UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-K /A


Amendment No. 2





[X]
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended  February 28, 2010[  ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTFor the transition period from _________ to ________Commission file number:333-91191





Xzeres Wind Corp.(Exact name of registrant as specified in its charter)  Nevada
74-2329327(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)9025 SW Hillman Court, Suite 3126 Wilsonville, OR
97070(Address of principal executive offices)
(Zip Code)Registrant’s telephone number:  503-388-7350





Securities registered under Section 12(b) of the Exchange Act:Title of each class
Name of each exchange on which registeredNone
not applicableSecurities registered under Section 12(g) of the Exchange Act:Title of classNone





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [  ] No [X]





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [X]       No [  ]





Indicate by checkmark 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 preceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [ ] No [X]




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] No [X]




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [X]




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.




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]




State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. Not available




Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  13,280,255 common shares as of January 10, 2011








Explanatory Note
  The purpose of this amendment to our annual report on Form 10-K/A is to incorporate the revised disclosures we made by in connection with comment letters we received from the Securities and Exchange Commission on August 13, 2010, September 21, 2010, November 2, 2010, and December 7, 2010.





Table of Contents





TABLEOF CONTENTS





PagePART IItem 1.
Business
3Item 1A.
Risk Factors
15Item 2.
Properties
15Item 3.
Legal Proceedings
15PART IIItem 5.
Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
16Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19Item 8.
Financial Statements and Supplementary Data
22Item 9.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
23Item 9A(T).
Controls and Procedures
23Item 9B.
Other Information
24PART IIIItem 10.
Directors, Executive Officers and Corporate Governance
27Item 11.
Executive Compensation
30Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
34Item 13.
Certain Relationships and Related Transactions, and Director Independence
35Item 14.
Principal Accountant Fees and Services
35PART IVItem 15.
Exhibits
36





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PART I


Item1.   Business


Company Overview and History
  We were originally incorporated in the state of New Mexico in January of 1984.  We were engaged in the natural gas and asphalt businesses until 2007, at which time we liquidated our assets and operations and distributed the net proceeds to our shareholders after paying our debts.  On October 2, 2008, we re-domiciled from New Mexico to Nevada in anticipation of pursuing the wind turbine business.  Our former management resigned on October 21, 2008 after spending years in the oil and gas industry.  Mr. Steven Shum, our current director and CFO, replaced former management in order to start a new business direction into alternative energy.  On May 17, 2010, we changed our name to “XZERES Wind Corp.”
  On March 25, 2010, we acquired certain assets formerly owned by Abundant Renewable Energy, LLC, a privately held Oregon limited liability company (“ARE”) that filed bankruptcy on March 26, 2009, from ARE’s secured creditors in exchange for 3,192,152 shares of our common stock, par value $0.001 per share. The bankruptcy was later dismissed and the secured creditors subsequently acquired the assets of ARE under a Collateral Surrender Agreement signed February 8, 2010.  The secured creditors then conveyed the surrendered assets to us in exchange for stock on March 25, 2010 pursuant to an Asset Purchase Agreement.
 The assets acquired included intellectual property and other rights related to wind turbine systems formerly manufactured and sold by ARE.  We have rebranded these products with our name and logo.  Our products are presently commercially available and we are actively marketing our products to potential customers.
 On May 14, 2010, we closed on a private offering of common stock and warrants with total gross proceeds to us of $4,010,500, which capital allowed us to commence operation of our wind turbine business during the fiscal quarter ended May 31, 2010 by providing us with working capital.  We have been and will continue to use this working capital to acquire components to build products, to lease and outfit our leased space, and to hire staff for general administration, sales and marketing, engineering, and for test and assembly roles.
  Our principal offices are located at 9025 SW Hillman, Suite 3126, Wilsonville, OR 97070.  Our phone number is (503) 388-7350.


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Business of Company


We are in the business of designing, developing, and marketing small wind turbine systems and related equipment for electrical power generation, specifically for use in residential, small business, rural electric utility systems, other rural locations, and other infrastructure applications.  We employ proprietary technology, including power electronics, alternator design, and blade design to increase performance, reliability, and sound suppression.
 Our products integrate with currently available complementary products from other manufacturers, such as inverters, lightning protection equipment and towers.  We do not have any written agreements with these other manufacturers. Our systems comprise several major components including the turbine sub-system (which converts wind energy into electricity), the tower (which holds the turbine high in the wind), a turbine controller (which controls the turbine subsystem and contains monitoring hardware and software), and an inverter (which converts the electricity generated from DC to AC to connect to a customer’s electrical load or to the grid). We currently design and contract the manufacturing for the turbine and controller, but the tower while designed to specifications suitable to our turbine requirements is made and sold by separate companies depending on the style that the customer orders.  Similarly, the inverter, which converts the energy generated to a form suitable to connect into the electric grid, is manufactured by another company and is in fact a commercial off-the-shelf product.  We sell a “system” with all of these parts included in the selling price.  The system will not operate as designed without these complementary products.  In the case of the inverter, there are other commercially available products that will integrate with our components, but we perform the system integration design to sell the entire system as a package to the customer.
 
 Going forward, we expect to seek feedback on our products from top renewable energy (“RE”) consultants, manufacturers of complementary equipment, the National Renewable Energy Laboratory, and the U.S. Department of Energy (“DOE”) which, in turn, will help us to develop new innovative, attractive, quiet, and durable small wind equipment, designed for ease of installation and to certification standards which cover standard testing procedures, power ratings, and structural designs of small wind systems.
 We believe that having outside evaluations of our products can lead to overall improvement in the quality of our product line.  Independent reviews also provide useful support or validation in our marketing and sales effort.  For example, the National Renewable Energy Laboratory (NREL) installed and tested our 10kW machine at their testing facility in Colorado.  (The testing report notes that the test was performed on an ARE 442 turbine product, which is the exact product that we now sell branded under our name.)
 
 This test was conducted as part of the U.S. Department of Energy’s (DOE) Independent Testing project. This project was established to help reduce the barriers of wind energy expansion by providing independent testing results for small turbines. In total, four turbines were tested at the National Wind Technology Center (NWTC) as a part of this project. Five tests were included in the evaluation on the ARE442: safety and function, power performance, duration, noise, and power quality tests. Test results provide manufacturers with reports that can be used for small wind turbine certification. The system was installed by the NWTC Site Operations group with guidance and assistance from Abundant Renewable Energy. We will use the tests reports for small wind turbine certification. The report is available on the NREL website. http://www.nrel.gov/wind/smallwind/abundant_renewable_energy.html
 
 We were then able to use this independent data from NREL to engage an outside consulting firm to seek Underwriters Laboratories listing for our 10kW system.  UL is a product safety certification and compliance solution that we believe may enhance the sales and marketing appeal of our systems.  We have not yet obtained UL listing for any of our products. At this time, there is no approved UL standard governing wind turbine systems.  There is a draft UL standard (UL Subject 6140) which we anticipate being widely used within the United States following its approval.   Because we are anticipating the wide adoption of this standard by local authorities within the United States, we are currently designing our products for compliance with it.  When this standard is approved we intend to pursue listing of our wind turbine systems under it.
 
 4
 
 Dramatic increases in state and federal incentives, high energy costs, and environmental consciousness are driving unprecedented growth in the small wind turbine market.  Our current products compare as technology leaders in this market, and we will work to advance this leadership position through the continual development of performance improvements.  For example, the power curve, which is a measure of performance of a system, on our 10kW system exceeds the claimed power curves on similar sized machines from competitors in the field.  Every manufacturer states the specifications on performance of its turbines, known as a “power curve” which plots power output vs wind speed,based on product testing.  Those specifications are published by each manufacturer in much of the same way a manufacturer details the specifications of an automobile. We are then able to compare the specifications of other manufactured turbines to our own turbines.  Our power curve for our Model 442  has been independently validated by the National Renewable Energy Laboratory, while many manufacturer curves are only based on internal testing.  Using this published data, we can plot our curve on the same graph as competitor curves and can show that our products produce more power at a given wind speed than some other competitors with the same nominal rating.   We can also use the same data to predict the annual energy production of competing machines assuming a standard distribution of wind resource availability.  This energy production, calculated based on published power curves by multiple manufacturers, is used in conjunction with published pricing of competing machines to show that our product has a superior return on investment.  Much of the published data comes from Home Power Magazine which has an annual buyer’s guide issue showing specifications of many of the competing products available on the market.
 
 There can be no assurance that we will be able to maintain any technological leadership or successfully exploit that leadership position to the benefit of our shareholders.
 
 Wind Power
 
 The demand for alternative means of electricity generation has increased due to the rising cost of energy and consumer awareness of environmental issues. According to the American Wind Energy Association (“AWEA”), wind power is second only to natural gas in terms of new capacity added and was the most rapidly growing means of alternative electricity generation at the turn of the 21st century. State and federal incentives have significantly reduced barriers to wind power development as well as the payback period for investments in small wind turbines for homeowners and small businesses.
 
 Such incentives take the form of significant tax breaks or even cash incentives to purchasers of wind power systems.  As a result of such incentives, the effective price or cost to the user is greatly reduced making the return on investment much more attractive and lowers the time period it takes to generate enough energy to recover the total cost of the system.  While many customers are attracted to renewable energy for the positive environmental attributes, the ultimate decision often centers on a cost/benefit and investment return analysis.  Governmental incentives play an important role by lowering the effective cost to the end user of and wind power system and thereby making a purchase more attractive.
 
 Wind is a form of solar energy. Winds are caused by the uneven heating of the atmosphere by the sun, the irregularities of the earth's surface, and rotation of the earth. Wind flow patterns are modified by the earth's terrain, bodies of water, and vegetation.
 
 The terms wind energy or wind power, describe the process by which the wind is used to generate mechanical power or electricity. Wind turbines convert the kinetic energy in the wind into mechanical power. A generator can convert this mechanical power into electricity.
 
 Modern wind turbines fall into two basic groups: the horizontal-axis variety and the vertical-axis design.  Horizontal-axis wind turbines typically either have two or three blades. These three-bladed wind turbines are operated "upwind," with the blades facing into the wind.
 
 Single small turbines, below 100 kilowatts, are used for homes, telecommunications dishes, or water pumping. Small turbines are sometimes used in connection with diesel generators, batteries, and photovoltaic systems. These systems are called hybrid wind systems and are typically used in remote, off-grid locations, where a connection to the utility grid is not available.


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As a result of the Asset Purchase, we are now engaged in the business of designing, developing, and marketing small wind turbine systems and related equipment for electrical power generation, specifically for use in residential, small business, rural electric utility systems, other rural locations, and other infrastructure applications globally.  We employ proprietary technology, including breakthroughs in power electronics, alternator design, and blade design to increase performance, reliability, and sound suppression. We also work with manufacturers of inverters, lightning protection equipment and towers to integrate their equipment into our products. Going forward, we expect to collaborate with top renewable energy (“RE”) consultants, manufacturers, the National Renewable Energy Laboratory, and the U.S. Department of Energy (“DOE”) to develop new innovative, attractive, quiet, and durable small wind equipment, designed for ease of installation and to certification standards which cover standard testing procedures, power ratings, and structural designs of small wind systems.
  Dramatic increases in state and federal incentives, high energy costs, and environmental consciousness are driving unprecedented growth in the small wind turbine market.  Our current products are recognized as technology leaders in this market, and we will work to advance this leadership through the continual development of performance improvements.


Inside the Wind Turbine











Wind Power Industry




The U.S. Department of Energy's Wind and Hydropower Technologies Program is working with wind industry partners to develop clean, domestic, innovative wind energy technologies that can compete with conventional fuel sources. Program efforts have culminated in some of the industry's leading products today and have contributed to record-breaking industry growth.
  For the past four years, the U.S. has led the world in new wind capacity, overtaking Germany in cumulative wind capacity installations, according to the AWEA’s U.S. Wind Industry Annual Market Report, Year Ending 2009.
  Much of the Wind Industry to date is made up of large, utility-scale turbines.  However, small wind turbines (<100kW) are now benefitting from many of the same high-growth factors driving large turbines, which include:
  §
Persistent, high energy costs;
  §
Improved technology leading to significantly more efficient turbines;
  §
Incentive programs; and
  §
General improvement in attitudes toward alternative energy solutions.


