UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 10-QSB



xQUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period endedMarch 31, 2006



[   ]         TRANSITION REPORT UNDER TO SECTION 13 OR

15(d) OF THE EXCHANGE ACT



Commission file number333-118632



XSINVENTORY

(Exact name of small business issuer as specified in its charter)



|Nevada                                                         | 71-0934772                      
|-------------------------------------------------------------- | --------------------------------
|(State or other jurisdiction of incorporation or organization) | (Employer Identification Number)



2950 E. Flamingo Rd., Suite E-6D

Las Vegas, Nevada 89121

(Address of principal executive offices)



(702) 866-5840

(Issuers telephone number)



Copies of Communications to:

Stoecklein Law Group

402 West Broadway, Suite 400

San Diego, CA 92101

(619) 595-4882

Fax (619) 595-4883



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.



YesXNo ____



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



YesXNo



The number of shares of Common Stock, $0.001 par value, outstanding on May 22, 2006, was2,543,139shares.



Transitional Small Business Disclosure Format (check one):



Yes
NoX



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PART I  FINANCIAL INFORMATION



Item 1. Financial Statements.



XSInventory

(a Development Stage Company)

Balance Sheets

|                                     |                                               |                                                |                   |       | (unaudited)
|------------------------------------ | --------------------------------------------- | ---------------------------------------------- | ----------------- | ----- | -----------
|                                     |                                               |                                                |                   |       | March 31,  
|                                     |                                               |                                                |                   |       | 2006       
|Assets                               |                                               |                                                |                  
|                                     |                                               |                                                |                   |       |            
|Current assets:                      |                                               |                                               
|                                     | Cash and cash equivalents                     | $                                              | 1,478            
|                                     | Inventory                                     |                                                | 403              
|                                     |                                               | Total current assets                           |                   | 1,881
|                                     |                                               |                                                |                   |       |            
|                                     |                                               |                                                | Total assets      | $     | 1,881      
|                                     |                                               |                                                |                   |       |            
|Liabilities and Stockholders' Equity |                                               |                                               
|                                     |                                               |                                                |                   |       |            
|Current liabilities                  |                                               | 3,365                                         
|                                     |                                               |                                                | Total liabilities |       | 3,365      
|                                     |                                               |                                                |                   |       |            
|Stockholders' Equity:                |                                               |                                               
|                                     | Preferred stock, $0.001 par value, 10,000,000 |                                                |                  
|                                     |                                               | shares authorized, no shares issued and        |                   |      
|                                     |                                               | outstanding                                    |                   |      
|                                     | Common stock, $0.001 par value, 100,000,000   |                                                |                  
|                                     |                                               | shares authorized, 2,543,139 shares issued and |                   |      
|                                     |                                               | outstanding                                    |                   | 2,543
|                                     | Additional paid-in capital                    |                                                | 114,114          
|                                     | Deficit accumulated during development stage  |                                                | (118,141)        
|                                     |                                               |                                                |                   |       |            
|                                     |                                               |                                                |                   |       |            
|                                     |                                               |                                                |                   |       | $          





The Accompanying Notes are an Integral Part of These Financial Statement



1

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XSInventory

(a Development Stage Company)

Statements of Operations



|                                                    | (unaudited)   | (unaudited)   |                   
|--------------------------------------------------- | ------------- | ------------- | ------------------
|                                                    | For the Three | For the Three | September 27, 2002
|                                                    | Months Ended  | Months Ended  | (Inception) to    
|                                                    | March 31,     | March 31,     | March 31,         
|                                                    | 2006          | 2005          | 2006              
|                                                    |               |               |                   
|                                                    |               |               |                   
|Revenue                                             | $             | -             | $                 
|Cost of goods sold                                  |               | -             |                   
|                                                    |               | -             |                   
|                                                    |               |               |                   
|Expenses:                                           |               |               |                   
|General and administrative expenses                 |               | 913           |                   
|Professional fees                                   |               | 1,000         |                   
|Salaries and wages                                  |               | 6,300         |                   
|Total expenses                                      |               | 8,213         |                   
|                                                    |               |               |                   
|                                                    |               |               |                   
|Net (loss)                                          | $             | (8,213)       | $                 
|                                                    |               |               |                   
|Weighted average number of                          |               |               |                   
|common shares outstanding - basic and fully diluted |               | 2,426,841     |                   
|                                                    |               |               |                   
|Net (loss) per share - basic and fully diluted      | $             | (0.00)        | $                 



