**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB**





x
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
                of 1934**
              For the quarterly period ended:
                     March 31,
                2006.







o
            **Transition
                Report Pursuant to Section 13 or 15(d) of the Exchange
                Act**
              For the transition period from ________
                to
                _________







Commission
      File Number:    0-51213





**XL
      GENERATION INTERNATIONAL INC.**


(Exact
      Name of Small Business Issuer as Specified in Its Charter)





**NEVADA**
            **20-0909393**(State
                or other jurisdiction of
            (IRS
                Employerincorporation
                or organization)
            Identification
                Number)








**Sumpfstrasse
      32**


**6304
      Zug**


**Switzerland**





(Address
      of principal executive offices)





**4141
      723 1090**





(Issuer’s
      telephone number, including area code)





**460
      Saint-Gabriel, Suite 21**


**Montréal
      Québec H2Y 2Z9**


**Canada**





(Former
      name, former address and former fiscal year, if changed since last
      report)







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. Yes x No o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date:





The
      Issuer had 34,328,268 shares of Common Stock, par value $.001, outstanding
      as of
      May 22, 2006.





Transitional
      Small Business Disclosure format (Check one):  Yes o No x









TABLE
      OF
      CONTENTS





Page





PART
                I
            FINANCIAL
                INFORMATION (unaudited)
            1Item
                1.
            Financial
                Statements
            1Balance
                Sheet
            2Statements
                of Stockholders Deficiency
            3Statements
                of Operations
            4Statements
                of Cash Flows
            5Notes
                to Financial Statements
            6Item
                2.
            Management’s
                Discussion and Analysis
            12Item
                3.
            Controls
                and Procedures
            16PART
                II
            OTHER
                INFORMATION
            17Item
                1.
            Legal
                Proceedings
            17Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            17Item
                3.
            Defaults
                Upon Senior Securities
            19Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            19Item
                5.
            Other
                Information
            19Item
                6.
            Exhibits
                and Reports on Form 8-K
            20SIGNATURES
            22








**PART
      I**  **FINANCIAL
      INFORMATION**





**Item
      1.** ****  **Financial
      Statements** ****





The
      accompanying unaudited financial statements have been prepared in accordance
      with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B,
      and, therefore, do not include all information and footnotes necessary for
      a
      complete presentation of financial position, results of operations, cash flows,
      and stockholders’ equity in conformity with generally accepted accounting
      principles. In the opinion of management, all adjustments considered necessary
      for a fair presentation of the results of operations and financial position
      have
      been included and all such adjustments are of a normal recurring nature. It
      is
      suggested that the following consolidated financial statements be read in
      conjunction with the year-end consolidated financial statements and notes
      thereto included in our Annual Report on Form 10-KSB for the year ended
      December 31, 2005. Operating results for the three months ended
      March 31, 2006 are not necessarily indicative of the results that can be
      expected for the year ending December 31, 2006 or for any other period.




1








XL
      GENERATION INTERNATIONAL INC.


(formerly
      CYGNI SYSTEMS CORPORATION)


BALANCE
      SHEET


March
      31,
      2006


(Unaudited)





March
                31, 2006**ASSETS**CURRENT
                ASSETS:Cash
            
            $
            450,430Inventory
            
            
            132,520Prepaid
                expenses and sundry current assets
            
            
            224,224TOTAL
                CURRENT ASSETS
            
            
            807,174PROPERTY
                AND EQUIPMENT, AT COST,LESS
                ACCUMULATED DEPRECIATION
            
            
            61,294TOTAL
                ASSETS
            
            $
            868,468**LIABILITIES
                AND STOCKHOLDERS’ DEFICIENCY**CURRENT
                LIABILITIES:Note
                payable-shareholders
            
            $
            1,131,675Note
                payable- supplier
            
            
            1,768,933Accrued
                expenses and sundry current liabilities
            
            
            982,743TOTAL
                CURRENT LIABILITIES
            
            $
            3,883,351STOCKHOLDERS'
                DEFICIENCYCommon
                stock
            
            $
            95,764Additional
                paid in capital
            
            
            7,744,014Accumulated
                Deficit
            
            
            (11,128,101
            )Other
                comprehensive income/(loss)
            
            
            273,440TOTAL
                STOCKHOLDERS' DEFICIENCY
            
            $
            (3,014,883
            )TOTAL
                LIABILITIES AND STOCKHOLDERSDEFICIENCY
            
            $
            868,468








2





XL
      GENERATION INTERNATIONAL INC.


(formerly
      CYGNI SYSTEMS CORPORATION)


STATEMENTS
      OF STOCKHOLDERS DEFICIENCY


Three
      months Period ended March 31, 2006


(unaudited)





Stockholders
      Deficiency





Stockholders
              Deficiency
            
            Common
              Stock
            
            Additional
              paidin
              Capital
            
            Accumulated
              Deficit
            
            Other
                Comprehensive
              Income
                (Loss)
            
            Total
            
            Total
              Common
              Stock
              OutstandingJanuary
                1, 2005
            
            $
            88,390
            
            $
            0
            
            $
            (1,954,958
            )
            $
            (149,897
            )
            $
            (2,016,465
            )
            
            50,000Proceeds
                fromthe
                issuance ofcommon
                stock
            
            
            4,533
            
            
            4,195,467
            
            
            —
            
            
            —
            
            
            4,200,000Net
                Loss
            
            
            —
            
            
            —
            
            
            (5,356,281
            )
            
            
            
            
            (5,356,281
            )Other
                comprehensiveLoss
            
            
            
            
            
            
            
            
            
            
            
            412,300
            
            
            412,300January
                1, 2006
            
            
            92,923
            
            
            4,195,467
            
            
            (7,311,239
            )
            
            262,403
            
            
            (2,760,446
            )
            
            30,050,333Proceeds
                fromthe
                issuance ofCommon
                stock
            
            
            2,841
            
            
            3,548,547
            
            
            —
            
            
            —
            
            
            3,551,388
            
            
            2,841,111Net
                Loss
            
            
            —
            
            
            —
            
            
            (3,816,862
            )
            
            
            
            
            (3,816,862
            )Other
                comprehensiveIncome
            
            
            
            
            
            
            
            
            
            
            
            11,037
            
            
            11,037March
                31, 2006
            
            $
            95,764
            
            $
            7,744,014
            
            $
            (11,128,101
            )
            $
            273,440
            
            $
            (3,014,883
            )
            
            32,891,444








3


XL
      GENERATION INTERNATIONAL INC.


(formerly
      CYGNI SYSTEMS CORPORATION)


STATEMENTS
      OF OPERATIONS


Three
      months ended March 31, 2006 and 2005


(unaudited)





Three
                Months Ended
            
            Three
                Months EndedMarch
                31,
            
            March
                31,2006
            
            2005SALES
            
            $
            1,210,971
            
            $
            2,355COSTS
                AND EXPENSES:Cost
                of sales
            
            
            807,280
            
            
            244,380Selling,
                general and administrative
            
            
            1,960,624
            
            
            712,369Provision
                for Note receivable - related party
            
            
            2,217,607
            
            
            0Interest
            
            
            42,152
            
            
            732Foreign
                exchange loss
            
            
            170
            
            
            3,331TOTAL
                COSTS AND EXPENSES
            
            
            5,027,833
            
            
            960,810NET
                LOSS
            
            $
            (3,816,862
            )
            $
            (958,456
            )Net
                loss Per Share
            
            $
            (0.12
            )
            $
            (19.17
            )Average
                weighted Number of Shares
            
            
            31,152,691
            
            
            50,000




4






XL
      GENERATION INTERNATIONAL INC.


