U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   FORM 10-QSB


         [X] Quarterly report under Section 13 or 15(d) of the Securities
         Exchange Act of 1934

         For the quarterly period ended December 31, 2004
                                        -----------------

         [ ] Transition report under Section 13 or 15(d) of the Exchange Act

         For the transition period from __________ to __________

                         Commission File Number 0-49659

                                    XRG, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

                   DELAWARE                                  58-2583457
                   --------                                    ----------
         (State or Other Jurisdiction of                  (I.R.S. Employer
          Incorporation or Organization)                 Identification No.)

            601 Cleveland Street, Suite 820 Clearwater, Florida 33755
                    (Address of Principal Executive Offices)

                                 (727) 475-3060
                           (Issuer's Telephone Number)


         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 a
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

Yes               No    X
     ---               ---

         The number of shares outstanding of the Issuer's Common Stock, $.001
Par Value, as of February 22, 2005 was 14,504,871.

         Transitional Small Business Disclosure Format:

Yes               No    X
     ---               ---



<PAGE>





<TABLE>
<CAPTION>





                                                  XRG, Inc. and Subsidiaries



                                                             Index



                                                                                                            Page
Part I - Financial Information
------------------------------
<S>                                                                                                      <C>


Item 1.  Consolidated Financial Statements (Unaudited)

         Consolidated Balance Sheet -
           December 31, 2004.......................................................................           1

         Consolidated Statements of Operations -
           Three and Nine months ended December 31, 2004 and 2003..................................           2

         Consolidated Statements of Cash Flows -
           Nine months ended December 31, 2004 and 2003............................................           3

         Notes to Consolidated Financial Statements................................................           5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations.....................................................          17

Item 3.  Controls & Procedures.....................................................................          26

Part II - Other Information

Item 1. Legal Proceedings..........................................................................          29

Item 2. Change in Securities and Use of Proceeds...................................................          29

Item 3. Defaults Upon Senior Securities............................................................          31

Item 5. Other Information..........................................................................          33

Item 6. Exhibits and Reports on Form 8-K...........................................................          33


         Signatures................................................................................          35



</TABLE>







<PAGE>
<TABLE>
<CAPTION>


                                         XRG, Inc. and Subsidiaries
                                         Consolidated Balance Sheet



                                                                                       December 31, 2004
                                                                                       -----------------
Assets                                                                                     (Unaudited)
<S>                                                                             <C>
Current assets:
   Accounts receivable, net of allowance of $133,746                               $           4,958,170
   Other current assets                                                                          907,294
                                                                                             -----------
Total current assets                                                                           5,865,464
                                                                                             -----------

Fixed assets, net of accumulated depreciation                                                  5,411,812

Other assets
   Goodwill                                                                                    4,606,520
   Other assets                                                                                   35,338
                                                                                             -----------
Total other assets                                                                             4,641,858
                                                                                             -----------

                                                                                   $          15,919,134
                                                                                             ===========

Liabilities and Stockholders' Equity

Current liabilities:

   Current portion of long-term debt                                               $           1,840,806
   Current portion of long-term convertible debt;
     net of unamortized discount of $73,725                                                      231,276
   Current portion of capital lease obligations                                                    6,111
   Bank overdraft                                                                                630,205
   Accounts payable                                                                              762,759
   Accrued expenses                                                                              623,765
   Accrued purchased transportation                                                              102,798
   Accrued payroll expenses                                                                      234,424
   Factor line of credit                                                                       3,487,968
   Related party advances and payables                                                           163,126
                                                                                             -----------
Total current liabilities                                                                      8,083,238
                                                                                             -----------

Long-term liabilities:

   Notes payable                                                                               2,468,809
   Other long-term liabilities                                                                    55,923
                                                                                             -----------
Total long-term liabilities                                                                    2,524,732

                                                                                             -----------
Total liabilities                                                                             10,607,970
                                                                                             -----------

Stockholders' equity:
   Common stock; $.001 par value; 25,000,000 shares authorized;
     14,500,040 shares issued and outstanding                                                     14,500
   Common stock to be issued                                                                      24,000
   Additional paid-in capital                                                                 33,137,265
   Subscription receivable                                                                      (380,000)
   Accumulated deficit                                                                       (26,304,600)
   Treasury stock; at cost, 210,500 shares                                                    (1,180,000)
                                                                                             -----------
Total stockholders' equity                                                                     5,311,165
                                                                                             -----------

                                                                                   $          15,919,134
                                                                                             ===========

</TABLE>

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



                                        1
<PAGE>

                           XRG, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                          Three months ended December 31,            Nine months ended December 31,
                                                          ---------------------------------         -------------------------------
                                                              2004                  2003                2004               2003
                                                          ------------         ------------         ------------       ------------
<S>                                                 <C>                  <C>                  <C>                <C>
Revenues                                               $   12,130,523       $      908,066       $   33,985,161     $    1,206,291

Cost of revenues                                            8,078,692              228,130           26,470,154            251,100
                                                          ------------         ------------         ------------       ------------
Gross profit                                                4,051,831              679,935            7,515,007            955,190

Selling, general and administrative expenses                3,521,524              281,921           10,166,562          1,507,546
Settlement loss                                                     -                    -              744,582                  -
                                                          ------------         ------------         ------------       ------------
                                                            3,521,524              281,921           10,911,144          1,507,546
                                                          ------------         ------------         ------------       ------------

Income (loss) from operations                                 530,307              398,014           (3,396,137)          (552,356)

Interest expense                                             (482,296)            (153,799)          (1,606,750)          (222,741)

Intrinsic value of convertible debt and debt discount
   for value of  detachable warrants                                -                    -             (153,844)          (551,798)
                                                          ------------         ------------         ------------       ------------
                                                             (482,296)            (153,799)          (1,760,594)          (774,539)
                                                          ------------         ------------         ------------       ------------

Net income (loss) applicable to common shareholders     $      48,011       $      244,215        $  (5,156,731)     $  (1,326,895)
                                                          ============         ============         ============       ============

Basic income (loss) per common shareholder              $        0.00       $         0.22        $       (0.49)     $       (1.59)
                                                          ============         ============         ============       ============
Basic weighted average number of
      common shares outstanding                            13,920,467            1,110,354           10,456,005            832,791
                                                          ============         ============         ============       ============

Diluted income (loss) per common shareholder            $        0.00       $         0.21        $       (0.49)     $       (1.59)
                                                          ============         ============         ============       ============
Diluted weighted average number of
      common shares outstanding                            14,419,348            1,165,123           10,456,005            832,791
                                                          ============         ============         ============       ============

</TABLE>


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



                                        2
<PAGE>



                           XRG, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                                  (unaudited)
<TABLE>
<CAPTION>

                                                                                                    Nine months ended December 31,
                                                                                                 ----------------------------------
                                                                                                       2004                2003
<S>                                                                                     <C>                    <C>
Operating activities
        Net loss                                                                           $        (5,156,731)   $      1,326,895)
                                                                                                 --------------      --------------
        Adjustments to reconcile net loss to net cash
          used by operating activities:
              Depreciation and amortization                                                            704,061              10,249
              Bad debt                                                                                 112,746                   -
              Common stock, options and warrants issued for services and compensation                1,290,536             856,076
              Stock issued in lieu of interest                                                         188,400               4,955
              Amortization of discount and intrinsic value of convertible notes                         73,725             671,053
              Amortization of deferred financing fees                                                   20,442                   -
              Amortization of deferred stock compensation and consulting                               163,689                   -
              Settlement loss                                                                          707,131                   -
              (Increase) decrease, net of effect of acquisitions:
                Accounts receivable                                                                 (1,719,579)            (66,408)
                Other assets                                                                          (681,954)                  -
              Increase (decrease), net of effect of acquisitions:
                Accounts payable                                                                        (3,630)             46,278
                Accrued expenses and other liabilities                                                 107,183               9,491
                                                                                                 --------------      --------------
          Total adjustments                                                                            962,750           1,531,694

                                                                                                 --------------      --------------
          Net cash used by operating activities                                                     (4,193,981)            204,799
                                                                                                 --------------      --------------