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The U.S. and Europe contain approximately 71% of the planet’s existing wind power installations. The U.S., Germany, Spain, India and Denmark have made the largest investments in wind-generated electricity according to the World Wind Energy Association. The World Wind Energy Association expected that by 2010, 190GW of capacity would be installed worldwide, up from 121.2 GW at the end of 2008, implying an anticipated net growth rate of more than 25% per year.
 The U.S. continues to lead the world as one of the fastest-growing wind power markets, according to a report from the U.S. Department of Energy (DOE) by Lawrence Berkeley National Laboratory (LBNL). The States with the most wind production are Texas, California, Iowa, Minnesota, and Oklahoma.
  A new assessment from the National Renewable Energy Laboratory showed U.S. wind resources are larger than previously estimated. Highlights of the analysis reveal Onshore U.S. wind resources could generate nearly 37,000,000 gigawatt hours (GWh) annually, more than nine times the current total U.S. electricity consumption.
  In 2008, the U.S. Department of Energy (DOE) published a report that examined the technical feasibility of using wind energy to generate 20% of the nation’s electricity demand by 2030. The report, "20% Wind Energy by 2030: Increasing Wind Energy's Contribution to U.S. Electricity Supply," includes contributions from DOE and its national laboratories, the wind industry, electric utilities, and other groups. The report examines the costs, major impacts, and challenges associated with producing 20% wind energy or 300 GW of wind generating capacity by 2030.
  The report's conclusions include:
  §
Reaching 20% wind energy will require enhanced transmission infrastructure, streamlined siting and permitting regimes, improved reliability and operability of wind systems, and increased U.S. wind manufacturing capacity.
  §
Achieving 20% wind energy will require the number of annual turbine installations to increase nearly 3-fold by 2017.
  §
Integrating 20% wind energy into the grid can be done reliably for less than 0.5 cents per kWh.
  §
Achieving 20 percent wind energy is not limited by the availability of raw materials.
  §
Addressing transmission challenges such as siting and cost allocation of new transmission lines to access the Nation's best wind resources will be required to achieve 20% wind energy.
  Apart from regulatory issues and externalities, decisions to invest in wind energy generally depend on the cost of alternative sources of energy. Natural gas, oil and coal prices, and the main production technologies with significant fuel costs are often determinants in the choice of the level of wind energy.
  7


Our Market





U.S. wind power capacity grew by 50% to 25.3GW in 2008, the latest year for which industry wide data is available. The average output of one megawatt of wind power is equivalent to the average electricity consumption of about 250 American households. According to the AWEA, wind generated enough electricity in 2008 to power 1.5% (4.5 million households) of total electricity demands in the U.S., up from less than 0.1% in 1999. U.S. Department of Energy studies have concluded that onshore wind resources in the U.S. could generate nearly 37,000,000 gigawatt-hours, more than nine times current total U.S. electricity consumption.
 According to an AWEA survey, small wind turbine sales for U.S. manufacturers increased from $42 million in 2007 to $77 million in 2008, or a 78% increase. This reflects a 30% growth in capacity, or an increase of 17.3MW capacity in small wind turbines. Andy Kruse, co­founder of Southwest Wind Power (“SWWP”) recently stated that the two largest U.S. manufacturers of small wind turbines (SWWP and Bergey Wind Power) experienced 70% and 80% growth in sales in 2007, respectively. Residential installations more than doubled between 2007 and 2008.  Despite the severe economic challenges in 2009, according to the AWEA the small wind industry continued to grow, adding an additional 20 megawatts (MW) of new installed capacity with approximately 10,000 new systems installed, representing a 15% increase over 2008.
 
 As payback periods continue to be reduced, we expect that the market for small wind products will continue to grow, even re-accelerating from the 2009 pace (which was affected by the severe economic recession).  Several developments are contributing to the industry's growth.  We feel that the small wind industry is approaching a tipping point, where increased performance, better incentives, and higher energy costs will combine to make wind-generated energy cheaper than utility energy. If this occurs, small wind turbine systems will become a smart investment for the ordinary rural resident. Additionally, we anticipate that rapid growth will make established companies in this industry attractive acquisition targets for larger companies.
 
 We expect that our typical customer will have one or more acres of property that consistently experiences at least an average wind speed in the range of 9.8 to 11.5 mph, which is known as a Class 2 Wind.  According to AWEA's 2009 report on "Small Wind Global Market Study", 25.2 million homes in the U.S. have an acre or more of property and 35% of those homes have Class 2 Winds or better, generating a potential market of 12 million units in 2010 that AWEA expects to grow to 13.9 million homes by 2020.
 
 The foregoing market and industry data was collected from the 2009 American Wind Energy Association (AWEA) annual report, publicly available on the AWEA website.  We believe that this is the most recent report and public market data available currently.  We did not pay for the report and it was not prepared for our use.  The AWEA allows the data to be used with proper attribution.


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Our Products
 
 The wind turbine systems we acquired and now offer for sale are comprised of our own, proprietary design (that uses both standard third party engineered components and our own internally engineered components integrated into a single system). Leveraging an outsourced manufacturing model, we currently assemble  these wind turbine systems from component parts manufactured by third-party suppliers at our leased facility at 9026 SW Hillman in Wilsonville, Oregon.   We sell the assembled wind turbine systems, the towers on which the turbines are mounted, and related components and accessories.
  We currently assemble and offer for sale two wind turbine systems, a 2.5kW system we have branded as the XZERES 110, and a 10kW system we have branded as the XZERES 442.  Both systems are tower mounted and generate electrical output for use on site where installed and can also be connected to the electrical grid.  When connected to the electrical grid, a configuration referred to as an on-grid application, our wind turbine system is integrated into the site’s existing electrical power connection to the main grid.  This configuration allows a customer to draw electrical power from either the wind turbine system or the main grid or both, depending upon the customer’s need and the wind turbine system’s current output.  In some jurisdictions, power generated by the wind turbine system in excess of the customer’s current needs can be sent back into the main grid and the customer can receive a credit from their utility provider.  Credit is not universally available, however, and specific net-metering rules for local area jurisdictions vary widely.
 In addition, both our 2.5kW system branded as the XZERES 110 and our 10kW system can be further configured to link to a battery system that will store electrical power generated by the wind turbine system in excess of the customer’s current demands.  That stored power can then be drawn from the battery system by the customer when needed.
  We also offer both our wind turbine systems in a configuration suitable for marine applications.  Here the system receives marine-grade protective coatings and components designed to withstand high salinity and high humidity conditions as typically found in coastal environments.
  Our wind power systems are installed on towers, which can range from 45 feet to 140 feet tall, depending on the specific site characteristics.  For our 10kW system, we source towers from third party tower manufacturers.  For our 2.5kW system, we sell both third party towers and towers that we have branded as ours.  All towers we offer, whether 3rd party solutions or our own, are commercially available today.  The towers that we build are customer designed to specification.  Although we have the ability to manufacturer our own towers and may do so from time to time, we have recently made a business decision to outsource tower building to third parties going forward.
 We also offer for sale, but do not manufacture, other products that work with our wind turbine systems and provide value to our customers, including devices to protect our wind turbine systems from lightning strikes and equipment needed to connect our wind turbine systems to the main electrical grid or to battery storage systems.
  In addition to the above products, we hope to someday work collaboratively as a strategic partner with other RE manufacturers, such as SMA America, LLC and OutBack Power, to develop new component solutions to further enhance our overall systems and as we develop new products. We do not currently have any such strategic partnerships in place and there can be no assurance that any RE manufacturer would be receptive to such an arrangement.  At present, our wind turbine systems integrate with standard off-the-shelf equipment needed to connect our systems to the main electrical grid from SMA America, LLC and Outback Power and we resell those products to our customers. Standard off-the-shelf equipment means stock merchandise that is readily available through vendors in the industry.
  In addition, we are currently working on engineering changes to our products that will allow remote access data monitoring of the wind turbines.  Some of our competitors have the ability to remote access and we feel this will allow our customers and us to have an easier time of troubleshooting any problems that may arise with the various systems we sell. We also believe it will help our products to be better competitive in the marketplace.
  9
  Distribution of Products
  Dealers are an important aspect in our sales and distribution strategy.  We expect that most sales of our products will occur through a network of dealers.  Dealers can range from small, 1-2 person operations to larger, regional or national companies.  At present, our dealer network consists of smaller companies only and we have not established agreements with any larger, regional or national dealers.  We are working to establish agreements with dealers already familiar with our products as well as to bring in new dealers.   At present we have signed agreements with a limited number of initial dealers, 40 as of August 31, 2010, and there can be no assurance that we will be successful in establishing a viable dealer network on favorable terms.   We are not dependent upon any one or more particular dealers.
  Dealers are often contractors who provide various construction services for small business and homeowners and have experience with installing renewable energy systems, such as wind and solar.  They provide a vital link to potential end users of renewable energy equipment and alleviate manufacturers from having to provide large field service operations for conducting sales and service.  Thus, our sales and marketing effort is designed to support, educate, and provide training seminars for dealers.
 We employ five dedicated sales representatives who are focused on building our dealer network and helping the current dealers to close specific sales opportunities.  We employ an additional three personnel assigned to building a more detailed and sophisticated website which we plan to use for marketing and sales purposes.
  Competition
  We will compete with a number of established manufacturers, importers, and distributors who sell wind turbine systems and related equipment. These companies enjoy brand recognition which exceeds that of our brand name. We will compete with several manufacturers, importers, and distributors who have significantly greater financial, distribution, advertising, and marketing resources than we do.  We have only recently begun selling our wind turbine systems and, at present, represent an insignificant portion of the total number of small wind turbine systems being sold into the target market.
  Our primary competitors of similarly sized, horizontal access wind turbines that compete in our market and sell 2.5 to 10 kilowatt systems are:
  §
Bergey WindPower (“Bergey”) - The XL.1 (1 kW) is mass-produced in China and is smaller than any of our models. The Excel (10kW) is built in Oklahoma; it is a 25 year old design. Bergey sells to its own network of dealers/installers and directly to consumers.
  §
Southwest Windpower (“SWWP”) - The Whisper 200 (900 W) and the Whisper 500 (3 kW) are inexpensive wind turbines manufactured in the U.S. The new Skystream (1.8 kW) wind turbine began shipping last year. SWWP sells through RE distributors such as Conergy and GroSolar.
  §
Proven Energy, Ltd. – A European (Scotland-based) company that installed its first turbine in 1982.  The company provides four different products (3.2kW, 6kW and two separate 15kW machines).
  Over the past 24 months, new companies have entered the small wind marketplace, many of which are focused on vertical-access system designs.  Most of these newer companies have yet to demonstrate field-tested, proven equipment.
  Developing successful products for the small wind market requires, among other things, industry knowledge and expertise, which we believe provides a significant barrier to entry. In addition, having proven, field-tested equipment is perhaps the most important factor in customer purchase decisions and an even greater barrier to entry.  While numerous small wind providers have emerged more recently, very few meet this requirement of equipment out in the field that has been running for an extended period of time and delivered on the promised energy output. Thus, we believe there are relatively few companies that meet the necessary customer/dealer standards to currently compete in the small wind industry.
  We expect to compete primarily on the basis of quality, technology advantages, ability to timely deliver product, field-proven experience and price (on a per kWh basis). We believe that our success will depend upon our ability to remain competitive in our product areas.
  In addition to direct competition from other manufacturers of small wind turbine systems, we face indirect competition from other sources of energy, including both traditional delivery of electrical power over the grid and other sources of small renewable energy, such as small solar panel systems.  Generally speaking, the strength of one technology over another in a particular instance is a function of the specific application, location, and total cost/benefit characteristics.  Whatever technology solution can provide the best electrical output at the lowest cost in a particular environment will tend to be favored.
  10
  Principal Suppliers
  We have elected to outsource the manufacturing on most of the various system components and then conduct assembly and final test internally at a facility in Oregon.  Our most important supplier is Powin Corporation  because it is the Company’s alternator manufacturer, which is the most expensive component to the system.  There is no written agreement in place with Powin. We purchase alternators from Powin on a purchase order basis.
  Intellectual Property
  We own the rights to three applications filed in the United States for patent protection on key technology innovations and five applications for trademark registrations.  We do not currently hold any patents or registered trademarks. We will also apply for copyright protection in the United States and other jurisdictions where appropriate. We also may elect to avoid filing for patent protection on other aspects of our systems because of difficulty protecting the patent or disclosure of proprietary information that would result from the patent process, which is determined to be better remaining as trade secrets.  There can be no assurance that we will receive any patents in the United States or elsewhere.  Further, even if we receive patents, there can be no assurance that the patents will be enforceable.
  We will seek to obtain confidentiality agreements where necessary from our various suppliers. We will also seek confidentiality agreements with any consultants that we use.
  We intend to assert our rights under trade secret, unfair competition, trademark and copyright laws to protect our intellectual property, including product design, proprietary manufacturing processes and technologies, product research and concepts and recognized trademarks. These rights will be protected through the acquisition of patents and trademark registrations, the maintenance of trade secrets, the development of trade dress, and, where appropriate, litigation against those who are, in our opinion, infringing these rights.
  While there can be no assurance that patents, copyrights, registered trademarks or other measures will protect our proprietary information, subject to our financial, legal and business constraints, we intend to assert our intellectual property rights against infringers.
  We estimate we will spend approximately $75,000 on counsel and filing fees in the next twelve months on intellectual property protection regarding the designs for our residential wind turbine systems and related equipment.
  11
  Regulatory Matters and Government Incentives
  Many state and local governments have implemented a diverse set of initiatives and incentive programs for wind equipment purchases. State incentives can take the form of net metering, rebates, tax credits, and feed in tariffs:
  §
Net metering allows customers to connect renewable generation equipment to their utility power system. The utility takes any excess energy produced and credits it back to the customer on a net basis. The utility in essence banks your energy for free. There are 43 states that have net metering in all or part of the state.
  §
Rebates are cash payments that are usually given to the installer, who must wait until the project is completed and inspected to get paid. The rebate is deducted from the project cost billed to the customer. Rebates can be based on rated power, swept area, blade length, installed cost, or projected energy generation.
  §
Tax credits can be based on project cost or per kW of rated capacity. Some tax credit programs have caps on maximum dollars per project or year. Some must be taken over several years and some are transferable.
  §
Feed in tariffs, or production incentives as they are called in Washington State, are above-market payments for energy generated from RE. These are common in Europe and interest levels are growing in the United States. Washington State is the only state offering production incentives at this time, but several other states have introduced bills to implement production incentives.
  As of June 2010, at least 39 states have tax incentives of some type, such as credits, sales tax exemption, or property tax exemption, productivity incentives such as grants or rebates, or other subsidies to support wind energy development and use. Newer incentive programs such as Oregon's, Wisconsin's and Massachusetts’ are being designed so they favor higher production machines such as our 2.5kW and 10kW systems.  Many states continue to streamline permitting processes and incentive programs.
  In 2009, DOE announced $118 million from The American Recovery and Reinvestment Act for wind energy R&D.  With respect to the FY2010 R&D budget, there are three proposals on the table.  The President’s FY2010 budget includes $75 million for the DOE wind program.  The Senate has passed an energy and water appropriations bill that includes $85 million for the DOE wind program in 2010, and the House of Representatives’ appropriations bill includes $70 million for the same purpose.  The differences between the two bills must now be reconciled by a Conference Committee.  Final passage is expected early this fall.  AWEA seeks to increase the annual funding for wind energy research & development and other programs at the DOE and other Federal agencies to $217 million over the course of the next three to five years.
 