(formerly
      CYGNI SYSTEMS CORPORATION)


STATEMENTS
      OF CASH FLOWS


Three
      months ended March 31, 2006 and 2005


(unaudited)





March
                31,
            
            March
                31,2006
            
            2005Net
                loss
            
            $
            (3,816,862
            )
            $
            (1,068,057
            )Adjustment
                to reconcile net income to net cash providedby
                operating activitiesDepreciation
                and amortization
            
            
            4,172
            
            
            0Unrealized
                foreign exchange
            
            
            11,037
            
            
            (6,346
            )Reclassification
                of shareholdersLoan
                to royalty fee expense
            
            
            
            
            
            416,047Changes
                in operating assets and liabilities:Inventory
            
            
            (77,549
            )
            
            0Prepaid
                expenses and sundry current assets
            
            
            (66,880
            )
            
            6,743Accrued
                expenses and sundry current liabilities
            
            
            (37,324
            )
            
            784,300Net
                cash provided (used) by operating activities
            
            $
            (3,983,406
            )
            $
            132,687Investing
                activitiesAcquisitions
                of property and equipment
            
            $
            (19,338
            )
            $
            65Net
                cash (used) provided in investing activities:
            
            
            (19,228
            )
            
            65Financing
                activitiesProceeds
                from issuance of common stock
            
            
            3,551,388
            
            
            0Note
                payable - Related party
            
            
            1,047,643
            
            
            1,245,628Proceeds
                of loans payable shareholder
            
            
            154,801
            
            
            93,761Proceeds
                (repayments) of loans from suppliers
            
            
            (563,104
            )
            
            (1,931,807
            )Net
                cash provided (used) by financing activities
            
            $
            4,190,728
            
            $
            (592,418
            )Increase
                (decrease) in cash
            
            
            187,984
            
            
            (459,666
            )Cash-
                beginning of period
            
            
            262,446
            
            
            434,194Cash-
                end of period
            
            $
            450,430
            
            $
            (25,472
            )








5





NOTE
      1 -
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





NATURE
      OF
      BUSINESS





XL
      Generation International Inc. (the "Company") was incorporated in Nevada on
      March 18, 2004 as Cygni Systems Corporation and changed its name to XL
      Generation International Inc. on August 23, 2005. On August 19, 2005, the
      Company entered into a Share Exchange Agreement (”SEA”) with XL Generation AG
      ("XLG") pursuant to which the Company acquired all of the issued and outstanding
      shares of common stock of XLG in exchange for the issuance of fifteen million
      shares of restricted common stock (the "Common Stock").





In
      connection with the SEA, the Company commenced actions to provide for the
      revision of the Company's capital structure. Pursuant to such actions, DT
      Crystal Holdings Ltd., the controlling shareholder of the Company prior to
      entry
      into the SEA, as inducement to the shareholders of XLG to enter into the SEA,
      agreed to cancel four million shares of the Company’s Common Stock and accept in
      consideration thereof an option exercisable for 500,000 shares of the Company.
      In addition, the Company made a stock dividend to shareholders of record of
      the
      Company of nine shares of Common Stock for each one share of Common Stock held
      of record, provided, however, each of DT Crystal Holdings Ltd. and the Alain
      Lemieux Trust, a trust formed in the Jersey Islands, and Mr. Albert Beerli
      waived their respective rights to such stock dividend. The record date for
      such
      dividend was set as August 29, 2005.





The
      Company now serves as the holding company for XLG. The Company has no other
      operations other than XLG.





XLG
      was
      incorporated in 1991, and was inactive until March of 2004, when it was granted
      the exclusive worldwide right to manufacture, promote and sell XL Turf products.
      XL Turf is an artificial pitch used primarily in soccer stadiums and indoor
      recreational facilities. XLG has its operational headquarters in Zug,
      Switzerland. XLG is a provider of artificial turf to international soccer clubs,
      educational institutions and other leisure providers across North America,
      Europe and Asia. XLG has developed new artificial turf systems for sports
      fields. XLG holds the worldwide commercial and manufacturing rights for the
      "XL
      technology." The “XL technology” consists of six patents. Of these six patents,
      one is patented in 38 countries, with patents pending in 6 more countries;
      another is patented in 16 countries, with patents pending in 28 more; two of
      these patents are pending in seven countries; and two of the six patents are
      pending in one country each. XLG produces its owned product lines under the
      "XL
      Generation" trademark, including the "genuine" XLTURF sport systems. XLG also
      distributes its products worldwide through an extensive licensed distribution
      network, designing and manufacturing private labeled products using the "XL
      technology."





XLG
      is
      represented in Canada by XL Generation Canada Inc. (XLG Canada) which was
      incorporated on November 11, 2003 under the name of Symbior Marketing NA Inc.,
      under the Companies Act, part 1A (Quebec). From inception until March 2004,
      XLG
      Canada had no active operations. The head office was, and is still today,
      situated at 1000, de la Gauchetière West, Suite 2900, Montreal, Quebec, H3B 4W5,
      Canada. From the incorporation date to April 5, 2004 the sole shareholder of
      XLG
      Canada was Symbior Marketing AG. On April 5, 2004, Symbior marketing AG
      transferred all the issued and outstanding shares of XLG Canada to XL Generation
      AG for nominal consideration. Subsequently, on September 1, 2004, XL Generation
      AG transferred all the issued and outstanding shares of XLG Canada to Albert
      Beerli. Mr. Beerli is a Director of XLG and a Director of the Company and a
      shareholder of both XLG and the Company. The transfer was made for a nominal
      consideration. In February 2004, XLG entered into a Management Agreement (the
      “Management Agreement”) with XLG Canada. The Management Agreement provided that
      XLG Canada would act as XLG’s representative in Canada. The Management Agreement
      provided that XLG Canada would (i) register with Canadian tax authorities;
      (ii)
      employ the staff required by XLG in Canada; (iii) pay the salary of XLG’s
      Canadian staff; (iv) reimburse employees of XLG, upon the approval of XLG;
      (v)
      pay certain consulting fees on behalf of XLG; (vi) pay certain fees to Polyprod
      Inc. (a related party service provider to the Company); (vii) maintain a
      separate bank account; (viii) represent XLG in transactions with Polyprod Inc.;
      and (ix) serve as the vendor for any sales of XLG products in Canada. The
      Management Agreement further provides that in the event of a change of control,
      XLG Canada would continue to act on behalf of XLG in Canada, but any profits
      would be paid to XLG. In the event of a change of control, XLG would have the
      right to appoint another party to act as its agent in Canada. The Management
      Agreement provides that in the event of a change of control, in consideration
      for the services to be rendered by XLG Canada to XLG, a fee would be negotiated
      by the parties which shall represent the fair market value of services rendered.
      The Management Agreement has no set termination date, but may be terminated
      at
      any time by a written notice sent to the other party at least two (2) months
      prior to the termination date. XLG Canada has never charged a fee to XLG for
      services rendered. Mr. Beerli, acting both on his own behalf and on behalf
      of
      XLG has executed a memorandum (the “Memorandum”) with XLG and the Company,
      memorializing certain oral agreements previously reached between the Company,
      XLG and XLG Canada. Pursuant to the Memorandum, Mr. Beerli is not entitled
      to
      receive any compensation or equity benefit from XLG Canada or for his ownership
      of XLG Canada. Any profits from the sales of products of XLG in Canada shall
      pass-through XLG Canada to XLG. All advances made to XLG Canada shall be
      allocated solely for the benefit of XLG.




6





XLG
      products are produced by Polyprod Inc. (“Polyprod”), a Canadian Corporation,
      pursuant to an Exclusive Manufacturing License Agreement (the “Exclusive
      Agreement”) entered into as of January 2, 2005. Polyprod
      Inc. provides the assembly of the final XLG products, using a combination of
      turf, glue, and Expanded Polypropylene (EPP). Pursuant to the Exclusive
      Agreement. Polyprod manufactures XLG’s products on a cost-plus basis. The
      Exclusive Agreement has a term of ten (10) years.