Investing activities
        Purchase of equipment                                                                         (567,673)             (1,305)
        Acquisition for business, net of $39,787 cash acquired in acquisition                       (1,960,213)                  -
        Deposit on purchase of transportation equipment                                                      -             (50,000)
                                                                                                 --------------      --------------
        Net cash used by investing activities                                                       (2,527,886)            (51,305)
                                                                                                 --------------      --------------

Financing activities

        Bank overdraft                                                                                 578,874             191,084
        Increase in advances to J. Bently Companies, Inc.                                                    -          (1,142,653)
        Factoring line of credit                                                                       683,151              59,094
        Net borrowings (payments) on stockholder advances                                             (260,000)             38,500
        Proceeds from common stock issued and to be issued and options exercised                     6,730,853             463,918
        Proceeds from common stock to be issued                                                              -              80,000
        Proceeds from issuance of notes payable, net                                                   421,611             270,000
        Principal payments on notes payable                                                         (1,271,520)            (30,000)
        Payment for treasury stock                                                                     (95,000)           (100,000)
        Payments on capital lease                                                                      (66,102)                  -
                                                                                                --------------      --------------
        Net cash provided by financing activities                                                    6,721,867            (170,057)
                                                                                                --------------      --------------
        Net increase in cash                                                                                 0             (16,563)

        Cash at beginning of period                                                                          0              16,563
                                                                                                --------------      --------------
        Cash at end of period                                                             $                  0   $               0
                                                                                                ==============      ==============


</TABLE>

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


                                       3
<PAGE>


                           XRG, Inc. and Subsidiaries
                Consolidated Statements of Cash Flows (Continued)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                  Nine Months Ended
                                                                      December 31,
                                                               2004              2003
                                                          --------------------------------
Supplemental disclosures of cash flow
        information and noncash investing
        and financing activities:
<S>                                                    <C>
               Cash paid during the period for interest     $614,935          $64,139
                                                          ================================
</TABLE>

        During the first quarter of 2004, note holders converted $490,000 in
        notes payable into 122,500 shares of common stock.

        During the first quarter of 2004, the Company issued 1,250,000 shares of
        common stock in exchange for the cancellation of 5,000,000 shares of
        Series A Preferred Stock to three executives.

        During the first quarter of 2004, the Company issued 3,000,000 shares of
        its common stock in conjunction with a cashless warrant exercise by a
        warrant holder valued at $60,000.

        During the first quarter of 2004, the Company issued 580,000 shares of
        common stock in conjunction with several acquisitions. The estimated
        fair value of assets acquired was $16,742,530 and the fair value of
        liabilities assumed was $11,037,680. (see Note 7 below for a detailed
        discussion of these acquisitions). During the second quarter of 2004,
        the Company amended the agreement with Express Freight Systems, Inc.'s
        (EFS) prior shareholders which requires the EFS prior shareholders to
        return 187,500 shares of common stock which was recorded as treasury
        stock at September 30, 2004.

        During the second quarter of 2004, the Company granted warrants to
        purchase approximately 1,123,041 shares of its common stock for offering
        costs fees. These warrants were valued at $5,205,003.

        During the second quarter 2004, the Company issued 25,000 shares of
        common stock in exchange for consulting services valued at $135,000
        which was recorded as deferred consulting expense. In the second quarter
        of 2004 the Company determined that no more services will be performed
        so it was all expensed during September 2004.

        During the quarter ended June 30, 2004, the Company issued 5,557,717
        shares of its common stock that was recorded as common stock payable at
        March 31, 2004.

        During the second quarter of 2004, the Company recorded 50,000 shares of
        common stock as issuable as a settlement with a prior employee. These
        shares were valued at $180,000 and recorded as a settlement loss.

        During the second quarter of 2004, the Company agreed to issue 95,833
        shares of its common stock to investors who purchased stock during the
        first quarter of 2004 to bring their purchase price to $0.10 per share.

        Prior to March 31, 2004, an investor invested $200,000 which was
        classified as common stock payable at March 31, 2004. During the six
        month period ended September 30, 2004, per the investor's request,
        $100,000 of the $200,000 investment was reclassified to an advance to
        the Company.

        During the three months ended December 31, 2004, we raised $1,375,000 in
        exchange for 875,000 shares of Common Stock pursuant to a Stock Purchase
        Agreement from various investors. There were Finder's Fees associated
        with this financing consisting of $154,500 and Common Stock Purchase
        Warrants representing the right to purchase 527,000 shares of Common
        Stock at $2.00.

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


                                       4
<PAGE>

                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)

1.  Consolidated Financial Statements

In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three and nine months ended December 31, 2004 and 2003, (b)
the financial position at December 31, 2004, and (c) cash flows for the nine
month periods ended December 31, 2004 and 2003, have been made.

The unaudited condensed consolidated financial statements and notes are
presented as permitted by Form 10-QSB. Accordingly, certain information and note
disclosures normally included in condensed consolidated financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been omitted. The accompanying condensed
consolidated financial statements and notes should be read in conjunction with
the audited consolidated financial statements and notes of the Company for the
fiscal year ended March 31, 2004. The results of operations for the nine-month
period ended December 31, 2004 are not necessarily indicative of those to be
expected for the entire year.

The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company incurred
operating losses of approximately $3,396,000 for the nine months ended December
31, 2004, has an accumulated deficit at December 31, 2004 of approximately
$26,305,000, which consists of approximately $15,405,000 from unrelated dormant
operations and $10,900,000 from current operations; and a tangible net worth of
approximately $705,000 as of December 31, 2004. In addition, the Company has
negative working capital of approximately $2,218,000 at December 31, 2004 and
has used approximately $4,194,000 of cash from operations for the nine months
ended December 31, 2004. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets or the amounts and classification of
liabilities that might be necessary in the event the Company cannot continue in
existence.

The Company has established and begun to implement the first phase of a profit
improvement plan to achieve a more streamlined and efficient operation. As part
of this plan, the Company is identifying savings opportunities associated mostly
with redundancies and economies of scale. The Company is focusing these efforts
on improvement in operating ratios and tractor utilization (average revenue per
tractor per week.) The first stage of this plan included the restructuring of
the Company's Express Freight Systems, Inc., acquisition on August 16, 2004. In
addition, the Company restructured its asset purchase of Highbourne Corporation
on October 4, 2004. These restructurings fix our operating costs associated with
these companies through an agency arrangement under terminal agreements. The
Company's profit improvement plan may decrease its operating losses in the
future, however, there is no assurance that this plan will be effective in
obtaining profitability for the Company.

                               Revenue Recognition
                               -------------------

The Company recognizes operating revenues (including fuel surcharge revenues)
and related direct costs when the shipment is delivered. For shipments where a
third-party provider is utilized under an agency arrangement to provide some or
all of the service and the Company is the primary obligor in regards to the
delivery of the shipment, establishing customer pricing, and has credit risk on
the shipments, the Company records both revenues for the dollar value of
services billed by the Company to the customer and purchased transportation
expense for the costs of transportation paid by the Company to the agent upon
delivery of the shipment. Accordingly, revenue and the related direct freight
expenses of our business and our agency arrangements are recognized on a gross
basis upon completion of freight delivery. Fuel surcharges billed to customers
for freight hauled by our agency arrangements are excluded from revenue and paid
in entirety to the Agents.

                        Stock Based Employee Compensation
                        ---------------------------------

For the stock options issued to employees, we have elected to apply the
intrinsic value based method of accounting prescribed by Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Under the intrinsic value based method, compensation
cost is measured on the date of grant as the excess of the quoted market price
of the underlying stock over the exercise price. Such compensation amounts are
amortized over the respective vesting periods of the options.