 Under present law, a federal-level investment tax credit (ITC) is available to help consumers purchase small wind turbines for home, farm, or business use. Owners of small wind systems with 100 kilowatts (kW) of capacity or less can receive a credit for 30% of the total installed cost of the system.
 
 The ITC, written into law through the Emergency Economic Stabilization Act of 2008, is available for equipment installed from October 3, 2008 through December 31, 2016. The value of the credit is now uncapped, through the American Recovery and Reinvestment Act of 2009.
 
 The Energy Independence and Security Act of 2007, passed in December 2007, contained benefits for renewable energy systems in general, of which wind power systems would qualify.  Those provisions included Technical Assistance Grants, Renewable Energy Construction Grants, and Express Loans for Renewable Energy and Energy Efficiency (Small Businesses).  Each of those programs could further benefit customers that install a wind power system.  We view such policy initiatives as generally positive for the wind industry and the company, but do not expect that this particular piece of legislation is immediately material to our business prospects.
  12
 
 State Regulations Governing Power Produced
  Each state is responsible for regulating the sale, installation and interconnection of alternative energy within their state. Currently, there is no Federal-level regulation that specifically controls the sale, distribution and installation of small wind turbines beyond general small business regulations. The Public Utility Regulatory Policies Act of 1978 or PURPA, requires utilities to interconnect and purchase energy from small wind systems. Individual utilities are permitted to regulate that process.
  Local Regulations Surrounding Small Wind Turbine Use
  Individuals and small businesses interested in small wind turbine use are subject to local regulations and involve Public utility companies, inspectors, permits, site evaluation for placement, tower height and aesthetic concerns, and restrictions regarding professional versus do-it-yourself installation.  The AWEA offers a Model Zoning Ordinance to help local officials update ordinances governing small wind turbine installations. However, states often have unique subsidies or other programs designed to encourage on-site electricity generation. Existing state laws and local regulations continue to evolve in order to encourage and maintain safe, effective and efficient use of small wind energy systems.
  Environmental Studies and Regulations
  Overall, studies have shown wind energy has a low impact on the environment and does not generate air, or water pollution, global warming pollutants or waste. According to the American Wind Energy Association, although wind turbines have positive impacts, there are a few studies indicating negative impacts on the environment.
  Wind turbines and energy plants are generally known to be quiet, unobtrusive and non-threatening to both humans and wildlife. Recent studies that indicate negative impacts on humans and wildlife include: birds and bats colliding with wind turbines, noticeable “whooshing” or low frequency sounds and shadow flicker. Shadow flicker occurs when the blades of a turbine pass in front of the sun to create a recurring shadow on an object.
  The wind energy industry is partnering with conservation groups and government agencies and conducts ongoing land use and avian studies at wind sites across the country. Pre- and post-construction efforts to protect land and wildlife include wildlife consultants, surveys, and various state, federal land use, fish and wildlife agencies.
  We have not incurred and do not anticipate incurring any expenses associated with environmental laws.
  13
  Research and Development Expenditures
  We did not incur any research and development expenses in the prior two fiscal years.  Since our recent financings, we have incurred significant development expenditures as we pursue our product development and expansion efforts.  Our research and development expense of $171,620 incurred in the fiscal quarter ended May 31, 2010, as well as the anticipated costs over the next twelve months will continue to be largely associated with compensation paid to our newly expanded engineering staff.  We expect these costs to remain significant as we focus on improving our existing products as well as designing and developing new wind turbine systems.  We expect that our research and development expense over the next twelve months will approximate $1.2 million, none of which will be borne directly by our customers.
  Subsidiaries
  We do not currently have any subsidiaries.
  Employees
  Since commencement of active operations during the fiscal quarter ended May 31, 2010, we have added a number of employees to begin executing on our business plan.  As of August 31, 2010, we have 26 full time employees, including 8 technical and engineering personnel, 8 sales and marketing personnel, and the balance in executive, manufacturing or general administration.  Additional individuals have been and may continue to be engaged as outside consultants to provide additional assistance in our operations on an as-needed basis.
  At present, we have three such independent contractors providing services.  On April 7, 2010, we retained the services of TRD Associates, LLC to provide technical assistance, design, consultation, and review services as directed, which include power engineering, electronic design, component engineering, manufacturability, engineering process, documentation, quality systems, software systems design development and testing. The agreement is terminable by written notice to the other party on 30 days’ written notice.  We have agreed to compensate TRD Associates $175 per hour with discounts rates available for projects that take longer than a week.  On August 6th, we retained the services of Michelle Lequini to provide technical writing services for internal system documentation. The agreement is terminable by written notice to the other party on 30 days’ written notice.  We have agreed to compensate Lequini $35 per hour.  On July 29, 2010, we retained the services of Sabriha J. Luevano to provide website design services. The agreement is terminable by written notice to the other party on 30 days’ written notice.  We have agreed to compensate Luevano $15 per hour.
  As we begin to generate revenues, we may further expand our current management team and employee headcount in the future to retain skilled directors, officers, and employees with experience relevant to our business focus.  Specifically, we are actively seeking to hire additional personnel for both sales and for technical and engineering.  On August 25, 2010, we appointed a new CEO with significant industry experience, Frank Greco.


14
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Item1A.   Risk Factors.




Smaller reporting companies are not required to provide the information required by this Item.
  Item 2.   Properties
  We maintain our corporate office at 9026 SW Hillman, Suite 3126, Wilsonville, OR 97070.
  On April 27, 2010, we entered in to a three (3) year, three (3) month lease agreement with BIT Holdings Fifty-Seven-Inc., a Maryland corporation, for the use of approximately 13,558 square feet located at 9025 SW Hillman Court, Bldg. 31, Suites #3126 and 3122 in Wilsonville, Oregon. We use approximately 3,960 square feet as office space and the balance, approximately 9,598 square feet, as shop floor space to conduct final testing of components, product assembly, and shipping and receiving.
  Our lease includes an option to extend for an additional three (3) year term.  Our rent starts at $2,500 per month for suite 3126 and $940 per month for suite 3122.  We presently occupy and pay rent on both suites.  The rent doubles to $5,000 per month and $1,880 per month for the suites, respectively, in month seven and then escalates every six months thereafter until the final six months of the term.  The final monthly rent for the two suites is $5,463 and $2,054, respectively.  We have paid advance rent of $4,000 and a security deposit of $15,838.  We are also responsible for our proportionate share of the CAM and real property taxes attributable to the building.
  The tenant improvement portion of the lease is guaranteed by one of our shareholders, Core Fund, L.P.  Although we are not required to do so, we have agreed to replace this guarantee with a bank letter of credit, but we have not done so as of October 7, 2010.  We expect to replace the guarantee with a letter of credit by the end of the current fiscal year.
  Item 3.   Legal Proceedings
 
 We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.


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PART II





Item5.    Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities





Market Information





Our common stock is currently eligible to be quoted on the Financial Industry Regulatory Authority’s Over the Counter Bulletin Board (“OTCBB”) under the symbol “XWND.”  At present there is a very limited public market for our common stock.  We cannot give any assurance that the shares offered will have a market value, or that they can be resold at the offered price if and when an active secondary market might develop, or that a public market for our securities may be sustained even if developed.
 
 The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.


Fiscal Year Ending February 28, 2010Quarter Ended

High $

Low $February 28, 2010

N/A

N/ANovember 30, 2009

N/A

N/AAugust 31, 2009

N/A

N/AMay 31, 2009

N/A

N/A








Fiscal Year Ending February 28, 2009Quarter Ended

High $

Low $February 28, 2009

N/A

N/ANovember 30, 2008

0.10

0.10August 31, 2008

N/A

N/AMay 31, 2008

0.50

0.50





Penny Stock





The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.




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The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.





In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.





These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.





Outstanding Options, Warrants or Convertible Debt





As of February 28, 2010, we did not have any outstanding options, warrants or convertible debt.





Holders of Our Common Stock





As of August 31, 2010, there were 13,280,255 shares of our common stock issued and outstanding held by 309 stockholders of record. We have not issued any shares of preferred stock.





Dividends





There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends.  The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:





1.
we would not be able to pay our debts as they become due in the usual course of business, or;


2.
our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.





We did not declare any dividends in the fiscal year ended February 28, 2010, and we do not plan to declare any dividends in the foreseeable future.