PRINCIPLES
      OF CONSOLIDATION





The
      consolidated financial statements include the accounts of the Company and its
      subsidiary XLG after the elimination of inter-company accounts and transactions
      up to the transaction date. As required by the SEC in Reverse Takeover
      transactions, the operating entity, in this case XLG, is deemed to be the
      acquirer whose results are reported in these financial statements. Any
      additional stock issued after August 19, 2005 will be recorded as additional
      share capital, as if it was XLG issuing the stock. Any inter-company assets,
      liabilities and internal transactions are eliminated, including any profit
      based
      on inter-company trading.





CASH
      AND
      CASH EQUIVALENTS





The
      Company considers all highly liquid debt instruments with original maturities
      not exceeding three months to be cash equivalents.





INVENTORIES





Inventories
      are valued at the lower of cost determined on the first-in, first-out method
      or
      market.





PROPERTY
      & OFFICE EQUIPMENT





Equipment
      is stated at cost. Depreciation is computed using the straight-line method
      over
      3 to 10 years.





March
                31,2006Computer
                equipment--3 yrs
            
            $
            2,904Furniture
                & fixtures--5 yrs
            
            
            46,364Leasehold
                improvements
            
            
            19,338$
            68,606Less:
                accumulated depreciation
            
            
            ($7,312
            )Balance
                March 31, 2006
            
            $
            61,294





REVENUE
      RECOGNITION





The
      Company recognizes revenue when it is realized or realizable and earned. The
      Company considers revenue realized or realizable and earned when persuasive
      evidence of an arrangement exists, the product has been shipped or the services
      have been provided to the customer, the sales price is fixed or determinable
      and
      collectibles are reasonably assured. The Company reduces revenue for estimated
      customer returns, rotations and sales rebates when such amounts are estimable.
      When not estimable, the Company defers revenue until the product is sold to
      the
      end customer. As part of its product sales price, the Company provides support,
      which is generally utilized by the customer shortly after the sale.




7





INCOME
      TAXES





The
      asset
      and liability approach is used to account for income taxes by recognizing
      deferred tax assets and liabilities for the expected future tax consequences
      of
      temporary differences between the carrying amounts and the tax bases of assets
      and liabilities. The Company records a valuation allowance to reduce the
      deferred tax assets to the amount that is more likely than not to be
      realized.





LOSS
      PER
      COMMON SHARE





The
      basic
      net loss per common share is computed by dividing the net loss by the weighted
      average number of common shares outstanding.





Diluted
      net loss per common share is computed by dividing the net loss, adjusted on
      an
      "as if converted" basis, by the weighted average number of common shares
      outstanding plus potential dilutive securities.





WARRANTY
      PROVISIONS





The
      Company provides a reserve based upon management experience and assessment
      of
      potential replacement costs. Company management will continue to monitor the
      stability of its products and will adjust the provision accordingly. During
      2005, management undertook a major review of the warranty policies and reserves
      required as a consequence of significant warranty request from customers in
      North America and Europe. In the second half of the year we found that our
      product during warm weather and direct sun did not withstand the expansion
      of
      the product’s sub-base. As a result the Company developed a “roll system” to
      counter the problem and improved the malleability of the product. During the
      second half of 2005 we commenced a replacement process by replacing problematic
      outdoor products with the new roll system. As at December 31, 2005 we were
      due
      to replace two products in Switzerland and Vancouver, Canada. The reserves
      required to replace these products were estimated at approximately $500,000.
      During the first quarter of 2006 we replaced the field in Wohlen, Switzerland
      at
      a cost of approximately $350,000 including transport and installation. In
      addition, we also replaced faulty products in the US for an additional $150,000.
      The product failure in Wohlen was due to problems with the connectivity of
      the
      panels in warm weather. The original product used a Tongue and Groove system
      which we have discontinued. In the US we have replaced different products for
      different reasons some of which were caused due to chemical complications in
      connection with using the surface for paintball sport. In August 2005 the
      Company installed a product in Interlaken, Switzerland. This product was our
      first type using the “click” connection system. As with the tongue and groove
      system the “click” would not sustain a playable surface in the variation of
      temperatures which were experienced in the area. The management therefore took
      the view to make a provision to replace the Interlaken which will be
      approximately $350,000. We therefore made a warranty reserve release provision
      of $500,000 ) to
      replace products in the future in the event that any other installed products
      would fail or not sustain the variation of temperatures.





USE
      OF
      ESTIMATES





In
      preparing financial statements, management makes estimates and assumptions
      that
      affect the reported amounts of assets and liabilities in the balance sheet
      and
      revenue and expenses in the income statement. Actual results could differ from
      those estimates.





RECENT
      ACCOUNTING PRONOUNCEMENTS





The
      Company does not expect the adoption of recently issued accounting
      pronouncements to have a significant impact on its results of operations,
      financial position or cash flow. For further information regarding recent
      accounting pronouncements, please see Note 12.




8





NOTE
      2 -
      GOING CONCERN





The
      Company's consolidated financial statements have been prepared on a going
      concern basis, which contemplates the realization of assets and settlement
      of
      liabilities and commitments in the normal course of business for the foreseeable
      future. During the three months period ended March 31, 2006, the Company has
      incurred losses of $3,812,690. The Company has negative working capital of
      $3,076,177 at March 31, 2006, and a stockholders deficiency of $ 3,014,882
      at
      March 31, 2006. As at March 31, 2006 current assets less current liabilities
      was
      a net liability of $ 3,076,177. These factors among others raise substantial
      doubt about the Company's ability to continue as a going concern.





Management's
      plans for the Company's continued existence include selling additional stock
      and
      borrowing additional funds to pay overhead expenses while current marketing
      efforts continue to raise its sales volume.





The
      Company's future success is dependent upon its ability to achieve profitable
      operations, generate cash from operating activities and obtain additional
      financing. There is no assurance that the Company will be able to generate
      sufficient cash from operations, sell additional shares of Common Stock or
      borrow additional funds.





The
      Company's inability to obtain additional cash could have a material adverse
      effect on its financial position, results of operations and its ability to
      continue in existence. The consolidated financial statements do not include
      any
      adjustments that might result from the outcome of this uncertainty.





NOTE
      3 -
      NOTE RECEIVABLE - Related party





The
      Company reimbursed $327,271 to XLG Canada Inc as payments for services. The
      note
      bears interest at a rate based upon a percentage of sales pursuant to a related
      sales agreement.





NOTE
      4 -
      PREPAID EXPENSES & SUNDRY CURRENT ASSETS





Balance
      consisted of the following at March 31, 2006:





March
                31, 2006Security
                Deposits
            
            $
            15,967Trade
                Debtors
            
            
            169,872Other
                receivable
            
            
            38,385$
            224,224





NOTE
      5 -
      ACCRUED EXPENSES AND SUNDRY CURRENT LIABILITIES





Accrued
      expenses consisted of the following at March 31, 2006:





March
                31, 2006:Accrued
                interest
            
            $
            141,500Accrued
                operating expenses
            
            
            341,243Warranty
            
            
            500,000$
            982,743Movement
                in the Warrant ProvisionBalance
                as at January 1, 2006
            
            $
            500,000Release
                of Provision
            
            
            (350,000
            )Addional
                Provision
            
            
            350,000Provision
                as at March 31, 2006
            
            $
            500,000






9




NOTE
      6 -
      NOTE PAYABLE - SUPPLIER





On
      April
      6, 2006, the Company, XL Generation AG and Stadium SA entered into a Stock
      Purchase Agreement (the "Stadium Stock Purchase Agreement") pursuant to which
      Stadium SA agreed to accept 1,236,824 restricted shares of the Company’s Common
      Stock in lieu of repayment of XL Generation AG indebtedness to Stadium SA of
      2,950,000 Euros (approximately $3,584,545). Previously, the Terenvi Society
      had
      loaned XL Generation AG 1,600,000 Euros pursuant to a loan agreement dated
      December 16, 2004 (the “Terenvi Loan”). The Terenvi Society subsequently
      assigned the right to receive re-payment of the Terenvi Loan to Stadium SA.
      XL Generation AG previously entered into a distribution agreement with the
      Soreve Society on April 13, 2004 (the “Soreve Distribution Agreement”). The
      Soreve Society subsequently transferred to Stadium SA its payment rights under
      the Soreve Distribution Agreement. Pursuant to the Stadium Stock Purchase
      Agreement, the Company agreed to intervene and resolve the indebtedness of
      XL
      Generation AG in respect of the Terenvi Loan and Soreve Distribution
      Agreement by issuing shares of restricted Company Common Stock
      in satisfaction of XL Generation AG obligations.