The Accompanying Notes are an Integral Part of These Financial Statement



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XSInventory

(a Development Stage Company)

Statements of Cash Flows

(unaudited)

|                                              | For the Three                      | For the Three | September 27, 2002
|--------------------------------------------- | ---------------------------------- | ------------- | ------------------
|                                              | Months Ended                       | Months Ended  | (Inception) to    
|                                              | March 31,                          | March 31,     | March 31,         
|                                              | 2006                               | 2005          | 2006              
|Cash flows from operating activities          |                                    |               |                   
|Net (loss)                                    | $                                  | (8,213)       | $                 
|Adjustments to reconcile changes in operating |                                    |               |                   
|                                              | assets and liabilities             |               |                   
|(Increase) decrease in inventory              |                                    | -             |                   
|                                              | (Increase) in prepaid expenses     |               | -                 
|(Decrease) Increase in liabilities            |                                    | 1,000         |                   
|Net cash (used) by operating activities       |                                    | (7,213)       |                   
|                                              |                                    |               |                   
|Cash flows from financing activities          |                                    |               |                   
|Sale of common stock                          |                                    | 8,198         |                   
|                                              | (Decrease) Increase in cash defict |               | -                 
|Net cash provided by financing activities     |                                    | 8,198         |                   
|                                              |                                    |               |                   
|Net (decrease) increase in cash               |                                    | 985           |                   
|Cash - beginning                              |                                    | 493           |                   
|Cash - ending                                 | $                                  | 1,478         | $                 
|                                              |                                    |               |                   
|Supplemental disclosures:                     |                                    |               |                   
|                                              | Interest paid                      | $             | -                 
|                                              | Income taxes paid                  | $             | -                 



The Accompanying Notes are an Integral Part of These Financial Statement



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XSINVENTORY

And Subsidiary

(a Development Stage Company)

Notes







Note 1 - Basis of Presentation



The consolidated interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein.  It is suggested that these consolidated interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2005 and notes thereto included in the Company's 10-KSB annual report.  The Company follows the same accounting policies in the preparation of interim reports.



Results of operations for the interim periods are not indicative of annual results



Note 2 - Revenue recognition



XSInventory sells merchandise via the internet to the general public. The Company recognizes revenue as each item is sold. Costs are recognized upon completion of each sales transaction. For the three months ended March 31, 2006 and 2005, the Company recognized $0 and $3,129 in revenue, respectively.



Note 3  Stockholders equity



The Company is authorized to issue 10,000,000 shares of it $0.001 par value preferred stock and 100,000,000 shares of its $0.001 par value common stock.



In February 2003, the Company sold to an officer of the Company 350,000 shares of its $0.001 par value common stock at a price of $0.02 per share for a total amount raised of $7,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In March 2003, the Company sold to an officer of the Company 200,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $10,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In July 2003, the Company sold to an officer of the Company 10,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $500. The shares



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XSINVENTORY

And Subsidiary

(a Development Stage Company)

Notes





were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In August 2003, the Company sold to an officer of the Company 100,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $5,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In September 2003, the Company sold to an officer of the Company 20,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $1,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In October 2003, the Company sold to an officer of the Company 60,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $3,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In November 2003, the Company sold to an officer of the Company 60,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $3,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In December 2003, the Company sold to an officer of the Company 10,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $500. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In January 2004, the Company sold to an officer of the Company 130,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $6,500. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In March 2004, the Company sold to an officer of the Company 30,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $1,500. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In April 2004, the Company sold to an officer of the Company 80,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $4,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



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XSINVENTORY

And Subsidiary

(a Development Stage Company)

Notes





In May 2004, the Company sold to an officer of the Company 50,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $2,500. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In June 2004, the Company sold to an officer of the Company 420,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $21,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In October 2004, the Company sold to an officer of the Company 240,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $12,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In November 2004, the Company sold to an officer of the Company 60,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $3,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In December 2004, the Company sold to an officer of the Company 200,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $10,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In June 2005, the Company sold to an officer of the Company 249,192 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $12,459. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In July 2005, the Company sold to an officer of the Company 110,000 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $5,500. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



In February 2006, the Company sold to an officer of the Company 111,031 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $5,552. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.





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XSINVENTORY

And Subsidiary

(a Development Stage Company)

Notes





In March 2006, the Company sold to an officer of the Company 52,916 shares of its $0.001 par value common stock at a price of $0.05 per share for a total amount raised of $2,646. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration transactions by an issuer not involving any public offering.



There have been no other issuances of common stock.



