equipment. The amount of the loan was $65,144 and is payable in 33 installments of $2,412 including sales tax.

The loan is guaranteed by the Company’s majority stockholder.

 

During the period ended March 31, 2015 the company closed its subassembly facility in Wenling, China, relocating all equipment and inventory to its main manufacturing and assembly plant in North Las Vegas, Nevada. As a result of this move, 100% of the Company’s manufacturing and assembly is being accomplished in the United States.

 

 

Results of Operations

 

Comparison of three months ended September 30, 2015 to the three months ended September 30, 2014

 

Revenue - Sales for the three months ended September 30, 2015 were $159,959 compared to $256,717 for the three months ended September 30, 2014. Since its emergence from Chapter 11 Reorganization the Company has gone through a substantial reorganization. A significant amount of time and resources were allocated to the closing and relocation of the China facility to Las Vegas, installation of new machinery and equipment, and restructuring its marketing strategy through the addition of new distribution channels both domestically and internationally. As a result of this reorganization, the company’s sales were negatively impacted during the nine months ended September 30, 2015 with some order commitments moved until later.

 

Cost of Sales - Cost of sales for the three months ended September 30, 2015 was $114,051 which resulted in a gross profit of $45,908 compared to cost of sales of $247,217 and a gross profit of $9,500 for the comparable prior year period. Direct costs of manufacturing and factory overhead costs are applied to cost of sales using predetermined rates. Excess manufacturing capacity resulted in increased fixed costs in our units produced relative to the revenues generated. During the third quarter ended September 30, 2015 the Company experienced improvements in its production efficiency as a result of the closing of its China Facility and consolidation of its manufacturing and assembly operations to the Las Vegas facility.

 

General and administrative - General and administrative expenses were $354,998 for the three months ended September 30, 2015 compared to $284,380 for the three months ended September 30, 2014. The higher general and administrative expense in 2015 primarily results from a consulting fee expense credit from China during the third quarter of 2014. Our general and administrative expenses consist primarily of salaries, insurance expense, legal and professional fees and general operating costs. We had 24 full-time employees during the three months ended September 30, 2015 compared to 20 for the comparable prior year period.

 

Sales & marketing - The cost of sales and marketing for the three months ended September 30, 2015 was $66,135 compared to $56,909 for the same prior year period. The Company’s marketing strategy is to continue its mission to reposition itself both domestically and internationally through the employment of marketing consultancies and addition of independent distributorships.

 

Interest expense - Interest expense for the three months ended September 30, 2015 was $8,378 compared to $832 for the comparable prior year period. Interest expense consists primarily of amounts due under various notes payable to shareholders. The increase in interest expense is primarily due to the increase in shareholder notes payable when compared to the same prior year period.

 

Loss from operations - We incurred a loss from operations of $377,240 for the three months ended September 30, 2015 compared to a loss of $351,226 for the comparable prior year period. The increase in the Company’s loss is a result of increased general and administrative costs during the third quarter ended September 30, 2015.

 

Comparison of nine months ended September 30, 2015 to the nine months ended September 30, 2014

 

Revenue - Sales for the nine months ended September 30, 2015 were $774,776 compared to $804,393 for the comparable prior year period.

 

Cost of Sales - Cost of sales for the nine months ended September 30, 2015 was $654,329 which resulted in a gross profit of $120,447 compared to cost of sales of $898,006 and a negative operating margin of $93,613 for the prior nine month period. Direct costs of manufacturing and factory overhead costs are applied to cost of sales using predetermined rates. Excess manufacturing capacity resulted in increased fixed costs in our units produced relative to the revenues generated. During the third quarter ended September 30, 2015 the Company experienced improvements in its production efficiency as a result of the closing of its China Facility and consolidation of its manufacturing and assembly operations to the Las Vegas facility.

 

 

General and administrative - General and administrative expenses were $1,048,272 for the nine months ended September 30, 2015 compared to $1,043,727 for the nine months ended September 30, 2014. Our general and administrative expenses for the nine months ended September 30, 2015 consist primarily of salaries, insurance expense, legal and professional fees, and general operating costs. The higher general and administrative expense in 2015 primarily results from a consulting fee expense credit from China during the 2014 period. We had 24 full-time employees during the nine months ended September 30, 2015 compared to 20 for the comparable prior year period.

 

Sales & marketing - The cost of sales and marketing for the nine months ended September 30, 2015 was $204,267. Sales and marketing cost for the comparable period in 2014 was $218,932. The decrease in marketing costs is a result of the Company’s reduction of its field sales force in 2015. The Company’s marketing strategy is to continue its mission to reposition itself both domestically and internationally through the employment of marketing consultancies and addition of independent distributorships.