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Recent Sales of Unregistered Securities
 
 During the three month period ended May 31, 2010, we issued 1,080,000 stock options to employees.  The options were issued pursuant to section 4(2) of the securities act of 1933, as amended.
 We conducted a private placement of common stock and warrants during the fiscal quarter ended May 31, 2010.  We commenced the private offering on or about March 29, 2010 and conducted two closings, on April 28 and May 14, 2010.  We sold a total of 4,010,500 shares of common stock and 1,403,675 warrants to purchase our common stock, exerciseable for three years from the date of issuance at a strike price of $1.25 per share.  We received total gross proceeds of $4,010,500 from this offering from 58 purchasers, each of whom is and a Selling Shareholder in this registration statement. The shares of common stock and warrants were sold pursuant to the exemption from registration provided by Rule 506 of Regulation D, promulgated pursuant to Section 4(2) of the Securities Act of 1933, as amended. The shares and warrants were sold to accredited investors as defined in Regulation D.  No general solicitation or advertising was used in connection with the offering.  All securities sold are “restricted securities” within the meaning of Regulation D.
  We paid commissions and other related fees in the total amount of $398,550 and issued warrants to purchase 373,550 shares of common stock to our placement agent, Jesup & Lamont Securities Corp., in connection with this private placement .  The terms and conditions of the warrants issued to our placement agent are identical to the terms and conditions of the warrants issued to the purchasers in our private placement.
  On March 25, 2010, 3,192,150 common shares were issued to acquire assets with a total cost of $1,276,864. The shares were issued at $.40 per share. The shares were issued pursuant to section 4(2) of the securities act of 1933, as amended.
 On March 23, 2010, we sold 875,000 shares of our restricted common stock in a private placement to Core Fund, L.P. and to our former CEO, William Hagler, at $0.40 per share for a total purchase price of $350,000.  The total purchase price consisted of new investment of $159,260 from Core Fund, the conversion of prior cash advances in the amount of $90,000, plus accrued interest of $740, and new investment of $100,000 from Mr. Hagler. The shares of common stock were sold pursuant to the exemption from registration provided by Rule 506 of Regulation D, promulgated pursuant to Section 4(2) of the Securities Act of 1933, as amended. The shares were sold to persons who represented to us that they were accredited investors as defined in Regulation D.  No general solicitation or advertising was used in connection with the offering.  All securities sold are “restricted securities” within the meaning of Regulation D. None of the shares sold in this unregistered offering are being registered for resale pursuant to this registration statement.
  On March 19, 2010, we issued a total of 200,000 shares of our restricted common stock to three consultants in exchange for their general management support services, including assistance in facilities management, equipment and insurance plan set up as well as integrating recently acquired assets into our operations and otherwise providing general business and administrative assistance at the direction of our board.  We issued 75,000 shares to Blake Goud, 75,000 shares to Hans Powers and 50,000 shares to Eric Richardson.  We issued the shares pursuant to an exemption from registration provided by Rule 506 of Regulation D, promulgated pursuant to Section 4(2) of the Securities Act of 1933, as amended.  Each recipient represented to us that he or she was an accredied investor.  No general solicitation or advertising was used in connection with the issuance.  All securities issued are “restricted securities” within the meaning of Regulation D. We did not pay any commission to any person in connection with any of these issuances. None of the shares sold in this unregistered offering are being registered for resale pursuant to this registration statement.
  On March 1, 2010, we agreed to pay our attorneys 320,000 shares of our restricted common stock for $0.01 per share in satisfaction of past due professional fees totaling $82,381.  The shares were issued pursuant to an exemption from registration provided by Rule 506 of Regulation D, promulgated pursuant to Section 4(2) of the Securities Act of 1933, as amended.  Each recipient represented to us that he or she was an accredied investor.  No general solicitation or advertising was used in connection with the issuance.  All securities issued are “restricted securities” within the meaning of Regulation D. We did not pay any commission to any person in connection with this issuance.
  During the year ended February 28, 2010 an additional 30,545 shares of common stock were issued for cash totaling $345.  There was also a correction to the shares outstanding of 79 additional shares.
 During the period ended February 28, 2009, the Company issued 4,501,899 shares of our common stock at a price of $0.01 per share. The Company conducted the offering as a private placement, exempt from the registration requirements of the Securities Act of 1933 under Section 4(2) and/or Rule 506 of Regulation D there under.
 In October 2008, the Company amended its Articles of Incorporation to increase the authorized common stock from 10,000,000 to 100,000,000 shares, and changed the par value of the common stock from no par to $0.001 par value.   The Company also reverse split the outstanding shares of common stock at a ratio of 7.7 to 1, leaving a total of 150,079 shares of common stock issued and outstanding following the split. All share and per share data have been adjusted to reflect the effect of the stock split for all periods presented.


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Securities Authorized for Issuance under Equity Compensation Plans
 
 As of February 28, 2010, we did not have any equity compensation plans.  Subsequently, we have adopted a stock option plan that provides for both qualified and non-qualified stock options equal to a maximum of fifteen percent (15%) of our total issued and outstanding shares of common stock, which is equal to 1,992,039 total shares available to be optioned as of August 31, 2010.


Item7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations





Forward-Looking Statements





Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.




Critical Accounting Policies
  In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that the following accounting policies fit this definition.
  Warranty Reserve – We currently reserve 2% on all new sales to cover potential future warranty claims.  There can be no assurance that such provision for estimated product warranty expenses will be sufficient to cover our warranty exposure in the future. We cannot ensure that our efforts to reduce our risk through warranty disclaimers will effectively limit our liability. Any significant incurrence of warranty expense in excess of estimates could have a material adverse effect on our business, including our operating results, financial condition and cash flow.  In addition, if our warranty reserve is understated, it would affect (overstate) net income.


19
 Table of Contents


Revenue Recognition - The Company recognizes revenue when products are shipped from the factory and collection is reasonably assured.  Xzeres does not currently sell wind turbines to end users, or install the wind turbines. All wind turbines and associated products are sold to pre-qualified dealers, and the dealer and/or end user assume responsibility for the installation. Dealer agreements require the dealer to sell one unit the first year and three units per year, thereafter. Dealers receive dealer pricing, a discount to the suggested retail price of the product. To date, the Company has not offered any price concessions to its dealers, and has no post shipment obligations other than the warranty it provides.




Intellectual Property - Intellectual property consists of product designs with an infinite life.  The Company annually evaluates the fair value of the intellectual property to determine whether events and circumstances warrant a revision to the fair value of these assets.  If the intellectual property requires an impairment adjustment, it would affect the balance sheet and statement of operations as assets would be overstated and income would be either overstated or understated depending on a negative or positive adjustment.




Fair Value - Stock-based compensation is accounted for at fair value in accordance with SFAS No. 123 and 123 (R) (ASC 718).  The Company’s financial instruments consist of cash and cash equivalents, loans to a related party, accrued expenses and credit card payables. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.  If the fair values of our assets are overstated, it would affect the balance sheet and statement of operations as assets would be overstated and income would be overstated.




Results of Operations for the Years Ended February 28, 2010 and February 28, 2009
  Income. We recorded $-0- in revenues from continuing operations for the year ended February 28, 2010, compared with $-0- in revenues for the year ended February 28, 2009.
  Operating Expenses. Operating expenses from continuing operations were $69,369 for the year ended February 28, 2010, compared to $209,274 for the year ended February 28, 2009. The Company liquidated its assets and ceased operations as of October 3, 2008.  The largest component of expense items for each of the last two fiscal years was professional fees incurred to meet our reporting obligations as a public company and in connection with an earlier failed attempt to acquire ARE.
  Discontinued Operations. We reported income from discontinued operations of $2,229 for the year ended February 28, 2010, compared to a loss of $237,495 for the year ended February 28, 2009.
  Net Loss.  Including the recovery of income tax mostly related to the previous discontinued business operations, we recorded a comprehensive loss of $68,378 for the year ended February 28, 2010, compared to $487,194 for the year ended February 28, 2009.




20
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Liquidity and Capital Resources




At February 28, 2010, we had $195,990 in current assets and $428,318 in current liabilities, resulting in a working capital deficit of $232,328.  At February 28, 2009, we had $1,978 in current assets and $166,233 in current liabilities, resulting in a working capital deficit of $164,255.


Cash Flows from Operating Activities




Net cash provided by operating activities was $105,878 for the year ended February 28, 2010, $176,485 of which was attributable to an increase in accrued expenses in the form of professional expenses, comparable to net cash used in operating activities of $48,181 for the same period ended 2009.




Cash Flows Used in Discontinued Operations




Net cash provided by discontinued operations amounted to $2,229 for the year ended February 28, 2010, compared to net cash used in discontinued operations of $469,137 for the year ended February 28, 2009.  The cash provided in the fiscal year ended February 28, 2009 came from the liquidation of the Company’s assets.




Cash Flows from Financing Activities




Cash provided by financing activities amounted to $85,905 for the year ended February 28, 2010, $85,600 of which was shareholder loans, compared to $50,159 for the year ended February 28, 2009, $45,019 of which was from the sale of common stock and $5,140 of which was from shareholder loans.




Going Concern




The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
  In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
  The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


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Item8.   Financial Statements and Supplementary Data





Index to Financial Statements Required by Article 8 of Regulation S-X:




F-1
Report of Independent Registered Public Accounting FirmF-2
Balance Sheets as of February 28, 2010 and 2009;F-3
Statements of Operations for the years ended February 28, 2010 and 2009, and the period from October 3, 2008 (inception) through February 28, 2010;F-4
Statement of Stockholders’ Deficit as of February 28, 2010;F-5
Statements of Cash Flows for the years ended February 28, 2010 and 2009, and the period from October 3, 2008 (inception) through February 28, 2010;F-6
Notes to Financial Statements
  22
 
 SilbersteinUngar, PLLC CPAs and Business Advisors
 Phone (248) 203-0080
 Fax (248) 281-0940
 30600 Telegraph Road, Suite 2175
 Bingham Farms, MI 48025-4586
 www.sucpas.com
   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board of Directors
 Cascade Wind Corp., Inc.
 Portland, Oregon
  We have audited the accompanying balance sheet of Cascade Wind Corp., Inc. as of February 28, 2010 and 2009, and the related statements of operations, stockholders’ deficit, and cash flows for the periods then ended and the period from October 3, 2008 (inception as development stage) to February 28, 2010.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cascade Wind Corp., Inc., as of February 28, 2010 and 2009 and the results of its operations and cash flows for the periods then ended and for the period from October 3, 2008 (inception as development stage) to February 28, 2010, in conformity with accounting principles generally accepted in the United States.
  The accompanying financial statements have been prepared assuming that Cascade Wind Corp., Inc. will continue as a going concern.  As discussed in Note 2 to the financial statements, the Company has incurred losses from operations, has negative working capital, and is in need of additional capital to grow its operations so that it can become profitable.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans with regard to these matters are described in Note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  /s/ Silberstein Ungar, PLLC
 Silberstein Ungar, PLLC
  Bingham Farms, Michigan
 March 23, 2010
 F-1
 CASCADEWIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 BALANCE SHEETS
 AS OF FEBRUARY 28, 2010 AND 2009
  ASSETS
2010

2009Current AssetsCash and cash equivalents
$
195,990

$
1,978TOTAL ASSETS
$
195,990

$
1,978LIABILITIES AND STOCKHOLDERS’ DEFICITLIABILITIESCurrent LiabilitiesAccrued expenses
$
337,578

$
161,093Loans from shareholder

90,740


5,140TOTAL LIABILITIES

428,318


166,233STOCKHOLDERS’ DEFICITPreferred stock, par $0.01, 5,000,000 shares authorized, no shares issued and outstanding

0


0Common stock, par $0.001, 100,000,000 shares authorized,

4,682,602 shares issued and outstanding (4,651,978 shares issued and outstanding – 2009)

4,683


4,652Additional paid in capital

40,641


40,367Deficit accumulated during the development stage

(277,652)


(209,274)Total Stockholders’ Deficit

(232,328)


(164,255)TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
$
195,990

$
1,978
  The accompanying notes are an integral part of the financial statements.
 F-2
 CASCADEWIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 STATEMENTS OF OPERATIONS
 FOR THE YEARS ENDED FEBRUARY 28, 2010 AND 2009
 FOR THE PERIOD FROM OCTOBER 3, 2008 (INCEPTION OF DEVELOPMENT STAGE) TO FEBRUARY 28, 2010
  Year ended

February 28, 2010

Year ended

February 28, 2009

Inception of Development Stage through

February 28, 2010GROSS REVENUES
$
0

$
0

$
0OPERATING EXPENSESProfessional fees

43,691


164,423


208,114Consulting fees

0


44,750


44,750General and administrative

25,678


101


25,779TOTAL OPERATING EXPENSES

69,369


209,274


278,643LOSS FROM OPERATIONS

(69,369)


(209,274)


(278,643)OTHER EXPENSE

(1,238)


0


(1,238)LOSS FROM CONTINUING OPERATIONS

(70,607)


(209,274)


(279,881)INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF INCOME TAXES

2,229


(237,495)


2,229OTHER COMPREHENSIVE LOSS, NET OF TAXES

0


(40,425)


0COMPREHENSIVE LOSS
$
(68,378)

$
(487,194)

$
(277,652)WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

4,652,643


2,529,933NET LOSS PER SHARE:CONTINUING OPERATIONS
$
(0.02)

$
(0.08)DISCONTINUED OPERATIONS
$
0.00

$
(0.09)COMPREHENSIVE LOSS PER SHARE
$
(0.01)

$
(0.19)
  The accompanying notes are an integral part of the financial statements.
 F-3
 CASCADEWIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 STATEMENT OF STOCKHOLDERS’ DEFICIT (RESTATED)
 AS OF FEBRUARY 28, 2010
  Common Stock