No other shares have been issued.



Note 4  Going concern



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, has not yet generated revenues from operations. Since its inception, the Company has been engaged substantially in financing activities and developing its product line, setting up its e-commerce website, and incurring substantial costs and expenses. As a result, the Company incurred accumulated net losses from September 27, 2002, (inception) through the period ended March 31, 2006 and 2005 of $118,141 and $83,896, respectively. In addition, the Companys development activities since inception have been financially sustained through equity financing.



The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues.  The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.



Note 5  Warrants and options



There are no warrants or options outstanding to acquire any additional shares of common stock.







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FORWARD-LOOKING STATEMENTS



This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements other than statements of historical fact are forward-looking statements for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.



Forward-looking statements may include the words may, could, estimate, intend, continue, believe, expect or anticipate or other similar words.  These forward-looking statements present our estimates and assumptions only as of the date of this report.  Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.



Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any or our forward-looking statements.  Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.  The factors impacting these risks and uncertainties include, but are not limited to:



| |  | increased competitive pressures from existing competitors and new entrants;
| | - | ---------------------------------------------------------------------------

| |  | increases in interest rates or our cost of borrowing or a default under any material debt agreements;
| | - | -----------------------------------------------------------------------------------------------------

| |  | deterioration in general or regional economic conditions;
| | - | ---------------------------------------------------------

| |  | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | loss of customers or sales weakness;
| | - | ------------------------------------

| |  | inability to achieve future sales levels or other operating results;
| | - | --------------------------------------------------------------------

| |  | the unavailability of funds for capital expenditures and/or general working capital; and
| | - | ----------------------------------------------------------------------------------------

| |  | operational inefficiencies in distribution or other systems.
| | - | ------------------------------------------------------------



For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see Factors That May Affect Our Results of Operations in this document and in our Annual Report on Form 10-KSB for the year ended December 31, 2005.







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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.



The following discussion and analysis should be read in conjunction with our financial statements and the notes thereto contained elsewhere in this filing.



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS



With the exception of historical matters, the matters discussed herein are forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning anticipated trends in revenues and net income, projections concerning operations and available cash flow. Our actual results could differ materially from the results discussed in such forward-looking statements. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto appearing elsewhere herein.



Background Overview



We are a development stage company incorporated in the State of Nevada in September of 2002. We were formed to engage in the business of marketing, selling and distributing products through the online trading website of companies such as eBay, (www.eBay.com.). In February 2003, we formed Creative Excess, Inc., as a wholly owned subsidiary, to become an online liquidator of products through eBay. Although the affiliation with eBay as an online trading platform allows us immediate online access to an online auction facility, we are highly dependent upon eBay to provide a platform for the sale of our products. As of the date of this prospectus, we have generated all of our revenue by selling goods using eBay. Our affiliation with eBay is a standard user agreement which eBay makes available to members of the general public.



Since our incorporation in September 2002 through March 31, 2006, we have generated $55,069 in revenues with a net loss of $118,141. Our recent activities include organization of the Company, our setting up of our account with eBay, and the commencement of buying inventory and re-selling the inventory through eBay. The XSInventory business plan is to establish a number of quality product outlets where we can purchase quality products and excess inventory and sell the same inventory at a marked up price through our online trading platform on eBay and/or other similar trading platforms.



Results of Operations



The following overview provides a summary of key information concerning our financial results for the three months ended March 31, 2006 and 2005.







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Revenue



|                                     | 2006              | 2005       | Increase/(decrease)
|------------------------------------ | ----------------- | ---------- | -------------------
|$                                    | %                
|For the three months ended March 31, |                   |            |                    
|Revenue                              | $               - | $    3,129 | $   (3,129)        



Revenue for the three months ended March 31, 2006 was $0, a decrease of $3,129, or 100%, from $3,129 in the same period one year ago.



We believe the decrease is due to a decrease in our purchasing of products for resale. This decrease in purchases is the result of the unavailability of cash for such purchases.



Cost of goods sold/Gross profit percentage of revenue



|                                     | 2006             | 2005          | Increase/(decrease)
|------------------------------------ | ---------------- | ------------- | -------------------
|$                                    |                 
|For the three months ended March 31, |                  |               |                    
|Cost of goods sold                   | $              - | $       3,040 | $   (3,040)        



Cost of goods sold for the three months ended March 31, 2006 was $0, a decrease of $3,040, or 100%, from $3,040 for the three months ended March 31, 2005. The decrease is the direct result of lower gross revenue for the period due to a decrease in purchases of products for resale.



|                                     | 2006             | 2005            | Increase/(decrease)
|------------------------------------ | ---------------- | --------------- | -------------------
|$                                    |                 
|For the three months ended March 31, |                  |                 |                    
|Gross profit                         | $              - | $            90 | $               90 



Gross profit for the three months ended March 31, 2006 was $0, for a decrease of $90 over the $90 gross profit for the three months ended March 31, 2005.