                                       5
<PAGE>

                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)


The following table illustrates the effect on net loss and loss per share as if
the fair value based method of accounting had been applied to stock-based
employee compensation, as required by SFAS No. 123, "Accounting for Stock-Based
Compensation" and SFAS 148 "Accounting for Stock-Based Compensation - transition
and disclosure", an amendment of SFAS No. 123 for the three and nine months
ended December 31, 2004 and 2003:

On July 1, 2004, ten year options to purchase 20,000 shares of the Company's
common stock option plan were granted to the Chief Executive Officer of the
Company at an exercise price of $.207 per share. Such options vest immediately.
Fair value was determined at the date of grant using the Black-Scholes option
pricing model using an expected dividend yield of -0-; a risk free interest rate
of 1.11%; expected stock volatility of 46.17% and an expected option life of ten
years.


<TABLE>
<CAPTION>


                                                              Three months ended              Nine months ended
                                                                  December 31,                   December 31,
                                                                 -------------                   ------------
                                                          2004              2003            2004               2003
                                                          ----              ----            ----               ----
<S>                                            <C>               <C>             <C>               <C>

   Net loss, as reported                          $         48,011  $      244,215  $    (5,156,731)  $     (1,326,895)
   Deduct:  Fair value of stock-based employee
                compensation costs                               -               -          (13,205)                 -
   Plus:      Intrinsic value of compensation
               costs included in net loss                        -               -           13,200                  -

                                                   ---------------   --------------   ---------------   ---------------
   Pro forma net income (loss)                    $         48,011         244,215  $    (5,156,736)  $     (1,326,895)
                                                    ===============  ==============   ===============   ===============

   Loss per share:
    Basic - as reported                           $           0.00            0.22  $         (0.49)  $          (1.59)
                                                    ===============  ==============   ===============   ===============
    Basic - pro forma                             $           0.00            0.22  $         (0.49)  $          (1.59)
                                                    ===============  ==============   ===============   ===============

</TABLE>

The Company estimates the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model.

2.  Per Share Calculations

Per share data was computed by dividing net income (loss) by the basic and
diluted weighted average number of shares outstanding during the three and nine
months ended December 31, 2004 and during the three and nine months ended
December 31, 2003. Common stock equivalents during certain periods were
anti-dilutive due to the net losses sustained by us during those periods, thus
the diluted weighted average common shares outstanding in these periods are the
same as the basic weighted average common shares outstanding.

3.  Fixed assets

As of December 31, 2004, the Company had the following fixed assets:





                                       6
<PAGE>




                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)


         Trailers                                    $     3,680,800
         Tractors                                          2,111,250
         Machinery and equipment                               8,000
         Office equipment and software                       221,909
                                                    ----------------
                                                           6,021,959

         Accumulated depreciation                            610,147
                                                    ----------------
         Total Fixed assets, net                     $     5,411,812
                                                    ================

During the first quarter of 2004, the Company acquired fixed assets totaling
$7,681,350 related to the acquisitions it made (See acquisition note below).
During the second quarter of 2004, the Company recorded $1,369,800 of assets
related to J. Bently Companies, Inc. commercial trailer equipment and reduced
fixed assets by $3,620,491 in accordance with the amended agreement entered into
with Express Freight Systems, Inc. prior shareholders during the second quarter
(See acquisition note below).

Depreciation totaled approximately $704,100 and $10,200 for the nine months
ended December 31, 2004 and 2003, respectively.

4. Notes Payable

During the first quarter of 2004, certain note holders converted notes totaling
$490,000 to common stock. The Company issued 122,500 shares of its common stock
to these note holders for this conversion.

The following table outlines the notes payable balance for each entity at
December 31, 2004:

XRG, Inc. - Notes  payable:  interest  ranging from 6.00% to
10.00%;  Monthly payments of approximately  $13,500;  due at
various dates between  December 2004 and December  2007; one
note required a balloon  payment of $166,275 due by December
1, 2004,  the lender has  extended the due date to March 31,
2005; Secured by  equipment and securities                             $ 738,953

Carolina  Truck  Connection,  Inc.  ("CTC") - Notes payable;
interest  ranging from 6.48% to 8.53%;  Monthly  payments of
approximately $6,000; due at various dates between September
2005 to December 2008;  one note required a balloon  payment
of  $226,000  due by  November  10,  2004,  the  lender  has
extended the due date to March 31, 2005;
Secured by equipment.                                                    431,308

XRG Logistics, Inc. - Notes payable; interest ranging from
4.08% to 14.34%; Monthly payments of approximately $53,000;
due at various dates between 2004 to 2005;
Secured by equipment.                                                    443,102

Highway  Transport,  Inc. - Notes payable;  interest ranging
from  6.25% to 14.95%;  Monthly  payments  of  approximately
$42,000; due at various dates between 2004 to 2006;
Secured by equipment.  *                                               1,250,097




                                       7
<PAGE>



                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)



RSV, Inc. - Notes payable; interest
ranging from 5.25% to 9.50%; Monthly payments of approximately
$59,000; due at various dates between 2004 to
2008; Secured by equipment. *                                         1,677,431
                                                                      ---------

                                                                $     4,540,891
                                                                      =========

* The Company has an obligation to assume these notes in connection with its
acquisitions. The Company's majority shareholder has indicated its willingness
to assist in the refinancing of the outstanding RSV, Inc. debt which the Company
is obligated to assume in connection with its acquisition of RSV. The failure to
complete the refinancing of the RSV debt and the release of the RSV shareholder
from the personal guarantee would have a material adverse effect on us.

Previously, Barron advanced us $225,809.96 pursuant to a Promissory Note dated
September 10, 2004 (of which $45,000 has been repaid) and a $166,275 Promissory
Note dated October 1, 2004. The proceeds of these notes were used to refinance
certain of the tractor trailer equipment of Carolina Truck Connection, Inc.
("CTC") which we assumed pursuant to our Asset Purchase Agreement with CTC in
April 2004. We have agreed that Barron shall take a lien upon possession of the
CTC tractor/trailer equipment titles which were released from the prior lender
from the proceeds of these notes. Barron has agreed to extend the maturity dates
of these notes to March 31, 2005.

5.  Other Equity Transactions

On June 15, 2004 the Company entered into an agreement with Barron Partners, LP
(Investor) to have the number of shares underlying the warrants owned by Barron
reduced to 3,166,667 and the exercise price of the warrant shares reduced to
$0.01. Simultaneously Barron Partner, LP exercised all of its warrants in a
cashless tender and acquired 3,000,000 shares of the Company's Common Stock
through this exercise.

The Company also entered into a Registration Rights Agreement with the Investor.
The Company is obligated to file a Registration Statement within ninety (90)
days of the final acquisition closing, or on or about July 27, 2004 for the
purpose of registering for resale the common shares and the shares underlying
the Warrants issued to the Investor. The Registration Rights Agreement contains
a liquidated damages provision if we fail to have the subject Registration
Statement declared effective on or before December 26, 2004 and to maintain the
effectiveness of said Registration Statement for two (2) years. The Investor is
also granted incidental piggyback registration rights. On February 18, 2005 the
Company filed a request that its Registration Statement No. 333-12412 filed
under cover of Form SB-2 be withdrawn pursuant to Rule 477. Barron Partners, LP
has agreed to waive all the liquidated damages penalties incurred from the
initial penalty date until December 31, 2004. The total liquidated damages
waived by Barron is approximately $340,000.

In connection with a Stock Purchase Agreement, the Company agreed to cause the
appointment of at least three (3) independent directors and to appoint an audit
committee and compensation committee consisting of a majority of outside
members. If no such directors are appointed, the Company shall pay to the
Investor, pro rata, as liquidated damages an amount equal to twenty four percent
(24%) of the purchase price per annum, payable monthly. Provided that the
Company complies with the independent director covenant, the Investor has agreed
to allow up to fifteen percent (15%) of the voting rights for our shares to be
voted by our Board of Directors for one (1) year. The Company appointed 3
directors on November 15, 2004 and its major shareholder has verbally agreed to
waive these liquidating damages.

In April 2004, the Company collected the $3,250,000 that was recorded as a stock
subscription receivable at March 31, 2004.

In 2004, the Company issued 5,557,717 shares of common stock which were recorded
in common stock payable at March 31, 2004.


                                       8
<PAGE>


                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)

In 2004, the Company issued 1,250,000 shares of common stock in exchange for the
cancellation of 5,000,000 shares of Series A Preferred Stock to three executives
of the Company.