Additional

Paid in

Deficit Accumulated During the Development

Retained

ComprehensiveShares

Amount

Capital

Stage

Earnings

Gain (Loss)

TotalBalance, October 3, 2008, Inception of Development

Stage

150,079

$
150

$
1,458

$
-

$
237,495

$
0

$
239,103Common stock issued for cash at $0.01 per share

4,501,899


4,502


40,517


-


-


-


45,019Reduction in paid in capital for excess liabilities from

discontinued operations

-


-


(1,608)


-


-


-


(1,608)Net loss for the year ended February 28, 2009

-


-


-


(209,274)


(237,495)


-


(446,769)Balance, February 28, 2009

4,651,978


4,652


40,367


(209,274)


0


0


(164,255)Correction of shares outstanding

79


-


-


-


-


-


-Issuance of stock for cash

30,545


31


274


-


-


-


305Net loss for the year ended February 28, 2010

-


-


-


(68,378)


-


-


(68,378)Balance, February 28, 2010

4,682,602

$
4,683

$
40,641

$
(277,652)

$
0

$
0

$
(232,328)
  The accompanying notes are an integral part of the financial statements.
 F-4
 CASCADEWIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 STATEMENTS OF CASH FLOWS
 FOR THE YEARS ENDED FEBRUARY 28, 2010 AND 2009
 FOR THE PERIOD FROM OCTOBER 3, 2008 (INCEPTION OF DEVELOPMENT STAGE) TO FEBRUARY 28, 2010
  Year ended

February 28, 2010

Year ended

February 28, 2009

Inception of Development

Stage through

February 28, 2010Cash Flows from Operating Activities:Net Loss for the period
$
(70,607)

$
(209,274)

$
(279,881)Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:Changes in Assets and LiabilitiesIncrease in accrued expenses

176,485


161,093


337,578Net Cash Provided By (Used in) Operating Activities- Continuing Operations

105,878


(48,181)


57,697Net Cash Provided by Operating Activities - Discontinued Operations

2,229


469,137


2,229Net Cash Provided By Operating Activities

108,107


420,956


59,926Cash Flows from Financing Activities:Sale of common stock

305


45,019


45,324Loan from shareholder

85,600


5,140


90,790Net Cash Provided by Financing Activities - Continuing Operations

85,905


50,159


136,064Net Cash Provided by Financing Activities - Discontinued Operations

0


(2,532,024)


0Net Cash Provided by (Used In) Financing Activities

85,905


(2,481,865)


136,064Net Increase (Decrease) in Cash and Cash Equivalents

194,012


(2,060,909)


195,990Cash and Cash Equivalents – Beginning

1,978


2,062,887


0Cash and Cash Equivalents – Ending
$
195,990

$
1,978

$
195,990Supplemental Cash Flow Information:Cash paid for interest
$
0

$
314

$
0Cash paid for income taxes
$
0

$
(7,394)

$
0
  The accompanying notes are an integral part of the financial statements.
  F-5
 CASCADE WIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 NOTES TO THE FINANCIAL STATEMENTS
 FEBRUARY 28, 2010
  NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Nature of Business
 Xzeres Wind Corp. (“Xzeres” and the “Company”), a development stage company located in Portland, Oregon, was originally incorporated in the state of New Mexico in January of 1984.  The Company, then known as Intermountain Refining Co., Inc., was engaged in the natural gas and asphalt businesses until 2007, at which time it liquidated its assets and operations and distributed the net proceeds to its shareholders after paying its debts.  On October 2, 2008, the Company re-domiciled from New Mexico to Nevada in anticipation of pursuing the wind turbine business. The Company commenced operations in the wind turbine business in the fiscal quarter ended May 31, 2010.
  The Company is in the business of designing, developing, and marketing small wind turbine systems and related equipment for electrical power generation, specifically for use in residential, small business, rural electric utility systems, other rural locations, and other infrastructure applications.  The Company employs proprietary technology, including power electronics, alternator design, and blade design to increase performance, reliability, and sound suppression.  The Company also works with manufacturers of inverters, lightning protection equipment and towers to integrate their equipment into the Company’s products.
  Use of Estimates
 The preparation of financial statements in conformity with generally accepted accounting principles requires management 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 period.  Actual results could differ from those estimates.
  Accounting Basis
 The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting).  The Company has adopted a February 28 fiscal year end.
  Recent Accounting Pronouncements
 In May 2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent Events”.  Companies are now required to disclose the date through which subsequent events have been evaluated by management. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 (ASC 855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) during the quarter ended September 30, 2009 did not have a significant effect on the Company’s financial statements as of that date or for the quarter or year-to-date period then ended.
  In June 2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” or ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented.
  F-6
 CASCADE WIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 NOTES TO THE FINANCIAL STATEMENTS
 FEBRUARY 28, 2010
  NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Recent Accounting Pronouncements (continued)
 As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. The Company implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.
  With the exception of the pronouncements noted above, no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.
  Basis of Presentation
 The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
  Advertising Costs
 The Company’s policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $0 during the periods ended February 28, 2010 and 2009.
  Revenue Recognition
 The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
  Development Stage Company
 The Company has been reclassified as a development stage enterprise as of October 3, 2008. The accompanying financial statements have been prepared in accordance with the Statement of Financial Accounting Standards No. 7 ”Accounting and Reporting by Development-Stage Enterprises” (ASC 915-10). A development-stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from.
  The Company was formerly in the natural gas and asphalt business, which was liquidated prior to re-domiciling in Nevada on October 2, 2008. On March 25, 2010, the Company entered into an Asset Purchase Agreement to acquire assets in consideration for issuing the Sellers a total of 3,192,150 shares of our common stock. The Company is now in the business of designing, developing, marketing, and selling premium wind turbine systems and related equipment for electrical power generation, specifically for use in residential, small business, rural electric utility systems and other rural locations such as farms and wineries.
  Cash and Cash Equivalents
 Cascade Wind Corp. considers all highly liquid investments with maturities of three months or less to be cash equivalents.  At February 28, 2010 and 2009 the Company had $195,990 and $1,978 of cash, respectively.
  Stock-Based Compensation
 Stock-based compensation is accounted for at fair value in accordance with SFAS No. 123 and 123 (R) (ASC 718).  To date, the Company has not adopted a stock option plan and has not granted any stock options.
  As of February 28, 2010, the Company has not issued any stock-based payments to its employees.
  F-7
 CASCADE WIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 NOTES TO THE FINANCIAL STATEMENTS
 FEBRUARY 28, 2010
 
 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Fair Value of Financial Instruments
 The Company’s financial instruments consist of cash and cash equivalents, loans to a related party, accrued expenses and credit card payables. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
  Dividends
 The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown.
  Income Taxes
 Income taxes are accounted for under the assets and liability method.  Deferred  tax  assets  and  liabilities are recognized for  the  estimated future tax consequences attributable  to differences between the financial statement carrying amounts of existing  assets  and  liabilities and their respective  tax  bases and operating loss and tax credit  carry  forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
  It is the Company’s policy to classify interest and penalties on income taxes as interest expense and penalties expense. As of February 28, 2010, there have been no interest or penalties incurred on income taxes.
  Basic Income (Loss) Per Share
 Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of February 28, 2010.
  NOTE 2 - GOING CONCERN
  The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
  In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
  The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
  F-8
 CASCADE WIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 NOTES TO THE FINANCIAL STATEMENTS
 FEBRUARY 28, 2010
  NOTE 3 - SIGNIFICANT EVENTS
  On October 2, 2008, the Company entered into an Agreement and Plan of Merger to re-domicile the Company from New Mexico to Nevada.  The re-domicile was effectuated by merging (the “Merger”) Intermountain Refining Co., Inc., a New Mexico Corporation, with and into A.R.E. Wind Corp., a Nevada corporation formed in preparation for the re-domicile. The Merger was effective on October 2, 2008 upon filing Articles of Merger with the Nevada Secretary of State.  The Company’s shareholders approved the Merger at the annual shareholder meeting held on October 2, 2008.
  Pursuant to the Agreement and Plan of Merger, each share of common stock of the Company was converted into one fully paid and non-assessable share of A.R.E. Wind Corp.  As such, each stock certificate representing issued and outstanding shares of common stock of Intermountain Refining Co., Inc. continued to represent the same number and class of shares of A.R.E. Wind common stock. The officers and directors of the Company became the officers and directors of A.R.E. Wind Corp. The Company also adopted the Articles of Incorporation and Bylaws of A.R.E. Wind Corp. as our governing documents.
  The Company amended the Articles of Incorporation and Bylaws to allow one director instead of requiring two directors to serve at any given time. The Merger has been accounted for as a recapitalization of the Company accordingly the historical financial statements of the Company are presented as those of the merged entity.
 
 On October 3, 2008, the Company entered into a Plan of Liquidation and Escrow Agreement (the “Plan”) with an officer and director, Mr. William Hagler, for the purpose of effecting the liquidation of all of its assets to shareholders of the Company.  The Company’s board of directors and shareholders approved the Plan pursuant to Nevada law.  Under the Plan, Mr. Hagler served as Escrow Agent and was authorized to sell and otherwise liquidate all of our assets and properties and to pay or make adequate provision for the payment of all of our debts, liabilities and obligations (the “Asset Sale”). The Company distributed the net proceeds from the Asset Sale to the Company’s shareholders of record as of December 11, 2008.
  As a result of the Asset Sale, the Company is no longer engaged in its prior business, and has undertaken the business of manufacturing and selling wind energy generators.
  On December 1, 2008, the Company entered into an Advisory Agreement (“Agreement”) with Steve Shum, its Chief Executive Officer.  Mr. Shum was retained to provide financial advisory services to the Company for a term from November 17, 2008 to December 31, 2008.  Mr. Shum was paid a fixed fee in the amount of $10,250 for services provided under the Agreement.  In providing services under the Agreement, Mr. Shum was acting as an independent contract, not an employee of the Company.
 
 On December 1, 2008, the Company also entered into an Advisory Agreement (“Agreement”) with David N. Baker.  Mr. Baker was retained to provide financial advisory services to the Company for a term from November 17, 2008 to December 31, 2008.  Mr. Baker was paid a fixed fee in the amount of $34,500 for services provided under the Agreement.
  F-9
 CASCADE WIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 NOTES TO THE FINANCIAL STATEMENTS
 FEBRUARY 28, 2010
 
 NOTE 3 - SIGNIFICANT EVENTS (CONTINUED)
 
 On December 1, 2008, the Board of Directors of the Company approved an amendment to the Company's articles of incorporation to change the name of the Company from "A.R.E. Wind Corp." to "Cascade Wind Corp., Inc." The name change amendment was approved by the board of directors and by a majority of the shareholders.  The name change amendment was filed with the Nevada Secretary of State on December 2, 2008.
  NOTE 4 – ACCRUED EXPENSES
  Accrued expenses consisted of the following as of February 28, 2010 and 2009:
  2010

2009Accrued legal fees
$
181,967

$
154,881Accrued accounting fees

1,000


6,137Accrued liability to former shareholders

153,178


0Accrued transfer agent fees

195


75Accrued interest

1,238


0Total Accrued Expenses
$
337,578

$
161,093
 
 NOTE 5 – LOAN FROM SHAREHOLDER
  On October 14, 2008, the Company received a loan from a shareholder for $5,140.  The loan is non-interest bearing and due on demand.
  During the year ended February 28, 2010 the Company received additional loans from shareholders in the amount of $85,600. These loans bear 8% interest and are due on demand. As of February 28, 2010 interest totaling $1,238 has been accrued from these loans.
  As of February 28, 2010, a principal balance of $90,740 is due to shareholders on these loans.
  NOTE 6 – CAPITAL STOCK
  In October 2008, the Company amended its Articles of Incorporation to increase the authorized common stock from 10,000,000 to 100,000,000 shares, and changed the par value of the common stock from no par to $0.001 par value.   The Company also reverse split the outstanding shares of common stock at a ratio of 7.7 to 1, leaving a total of 150,079 shares of common stock issued and outstanding following the split. All share and per share data have been adjusted to reflect the effect of the stock split for all periods presented.
  During the period ended February 28, 2009, the Company issued 4,501,899 shares of our common stock at a price of $0.01 per share. The Company conducted the offering as a private placement, exempt from the registration requirements of the Securities Act of 1933 under Section 4(2) and/or Rule 506 of Regulation D there under.
  During the year ended February 28, 2010 an additional 30,545 shares of common stock were issued for cash totaling $345.  There was also a correction to the shares outstanding of 79 additional shares.
  Total common shares issued and outstanding at February 28, 2010 are 4,682,602.
  F-10
 CASCADE WIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 NOTES TO THE FINANCIAL STATEMENTS
 FEBRUARY 28, 2010
  NOTE 7 – INCOME TAXES
  For the period ended February 28, 2010, Cascade Wind Corp. has incurred net losses from continuing operations and, therefore, has no tax liability.  The net deferred tax asset generated by the loss carry-forward has been fully reserved.  The cumulative net operating loss carry-forward is approximately $278,000 at February 28, 2010, and will expire beginning in the year 2029. The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
  The provision for Federal income tax consists of the following at February 28:
  2010