NOTE
      7 -
      PAYABLE - SHARE HOLDERS





Mr.
      Albert Beerli, a significant shareholder, continued to support the Company
      with
      additional shareholder loans through payment of certain Company overhead
      obligations. The total note balance at March 31, 2006 was $655,640. The note
      carries an interest of 4.5% and is payable on demand.





On
      the 30
      December of 2005 the Company received loans from shareholder CAPEX Investment
      Limited in the amount of $300,000. This loan was an advance on Warrants as
      part
      of the Private Placements executed November 17, 2005. The advance was carrying
      an interest rate of 10% per annum and was converted into restricted shares
      of
      the Company’s Common Stock on March 30, 2006.





NOTE
      8 -
      CAPITAL STOCK





The
      company is authorized to issue 100,000,000 shares of Common Stock (par value
      $0.001) of which 32,891,444 were issued and outstanding at of March 31, 2006.
      During the first quarter 2006, the Company issued a total of 2,841,111
      restricted shares of the Company’s Common Stock in connection with various
      private placements and the exercise of warrants.





NOTE
      9 -
      INCOME TAXES





Income
      taxes are not due since the Company has incurred a loss since inception. The
      Company has deductible net operating losses of approximately $7,321,193 at
      March
      31, 2006. These losses expire as follows: in 2023 $626,000 will expire and
      in
      2024 $2,142,000 will expire.





Components
      of deferred tax assets and liabilities at March 31, 2006 are as
      follows:





March
                31, 2006:Deferred
                tax asset
            
            $
            2,768,000Valuation
                allowance
            
            
            (2,768,000
            )Net
                deferred tax asset
            
            $
            0





The
      Company has recorded a full valuation allowance against its deferred tax asset
      since it believes it is more likely than not that such deferred tax asset will
      not be realized.




10





NOTE
      10 -
      COMMITMENTS AND CONTINGENCIES





The
      Company is committed under an operating lease for its New York office that
      calls
      for minimum annual rental of approximately $96,000 per year and expires August
      2008.





NOTE
      11-
      RELATED PARTY TRANSACTIONS





Mr.
      Beerli undertook to advance payments on behalf of the Company during the year
      to
      cover general overhead items related to the running cost of the Zug office.
      The
      balance as of March 31, 2006 was $655,640.





XLG
      was
      charged $88,159 during the first quarter of 2006 for fees and expenses for
      the
      period of January to March 2006 by Greendale Consulting Limited (“Greendale”).
      In April of 2005, XLG entered into a verbal agreement, pursuant to which
      Greendale, an entity formed in the United Kingdom, would provide financial
      and
      commercial consulting and support services to the Company. Greendale is
      controlled by Flemming Munck, who is a director of the Company, as well as
      the
      Company's CFO and Treasurer. Since May of 2005, XL Generation AG has been paying
      6,600 GBP (approximately $11,638) per month to Greendale. The outstanding amount
      owed to Greendale Consult Ltd as of March 31, 2006 was $0 ($0 for
      2005).





On
      September 25, 2005 XLG signed an agreement with Mr. Daniel Courteau for the
      transfer of his rights in the bankruptcy of Symbior Technology Ltd for an amount
      of $60,000 Canadian Dollars (CAD). The outstanding amount as at March 2006
      was
      $0 ($50,000 as of December 31, 2005).





The
      Company has reviewed the recoverability of a receivable from XL Generation
      Canada Inc., a related party. The Company has taken a charge of $2,217,607
      in
      the first quarter of 2006 in respect of such receivable. The funds underlying
      the receivable were previously forwarded to XL Generation Canada Inc. for
      Company-related activities in Canada, including building up inventory with
      our
      suppliers to facilitate shorter delivery periods. As XL Generation Canada Inc.
      does not have sufficient cash resources to repay the advance, management
      determined to take a charge for the full amount of such outstanding
      advances.





Note
      12 -
      RECENTLY ISSUED ACCOUNTING STANDARDS





In
      December 2003, the Financial Accounting Standards Board issued FASB
      Interpretation Number 46-R ("FIN 46-R") "Consolidation of Variable Interest
      Entities." FIN 46-R, which modifies certain provisions and effective dates
      of
      FIN 46, sets forth criteria to be used in determining whether an investment
      in a
      variable interest entity should be consolidated. These provisions are based
      on
      the general premise that if a company controls another entity through interests
      other than voting interests, that company should consolidate the controlled
      entity. The Company believes that currently, it does not have any material
      arrangements that meet the definition of a variable interest entity, which
      would
      require consolidation.





In
      November 2004, the FASB issued SFAS No. 151, "Inventory Costs - An Amendment
      of
      ARB No. 43, Chapter 4" (SFAS No. 151). SFAS No. 151 requires all companies
      to
      recognize a current-period charge for abnormal amounts of idle facility expense,
      freight, handling costs and wasted materials. This statement also requires
      that
      the allocation of fixed production overhead to the costs of conversion be based
      on the normal capacity of the production facilities. SFAS No. 151 will be
      effective for fiscal years beginning after June 15, 2005. The Company does
      not
      expect the adoption of this statement to have a material effect on its
      consolidated financial statements.





In
      December 2004, the FASB issued SFAS No.123(R), "Share-Based Payment" (SFAS
      No.
      123(R). This statement replaces SFAS No. 123 and supersedes APB 25. SFAS 123(R)
      requires all stock-based compensation to be recognized as an expense in the
      financial statements and that such compensation be measured according to the
      grant-date fair value of stock options. SFAS 123 (R) will be effective for
      annual periods beginning after June 15, 2005. The Company currently does not
      provide for any stock-based compensation and it will evaluate the impact this
      statement will have on its consolidated financial statements if such
      compensation were to take place in the future.




11





In
      December 2004, the FASB issued SFAS No. 153, "Exchanges on Nonmonetary Assets
      An
      Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions" (SFAS
      153). SFAS 153 eliminates the exception from fair value measurement for
      nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB
      Opinion No. 29, "Accounting for Nonmonetary Transactions," and replaces it
      with
      an exception for exchanges that do not have commercial substance. SFAS 153
      specifies that a nonmonetary exchange has commercial substance if the future
      cash flows of the entity are expected to change significantly as a result of
      the
      exchange. SFAS 153 is effective for fiscal periods beginning after June 15,
      2005. The Company does not expect the adoption of this statement to have a
      material effect on its consolidated financial statements.





In
      May
      2005, the FASB issued SFAS No. 154, "ACCOUNTING FOR CHANGES AND ERROR
      CORRECTIONS, A REPLACEMENT OF APB OPINION NO. 20 AND FASB STATEMENT NO. 3"
      SFAS
      154 applies to all voluntary changes in accounting principles and requires
      retrospective application to prior periods' financial statements of changes
      in
      accounting principle. This statement also requires that a change in
      depreciation, amortization, or depletion method for long-lived, nonfinancial
      assets be accounted for as a change in accounting estimate effected by a change
      in accounting principle. SFAS 154 carries forward without change the guidance
      contained in Opinion No. 20 for reporting the correction of an error in
      previously issued financial statements and a change in accounting estimate.
      This
      statement is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005. The Company does not expect
      the
      adoption of this standard to have a material impact on its financial condition,
      results of operations, or liquidity.