On December 27, 2004 the Certificate of Incorporation for the Company was
amended and the Preferred Stock was eliminated.

In 2004, the Company raised $1,120,000 for 466,667 shares of Common Stock
pursuant to a Stock Purchase Agreement from various accredited investors.

During the first quarter of 2004, the Company received $104,366 and issued
23,286 shares of its common stock related to the exercise of warrants.

In 2004, the Company issued 580,000 shares of common stock with a total value
recorded at $2,703,850 in conjunction with several acquisitions.

In second quarter of 2004, the Company issued 220,000 shares of common stock in
exchange for services and compensation valued at $1,011,000 of which $135,000
was recorded as deferred consulting. In 2004, the remaining deferred consulting
expense of $118,125 was recorded as settlement loss as the consultant was no
longer providing services at September 30, 2004.

In 2004, the Company issued 15,000 shares of its common stock valued at $66,000
for interest on notes payable and recorded a common stock payable for 25,000
shares of its common stock valued at $92,000 for interest on notes payable.

In 2004, per the request of an investor, $100,000 of the $200,000 investment
that was originally recorded as a common stock payable was reclassified to an
advance to the Company. The Company issued 25,000 shares of common stock in 2004
for the remaining $100,000 investment.

In 2004, the Company raised an additional $1,450,000 ($1,252,488 net of cash
offering costs) in exchange for 725,000 shares of Common Stock pursuant to a
Stock Purchase Agreement from various investors in a private placement
transaction. In addition, five-year warrants were issued representing the right
to purchase 181,250 shares of Common Stock at $2.00 per share. At September 30,
2004, 625,000 of these shares were issued and 100,000 shares were recorded in
the common stock payable account.

In second quarter of 2004, the Company granted warrants to purchase
approximately 1,123,042 shares of its common stock for offering fees. These
warrants were valued at $5,205,003. In 2004, the Company issued warrants to
purchase 46,667 of its shares of common stock at an exercise price of $2.00 per
share. These warrants previously had an exercise price of $2.40 to $3.00 per
share and were repriced to $2.00 per share.

Pursuant to the terms of the EFS Merger Agreement the former EFS shareholders
were issued 375,000 shares of the Registrant's common stock. 187,500 shares of
the Company's common stock will be forfeited and returned to the Company as part
of the EFS amendment (See acquisition note 7). These 187,500 shares valued at
$828,750 are recorded as treasury stock. In 2004, the Company also acquired
15,818 shares of stock for $95,000 which brings the total treasury stock to
210,500 at September 30, 2004.

In 2004, the Company reached a settlement with one of its employees. In
accordance with this settlement, the Company recorded a common stock payable of
$180,000 for 50,000 shares to be issued to this former employee. The $180,000
was recorded as a settlement loss for the voluntary termination of the
employee's employment agreement.

In 2004, the Company granted 20,000 common stock options to an employee. The
exercise price was lower than the market value of the therefore the Company
recorded $13,200 value for these options based upon the difference between the
exercise price and the market value of the stock. During the second quarter of
2004, these options were exercised and the Company received $85,902.


                                       9
<PAGE>


                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)

In 2004, the Company agreed to issue 95,833 shares of its common stock to
investors who purchased stock during the first quarter of 2004 to bring their
purchase price to $2.00 per share. Also, 90,000 warrants issued to investors
during the first quarter of 2004 that had an exercise price of $3.00 per share
were reissued at $2.00 per share.

During the three months ended December 31, 2004, we raised $1,375,000 in
exchange for 875,000 shares of Common Stock pursuant to a Stock Purchase
Agreement from various investors. There were Finder's Fees associated with this
financing consisting of $154,500 and Common Stock Purchase Warrants representing
the right to purchase 527,000 shares of Common Stock at $2.00. These shares were
issued to the Investors in a private placement transaction pursuant to Section
4(2) under the Securities Act of 1933, as amended. All Investors have
represented that they are "accredited investors" as that rule is defined under
Rule 501(a) of Regulation D.

6.  Acquisitions

The Company is focused on acquiring, consolidating, and operating short and long
haul truckload carriers. The Company's acquisition strategy targets both asset
and non-asset based truckload carriers in the contiguous 48 states. Based upon
this criteria, the Company made the following acquisitions as outlined below.
The Company is in the process of evaluating the fixed assets purchased, thus the
purchase price allocation has not been finalized and is subject to change.

Express Freight Systems, Inc.
-----------------------------
The Company acquired Express Freight Systems, Inc. on April 21, 2004. Pursuant
to the terms of a Merger Agreement, Express Freight Systems, Inc. ("EFS"), a
Tennessee corporation was the survivor in a merger with a subsidiary of ours.
EFS is now a wholly-owned subsidiary of XRG. EFS is based in Chattanooga,
Tennessee. EFS has an owner-operator based fleet with a pool of approximately
270 trailers which were leased to the Company from an entity owned by the prior
shareholders of EFS pursuant to a Master Equipment Lease Agreement ("MELA").
This lease was recorded as a capital lease obligation of $2,371,397 at the
acquisition date. The MELA required us to pay Express Leasing Systems, Inc.
approximately $55,000 per month for a term of 36 months, at which time the
Company was required to purchase the trailers for $1 million. The Company also
leased the office building through an operating lease with monthly lease
payments of $6,000 through April 30, 2010. The Company also leased a facility in
California which is a month to month lease with monthly lease payments of
$30,677.

Pursuant to the terms of the EFS Merger Agreement $2,000,000 from the Stock
Purchase Agreement was paid to the shareholders of EFS. An additional $1,000,000
was recorded as a liability to the shareholders of EFS and in addition EFS
shareholders were issued 375,000 shares of the Company's common stock as part of
the merger and employment agreements. These shares were valued at $1,657,500 in
total based upon the quoted trading price on the acquisition date. The Company
also issued 17,500 shares for acquisition costs related to this acquisition. The
total purchase price for EFS was $4,734,850.

EFS had a factoring agreement whereby its accounts receivable are factored with
full recourse for unpaid invoices in excess of 90 days old. This agreement
provided for the payment of factoring fees.

EFS, as a wholly-owned subsidiary of ours entered into 6 new employment
agreements with the former shareholders and key employees of EFS. The former
major shareholder of EFS agreed to a 3 year employment agreement. All other
individuals have 10 year employment agreements. Annual compensation ranged from
$125,000 to $250,000 per annum. The agreements contained nondisclosure and
restrictive covenant arrangements. If the agreements are terminated for any
reason other than cause, the employees are due compensation for the remainder of
the employment agreement's term.

The EFS Merger Agreement provided the Company with certain rights of
indemnification in connection with the breach of a representation or warranty by
EFS or its prior shareholders. The Company withheld $100,000 in a cash escrow
agreement to satisfy unpaid taxes and other liabilities. $31,000 of these taxes
and liabilities were paid from escrow during the nine months ended December 31,
2004. The Company also issued a blanket corporate guaranty pursuant to which the
Company guaranteed all obligations of EFS pursuant to the terms of the Merger
Agreement, including but not limited to, the MELA capital lease, and lease for
the EFS offices, which are owned by the wife of the major EFS shareholder and
the employment agreements. The Company's blanket guaranty also contained cross
default provisions.