Expenses



|                                     | 2006          | 2005         | Increase/(decrease)
|------------------------------------ | ------------- | ------------ | -------------------
|$                                    |              
|For the three months ended March 31, |               |              |                    
|Expenses                             | $       8,213 | $     12,058 | $   (3,845)        



The total expenses were $8,213 for the three months ended March 31, 2006 versus $12,058 for the three months ended March 31, 2005 a $3,845 or 32% decrease. The decrease for the year ended March 31, 2006 versus the same period in 2005 is primarily due to costs related to general and administrative expenses. Our use of general office supplies decreased as a result of decreased sales activity.



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Net loss



|                                     | 2006         | 2005        | Increase/(decrease)
|------------------------------------ | ------------ | ----------- | -------------------
|$                                    |             
|For the three months ended March 31, |              |             |                    
|Net (loss)                           | $    (8,213) | $  (11,968) | $   (3,755)        



Our net loss for the three months ended March 31, 2006 was $8,213, versus a net loss of $11,968 for the three months ended March 31, 2005, a decrease of $3,755, or 31%. The decrease in net loss was primarily the result of decreased administrative expenses.



Risks that could cause actual sales to differ from expected sales are detailed in the remainder of this section, and under the section titled Factors That May Affect the Companys Future Operating Results.



Liquidity and Capital Reserves



Cash will be increasing primarily due to the receipt of funds from this offering to offset our near term cash requirements. Since inception, we have financed our cash flow requirements through the issuance of common stock and sales activities, which has resulted in our receipt of $116,657. We have used $114,776 as of March 31, 2006, leaving cash in the amount of $1,478, and inventory valued at $403. As we expand our activities, we may continue to experience net negative cash flows from operations, pending receipt of sales revenues. In addition to the SB-2 registration, we anticipate obtaining additional financing to fund operations through private placements of common stock offerings in the future, and subsequent to the funding of the pending registration.



In determining whether to conduct this public offering instead of raising money through other means we analyzed: (i) exemptions from registration under the Federal Securities Laws; (ii) exemptions from registration in Nevada; (iii) the requirements of audited financial statements for certain exemptions, such as Regulation D 505 and 506 (when offering to unaccredited investors) and the disclosure mandated; (iv) the ability to generally solicit the sale of a security wherein registration is provided; (v) and, the potential for creating liquidity in the investment if submitted for trading.



We anticipate we will incur operating losses in the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, provide order fulfillment through the Internet, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.



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As of March 31, 2006, current assets totaled $1,881, a decrease of $4,723 as compared to March 31, 2005. The decrease in current assets resulted from operational expenses and the purchase of inventory incurred during the normal course of business.



Plan of Operation



Satisfaction of our cash obligations for the next 12 months.Our plan of operation has provided for us to establish an outlet for the sale of product which we have begun purchasing. Having established our relationship with eBay, as the initial online trading platform, we have commenced selling our inventory. We capitalized our company with $116,657 from our sole officer, director and stockholder, Mr. Evangelista. We have utilized the $114,776 to setup our corporate organization, payment of audit fees for our registration, inventory purchases, general and administrative, and payment of salaries, leaving us with a balance of approximately $1,881 in cash and inventory as of March 31, 2006. Our plan of operation indicates expenditures in the following year of at least $31,700, the minimum net proceeds from the SB-2 registration, to be used for: (i) salaries -
$15,200, (ii) corporate filing fees - $325, (iii) accounting fees - $4,500, and (iv) inventory purchases - $11,675. We have based our assumptions on the fact that we will not incur additional obligations for personnel, office, etc. until such time as we either raise additional equity or debt, or generate revenues to support such expenditures. Our sole officer and director, Mr. Evangelista has agreed to continue his part time work without pay if required, until such salary can be paid from revenues. We have allocated $15,200 toward salaries from our minimum funds raised to pay toward our one full time employee. If we were to not receive any additional funds, we could not continue our business operations.



Summary of any product research and development that we will perform for the term of the plan.We do not anticipate performing any significant product research and development under our plan of operation. In lieu of product research and development we anticipate spending efforts on our acquisition of inventory which will allow for the highest return on cost of goods.