Note
      13 -
      SUBSEQUENT EVENTS





On
      April
      6, 2006, the Company, XL Generation AG and Stadium SA entered into the Stadium
      Stock Purchase Agreement pursuant to which Stadium SA agreed to accept 1,236,824
      restricted shares of the Company’s Common Stock in lieu of repayment of XL
      Generation AG indebtedness to Stadium SA of 2,950,000 Euros (approximately
      $3,584,545). Previously, the Terenvi Society had loaned XL Generation AG
      1,600,000 Euros pursuant to a loan agreement dated December 16, 2004 (the
“Terenvi Loan”). The Terenvi Society subsequently assigned the right to receive
      re-payment of the Terenvi Loan to Stadium SA. XL Generation AG previously
      entered into a distribution agreement with the Soreve Society on April 13,
      2004
      (the “Soreve Distribution Agreement”). The Soreve Society subsequently
      transferred to Stadium SA its payment rights under the Soreve Distribution
      Agreement. Pursuant to the Stadium Stock Purchase Agreement, the Company agreed
      to intervene and resolve the indebtedness of XL Generation AG in respect of
      the Terenvi Loan and Soreve Distribution Agreement by issuing shares of
      restricted Company Common Stock in satisfaction of XL Generation AG
      obligations.




On
      April
      28, 2006, the Company entered into a Common Stock Purchase Agreement with Poma
      Management SA ("Poma"). Pursuant to the Common Stock Purchase Agreement, Poma
      agreed to pay five hundred thousand dollars ($500,000) to purchase 200,000
      shares of restricted Company Common Stock. The aggregate sale price for the
      200,000 shares of the Company's Common Stock was $500,000. No underwriting
      commissions were paid or discounts granted to underwriters.





**ITEM
      2.**  **Management’s
      Discussion and Analysis**





**The
      Company's Operations**





The
      following discussion of the financial condition and results of operations of
      XL
      Generation International Inc. (referred to herein as the "Company") should
      be
      read in conjunction with the financial statements and the related notes thereto
      included elsewhere in this Quarterly Report on Form 10-QSB for the period ended
      March 31, 2006 (this “Report”). This Report contains certain forward-looking
      statements and the Company's future operating results could differ materially
      from those discussed herein. Certain statements contained in this Report,
      including, without limitation, statements containing the words "believes,"
      "anticipates," "expects" and the like, constitute "forward-looking statements"
      within the meaning of Section 27A of the Securities Act of 1933, as amended,
      and
      Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”). However, as the Company issues “penny stock,” as such term is defined in
      Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to
      rely on these safe harbor provisions. Such forward-looking statements involve
      known and unknown risks, uncertainties and other factors which may cause the
      actual results, performance or achievements of the Company to be materially
      different from any future results, performance or achievements expressed or
      implied by such forward-looking statements. Given these uncertainties, readers
      are cautioned not to place undue reliance on such forward-looking statements.
      The Company disclaims any obligation to update any such factors or to announce
      publicly the results of any revisions of the forward-looking statements
      contained or incorporated by reference herein to reflect future events or
      developments.




12





The
      Company was incorporated in the State of Nevada on March 18, 2004 as Cygni
      Systems Corporation. On August 19, 2005, the Company entered into the Share
      Exchange Agreement with XL Generation AG ("XLG"). Pursuant to the terms of
      the
      Share Exchange Agreement, the Company acquired all of the issued and outstanding
      shares of Common Stock of XLG in exchange for the issuance at closing of an
      aggregate of fifteen million shares of restricted Common Stock of the Company.





In
      connection with the Share Exchange Agreement, the Company commenced actions
      to
      provide for the revision of the Company's capital structure. Pursuant to such
      actions, DT Crystal Holdings Ltd., the controlling shareholder of the Company
      prior to entry into the Share Exchange Agreement, as inducement to the
      shareholders of XLG to enter into the Share Exchange Agreement, agreed to cancel
      four million shares of the Company’s Common Stock and accept in consideration
      thereof an option exercisable for 500,000 shares of the Company. In addition,
      the Company made a stock dividend to shareholders of record of the Company
      of
      nine shares of Common Stock for each share of Common Stock held, provided,
      however, each of DT Crystal Holdings Ltd. and the Alain Lemieux Trust, a trust
      formed in the Jersey Islands, and Mr. Albert Beerli waived their respective
      rights to such stock dividend (the record date for such dividend was set as
      August 29, 2005).





XLG,
      based in Zug, Switzerland, designs specific flooring products for sports,
      recreational and commercial markets. XLG has developed new artificial turf
      systems for sports fields. XLG holds the worldwide commercial and manufacturing
      rights for the "XL technology." The “XL technology” consists of six patents. XLG
      produces its owned product lines under the "XL Generation" trademark, including
      the "genuine" XLTURF sport systems. XLG also distributes its products worldwide
      through an extensive licensed distribution network, designing and manufacturing
      private labeled products using the "XL technology."





On
      August
      23, 2005, the Company filed a Certificate of Amendment with the State of Nevada,
      changing its name to "XL Generation International Inc." The Company also changed
      its stock symbol to XLGI.





The
      Company now serves as the holding company for XLG. The Company has adopted
      XLG's
      fiscal year end and the following Management's Discussion and Analysis of
      Financial Condition and Results of Operations describes the financial condition
      and results of operations for XLG. The Company has no other operations other
      than XLG and has no employees other than those employed by XLG.





XLG
      was
      incorporated in 1991 and was inactive until March of 2004, when WKF/5 Ltd
      granted it the exclusive worldwide right to manufacture, promote and sell XL
      Turf products. XL Turf is an artificial pitch used primarily in soccer stadiums
      and indoor recreational facilities.





**Results
      of Operations**





**Three
      Months Ended March 31, 2006 and 2005**





**Overview**


The
      Company posted a net loss of $3,816,863 for the three months ending March 31,
      2006, compared to a net loss of $1,670,607 for the three months ending December
      31, 2005.





**Sales**


Total
      amounts of gross sales for the three months ended March 31, 2006 were
      $1,210,971, compared to total gross sales of $2,355 for the three months ended
      March 31, 2005. Of all the sales, 90% were realized in Europe, the remaining
      10%
      was executed in North America with no significant single orders. The Company
      has
      closed three significant sales, mostly XL Pro EF products, two in Switzerland,
      one for the Municipalitie of Riehen ($277,000) and the second one for the
      Municipalitie of Buhrain ($389,000). The third sale closed in Norway for the
      Hammar Olympic Properties ($419,000). The latter sale was the first large
      project we have implemented in Norway and extends our coverage in the
      Scandinavian market.




13





**Total
      Cost and Expenses**


Total
      costs and expenses for the year ended March 31, 2006 were $5,027,833 compared
      to
      total costs and expenses for the three months ended March 31, 2005 of $960,810.
      The increases in costs and losses were caused in part by costs associated with
      corporate overhead, sponsoring of major events, marketing and merchandising,
      additional provisions for warranty cost and provisions against advances made
      to
      a related party.





**Cost
      of Sales**


During
      first quarter 2006 we realized a gross margin of 33.3% which reflects a
      substantial improvement against what has previously been achieved in any
      reported quarter. This was achieved as result of continually producing the
      same
      product line over a longer period of time. Management efficiencies obtained
      in
      our supply chain facilitated improvement in the Company’s position to buy in
      bulk and obtain better prices. We will continue where possible to plan our
      production schedule with our suppliers of raw materials to achieve the lowest
      prices as possible.





**SG&A**


New
      staff
      positions were created while the responsibilities of other staff positions
      were
      altered to improve the Company’s ability to respond to regulatory and market
      requirements. Additional management positions were created in the sales and
      marketing area as well as operations areas to work towards the Company’s goals
      of producing quality products, increasing sales, and lowering prices. We
      re-organized the sales department and took on two new sales staff in France
      and
      a new Sales Director in the United States.





We
      continued to work with the United Nations to establish the World Sports Alliance
      (WSA). This requires certain resources which we have allocated in Europe and
      the
      US for this purpose. The resources required are in the areas of sales,
      promotions, legal and marketing. In addition to their duties with WSA these
      individuals will also assist in Company sales projects in their geographical
      area as applicable. During the first quarter of 2006 we spent approximately
      $180,000 on this purpose, whereas there were no expenditures relating to WSA
      in
      the first quarter of 2005.