                                       10
<PAGE>

                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)

On August 12, 2004 the Company's counsel advised the former shareholders of EFS
that the Company believed that there were various breaches of the
representations and warranties by the EFS shareholders in connection with the
EFS Merger. On August 16, 2004 EFS and an entity formed by the former EFS
shareholders, Express Freight, Inc. ("EFI") entered into a Terminal Agreement.
EFS referred to as the Carrier and EFI as the Agent under this Terminal
Agreement. EFI is entitled to a commission of 85% of revenues on shipments that
are secured, processed and supervised under the direction of EFI as the Agent.
Under this Terminal Agreement, EFS as the Carrier is not responsible for any
expenses incurred in the operation of the Agent's terminal. EFS is responsible
for all legal documentation and paperwork and is the primary obligor on
shipments, to pay commissions on line hauls, including accessorial charges and
to provide the Agent weekly summaries of accounts standings and an account of
commissions due. For shipments under this Terminal Agreement EFS is the primary
obligor in regards to the delivery of the shipment, establishing customer
pricing, and has credit risk on the shipments. The Company records both revenues
for the dollar value of services billed by the Company to the customer and
purchased transportation expense for the costs of transportation paid by the
Company to the agent upon delivery of the shipment. Fuel surcharges billed to
customers for freight hauled by this Terminal Agreement are excluded from
revenue and paid in entirety to EFI. In the event either party fails to perform
any covenant or condition under the Terminal Agreement and such default
continues for a period of thirty (30) days after notice, the Terminal Agreement
may be terminated by the non-breaching party. The parties agree that if a
default occurs on the part of the Agent that is not cured, or if the Agent
terminates the Terminal Agreement, the damages payable to us will be Two Million
Dollars ($2,000,000) if occurring in the first year of the Terminal Agreement
and Four Hundred Thousand Dollars ($400,000) less each year thereafter. Further,
the Agent and certain of the EFS shareholders agree to be personally liable on a
joint and several basis for this termination obligation.

As part of the Terminal Agreement the former shareholders of EFS and XRG entered
into a Bullet Point Merger Agreement Addendum ("Addendum") which provides that
the parties will reach agreement on certain matters, including but not limited
to, the following:

o        mutual termination of the Master Equipment Lease Agreement ("MELA");
o        mutual termination of the Facility Lease Agreement for the office
         building in Chattanooga, Tennessee from the prior shareholders of EFS
         and a warehouse facility in California;
o        all employment agreements are mutually terminated with the former EFS
         shareholders and employees;
o        the former EFS shareholders personally assume all overdraft bank
         liabilities and bank loans of EFS. In addition, former EFS shareholders
         assume trade payables and accruals prior to March 1, 2004. All bad debt
         and charge-backs attributable to receivables outstanding as of April
         21, 2004 are assumed by the former EFS shareholders;
o        the One Million Dollar  ($1,000,000)  deferred payment  obligation
         under the EFS Merger Agreement is terminated;
o        if XRG fails to make  the required ComData fuel funding or settle
         agency payments timely and in full, then EFI has the right to terminate
         the Terminal Agreement. EFS is required to advance funds necessary for
         regulatory compliance, fund vehicle license requirements and fund
         owner/operator payments;
o        EFS is required to maintain liability and cargo insurance in full force
         and effect and maintain ancillary insurance benefits related to
         physical damage coverages;
o        the former EFS shareholders may engage in the boat hauling business
         without violating any non-compete provisions;
o        the parties anticipate entering into mutual releases subject to the
         above covenants and representations.

The Company is in the process of negotiating a formal settlement agreement with
the former EFS shareholders which incorporates the above matters which are
agreed to in principal pursuant to the Addendum entered into in connection with
the Terminal Agreement. However, a formal settlement agreement has not been
executed. The parties continue to operate pursuant to the terms and provisions
of the Terminal Agreement and related Addendum. One of the Company's priorities
is to enter into a formal settlement agreement prior to the end of its fiscal
year, March 31, 2005. The failure of the Company to enter into a final and
definitive settlement agreement with the former EFS shareholders could have a
material adverse affect on the Company's financial position.



                                       11
<PAGE>



                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)

The Company included the results of EFS in its financial statements beginning
April 21, 2004 (the closing date of the transaction). However, fuel surcharges
billed to customers for freight hauled by independent contractors who provide
capacity to the Company under exclusive lease arrangements are excluded from
revenue and paid in entirety to the independent contractors. The following table
summarizes the estimated fair values of the assets acquired and liabilities
assumed at the date of acquisition and adjusted based upon the August 16, 2004
amendment.

Accounts receivable                                    $           1,609,474
Other current assets                                                  99,031
Other assets                                                          55,171
Goodwill and other intangibles                                     2,758,235
                                                          -------------------
    Total assets acquired                                          4,521,911
                                                          -------------------
Accrued expenses and payables                                       (114,682)
Factorer line of credit                                           (1,501,129)
                                                          -------------------
    Total liabilities assumed                                     (1,615,811)
                                                          -------------------
Total purchase price                                   $           2,906,100
                                                          ===================


EFS Capital lease obligation
As part of the Express Freight Systems, Inc. (EFS) acquisition, the company
acquired the tractor and trailer assets acquired and assumed a capital lease
that expires in 2007. The asset was being amortized over its estimated
productive life. Amortization of the asset held under the capital lease is
included with depreciation expense. This lease required payments of $55,000 a
month for 36 months with a requirement to purchase the equipment for $1,000,000
at the end of the lease term. During the second quarter of 2004, the Company
entered into an amendment to the agreement with the EFS prior shareholders which
mutually terminated this capital lease. Therefore, during the second quarter of
2004, the Company eliminated this capital lease and the related fixed assets
that were financed by the lease from its books in accordance with the amended
agreement with the EFS prior shareholders.

RSV, Inc.
---------
The Company acquired RSV, Inc. on April 29, 2004. Pursuant to the terms of the
Merger Agreement, RSV, Inc. ("RSV"), a Tennessee corporation was the survivor in
a merger with a subsidiary of the Company. RSV is now a wholly-owned subsidiary
of the Company. The Company issued a total of 100,000 shares of its common stock
to the two RSV shareholders. These shares were valued at $510,000 in total based
upon the quoted trading price on the acquisition date. There was no cash paid at
closing to the RSV shareholders. The Company is obligated to remove the majority
RSV shareholder as a guarantor on approximately $2,000,000 of RSV debt within 45
days. In order to secure this obligation the Company has placed the RSV shares
it acquired pursuant to the Merger Agreement in escrow. The Company's failure to
consummate a refinancing, payoff or satisfaction of the RSV debt within such
timeframes entitles the RSV shareholder, subject to the terms and conditions of
the stock escrow agreement, to a return of the RSV shares. The majority RSV
shareholder has granted the Company an extension of time to remove the
guarantees on the RSV debt.

The Company's majority shareholder has indicated its willingness to assist in
the refinancing of the outstanding "RSV" debt which the Company is obligated to
assume in connection with its acquisition of RSV. The failure to complete the
refinancing of the RSV debt and release the RSV shareholders from personal
guaranties would have a material adverse affect on XRG.

RSV is a van/asset based carrier with approximately 42 tractors headquartered in
Kings Point, Tennessee.

The Company included the results of RSV in its financial statements beginning
May 1, 2004 (the closing date was April 29, 2004). The following table
summarizes the estimated fair values of the assets acquired and liabilities
assumed at the date of acquisition.



                                       12
<PAGE>

                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)

Cash                                                 $             39,787
Other current assets                                              147,528
Fixed assets                                                    2,030,000
Goodwill and other intangibles                                    758,532
                                                        ------------------
    Total assets acquired                                       2,975,847
                                                        ------------------

Accrued expenses and payables                                    (499,833)
Notes payable                                                  (1,966,014)
                                                        ------------------
    Total liabilities assumed                                  (2,465,847)
                                                        ------------------
Total purchase price                                 $            510,000
                                                        ==================

Highway Transport, Inc.
-----------------------
Effective April 1, 2004 the Company acquired certain of the assets and assumed
certain of the liabilities which comprises the business of Highway Transport,
Inc. ("HTI"), an Alabama corporation in exchange for 17,500 shares of its
restricted common stock. These shares were valued at $95,200 in total based upon
the quoted trading price on the acquisition date. The Company acquired
approximately $1,355,000 of HTI's equipment and assumed approximately $1,700,000
of notes payable and other commercial obligations. The Company also entered into
a commercial sublease agreement for the HTI facilities with one of the HTI
shareholders. This sublease has a term through March 31, 2006 with monthly fixed
annual rent of $1,750 per month. The Company also entered into 3 year employment
agreements with the two HTI shareholders. One employment agreement has annual
compensation of $125,000; the other employment agreement has annual compensation
of $75,000. HTI primarily operates a flatbed operation.