Expected purchase or sale of plant and significant equipment.We do not anticipate the purchase or sale of any plant or significant equipment, as such items are not required by us at this time or in the next 12 months.



Significant changes in number of employees.The number of employees required to operate our business is currently one part time individual and one full time individual. After we complete the current offering and have commenced generating revenues based upon the expenditures of our inventory, our plan of operation anticipates our requiring additional capital to hire at least one additional full time person.



FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE OPERATING RESULTS



Going Concern; Need For Additional Capital





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Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have suffered losses from operations during our operating history and our ability to continue as a going concern is dependent upon obtaining future profitable operations. Our business is capital intensive. Although management believes that the proceeds from the sale of its securities, together with funds from operations, will be sufficient to cover its anticipated cash requirements, the Company may be required to seek additional capital to fund future growth and expansion. No assurance can be given that such financing will be available or, if available, that it will be on commercially favorable terms. Moreover, favorable financing may be dilutive to investors.



Limited History of Business Operations; Accumulated Losses



We have only a limited operating history and our business model has not yet been tested in the market place. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a business in the eBay retail markets industry, which are characterized by a large number of market entrants, intense competition and a high failure rate. To date, we have been engaged primarily in start-up and business development activities and have generated little revenue from product sales. To achieve profitable operations, we must successfully establish methods of acquiring products for re-sale which can be purchased at significantly discounted prices, enabling us to introduce and market the products at competitive prices. No assurance can be given that we will be successful in the location of product, or if located, that we will be able to purchase the
products at competitive prices as the result of our inability to purchase large quantities of products, or if competitively purchased, that we will be successful in marketing the product through the Internet. Accordingly, we have generated only $55,069 in revenues from the sale of products from inception. Consequently, we have incurred a net loss from operating activities of approximately $118,141 for the same period. In view of our lack of revenue and losses we have analyzed various methods of Internet marketing. We have no intention of merging, acquiring, or forming a business combination with any other entity. Future operating results will depend on many factors, including our ability to raise capital to acquire inventory, the demand for our products, the level of competition and our ability to establish relationships wherein we are able to acquire inventory on a substantially discounted basis.



We will require approximately $31,700 to operate our business over the next 12-month period. This amount includes funds for salaries, accounting, corporate filing fees, office lease, postage and telephones, and $11,765 in inventory purchases. Although our majority stockholder has indicated a willingness to continue funding our operations during the next 12 months in the event we are unsuccessful in raising funds through this offering, we would anticipate raising money privately, if this offering fails for any reason. If we are unable to raise money: (i) from this offering; (ii) from private placements; or (iii) alternatively from our majority stockholder; then in that event we may be forced into terminating our operations until such time as funds are available from one of the above sources.



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Off-Balance Sheet Arrangements



We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.



Item 3. Controls and Procedures.



We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. As of the end of the period covered by this report, Michael J. Evangelista, our President and Principal Accounting Officer evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, which disclosed no significant deficiencies or material weaknesses, Mr. Evangelista our President and Principal Accounting Officer concluded that our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.



PART II  OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------



| | None.
| | -----



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



Use of Proceeds From Sales of Registered Securities



Our Registration Statement on Form SB- 2 (File No. 333-118632), related to our initial public offering, was declared effective by the SEC on February 13, 2006. A total of 1,000,000 shares maximum and 350,000 shares minimum of our Common Stock was registered with the SEC with an aggregate offering price of $100,000 maximum and $35,000 minimum.  All of these shares were registered on our behalf. As of the date of this filing the Company has not sold any shares under the registration statement.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------



| | None.
| | -----





|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------



| | None.
| | -----





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|Item 5. | Other Information.
|------- | ------------------



None.



|Item 6. | Exhibits and Reports on Form 8-K.
|------- | ---------------------------------



Exhibits



|31* | Certification pursuant to Section 302 of the Sarbanes-Oxley Act
|--- | ---------------------------------------------------------------
|32* | Certification pursuant to Section 906 of the Sarbanes-Oxley Act

* Filed herewith.



SIGNATURES



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



XSINVENTORY

(Registrant)





By:/s/
Michael J. Evangelista

| | Michael J. Evangelista, President &        | 
| | ------------------------------------------ | 
| | Chief Executive Officer (On behalf of      | 
| | the registrant and as principal accounting
| | officer)                                   | 
| |                                            | 



Date: May
22, 2006



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