2009Refundable Federal income tax attributable to:Current Operations
$
23,120


$
71,400Less: valuation allowance

(23,120
)


(71,400
)Net provision for Federal income taxes
$
0


$
0
  The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows at February 28:
  2010


2009Deferred tax asset attributable to:Net operating loss carryover
$
94,520


$
71,400Less: valuation allowance

(94,520
)


(71,400
)Net deferred tax asset
$
0


$
0
  Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $278,000 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
  NOTE 8 – DISCONTINUED OPERATIONS
  On October 3, 2008, the Company entered into a Plan of Liquidation and Escrow Agreement (the “Plan”) with an officer and director, Mr. William Hagler, for the purpose of effecting the liquidation of all of its assets to shareholders of the Company.  The Company’s board of directors and shareholders approved the Plan pursuant to Nevada law.  Under the Plan, Mr. Hagler served as Escrow Agent and was authorized to sell and otherwise liquidate all of our assets and properties and to pay or make adequate provision for the payment of all of our debts, liabilities and obligations (the “Asset Sale”). The Company distributed the net proceeds from the Asset Sale to the Company’s shareholders of record as of December 11, 2008.
  As a result of the Asset Sale, the Company is no longer engaged in its prior business, but will undertake the business of manufacturing and selling wind energy generators.
  F-11
 CASCADE WIND CORP., INC.
 (A DEVELOPMENT STAGE COMPANY)
 NOTES TO THE FINANCIAL STATEMENTS
 FEBRUARY 28, 2010
  NOTE 9 – COMMITMENTS
  The Company neither owns nor leases any real or personal property. An officer has provided office services without charge.  There is no obligation for the officer to continue this arrangement.  Such costs are immaterial to the financial statements and accordingly are not reflected herein.  The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
  NOTE 10 – SUBSEQUENT EVENTS
  Management has evaluated subsequent events through the date on which the financial statements were submitted to the Securities and Exchange Commission and has determined it does not have any material subsequent events to disclose other than what is disclosed below.
  On March 25, 2010, we entered into an Asset Purchase Agreement whereby we acquired substantially all of the assets (the “Assets”) formerly owned by Abundant Renewable Energy, LLC, a privately held Oregon limited liability company (“Abundant”), from the secured creditors of Abundant (the “Sellers”) in consideration for issuing the Sellers a total of 3,192,152 shares (the “Shares”) of our common stock, par value $0.001 per share (the “Asset Purchase”).  The Sellers had been secured creditors of Abundant and had obtained the Assets via a Collateral Surrender Agreement dated February 8, 2010.  We did not assume any liabilities in connection with this acquisition.
  The Assets we acquired are generally described as follows:
 1.
Equipment and tangible assets necessary to assemble products formerly designed, assembled and sold by Abundant.
 2.
All rights to the products formerly designed, assembled and sold by Abundant, namely:
 a.
ARE110-48V (2.5 kW) 48V Battery-Charging Wind Generator;
 b.
ARE110-HV (2.5 kW) Grid-Connect Wind Generator;
 c.
ARE442-HV (10 kW) Grid-Connect Wind Generator;
 d.
Lightning Protection Systems for the ARE110 and ARE442 wind Generators;
 e.
Voltage Clamp – connects generator to an inverter for connection to the grid;
 f.
04" Tilt-up, Guyed Pipe Tower Kit (with or without Pipe) for  ARE110 - 43', 64’, 85’, 106’ or 127’; and
 g.
05" Tilt-up, Guyed Pipe Tower Kit (with Pipe or without Pipe) for  various turbines 43', 64’, 85’, 106’ or 127’.
 3.
All intellectual property formerly owned by Abundant, including websites, domain names, patent applications, and product designs.
  A complete listing of the Assets is contained in the schedules to the Asset Purchase Agreement.   The assets we acquired can be used in our business of designing, developing, and marketing small wind turbine systems and related equipment for electrical power generation, specifically for use in residential, small business, rural electric utility systems, other rural locations, and other infrastructure applications globally.
  On March 23, 2010, we sold 875,000 shares of our restricted common stock in a private placement to Core Fund, L.P. and to our former CEO, William Hagler, at $0.40 per share for a total purchase price of $350,000.  The total purchase price consisted of new investment of $159,260and the conversion of prior cash advances in the amount of $90,000, plus accrued interest, from Core Fund, L.P. and new investment of $100,000 from Mr. Hagler.
  On March 19, 2010, we issued a total of 200,000 shares of our restricted common stock to three consultants in exchange for their services in integrating the Assets into our operations and otherwise providing general assistance at the direction of our board.
  On March 1, 2010, we agreed to pay our attorneys 320,000 shares of our restricted common stock for $0.01 per share in satisfaction of past due professional fees totaling $82,381.
  NOTE 11 – RESTATEMENT OF STOCKHOLDERS’ DEFICIT
  This financial statement has been restated to retrospectively correct the number of shares outstanding  at the beginning of the prior period. The number of shares changed as a result of a reverse stock split which occurred during this fiscal year.  This change did not affect the balance sheet, net loss or per share data.
  The Statement of Stockholders’ Deficit was also corrected to begin at October 3, 2008, the inception date of the development stage. This change did not affect the balance sheet, net loss or per share data.
  F-12
  Item9.   Changes In and Disagreements with Accountants on Accounting and Financial Disclosure





No events occurred requiring disclosure under Item 307 and 308 of Regulation S-K during the fiscal year ending February 28, 2010.





Item9A(T).  Controls and Procedures





Evaluation of Disclosure Controls and Procedures




As required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “1934 Act”), as of February 28, 2010, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act). This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), who concluded, that because of the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of February 28, 2010.




Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities 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 in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.




Management’s Report on Internal Control over Financial Reporting




Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:




§
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;


§
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and


§
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.




Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.




Mr. Frank Greco, our Chief Executive Officer, and Mr. Steven Shum, our Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting.   Based on this evaluation, our management has concluded that our internal control over financial reporting was not effective as of February 28, 2010 as the result of a material weakness.   The material weakness results from significant deficiencies in internal control that collectively constitute a material weakness.




A significant deficiency is a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.   The Company had the following significant deficiencies at February 28, 2010:




§
As of February 28, 2010, we had only one employee, our CEO and CFO, to oversee bank reconciliations, posting payables, and so forth, so there are no checks and balances on internal controls.




23
 Table of Contents





Remediation of Material Weakness
 
 We are unable to remedy the material weakness in our internal controls until we are able to hire additional employees, so that we may then introduce checks and balances on internal controls.


Item9B.   Other Information





The Asset Purchase Agreement





On March 25, 2010, we entered into an Asset Purchase Agreement whereby we acquired some assets (the “Assets”) necessary for us to commence our planned operations in the wind energy business from the sellers (the “Sellers”) in consideration for issuing the Sellers a total of 3,192,152 shares (the “Shares”) of our common stock, par value $0.001 per share (the “Asset Purchase”).  A complete listing of the Assets is contained in the schedules to the Asset Purchase Agreement, which is filed as Exhibit 10.1.
 
 The foregoing description of the Asset Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Asset Purchase Agreement, which is filed as Exhibit 10.1.
 
 Our issuance of the Shares to the Sellers was not registered under the Securities Act of 1933, as amended (the “Securities Act”), but were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and/or Regulation D promulgated under that section. These provisions exempt transactions by an issuer not involving any public offering. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. Certificates representing these shares contain a legend stating the same.
 
 Prior to the Asset Purchase, there were no material relationships between us and the Sellers, or any of their respective affiliates, directors or officers, or any associates of their respective officers or directors, except as follows:  Steven Shum is a Managing Principal of Core Fund Management, L.P., which is the Fund Manager and General Partner of one of the Sellers, Core Fund, L.P.  Mr. Shum is also our CFO, corporate secretary and director.  David Baker, our majority shareholder and the other member of our board of directors effective as of March 26, 2010, is also a non-managing member of Core Fund Management, L.P.  Core Fund, L.P. will receive 2,750,614 of the Shares issued in connection with the Asset Purchase, 569,232 of which Core Fund, L.P. is obligated to deliver to a non-affiliate third party.  David Baker will receive 227,693 of the Shares issued in connection with the Asset Purchase.


24
 Table of Contents








Unregistered Sales of Equity Securities





On March 23, 2010, we sold 875,000 shares of our restricted common stock in a private placement to Core Fund, L.P. and to our former CEO, William Hagler, at $0.40 per share for a total purchase price of $350,000.  The total purchase price consisted of new investment of $165,000 and the conversion of prior cash advances in the amount of $85,000, plus accrued interest, from Core Fund, L.P. and new investment of $100,000 from Mr. Hagler.





On March 19, 2010, we issued a total of 200,000 shares of our restricted common stock to three consultants in exchange for their services in integrating the Assets into our operations and otherwise providing general assistance at the direction of our board.





On March 1, 2010, we agreed to pay our attorneys 320,000 shares of our restricted common stock for $0.01 per share in satisfaction of past due professional fees totaling $82,381.





On February 25, 2010, we sold 7,700 shares of our restricted common stock in a private placement to our then sole officer and director, Steven Shum, at $0.01 per share for a total purchase price of $77.00 and 22,845 shares to our then majority shareholder, David Baker, at $0.01 per share for a total purchase price of $228.45.





As with our issuance of shares to the Sellers in connection with the Asset Purchase, none of our issuances of the shares to the consultants, Mr. Hagler, Core Fund, L.P. and our attorneys were registered under the Securities Act of 1933, as amended (the “Securities Act”), but were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and/or Regulation D promulgated under that section. These provisions exempt transactions by an issuer not involving any public offering. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. Certificates representing these shares contain a legend stating the same.




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Election of Directors; Appointment of Principal Officers





On March 26, 2010, our largest shareholder, David N. Baker, joined our board of directors as its chairman.  He was appointed by our other director, Mr. Shum, by written consent pursuant to our bylaws.





On March 22, 2010, we entered into a written agreement with S. Clayton Wood to become our Chief Operating Officer and President for a period of one year, contingent upon our ability to conduct a successful private capital raise.  We can waive the contingency.  Mr. Wood’s compensation package entitles him to a base salary of $150,000 per year and discretionary bonuses as may be awarded by our Board.  In addition, Mr. Wood’s compensation package includes options to purchase up to 460,000 shares of our common stock at $0.85 per share.  Mr. Wood’s options will vest pro-rata over each of the four calendar years following the grant date of March 25, 2010.  Prior to entering into this agreement, there was no financial or familial relationship with us or with any of our officers or directors.





Should the contingency in his written employment agreement be satisfied, as our COO and President Mr. Wood will be responsible for leading all operational aspects of the business including product development, supply chain, sales, marketing, support and administration.  Previously, from February 2006 through October 2007, Mr. Wood was the Executive Director for WebJunction.org an online learning community and unit of OCLC, where he was responsible for executive leadership and execution of the business plan migrating from grant funding to product revenue self-sustaining operation.  From February 2005 through October 2006, Mr. Wood was Vice-President, Operations and Chief Operating Officer for Naverus, Inc. a venture-backed startup providing navigation information products to the commercial aviation industry where he was responsible for leading all operations of the business including design engineering, performance engineering, flight operations, marketing, sales, systems, and information technology.  Mr. Wood holds a license as a Professional Engineer (inactive) from the New Mexico Board of Professional Engineers and Land Surveyors, first issued in 1985.  Mr. Wood earned a Bachelor of Science degree in Mechanical Engineering from Texas A&M University, awarded in 1980, a Master of Science degree in Mechanical Engineering from Texas A&M University, awarded in 1982, and a Master of Business Administration degree from the University of Washington, awarded in 1998.