The Company included the results of HTI in its financial statements beginning
April 1, 2004. The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed at the date of acquisition.

Other current assets                                 $             38,910
Fixed assets                                                    1,355,200
Goodwill and other intangibles                                    390,993
                                                        ------------------
    Total assets acquired                                       1,785,103
                                                        ------------------
Accrued expenses and payables                                     (96,000)
Notes payable                                                  (1,593,903)
                                                        ------------------
    Total liabilities assumed                                  (1,689,903)
                                                        ------------------
Total purchase price                                 $             95,200
                                                        ==================


Highbourne Corporation
----------------------
Effective April 2, 2004 the Company closed an asset acquisition agreement with
Highbourne Corporation ("HBC"), an Illinois corporation. The Company issued a
total of 10,000 shares of restricted common stock to the two stockholders of
HBC. These shares were valued at $47,600 in total based upon the quoted trading
price on the acquisition date. Inasmuch as this is a non-asset based carrier,
the Company did not assume any long-term equipment or other liabilities in
connection with this acquisition. The Company agreed to lease the current HCB
facilities from one of the HBC shareholders for a 24 month term with $3,000
monthly payments. The Company entered into two year employment agreements with
each of the HBC shareholders at rates of $32,000 and $85,000 per annum
respectively. The Company has also agreed to pay the major HBC shareholder an
annual commission equal to two percent of the gross revenue billed each year
through the HBC operation in the form of our restricted common stock valued at
market on the day of payment. The Company also agreed to a quarterly bonus
program based upon quarterly operating results.



                                       13
<PAGE>

                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)

The Company included the results of HBC in its financial statements beginning
April 1, 2004 (the closing date was April 2, 2004. However, fuel surcharges
billed to customers for freight hauled by independent contractors who provide
capacity to the Company under exclusive lease arrangements are excluded from
revenue and paid in entirety to the independent contractors. The following table
summarizes the estimated fair values of the assets acquired and liabilities
assumed at the date of acquisition.

Goodwill and other intangibles                 $             47,600
                                                  ------------------
    Total assets acquired                                    47,600
                                                  ------------------
    Total liabilities assumed                                 (-)
                                                  ------------------
Total purchase price                           $             47,600
                                                  ==================

On October 4, 2004, the Company ("Carrier") mutually entered into a five year
Terminal Agreement with the shareholders of Highbourne Corporation under AGB
Transportation Services, LLC ("Agent"). This Terminal Agreement entitles the
Highbourne Corporation shareholders as Agent to receive a commission of 85% of
revenues on shipments that are secured, processed and supervised under the
direction of the Agent. Under this agreement, Carrier is not responsible for any
expenses incurred for the operation of the Agent's terminal. The Company is
responsible for all legal documentation and paperwork and is the primary obligor
on shipments, to pay commissions on line hauls, including accessorial charges
and to provide the Agent weekly summaries of accounts standings and an account
of commissions due. For shipments under this Terminal Agreement the Company is
the primary obligor in regards to the delivery of the shipment, establishing
customer pricing, and has credit risk on the shipments. The Company records both
revenues for the dollar value of services billed by the Company to the customer
and purchased transportation expense for the costs of transportation paid by the
Company to the agent upon delivery of the shipment. Fuel surcharges billed to
customers for freight hauled by this Terminal Agreement are excluded from
revenue and paid in entirety to Agent.

The Company has been operating under this Terminal Agreement since October 4,
2004. Pursuant to this agreement, Agent agreed to a reduced rent of the current
Highbourne Corporation facilities of $1,000 per month. In addition, the
employment agreements with each of the Highbourne Corporation shareholders at
rates of $32,000 and $85,000 per annum respectively were mutually terminated.

Carolina Truck Connection, Inc.
-------------------------------
On April 28, 2004 the Company closed an Asset Purchase Agreement with Carolina
Truck Connection, Inc. ("CTC"), a North Carolina corporation. The Company issued
60,000 shares of its restricted common stock to the two shareholders of CTC.
These shares were valued at $316,200 in total based upon the quoted trading
price on the acquisition date. The Company assumed approximately $489,000 of
long-term debt relating to this Asset Purchase Agreement with CTC. The Company
is obligated to remove the majority CTC shareholder as a guarantor on this debt
within 45 days. This period can be extended for an additional 45 days if the
Company is able to establish commercially reasonable best efforts in
facilitating a pay-off, refinancing or satisfaction of this debt. This period
has been verbally extended.

Previously, Barron advanced us $225,809.96 pursuant to a Promissory Note dated
September 10, 2004 (of which $45,000 has been repaid) and a $166,275 Promissory
Note dated October 1, 2004. The proceeds of these notes were used to refinance
certain of the tractor trailer equipment of Carolina Truck Connection, Inc.
("CTC") which we assumed pursuant to our Asset Purchase Agreement with CTC in
April 2004. We have agreed that Barron shall take a lien upon possession of the
CTC tractor/trailer equipment titles which were released from the prior lender
from the proceeds of these notes. Barron has agreed to extend the maturity dates
of these notes to March 31, 2005.

The Company also entered into employment/consulting agreements with the CTC
shareholders. The two year employment agreement includes base compensation of
$62,000. The consulting agreement requires compensation at an hourly rate of
$100 and terminates on December 31, 2005.


                                       14
<PAGE>


                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)

The Company included the results of CTC in its financial statements beginning
May 1, 2004 (the closing date was April 28, 2004). The following table
summarizes the estimated fair values of the assets acquired and liabilities
assumed at the date of acquisition.

Fixed assets                                   $            556,500
Goodwill and other intangibles                              248,700
                                                  ------------------
    Total assets acquired                                   805,200
                                                  ------------------
Notes payable                                              (489,000)
                                                  ------------------
    Total liabilities assumed                              (489,000)
                                                  ------------------
Total purchase price                           $            316,200
                                                  ==================


7. Unaudited Pro Forma Consolidated Financial Information for Acquisitions

The following unaudited pro forma consolidated financial information presents
the combined results of operations of the Company as if each of the acquisitions
had occurred on April 1, 2003. The unaudited pro forma consolidated financial
information is not intended to represent or be indicative of the consolidated
results of operations of the Company that would have been reported had the
acquisition been completed as of the dates presented, and should not be taken as
representative of the future consolidated results of operations of the Company.
Summarized unaudited pro forma consolidated results were as follows:
<TABLE>
<CAPTION>

                                                           For the three months ended               For the nine months ended
                                                                  December 31,                             December 31,
                                                            2004                2003                 2004               2003
                                                        ---------------  -----------------       ---------------   ----------------
<S>                                              <C>                 <C>                   <C>                <C>
                Revenues                            $   12,130,523      $    11,074,499       $    35,223,118    $     31,705,590
                Net income (loss) applicable to
                common shareholders                 $       48,011      $       (74,102)      $    (5,226,949)   $     (2,281,845)

                Basic loss per share                $         0.00      $         (0.06)      $         (0.53)   $          (0.26)

</TABLE>

8.  Subsequent Events

On December 27, 2004 the Company filed a Definitive Information Statement on
Schedule 14C with the Securities and Exchange Commission. The Information
Statement was filed in connection with a one (1) for twenty (20) reverse stock
split effective January 3, 2005. Additionally, on that date, our Certificate of
Incorporation was amended and the authorized number of common shares was reduced
from 500,000,000 to 25,000,000. Our new trading symbol is "XRGI" on the OTC
electronic bulletin board.

On January 5, 2005, Ken Steele, an existing shareholder advanced the Company
$500,000 pursuant to a Promissory Note that was originally repayable on February
5, 2005. The original interest rate on this Note was 18%. The Note carries a 24%
default interest rate commencing as of February 5, 2005. This note requires
warrants to acquire 60,000 shares of common stock at an exercise price of $2.40.
In addition, for each month that this Note is not paid, the Company is required
to issue this shareholder 20,000 shares of common stock and additional warrants
to acquire 60,000 shares of common stock at an exercise price of $2.40. The
warrants include cashless exercise provisions, anti-dilution and adjustment
provisions equivalent to most favorable anti-dilution rights on any outstanding
warrants or equity securities. This shareholder is granted demand registration
rights on these securities. The Company also agreed to grant this shareholder
security interests in vehicle license plates, operating permits, equipment and
accounts receivable. This shareholder has agreed to extend the maturity date of
this note until March 31, 2005.