 

Interest expense - Interest expense for the nine months ended September 30, 2015 was $20,929 compared to $16,218 for the comparable prior year period. Interest expense consists primarily of amounts due under various notes payable to shareholders and equipment financing.

 

Loss from operations - We incurred a loss from operations of $1,140,012 for the nine months ended September 30, 2015 compared to a loss of $1,375,709 for the comparable prior year period. The reduction in the Company’s loss is a result of improved manufacturing and assembly efficiencies, and cost cutting measures in general and administrative costs implemented during the nine months ended September 30, 2015.

 

Liquidity and Capital Resources

 

Since our inception on May 21, 2007, we have financed the costs associated with our operational activities through (i) the sale of shares of our common stock pursuant to private placements, and (ii) loans from certain of our stockholders. From inception through September 30, 2015, we have incurred a cumulative net loss of $14,015,639. Although the Company has experienced improvement over the past nine months ended September 30, 2015, the notes to our financial statements include language that raises some doubt about our ability to continue as a going concern. At September 30, 2015 the Company had cash of $18,946, net working capital of $139,332 and stock holders’ equity of $373,784.

 

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 were issued and outstanding 40,000,000 shares of common stock. The number of shares that the Company is authorized to issue remains unchanged.

 

On January 16, 2015 the Company privately sold 75,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On February 6, 2015 the Company privately sold 75,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On February 12, 2015 the Company privately sold 100,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On March 16, 2015 the Company privately sold 100,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On April 14, 2015 the Company privately sold 100,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

 

On May 7, 2015 the Company privately sold 250,000 additional shares of its common stock to an existing 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 250,000 shares of Common Stock at $1.00 per share.

 

On July 30, 2015 the Company privately sold 50,000 additional shares of its common stock to an existing private investor at a purchase price of $1.00 per share.

 

On July 31, 2015 the Company privately sold 50,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On August 5, 2015 the Company privately sold 250,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On August 24, 2015 the Company privately sold 30,000 additional shares of its common stock to an existing private investor at a purchase price of $1.00 per share.

 

On October 23, 2015 the Company privately sold 50,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

We are currently investigating various opportunities to raise additional capital through the sale of debt, equity securities and 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 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.

 

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 this period.

 

 

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 shipped or the service is performed. Provision for sales returns is estimated based on our historical return experience. A provision for sales returns was not required for the three or nine month periods ended September 30, 2015 and 2014.

 

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. For international sales and specialty sales orders a payment of 50% is required upon receiving the order with the balance due prior to shipping.

 

Going Concern

 

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

 

Our condensed 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 investment necessary to achieve the Company’s operating plan, which is long-term in nature. From inception to September 30, 2015 we have incurred a cumulative net loss totaling $14,015,639 and have working capital and stockholders’ equity of $139,332 and $373,784 at September 30, 2015. 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 grow our revenue base may result in the depletion of available funds and as a result, we may not be able to 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, and 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 September 30, 2015. 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 as they relate to inventory control at the Company’s China storage facility relocated to the Company’s main assembly plant in Las Vegas, NV. The Company expects, as a result of the relocation, these inventory issues will no longer occur.

 

(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.

 

 

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. We are currently not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

 

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

 

On January 16, 2015 the Company privately sold 75,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On February 6, 2015 the Company privately sold 75,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On February 12, 2015 the Company privately sold 100,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On March 16, 2015 the Company privately sold 100,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On April 14, 2015 the Company privately sold 100,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On May 7, 2015 the Company privately sold 250,000 additional shares of its common stock to an existing 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 250,000 shares of Common Stock at $1.00 per share.

 

On July 30, 2015 the Company privately sold 50,000 additional shares of its common stock to an existing private investor at a purchase price of $1.00 per share.

 

On July 31, 2015 the Company privately sold 50,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On August 5, 2015 the Company privately sold 250,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

On August 24, 2015 the Company privately sold 30,000 additional shares of its common stock to an existing private investor at a purchase price of $1.00 per share.

 

On October 23, 2015 the Company privately sold 50,000 shares of its common stock to a private investor at a purchase price of $1.00 per share.

 

All shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) thereunder.

 

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 the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	Xtreme Green Electric Vehicles Inc.
	(Registrant)
Date: November 23, 2015	/s/ Byron Georgiou
	Byron Georgiou
	Chief Executive Officer (Principal Executive Officer)
Date: November 23, 2015	/s/ Neil Roth
	Neil Roth
	Acting Chief Financial Officer (Principal Financial and Accounting Officer)