**Warranty**


The
      Company provides a reserve based upon management experience and assessment
      of
      potential replacement costs. Company management will continue to monitor the
      stability of its products and will adjust the provision accordingly. During
      2005, management undertook a major review of the warranty policies and reserves
      required as a consequence of significant warranty request from customers in
      North America and Europe. In the second half of the year we found that our
      product during warm weather and direct sun did not withstand the expansion
      of
      the product’s sub-base. As a result the Company developed a “roll system” to
      counter the problem and improved the malleability of the product. During the
      second half of 2005 we commenced a replacement process by replacing problematic
      outdoor products with the new roll system. As at December 31, 2005 we were
      due
      to replace two products in Switzerland and Vancouver, Canada. The reserves
      required to replace these products were estimated at approximately $500,000.
      During the first quarter of 2006 we replaced the field in Wohlen, Switzerland
      at
      a cost of approximately $350,000 including transport and installation. In
      addition, we also replaced faulty products in the US for an additional $150,000.
      The product failure in Wohlen was due to problems with the connectivity of
      the
      panels in warm weather. The original product used a Tongue and Groove system
      which we have discontinued. In the US we have replaced different products for
      different reasons some of which were caused due to chemical complications in
      connection with using the surface for paintball sport. In August 2005 the
      Company installed a product in Interlaken, Switzerland. This product was our
      first type using the “click” connection system. As with the tongue and groove
      system the “click” would not sustain a playable surface in the variation of
      temperatures which were experienced in the area. The management therefore took
      the view to make a provision to replace the Interlaken which will be
      approximately $350,000. We therefore made a warranty reserve provision of
      $500,000 ) to
      replace products in the future in the event that any other installed products
      would fail or not sustain the variation of temperatures.




**Other
      Charges**


The
      Company has reviewed the recoverability of a receivable from XL Generation
      Canada Inc., a related party. The Company has taken a charge of $2,217,607
      in
      the first quarter of 2006 in respect of such receivable. The funds underlying
      the receivable were previously forwarded to XL Generation Canada Inc. for
      Company-related activities in Canada, including building up inventory with
      our
      suppliers to facilitate shorter delivery periods. As XL Generation Canada Inc.
      does not have sufficient cash resources to repay the advance, management
      determined to take a charge for the full amount of such outstanding
      advances.




14




**Interest**


The
      Company calculates interest in accordance with the respective note payable.
      For
      the three months ending March 31, 2006 we took a charge of $ 42,152 against
      $732
      for the comparative period of 2005. The significant increase mirrors the
      increase liabilities, which the company has assumed as well as calculated
      interest on all loan notes.





**Liquidity
      and Capital Resources**





At
      March
      31, 2006, the Company had $450,430 in cash, as opposed to $262,446 in cash
      at
      December 31, 2005. Cash requirements for total operations for the quarter-ended
      March 31, 2006 were $4,002,744. Management estimates that cash requirements
      for
      the second quarter 2006 will be between $2 million to $3.5 million. As of the
      date of this report, the Company does not currently have available resources
      sufficient to cover the expected cash requirements through the end of the second
      quarter 2006 or the balance of the year. As a result, there is substantial
      doubt
      that we can continue as an ongoing business without obtaining additional
      financing. Management's plans for maintaining Company operations and
      continued existence include selling additional equity securities and borrowing
      additional funds to pay operational expenses with enhanced efforts to
      market and sell Company products. There is no assurance that the Company will
      be
      able to generate sufficient cash from operations, sell additional shares of
      Common Stock or borrow additional funds. The Company's inability to obtain
      additional cash could have a material adverse effect on our financial
      position, results of operations and the Company's ability to continue in
      existence. If our losses continue and we are unable to secure additional
      financing, we may ultimately be required to seek protection from creditors
      under
      applicable bankruptcy laws.





At
      March
      31, 2006, the Company had total assets of $872,640 compared to total assets
      of
      $1,568,533 at December 31, 2005. The decrease is mainly due to provisions made
      against advances to XL Generation Canada Inc., an operational agent based in
      Montreal, providing financial and accounting services for the bureau liaison
      in
      Montreal, Canada.





At
      March
      31, 2006, the Company had total current liabilities of $3,983,351. The
      liabilities are mainly due to (i) accrued operational costs; (ii) loan notes
      from shareholders and suppliers; and (iii) warranty costs, in particular for
      replacement of fields in Vancouver, Canada and Interlaken, Switzerland, of
      an
      aggregate of $500,000.





The
      prepaid expenses and sundry current assets are composed of accounts receivable
      $169,872, security deposit for the New York office $15,967 and subscription
      receivable $38,385 for a total of $224,224 at March 31, 2006.





Since
      its
      formation, XL Generation AG has received advances from Mr. Albert Beerli, a
      stockholder and (since March 2006) director, to cover the general overhead
      and
      running costs of XL Generation AG's offices in Zug, Switzerland. The total
      balance of amounts advanced as of March 31, 2006 was equal to $676,873 (the
      same
      as of December 31, 2005).





Between
      April 2005 and September 2005, Capex Investments Limited (which is affiliated
      with Capex Investments (Canada) Limited) loaned the Company $1,500,000. On
      September 12, 2005, Capex Investments Limited entered into a Loan Agreement
      with
      the Company, pursuant to which Capex Investments Limited loaned the Company
      an
      additional $500,000.





During
      the first quarter of 2006 the Company received an advance of approximately
      $478,000 on future finance initiatives.





In
      the
      first quarter of 2006, the Company focused considerable resources on further
      developing its outdoor turf products. In addition, the Company also experienced
      increased costs of sales and marketing, employee travel and operational expenses
      in connection with entering into new sales agreements.





The
      financial conditions of the Company raise substantial doubt about the Company's
      ability to continue as a going concern. Management's plan for the Company's
      continued existence includes selling additional stock through private placements
      and borrowing additional funds to pay overhead expenses while maintaining
      marketing efforts to raise the Company’s sales volume. The future success of the
      Company is dependent upon its ability to achieve profitable operations, generate
      cash from operating activities and obtain additional financing. There is no
      assurance that the Company will be able to generate sufficient cash from
      operations, sell additional shares of Common Stock or borrow additional funds.
      The inability of the Company to obtain additional cash could have a material
      adverse effect on its financial position, results of operations and its ability
      to continue as a going concern.




15





**Off-Balance
      Sheet Arrangements**





The
      Company is not a party to any off-balance sheet arrangements.





**ITEM
      3.** ****  **Control
      and Procedures**




As
      of the
      end of the period covered by this report, an evaluation was carried out under
      the supervision and with the participation of the Company’s management,
      including the Company’s Chief Executive Officer and Chief Financial Officer, of
      the effectiveness of the Company’s disclosure controls and procedures, as
      defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act
      of
      1934 (the “Exchange Act”). Based on their evaluation, the Company’s Chief
      Executive Officer and Chief Financial Officer have concluded that the Company’s
      disclosure controls and procedures are effective to ensure that information
      required to be disclosed by the Company in reports that it files or submits
      under the Exchange Act is accumulated and communicated to the Company's
      management, including the Company's Chief Executive Officer and Chief
      Financial Officer, to allow timely decisions on required disclosure and
      is recorded, processed, summarized and reported within the time periods
      specified in Securities and Exchange Commission rules and forms. There have
      been
      no changes in the Company’s internal controls over financial reporting during
      the Company’s most recently completed fiscal quarter that have materially
      affected, or are reasonably likely to materially affect, our internal controls
      over financial reporting.




16




**PART
      II**  **OTHER
      INFORMATION**





**Item
      1.**  **Legal
      Proceedings**





The
      Company is not, and has not been during the period covered by this report,
      a
      party to any legal proceedings.