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PART III





Item10.  Directors, Executive Officers and Corporate Governance





Our executive officers and directors and their respective ages as of August 31, 2010, are as follows:





Name
Age
Position(s) and Office(s) HeldFrank Greco
57
Chief Executive Officer, DirectorS. Clayton Wood
51
President, Chief Operating OfficerSteven Shum
40
Chief Financial Officer, and DirectorDavid Baker
42
Director





Set forth below is a brief description of the background and business experience of our current executive officers and directors.





Frank Greco joined us as our Chief Executive Officer and a member of our Board of Directors on August 25, 2010.  Mr. Greco will be responsible for all aspects of XZERES Wind Corp.’s business and his initial focus will be on domestic and global sales growth, product portfolio expansion and optimization of products and channels. We first hired Mr. Greco July 1, 2010, to serve as our executive vice president of business development.  Previously, from April 2004 to March 2010, Mr. Greco was Chief Executive Officer and a Director of Southwest Windpower Inc., a manufacturer of small wind turbines competitive with our smaller product, 2.5kW wind turbine system.  As CEO of Southwest Windpower, Mr. Greco oversaw all aspects of the business, including operations, material planning, marketing and sales, plant engineering and human resources.  It is Mr. Greco’s general industry experience and his experience while serving as CEO of Southwest Windpower, Inc., including his participation its launch of two new product platforms, its establishment of European operations and a joint venture in China, and its establishment of domestic and international patents and trademarks, that led us to conclude that Mr. Greco should be our CEO and a director.  Mr. Greco holds bachelor’s degrees in Business Administration & Behavioral Science, awarded by the University of Illinois in 1984, and in Plant Engineering, awarded by St. Joseph’s College in 1988.
 S. Clayton Wood has been our President and Chief Operating Officer since April 12, 2010.  He is responsible for all operational aspects of our business including product development, supply chain, sales, marketing, support and administration. Previously, from February 2006 through October 2007, Mr. Wood was the Executive Director for WebJunction.org an online learning community and unit of OCLC, where he was responsible for executive leadership and execution of the business plan migrating from grant funding to product revenue self-sustaining operation.  From February 2005 through October 2006, Mr. Wood was Vice-President, Operations and Chief Operating Officer for Naverus, Inc. a venture-backed startup providing navigation information products to the commercial aviation industry where he was responsible for leading all operations of the business including design engineering, performance engineering, flight operations, marketing, sales, systems, and information technology.  Mr. Wood holds a license as a Professional Engineer (inactive) from the New Mexico Board of Professional Engineers and Land Surveyors, first issued in 1985.  Mr. Wood earned a Bachelor of Science degree in Mechanical Engineering from Texas A&M University, awarded in 1980, a Master of Science degree in Mechanical Engineering from Texas A&M University, awarded in 1982, and a Master of Business Administration degree from the University of Washington, awarded in 1998.


27
 Table of Contents
 S. Clayton Wood has been our President and Chief Operating Officer since April 12, 2010.  He is responsible for all operational aspects of our business including product development, supply chain, sales, marketing, support and administration. Previously, from February 2006 through October 2007, Mr. Wood was the Executive Director for WebJunction.org an online learning community and unit of OCLC, where he was responsible for executive leadership and execution of the business plan migrating from grant funding to product revenue self-sustaining operation.  From February 2005 through October 2006, Mr. Wood was Vice-President, Operations and Chief Operating Officer for Naverus, Inc. a venture-backed startup providing navigation information products to the commercial aviation industry where he was responsible for leading all operations of the business including design engineering, performance engineering, flight operations, marketing, sales, systems, and information technology.  Mr. Wood holds a license as a Professional Engineer (inactive) from the New Mexico Board of Professional Engineers and Land Surveyors, first issued in 1985.  Mr. Wood earned a Bachelor of Science degree in Mechanical Engineering from Texas A&M University, awarded in 1980, a Master of Science degree in Mechanical Engineering from Texas A&M University, awarded in 1982, and a Master of Business Administration degree from the University of Washington, awarded in 1998.
 David N. Baker joined our Board of Directors as its Chairman on March 26, 2010 and is responsible for working with our Board and management on various strategic initiatives.  Mr. Baker has extensive experience in financing start-up companies.  He has led, as an investment principal, originating, structuring and investing in reverse merger, self registration and other non-traditional or alternative public transactions for companies in the asset recovery, consumer products, solar integration and technology, gaming, broadcast media, e-commerce, information services, video content, mobile hardware, video game, Internet media, information technology, automotive and biotechnology sectors.  In addition, his career has included positions as principal and owner in two hedge funds, other investment management capacities, technology and healthcare merchant banking, proprietary trading and securities brokerage.
  Since 2007, Mr. Baker has also been employed as the Managing Member of Cascade Summit, LLC, a private advisory firm focused upon advising small and micro-capitalization public and private companies regarding capital strategy, business strategy and restructurings, with an emphasis on alternative going public transactions.  Mr. Baker is also the CEO of Coin Mercantile, Inc., a private company engaged in the retail and wholesale global trade of precious metal modern world coins, which he co-founded in 2009.  Mr. Baker is also a non-managing principal of Core Fund Management, L.P., which is the general partner of Core Fund, L.P. a special situations, non-correlated, hedge fund that focuses on making investments in early stage, micro and small capitalization companies, across all sectors. Mr. Baker founded Core Fund, L.P. and Core Fund Management, L.P. in 2003 and was active in its management until 2007, when he stepped aside in favor of Mr. Steven Shum.  Mr. Baker earned a B.A. in 1989 from the University of Colorado and received a J.D. in 1992 from Golden Gate University, with a focus on securities.
  There was no particular or specific experience, qualification, attribute or skill that led us to the conclusion that Mr. Baker should serve as a member of our board of directors.
 Steven Shum is our CFO, corporate secretary and a member of our Board of Directors. Mr. Shum first joined us October 21, 2008.  From October 2008 through March 26, 2010, Mr. Shum was our sole director, at which time Mr. David Baker joined our board.  From October 21, 2008, through April 12, 2010, Mr. Shum was our sole officer, at which time he resigned as our president in favor of Mr. S. Clayton Wood.
  Since 2004 Mr. Shum has been a Managing Principal of Core Fund Management, L.P. and the Fund Manager of Core Fund, L.P.  Mr. Shum's tenure includes 15 years in the financial services industry where he has an extensive background in equity research, macroeconomics, and management.  Prior to joining Core Fund, he spent four years as founder and Executive Vice President of Revere Data, which created a patented equity research application.  In addition to Revere Data, from 1999 to 2003, Mr. Shum was the senior investment analyst and co-portfolio manager with DNB Capital Management. Mr. Shum earned a BS in both Finance and General Management from Portland State University, awarded in 1992.
  There was no particular or specific experience, qualification, attribute or skill that led us to the conclusion that Mr. Shum should serve as a member of our board of directors.
  28





Directors
 
 Our bylaws authorize no less than one (1) director.  We currently have three Directors.


Family Relationships





There are no family relationships between or among the directors, executive officers or persons nominated or chosen by the Company to become directors or executive officers.





Involvement in Certain Legal Proceedings
  To the best of our knowledge, during the past 10 years, none of the following occurred with respect to our present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.


Audit Committee





We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.




Compensation Committee
  We do not have a separately-designated standing compensation committee.  The entire Board of Directors performs the functions of a compensation committee.  During the fiscal year ended February 28, 2010, our sole director during that period, Mr. Shum, participated in all deliberations concerning executive officer compensation.  Mr. Baker joined our board on March 26, 2010, and has participated in all deliberations concerning executive officer compensation since that date.
  Term of Office
  Our Directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws.  Our officers are appointed by our board of directors and hold office until removed by the board.
  Significant Employees
  Our business is dependent upon the performance of certain key employees, notably our CEO and director, Frank Greco, our President and COO, S. Clayton Wood, our CFO and director, Steven Shum, and upon our director and consultant, David Baker.  We have no significant employees other than those mentioned above.




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 Table of Contents





Section 16(a) Beneficial Ownership Reporting Compliance





Our officers, directors and shareholders owning greater than ten percent of our shares are not required to comply with Section 16(a) of the Securities Exchange Act of 1934 because we do not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934.





Code of Ethics





As of February 28, 2010, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.





Item11.  Executive Compensation





Summary Compensation Table





Compensation Discussion and Analysis
 
 On August 25, 2010, Frank Greco became our Chief Executive Officer pursuant to a written employment agreement dated August 25, 2010.  As our President and Chief Executive Officer, Mr. Greco is responsible for all aspects of XZERES Wind Corp.’s business and his initial focus will be on domestic and global sales growth, product portfolio expansion and optimization of products and channels.
 
 Our written employment agreement with Frank Greco provides for an initial term of approximately four years and further provides for a compensation package that includes a base salary at an initial annual rate of Two Hundred Thousand Dollars ($200,000), payable bi-weekly, plus increases and performance bonuses to be awarded in the event the Company hits certain milestones as stated in the written agreement.  We have also granted Mr. Greco a qualified option to purchase a total of 320,000 shares of our common stock at a strike price of $1.25.  This option vests at a rate of 25% per year, starting on the first anniversary of the grant.  We have also granted Mr. Greco a non-qualified option to purchase an additional 655,000 shares of our common stock at a strike price of $1.25 per share.  The non-qualified option as to 55,000 shares vests at a rate of 25% per year, starting on the first anniversary of the grant.  The non-qualified option as to the remaining 600,000 shares vests at a rate of 150,000 per year at the end of each of the next four fiscal years, starting with February 29, 2012, but only in the event the Company achieves certain performance milestones as stated in the written Stock Option Agreement. Also on August 25, 2010, we granted Mr. Greco a second qualified option to purchase 20,000 shares of our common stock at a strike price of $1.25 per share, which option vests immediately.
 
 Mr. Greco is also entitled to other ancillary employment benefits such as vacation time and health insurance as stated in his written employment agreement.  We have also agreed to make a one-time contribution to Mr. Greco’s relocation, personal living and personal travel expenses in the amount of Ten Thousand ($10,000) Dollars payable in six (6) equal monthly installments over a six (6) month period commencing on October 1, 2010.
 
 On March 22, 2010, we entered into a written employment agreement with S. Clayton Wood to become our Chief Operating Officer and President, with a commencement date for his employment to occur on the first of (i) the initial closing of our private placement, or (ii) a date prior to the initial closing of our private placement as determined by our Board by written notice to Mr. Wood.  On April 12, 2010, and before the initial closing of our private placement, our Board chose to provide written notice to Mr. Wood and install him as our President and Chief Operating Officer with responsibility for all operational aspects of our business including product development, supply chain, sales, marketing, support and administration.
 
 Mr. Wood’s compensation package includes a base salary at an initial annual rate of One Hundred Fifty Thousand Dollars ($150,000), payable bi-weekly, plus any discretionary bonuses to be awarded by our Board annually, relocation expenses not to exceed Ten Thousand Dollars ($10,000), health insurance for him and his spouse and paid vacation time of two (2) weeks for each twelve (12) month period of employment. We also granted Mr. Wood options to purchase up to 460,000 shares of our common stock at $0.85 per share.  Mr. Wood’s options will vest pro-rata over each of the four calendar years following the grant date of March 25, 2010.
 
 30
 
 Summary Compensation Table
 
 The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered to us.





SUMMARY COMPENSATION TABLEName and

principal position
Year
Salary

($)
Bonus

($)
Stock Awards

($)
Option

Awards

($)
Non-Equity

Incentive Plan

Compensation

($)
Nonqualified

Deferred

Compensation

Earnings ($)
All Other

Compensation

($)
Total

($)Frank Greco, CEO and Director1
2010

2009
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0S. Clayton Wood, President, COO
2010

2009
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0Steven Shum, CFO and Director
2010

2009
0

0
0

0
0

0
0

0
0

0
0

0
0

10,250
0

10,250David Baker, Chairman2
2010

2009
0

0
0

0
0

0
0

0
0

0
0

0
0

34,500
0

34,500William N. Hagler, former CEO
2010

2009
0

$101,164
0

0
0

0
0

0
0

0
0

0
0

$3,035 (3)
0

$104,199Rick L. Hurt, former Secretary and Treasurer
2010

2009
$0

$54,889
0

0
0

0
0

0
0

0
0

0
0

$1,647 (3)
0

$56,536
  (1)
Mr. Greco joined our Board of Directors on August 25, 2010.(2)
Mr. Baker joined our Board of Directors as its Chairman on March 26, 2010.
 (3)
Consists of SIMPLE IRA employer matching contributions amounting to the lesser of employee elective deferrals or 3% of salary.