                                       15
<PAGE>

                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Nine Months Ended December 31, 2004 and 2003 (Unaudited)

At a Board of Directors meeting held on February 16, 2005, the Board approved
the withdrawal of the current Registration Statement, Form SB-2 filed on
November 12, 2004 with the Securities and Exchange Commission, as it has not
been declared effective. The request to withdraw was filed on February 18, 2005.

On February 16, 2005 certain officers and directors agreed to modify their
compensatory agreements. Annual compensation was reduced from $500,000 to
$336,250, a reduction of 32.75%.

On February 16, 2005 the Company engaged Walker Street Associates, an outside
consultant, to evaluate its operations and to provide recommendations to improve
financial performance.

On February 23, 2005 the Company entered into a $1,180,000 note payable with
Barron Partners, LP, its major shareholder. The note bears interest at 10.0%
with an origination fee of 7.0%. The note is due in sixty days with a default
interest rate of 17.0%. This note is secured by all of the Company's assets. The
Company is authorized to borrow an additional $800,000 from its majority
shareholder on the same terms and conditions as set forth in the $1,180,000
note. Any additional equity or debt financing up to $800,000 provided by any
source will be used for working capital purposes. Thereafter, the proceeds of
capital raised from any source will be allocated 70% to repay the outstanding
indebtedness to Barron and Steele on a prorata basis.

On February 24, 2005 the Company finalized a closing and funding of a Contract
of Sale/Security Agreement with Capco Financial Company. The purpose of this
financing arrangement was to replace the Company's existing factoring
arrangements. Pursuant to this agreement, the Company has the right to advance
against 80% of its eligible accounts receivable. The Company is subject to
lock-box arrangements and funds from the collection of the Company's receivables
will be deposited in a lockbox account and advanced to us based upon
availability. The interest rate is equal to a daily fee equal to the Greater Bay
Bank, N.A. prime rate plus 7% divided by 365 (equivalent to a monthly discount
fee of Greater Bay Bank, N.A. prime rate plus 7% divided by 12). Based upon
current market rates this effective interest rate is substantially less than the
effective cost of funds paid to our current factorers. The Capco financing
should improve our cash flow position because of the anticipated lower cost of
funds and the elimination of the factoring reserves. We have granted Capco a
security interest in all of our assets.

In connection with this financing, a $75,000 commitment fee was paid to Capco at
closing and the Company agreed to issue Capco common stock purchase warrants
with a value equal to $150,000. Said warrant will have an exercise price equal
to 120% of the 30 day average of the closing bid price of the Company's common
stock prior to the closing of this facility. In addition, a finder has requested
a cash fee equal to 3% of the initial draw down which equals $114,364.11 and a
cash fee equal to 3% of additional draw downs on this facility up to a $10
million maximum. The Company agreed in principal to said fees. The finder
requested additional warrants which the Company is not willing to issue. The
Company is currently negotiating with this finder a resolution of its fees.

During February 2005 two directors resigned from the Board of Directors. One
director resigned due to other commitments, the other director was unable to
agree upon an acceptable level of board compensation for his services.

At the February 16, 2005 meeting, the Board of Directors approved that the
obligations from XRG to the Company's Chief Financial Officer and the Company's
Chairman of the Board will be converted into shares of our common stock at a
conversion price of $1.00 per share for accrued compensation. These obligations
of $140,000 were converted into 140,000 shares of common stock.





                                       16
<PAGE>





Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements contained in this Report on Form 10-QSB, that are not purely
historical, are forward-looking information and statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These include statements regarding the Company's
expectations, intentions, or strategies regarding future matters. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof. It is important to note that the
Company's actual results could differ materially from those projected in such
forward-looking statements contained in this Form 10-QSB. The forward-looking
statements contained here-in are based on current expectations that involve
numerous risks and uncertainties. Assumptions relating to the foregoing involve
judgments regarding, among other things, the Company's ability to secure
financing or investment for capital expenditures, future economic and
competitive market conditions, and future business decisions. All these matters
are difficult or impossible to predict accurately and many of which may be
beyond the control of the Company. Although the Company believes that the
assumptions underlying its forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this form 10-QSB will prove to be
accurate.

                                    Overview

         We are focused on acquiring, consolidating, and operating short and
long haul truckload carriers. Our acquisition strategy targets both asset and
non-asset based truckload carriers in the contiguous 48 states. We seek to
increase volume within existing geographies while managing both the mix and
yield of business to achieve profitability. Our business is both labor intensive
and capital intensive. Our main focus is to leverage technology and achieve
better asset utilization to improve cost and productivity. Our expansion plans
are dependent upon, the availability of, among other things, suitable
acquisition candidates, adequate financing, qualified personnel, and our future
operations and financial condition.

Recent Acquisitions

         We currently operate seven truckload carriers, of which, five of these
carriers were acquired in April 2004. The following table summarizes our recent
acquisitions:
<TABLE>
<CAPTION>
                       Structure                   Common        Long Term
                          of         Cash @        Shares      Debt/Equipment           Type of
    Acquisition       Transaction     Close        Issued      Leases Assumed          Equipment      Equipment
------------------------------------------------------------------------------------------------------------------
<S>                <C>           <C>              <C>            <C>              <C>             <C>
RSV, Inc.             Merger                 0       100,000        $1,857,000       Van/Asset       42 Tractors
                                                                                     based

Express Freight                                                                      Van/Non-asset
Systems, Inc. (1)     Merger        $2,000,000       187,500                 0       based           106 O/O
                                                                                                     32

Highway Transport,    Asset                                                          Flatbed/Asset   Tractors,
Inc.                  Purchase               0        17,500         1,594,000       based           12 O/O

Highbourne            Asset                                                          Van/Non-asset
Corporation (2)       Purchase               0        10,000                 0       based           34 O/O

Carolina Truck        Asset                                                          Van/Asset       7 Tractors,
Connection, Inc.      Purchase               0        60,000           489,000       based           2 O/O
                                   --------------------------------------------
                                    $2,000,000       375,000        $3,940,000
</TABLE>

  (1)     On August 16, 2004, this Merger Agreement was amended which reduced
          the common shares issued to 187,500 and eliminated Long-Term Debt and
          Equipment Leases Assumed to $-0-.
  (2)     On October 4, 2004, the Company entered into a five year Terminal
          Agreement with the shareholders of Highbourne Corporation.


                                       17
<PAGE>


MERGER WITH EXPRESS FREIGHT SYSTEMS, INC.

         We acquired Express Freight Systems, Inc. on April 21, 2004. Pursuant
to the terms of a Merger Agreement, Express Freight Systems, Inc. ("EFS"), a
Tennessee corporation was the survivor in a merger with a subsidiary of ours.
EFS is now a wholly-owned subsidiary of XRG. EFS is based in Chattanooga,
Tennessee. EFS has an owner-operator based fleet with a pool of approximately
270 trailers which were leased to the Company from an entity owned by the prior
shareholders of EFS pursuant to a Master Equipment Lease Agreement ("MELA"). The
MELA required us to pay Express Leasing Systems, Inc. approximately $55,000 per
month for a term of 36 months. This MELA contained a $1,000,000 buyout at lease
end. We also leased the office building in Chattanooga, Tennessee from the prior
shareholders of EFS and a warehouse facility in California.

         Pursuant to the terms of the EFS Merger Agreement $2,000,000 from the
Stock Purchase Agreement was paid to the shareholders of EFS. In addition EFS
shareholders were issued 375,000 shares of the Registrant's common stock. EFS
was entitled to receive an additional $1,000,000 upon XRG competing a successful
offering.