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





**November
      8, 2005 issuance of Common Stock and Series A Warrants (Warrants exercised
      February 17, 2006 and March 30, 2006)**





On
      November 8, 2005, the Company entered into a Common Stock Purchase Agreement
      with each of Capex Investments Limited, Aton Select Fund Limited and Asset
      Protection Fund Limited (each a "Purchaser," and collectively, the
      "Purchasers"). Pursuant to the Common Stock Purchase Agreements, each Purchaser
      agreed to pay one million dollars ($1,000,000) to purchase from the Company
      (i)
      1,111,111 shares of the Company's Common Stock; and (ii) Series A Warrants
      entitling each Purchaser to purchase up to an additional 1,111,111 shares of
      the
      Company's Common Stock at an exercise price initially set at $1.25 per share.
      The Series A Warrants were to expire on November 8, 2007, and contained
      customary adjustment provisions in the event of changes in the capitalization
      of
      the Company. In connection with these Common Stock Purchase Agreements, the
      Company entered into a Registration Rights Agreement with each of the
      Purchasers, pursuant to which the Company agreed to register a total of
      2,222,222 shares for each Purchaser, representing the total number of shares
      of
      Common Stock sold to such Purchaser and those shares of Common Stock to be
      issued to the Purchaser upon the exercise of the Series A Warrant.





The
      offering price for the aggregate of 3,333,333 shares of the Company's Common
      Stock and Series A Warrants to purchase up to an additional 3,333,333 shares
      of
      the Company' Common Stock was a total of $3,000,000 (consisting of $1,000,000
      from each of the Purchasers). No underwriting commissions were paid or discounts
      granted to underwriters.





The
      Company entered into the aforementioned transaction in reliance upon the
      exemption from securities registration afforded by Section 4(2) of the U.S.
      Securities Act of 1933, as amended, and the rules and regulations promulgated
      thereunder, including Rule 506 of Regulation D and Regulation S promulgated
      thereunder. Each of the Purchasers have represented in their respective Common
      Stock Purchase Agreements that they are an "accredited investor" (as defined
      in
      Rule 501 of Regulation D) and that they are not a "U.S. Person" (as such term
      is
      defined in Regulation S).





On
      December 5, 2005, the Company and two of the three Purchasers agreed to an
      amendment of the terms of the aforementioned transaction. Aton Select Fund
      Limited agreed to the cancellation of the Series A Warrant it was granted
      pursuant to the Common Stock Purchase Agreement executed on November 8, 2005,
      and relinquished its right to purchase up to an additional 1,111,111 shares
      of
      the Company's Common Stock at $1.25 per share. Asset Protection Fund Limited
      agreed to reduce the number of shares of the Company's Common Stock it is
      entitled to purchase pursuant to the Series A Warrants from 1,111,111 to 330,000
      shares.




On
      February 17, 2006, Asset Protection Fund Limited exercised its Series A
      Warrants, paying the Company $412,500 to acquire 330,000 shares of the Company’s
      Common Stock. Those shares were issued on February 26, 2006.





On
      March
      30, 2006, Capex Investments Limited exercised its Series A Warrants, paying
      the
      Company $1,388,888.75 to acquire 1,111,111 shares of the Company’s Common Stock
      that were issued on the same date as the warrants exercise.





The
      shares of restricted Common Stock issued pursuant to exercise of the warrants
      were exempt from registration under Section 4(2) of the U.S. Securities Act
      of
      1933, as amended, in reliance on Regulation S promulgated
      thereunder.




17





**December
      6, 2005 issuance of Common Stock and Series B Warrants (Warrants exercised
      January 31, 2006)**





On
      December 6, 2005, the Company entered into a Common Stock Purchase Agreement
      with Professional Trading Services SA. Pursuant to the Common Stock Purchase
      Agreements, Professional Trading Services SA agreed to pay four hundred thousand
      dollars ($400,000) to purchase from the Company (i) 400,000 shares of the
      Company's Common Stock; and (ii) Series B Warrants entitling Professional
      Trading Services SA to purchase up to an additional 800,000 shares of the
      Company's Common Stock at an exercise price initially set at $1.25 per share.
      The Series B Warrants were to expire on June 6, 2006, and contained customary
      adjustment provisions in the event of changes in the capitalization of the
      Company. In connection with this Common Stock Purchase Agreement, the Company
      entered into a Registration Rights Agreement with Professional Trading Services
      SA, pursuant to which the Company agreed to register 1,200,000 shares for
      Professional Trading Services SA, representing the total number of shares of
      Common Stock sold to such Professional Trading Services SA and those shares
      of
      Common Stock to be issued to Professional Trading Services SA upon the exercise
      of the Series B Warrant.





The
      offering price for the 400,000 shares of the Company's Common Stock and Series
      B
      Warrants to purchase up to an additional 800,000 shares of the Company' Common
      Stock was a total of $400,000. No underwriting commissions were paid or
      discounts granted to underwriters.





The
      Company entered into the aforementioned transaction in accordance with and
      in
      reliance upon the exemption from securities registration afforded by Section
      4(2) of the U.S. Securities Act of 1933, as amended, and the rules and
      regulations promulgated thereunder, including Regulation D and Regulation S
      promulgated thereunder. Professional Trading Services SA represented in the
      Common Stock Purchase Agreements that it is an "accredited investor" (as defined
      in Rule 501 of Regulation D) and that it is not a "U.S. Person" (as such term
      is
      defined in Regulation S).





On
      January 31, 2006, Professional Trading Services SA exercised its Series A
      Warrants, paying the Company $1,000,000 to acquire 800,000 shares of the
      Company’s Common Stock.





**December
      27, 2005 issuance of Common Stock and Series B Warrants (Warrants exercised
      February 2, 2006)**





On
      December 27, 2005, the Company entered into an Amended and Restated Common
      Stock
      Purchase Agreement with Bank Sal. Oppenheim jr. & Cie. (Switzerland)
      Limited. Pursuant to this Common Stock Purchase Agreement, Bank Sal. Oppenheim
      jr. & Cie. (Switzerland) Limited agreed to pay three hundred thousand
      dollars ($300,000) to purchase from the Company (i) 300,000 shares of the
      Company's Common Stock; and (ii) Series B Warrants entitling Bank Sal. Oppenheim
      jr. & Cie. (Switzerland) Limited to purchase up to an additional 600,000
      shares of the Company's Common Stock at an exercise price initially set at
      $1.25
      per share. The Series B Warrants were to expire on June 6, 2006, and contained
      customary adjustment provisions in the event of changes in the capitalization
      of
      the Company.





The
      offering price for the 300,000 shares of the Company's Common Stock and Series
      B
      Warrants to purchase up to an additional 600,000 shares of the Company's Common
      Stock was a total of $300,000. No underwriting commissions were paid or
      discounts granted to underwriters.





The
      Company entered into the aforementioned transaction in accordance with and
      in
      reliance upon the exemption from securities registration afforded by Section
      4(2) of the U.S. Securities Act of 1933, as amended, and the rules and
      regulations promulgated thereunder, including Regulation S. Bank Sal. Oppenheim
      jr. & Cie. (Switzerland) Limited represented in the Common Stock Purchase
      Agreements that it is not a "U.S. Person" (as such term is defined in Regulation
      S).




On
      February 2, 2006, Bank Sal. Oppenheim jr. & Cie. (Switzerland) Limited
      exercised its Series A Warrants, paying the Company $750,000 to acquire 600,000
      shares of the Company’s Common Stock.