Narrative Disclosure to the Summary Compensation Table
 
 We did not pay any amounts in compensation to our officers and directors in the fiscal year ended February 28, 2010. In December 2008, we paid Mr. Shum and Mr. Baker one-time consulting fees of $10,250 and $34,500, respectively, for their efforts in connection with winding down our prior operations and in preparation for our change of business.
  Our employees, including officers, may receive such bonuses and salary increases as the Board of Directors, in its sole discretion, may award from time to time.




31
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  Outstanding Equity Awards At Fiscal Year-end Table
  The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer outstanding as of the end of our last completed fiscal year.
  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-ENDOPTION AWARDS
STOCK AWARDSName
Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable
Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable
Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)
Option

Exercise

Price

($)
Option

Expiration

Date
Number

of

Shares

or Shares

of

Stock That

Have

Not

Vested

(#)
Market

Value

of

Shares

or

Shares

of

Stock

That

Have

Not

Vested

($)
Equity

Incentive

Plan

Awards:

Number

of

Unearned

Shares,

Shares or

Other

Rights

That Have

Not

Vested

(#)
Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Shares or

Other

Rights

That

Have Not

Vested

(#)Frank Greco
0
0
0
0
0
0
0
0
0S. Clayton Wood
0
0
0
0
0
0
0
0
0Steven Shum
0
0
0
0
0
0
0
0
0
  Stock Option Grants
  On March, 25, 2010, we granted Steven Shum, our current CFO, corporate secretary and member of our Board of Directors, options that will allow him to purchase up to 200,000 shares of our common stock at an exercise price of $0.85 per share.  The options are fully vested.
  On March 22, 2010, we executed an employment agreement with S. Clayton Wood which includes options to purchase up to 460,000 shares of our common stock at $0.85 per share.  Mr. Wood’s options will vest pro-rata over each of the four calendar years following the grant date of March 25, 2010.
  On July 15, 2010, we entered into a written employment agreement with David N. Baker, chairman of our board of directors, which includes options to purchase up to 200,000 shares of our common stock.  The option to purchase 100,000 shares is fully vested and is exercisable at $1.10 per share.  The option to purchase the remaining 100,000 shares vests one-third per year over each of the next three years and is exercisable at $1.00 per share.  All of the options granted to Mr. Baker will expire if not exercised within five years.
  On August 25, 2010, we executed written a written stock option agreement that granted Mr. Greco a qualified option to purchase a total of 320,000 shares of our common stock at a strike price of $1.25.  This option vests at a rate of 25% per year, starting on the first anniversary of the grant.  We have also granted Mr. Greco a non-qualified option to purchase an additional 655,000 shares of our common stock at a strike price of $1.25 per share.  The non-qualified option as to 55,000 shares vests at a rate of 25% per year, starting on the first anniversary of the grant.  The non-qualified option as to the remaining 600,000 shares vests at a rate of 150,000 per year at the end of each of the next four fiscal years, starting with February 29, 2012, but only in the event the Company achieves certain performance milestones as stated in the written Stock Option Agreement.  Also on August 25, 2010, we granted Mr. Greco a second qualified option to purchase 20,000 shares of our common stock at a strike price of $1.25 per share, which option vests immediately.
  With the exception of the foregoing, we have not granted any stock options to the executive officers or directors since our inception.
  32




Compensation of Directors Table
  The table below summarizes all compensation paid to our directors for our last completed fiscal year.
  DIRECTOR COMPENSATIONName
Fees Earned or

Paid in

Cash

($)
Stock Awards

($)
Option Awards

($)
Non-Equity

Incentive

Plan

Compensation

($)
Non-Qualified

Deferred

Compensation

Earnings

($)
All

Other

Compensation

($)
Total

($)Frank Greco
0
0
0
0
0
0
0Steven Shum
0
0
0
0
0
0
0David Baker
0
0
0
0
0
0
0
  Narrative Disclosure to the Director Compensation Table
  Our directors do not currently receive any compensation from the Company for their service as members of the Board of Directors of the Company.  However, in December 2008, we paid Mr. Shum and Mr. Baker one-time consulting fees of $10,250 and $34,500, respectively, for their efforts in connection with winding down our prior operations and in preparation for our change of business.
  On July 15, 2010, we entered into a written employment agreement with David N. Baker.  Mr. Baker is the chairman of our board of directors.
  At present, we pay Mr. Baker the sum of $12,000 per month .  Per the terms of our written agreement, that payment will be increased to $15,000 per month effective January 1, 2011.  Mr. Baker is also eligible for any performance bonus that our board may, in its discretion, determine to award him.  We also granted Mr. Baker options to purchase up to 200,000 shares of our common stock.  The option to purchase 100,000 shares is fully vested and is exercisable at $1.10 per share.  The option to purchase the remaining 100,000 shares vests one-third per year over each of the next three years and is exercisable at $1.00 per share.  All of the options granted to Mr. Baker will expire if not exercised within five years.


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Item12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters





The following table sets forth, as of August 31 , 2010, the beneficial ownership of our common stock by each executive officer and director, by each person known by us to beneficially own more than 5% of the our common stock and by the executive officers and directors as a group. Except as otherwise indicated, all shares are owned directly and the percentage shown is based on 13,280,255 shares of common stock issued and outstanding on August 31 , 2010.
  Title of class
Name and addressof beneficial owner
Amount of

beneficialownership1
Percent

of classCommon
David N. Baker4

PO Box 16282201

Sioux Falls, SD 57186
3,486,187
25.5%Common
Steven Shum 2,3

9025 SW Hillman, Suite 3126

Wilsonville, OR 97070
3,395,888
25.19%Common
S. Clayton Wood

9025 SW Hillman, Suite 3126

Wilsonville, OR 97070
0
0.00%Common
Frank Greco5

9025 SW Hillman, Suite 3126

Wilsonville, OR 97070
20,000
0.15%Common
Total all executive officers and directors
6,902,075 Shares
50.83%Common
5% ShareholdersCore Fund, L.P.2

1500 SW 1st Ave. Suite 910

Portland, OR 97201
2,691,382
20.27%
  1.
As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
 2.
Includes the 2,691,382 shares held by Core Fund, L.P.  Mr. Steven Shum is the manager of Core Fund, L.P. and, in that capacity, is the sole beneficial owner of the shares.  Mr. David Baker is a passive non-managing member and principal of Core Fund Management, L.P., the general partner and Fund Manager to Core Fund, L.P.
 3.
On March 25, 2010, as compensation for services rendered, we awarded Mr. Shum fully vested options to purchase up to 200,000 shares of our common stock, all of which are fully vested and, therefore, may be exercised over a period of 60 days.
 4.
On July 15, 2010, we entered into a written employment agreement with David N. Baker, chairman of our board of directors, which includes options to purchase up to 200,000 shares of our common stock.  The option to purchase 100,000 shares is fully vested and, therefore, may be exercised immediately.
 5.
On August 25, 2010, we entered into agreements with Frank Greco, CEO and member of our board of directors, which include options to purchase up to 995,000 shares of our common stock, 20,000 of which may be exercised over a period of 60 days.




Securities Authorized for Issuance Under Equity Compensation Plans
  We have adopted a stock option plan that provides for both qualified and non-qualified stock options equal to a maximum of fifteen percent (15%) of our total issued and outstanding shares of common stock, which is equal to 1,992,039 total shares available to be optioned as of August 31, 2010.




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Item13.   Certain Relationships and Related Transactions, and Director Independence





Except as disclosed herein, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, Shares carrying more than 5% of the voting rights attached to all of our outstanding Shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us.




We and certain members of senior management have entered into employment agreements and option agreements. The terms and conditions of these agreements are more fully described in the section of this annual report titled “Executive Compensation” above.
  On March 25, 2010, we acquired certain assets formerly owned by Abundant Renewable Energy, LLC, a privately held Oregon limited liability company (“ARE”), from ARE’s secured creditors (“Sellers”) in exchange for 3,192,152 shares of our common stock, par value $0.001 per share.  The assets acquired included intellectual property and other rights related to wind turbine systems formerly manufactured and sold by ARE.  The Sellers had been secured creditors of ARE and obtained the assets via a Collateral Surrender Agreement dated February 8, 2010.  One of the Sellers was Core Fund, L.P., which received 2,750,614 of the Shares issued in connection with the Asset Purchase, 569,232 of which Core Fund, L.P. subsequently delivered to a non-affiliate third party.  Mr. Shum is the Managing Principal of Core Fund Management, L.P. and the Fund Manager of Core Fund, L.P.  David Baker, our majority shareholder and the other member of our board of directors effective as of March 26, 2010, is also a non-managing member of Core Fund Management, L.P.  David Baker received 227,693 of the Shares issued in connection with the Asset Purchase.
 
 On March 23, 2010, we sold 875,000 shares of our restricted common stock in a private placement to Core Fund, L.P. and to our former CEO, William Hagler, at $0.40 per share for a total purchase price of $350,000.  The total purchase price consisted of new investment of $165,000 and the conversion of prior cash advances in the amount of $85,000, plus accrued interest, from Core Fund, L.P. and new investment of $100,000 from Mr. Hagler.
  On March 19, 2010, we issued a total of 200,000 shares of our restricted common stock to three consultants in exchange for their general management support services, including assistance in facilities management, equipment and insurance plan set up as well as integrating recently acquired assets into our operations and otherwise providing general business and administrative assistance at the direction of our board.  We issued 75,000 shares to Blake Goud, 75,000 shares to Hans Powers and 50,000 shares to Eric Richardson.
  On March 1, 2010, we agreed to pay our attorneys 320,000 shares of our restricted common stock for $0.01 per share in satisfaction of past due professional fees totaling $82,381.
  On February 25, 2010, we sold 7,700 shares of our restricted common stock in a private placement to our then sole officer and director, Steven Shum, at $0.01 per share for a total purchase price of $77.00 and 22,845 shares to our then majority shareholder, David Baker, at $0.01 per share for a total purchase price of $228.45.





Item14.   Principal Accounting Fees and Services





Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial statements for the years ended:





Financial Statements for the

Year Ended February 28
Audit Services
Audit Related Fees
Tax Fees
Other Fees2010
$8,250
-
-
-2009
$4,000
-
-
-





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PART IV





Item15.   Exhibits, Financial Statements Schedules





Exhibit Number
Description3.1
First Amended and Restated Articles of Incorporation (5)3.2
Amended and Restated By-laws (5)3.3
Certificate of Amendment filed April 6, 2010 (5)3.4
Certificate of Amendment filed May 7, 2010 (5)10.1
Asset Purchase Agreement(1)10.2
Stock Option Plan(1)10.3
Employment Agreement-S. Clayton Wood(1)10.4
Stock Option Grant- S. Clayton Wood(1)10.5
Stock Option Grant- Steve Shum(1)10.6
Lease Agreement(2)10.7
Third Amended and Restated Stock Option Plan(3)10.8
Employment Agreement – David Baker (5)10.9
Sample Dealer Agreement (6)10.10
Employment Agreement – Frank Greco(4)10.11
Stock Option Agreement – Frank Greco(4)10.12
Incentive Stock Option Agreement – Frank Greco(4)10.14
Independent Contractor Agreement-TRD Associates, LLC10.15
Independent Contractor Agreement-Sabrina Luevano10.16
Independent Contractor Agreement-Michelle Lequin
 31.1
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
Certification 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 (1) Incorporated by reference to Annual Report on Form 10K filed on March 26, 2010
 (2) Incorporated by reference to Current Report on Form 8K filed on May 3, 2010
 (3) Incorporated by reference to Current Report on Form 8K filed on July 12, 2010
 (4) Incorporated by reference to Current Report on Form 8K filed August 30, 2010
 (5) Incorporated by reference to Registration Statement on Form S-1 filed July 19, 2010
 (6) Incorporated by reference to Registration Statement on Form S-1/A filed September 7, 2010




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SIGNATURES





In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





Xzeres Wind Corp.




By:
/s/ Frank GrecoFrank Greco

Chief Executive Officer, Principal Executive Officerand DirectorFebruary 18, 2011




By:
/s/ Steven ShumSteven Shum

Chief Financial Officer, Principal Financial Officer,

Principal Accounting Officer and DirectorFebruary 18, 2011


In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:




By:
/s/ Frank GrecoFrank Greco

DirectorFebruary 18, 2011




By:
/s/ Steven ShumSteven Shum

DirectorFebruary 18, 2011




By:
/s/ David BakerDavid Baker

DirectorFebruary 18, 2011