**April
      6, 2006 issuance of Common Stock**




On
      April
      6, 2006, the Company, XL Generation AG and Stadium SA entered into a Stock
      Purchase Agreement (the "Stadium Stock Purchase Agreement") pursuant to which
      Stadium SA agreed to accept 1,236,824 restricted shares of the Company’s Common
      Stock in lieu of repayment of XL Generation AG indebtedness to Stadium SA of
      2,950,000 Euros (approximately $3,584,545). Previously, the Terenvi Society
      had
      loaned XL Generation AG 1,600,000 Euros pursuant to a loan agreement dated
      December 16, 2004 (the “Terenvi Loan”). The Terenvi Society subsequently
      assigned the right to receive re-payment of the Terenvi Loan to Stadium SA.
      XL Generation AG previously entered into a distribution agreement with the
      Soreve Society on April 13, 2004 (the “Soreve Distribution Agreement”). The
      Soreve Society subsequently transferred to Stadium SA its payment rights under
      the Soreve Distribution Agreement. Pursuant to the Stadium Stock Purchase
      Agreement, the Company agreed to intervene and resolve the indebtedness of
      XL
      Generation AG in respect of the Terenvi Loan and Soreve Distribution
      Agreement by issuing shares of restricted Company Common Stock
      in satisfaction of XL Generation AG obligations. The Company entered into
      the aforementioned transaction involving issuance of restricted securities
      in
      reliance upon exemptions from securities registration afforded by Section 4(2)
      of the U.S. Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder, including Regulation S. Stadium SA represented in the
      Stadium Stock Purchase Agreements it is not a "U.S. Person" (as such term is
      defined in Regulation S).




18




**April
      28, 2006 issuance of common stock**




On
      April
      28, 2006, the Company entered into a Common Stock Purchase Agreement with Poma
      Management SA ("Poma"). Pursuant to the Common Stock Purchase Agreement, Poma
      agreed to pay five hundred thousand dollars ($500,000) to purchase 200,000
      shares of restricted Company Common Stock. The aggregate sale price for the
      200,000 shares of the Company's Common Stock was of $500,000. No underwriting
      commissions were paid or discounts granted to underwriters. The Company entered
      into the aforementioned transaction in accordance with and in reliance upon
      the
      exemption from securities registration afforded by Section 4(2) of the U.S.
      Securities Act of 1933, as amended, and the rules and regulations promulgated
      thereunder, including Regulation D and Regulation S promulgated thereunder.
      Poma
      represented in the Common Stock Purchase Agreements that it is an "accredited
      investor" (as defined in Rule 501 of Regulation D) and that it is not a "U.S.
      Person" (as such term is defined in Regulation S).





**Item
      3.**  **Defaults
      Upon Senior Securities**





None.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders**





None.





**Item
      5.**  **Other
      Information**





**Election
      of a Director**





On
      March
      17, 2006, Albert Beerli, holder of 4.6% of the shares of Common Stock of the
      Company, and Director of XL Generation AG was appointed Director of the Company,
      by a unanimous resolution of the Board of Directors. The Company Bylaws provides
      that any vacancy occurring in the Board of Directors, including a vacancy
      created by an increase in the number of Directors, may be filled by the
      shareholders or by the affirmative vote of a majority of the remaining Directors
      though less than a quorum of the Board of Directors. The Company shall have
      at
      least two (2) and not more than seven (7) Directors. Mr. Beerli is a scientist,
      having received his Ph.D in chemical engineering in 1969. Since 1988, Mr. Beerli
      has served as the Chief Executive Officer of Zenwex AG in Zug, Switzerland.
      Zenwex AG provides consulting services on scientific and technical matters.





**Prospective
      Corporate Structure Modification**




In
      order
      to improve the efficiency of the Company and to adapt to new markets, the Board
      of Directors is considering the development of a Company corporate structure
      modification plan (the “Plan”). The actions under consideration for inclusion in
      the Plan include possible merger, acquisition, tender offer, leveraged buyout,
      divestiture, spin-off, equity carve-out, liquidation or reorganization. The
      Plan
      may provide for the acquisition of additional subsidiaries or engagement of
      experts specialized in the fields of Company operations and in the markets
      of Company presence, such as North America and Europe. This may allow the
      Company to developed new clients and improve business relations with a view
      to
      increase sales. The Board of Directors is also assessing how it can
      reasonably reduce expenditures. The Company is currently exploring potential
      efficiencies in production overhead and possible reduction in personnel. The
      outline of the Plan is in a preliminary stage and subject to further review
      and
      revision by the Board of Directors.




19





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





(a)  Reports
      on Form 8-K





On
      February 7, 2006, the Company filed a Form 8-K in connection with a press
      release the Company issued on February 7, 2006 (the “Press Release”). The Press
      Release announced that XL Generation AG would be the major sponsor of the
      upcoming “Planetfutbol” biennial event. In addition, the Press Release announced
      that XL Generation AG had appointed Mr. Eric Wynalda as XL Generation AG's
      North
      America Sales Director.





On
      March
      16, 2006, the Company filed a Form 8-K disclosing that as of March 10, 2006,
      Mr.
      Harnam Kakkar resigned as a member of the Company’s Board of Directors to pursue
      other professional activities. Mr. Kakkar had served on the Company’s Board of
      Directors since December 2005. Mr. Kakkar expressed no disagreements with
      management in regard to his reasons for resigning from the Company’s Board of
      Directors.





On
      March
      23, 2006, the Company filed a Form 8-K disclosing the following three items.
      First, it was disclosed that on March 17, 2006, the Company’s Board of Directors
      appointed Mr. Albert Beerli as a Director. Second, it was disclosed that
      effective as of March 17, 2006, the Company amended Article III, Section 1
      of
      its Bylaws. Third, the Form 8-K disclosed that as of March 17, 2006, the Company
      changed its principal office mailing address to Sumpfstrasse 32, 6304 Zug,
      Switzerland. The Company’s new telephone number is 011 4141 723
      1090.





(b)  Exhibits





20





Exhibit
              No.
            Description
              of
              ExhibitsExhibit
                3.4
            Bylaws,
                as amended on March 17, 2006, incorporated by reference to Exhibit
                3.4 to
                the Company's Annual Report on Form 10-KSB filed with the Securities
                and
                Exchange Commission on April 13, 2006.Exhibit
                10.27
            Employment
                Agreement, dated as of March 30, 2006, by and among XL Generation
                AG and
                Alain Lemieux, incorporated by reference to Exhibit 10.27 to the
                Company's
                Annual Report on Form 10-KSB filed with the Securities and Exchange
                Commission on April 13, 2006.Exhibit
                10.28
            Employment
                Agreement, dated as of March 30, 2006, by and among XL Generation
                AG and
                Daniel Courteau, incorporated by reference to Exhibit 10.28 to the
                Company's Annual Report on Form 10-KSB filed with the Securities
                and
                Exchange Commission on April 13, 2006.Exhibit
                10.29
            Employment
                Agreement, dated as of March 30, 2006, by and among XL Generation
                AG and
                Flemming Munck, incorporated by reference to Exhibit 10.29 to the
                Company's Annual Report on Form 10-KSB filed with the Securities
                and
                Exchange Commission on April 13, 2006.Exhibit
                10.34
            Management
                Fee Arrangement, dated as of January 2006, by and between XL Generation
                AG
                and Polyprod Inc., incorporated by reference to Exhibit 10.34 to
                the
                Company's Annual Report on Form 10-KSB filed with the Securities
                and
                Exchange Commission on April 13, 2006.Exhibit
                10.39
            XL
                Generation International Inc. 2006 Equity Incentive Plan, incorporated
                by
                reference to Exhibit 10.39 to the Company's Annual Report on Form
                10-KSB
                filed with the Securities and Exchange Commission on April 13,
                2006.





Exhibit
                31.1
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.Exhibit
                31.2
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.Exhibit
                32.1
            Certification
                of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.Exhibit
                32.2
            Certification
                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.




21




**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the Registrant has caused
      this report to be signed on its behalf by the undersigned thereunto duly
      authorized.





**XL
                GENERATION INTERNATIONAL INC.**May
                22, 2006By:
            /s/ Alain
                LemieuxName:Alain
                LemieuxTitle:Principal
                Executive Officer





By:
            /s/ Flemming
                MunckName:Flemming
                MunckTitle:Principal
                Financial Officer and PrincipalAccounting
                Officer






22