         EFS, as a wholly-owned subsidiary of ours entered into 6 new employment
agreements with the former shareholders and key employees of EFS. The president
of EFS agreed to a 3 year employment agreement. All other individuals had 10
year employment agreements. Annual compensation ranged from $125,000 to $250,000
per annum. The agreements contained nondisclosure and restrictive covenant
arrangements. If the agreements are terminated for any reason other than cause,
the employees are due compensation for the remainder of the employment
agreement's term.

         The EFS Merger Agreement provided us with certain rights of
indemnification in connection with the breach of a representation or warranty by
EFS or its shareholders. We withheld $100,000 in a cash escrow agreement to
satisfy unpaid taxes and other liabilities. $31,000 of these taxes and
liabilities were paid from escrow during the nine months ended December 31,
2004. We also issued a blanket corporate guaranty pursuant to which we
guaranteed all obligations of EFS pursuant to the terms of the Merger Agreement,
including but not limited to, the MELA capital lease and the lease for the EFS
offices, which are owned by the wife of the major EFS shareholder and the
employment agreements. Our blanket guaranty also contained cross default
provisions.

         On August 12, 2004 our counsel advised the former shareholders of EFS
that XRG believed that there were various breaches of the representations and
warranties by the EFS shareholders in connection with the EFS Merger. On August
16, 2004 EFS and an entity formed by the former EFS shareholders, Express
Freight, Inc. ("EFI") entered into a Terminal Agreement. EFS referred to as the
Carrier and EFI as the Agent under this Terminal Agreement. EFI is entitled to a
commission of 85% of revenues on shipments that are secured, processed and
supervised under the direction of EFI as the Agent. Under this Terminal
Agreement, EFS as the Carrier is not responsible for any expenses incurred in
the operation of the Agent's terminal. EFS is responsible for all legal
documentation and paperwork and is the primary obligor on shipments, to pay
commissions on line hauls, including accessorial charges and to provide the
Agent weekly summaries of accounts standings and an account of commissions due.
For shipments under this Terminal Agreement EFS is the primary obligor in
regards to the delivery of the shipment, establishing customer pricing, and has
credit risk on the shipments. The Company records both revenues for the dollar
value of services billed by the Company to the customer and purchased
transportation expense for the costs of transportation paid by the Company to
the agent upon delivery of the shipment. Fuel surcharges billed to customers for
freight hauled by this Terminal Agreement are excluded from revenue and paid in
entirety to EFI. In the event either party fails to perform any covenant or
condition under the Terminal Agreement and such default continues for a period
of thirty (30) days after notice, the Terminal Agreement may be terminated by
the non-breaching party. The parties agree that if a default occurs on the part
of the Agent that is not cured, or if the Agent terminates the Terminal
Agreement, the damages to XRG will be Two Million Dollars ($2,000,000) if
occurring in the first year of the Terminal Agreement and Four Hundred Thousand
Dollars ($400,000) less each year thereafter. Further, the Agent and certain of
the EFS shareholders agree to be personally liable on a joint and several basis
for this termination obligation.

         As part of the Terminal Agreement the former shareholders of EFS and
XRG entered into a Bullet Point Merger Agreement Addendum ("Addendum") which
provides that the parties will reach agreement on certain matters, including but
not limited to, the following:

o        mutual termination of the Master Equipment Lease Agreement ("MELA");
o        mutual termination of the Facility Lease Agreement for the office
         building in Chattanooga, Tennessee from the prior shareholders of EFS
         and a warehouse facility in California;
o        all employment agreements are mutually terminated with the former EFS
         shareholders and employees;



                                       18
<PAGE>


o        the former EFS shareholders personally assume all overdraft bank
         liabilities and bank loans of EFS. In addition, former EFS shareholders
         assume trade payables and accruals prior to March 1, 2004. All bad debt
         and charge-backs attributable to receivables outstanding as of April
         21, 2004 are assumed by the former EFS shareholders;
o        the One Million Dollar ($1,000,000) deferred payment obligation under
         the EFS Merger Agreement is terminated;
o        if XRG fails to make the required Com Data fuel funding or settle
         agency payments timely and in full, then EFI has the right to terminate
         the Terminal Agreement. EFS is required to advance funds necessary for
         regulatory compliance, fund vehicle license requirements and fund
         owner/operator payments;
o        EFS is required to maintain liability and cargo insurance in full force
         and effect and maintain ancillary insurance benefits related to
         physical damage coverages;
o        the former EFS shareholders may engage in the boat hauling business
         without violating any non-compete provisions;
o        the parties anticipate entering into mutual releases subject to the
         above covenants and representations.


We have been negotiating a formal settlement agreement with the former EFS
shareholders which incorporates the above matters which are agreed to in
principal pursuant to the Addendum entered into in connection with the Terminal
Agreement. However, a formal settlement agreement has not been executed. The
parties continue to operate pursuant to the terms and provisions of the Terminal
Agreement and related Addendum. One of our priorities is to enter into a formal
settlement agreement prior to the end of our fiscal year, March 31, 2005. Our
failure to enter into a final and definitive settlement agreement with the
former EFS shareholders could have a material adverse affect on our financial
position.

MERGER WITH RSV, INC.

         We acquired RSV, Inc. on April 29, 2004. Pursuant to the terms of the
Merger Agreement, RSV, Inc., a Tennessee corporation ("RSV") was the survivor in
a merger with a subsidiary of ours. RSV is now a wholly-owned subsidiary of
ours. We issued a total of 100,000 of our common stock to the two RSV
shareholders. We are obligated to remove the majority RSV shareholder as a
guarantor on approximately $2,000,000 of RSV debt within 45 days of the closing.
In order to secure this obligation we have placed the RSV shares we acquired
pursuant to the Merger Agreement in escrow. Our failure to consummate a
refinancing, payoff or satisfaction of the RSV debt within such timeframes
entitles the RSV shareholder, subject to the terms and conditions of the stock
escrow agreement, to a return of the RSV shares. Although we believe we will be
able to refinance the subject debt, based upon current communications with
lenders and financing sources, there is no assurance that such refinancing will
occur within the agreed upon timeframes. The failure to consummate a
refinancing, satisfaction or payoff of such liabilities could potentially result
in the unwinding of this acquisition because the former RSV shareholder would
have the right to a return of the RSV shares to him from escrow. The majority
RSV shareholder has agreed to an extension of time to complete a refinancing.

         Our majority shareholder, Barron Partners, L.P. has indicated a
willingness to assist in the refinancing of the outstanding RSV debt which we
are obligated to assume in connection with RSV acquisition. The failure to
complete the refinancing of the RSV debt and release the two RSV shareholders
from personal guaranties would have a material adverse affect on XRG.

ASSET ACQUISITION OF HIGHWAY TRANSPORT, INC.

         Effective April 2, 2004 we acquired certain of the assets and assumed
certain of the liabilities of Highway Transport, Inc. ("HTI"), an Alabama
corporation. We issued the shareholders of HTI 17,500 shares of our restricted
common stock. We assumed approximately $1,360,000 of HTI's obligations relating
to its equipment and other commercial obligations. We also entered into a
commercial sublease agreement for the HTI facilities with one of the HTI
shareholders. This sublease has a term through March 31, 2006 with monthly fixed
annual rent of $1,750 per month. The Registrant also entered into 3 year
employment agreements with the two HTI shareholders. One employment agreement
has annual compensation of $125,000, the other employment agreement has annual
compensation of $75,000. HTI primarily operates a flatbed operation.

ASSET ACQUISITION OF HIGHBOURNE CORPORATION

         Effective April 2, 2004 we closed an asset acquisition agreement with
Highbourne Corporation ("HBC"), an Illinois corporation. We issued a total of
10,000 shares of restricted common stock to the two stockholders of HBC.
Inasmuch as this is a non-asset based carrier, we did not assume any long-term
equipment or other liabilities in connection with this acquisition. We agreed to
lease the current HCB facilities from one of the HBC shareholders for a 24 month
term with $3,000 monthly payments. We entered into two year employment
agreements with each of the HBC shareholders at rates of $32,000 and $85,000 per
annum respectively. We have also agreed to pay the major HBC shareholder an
annual commission equal to two percent of the gross revenue billed each year


                                       19
<PAGE>


through the HBC operation in the form of our restricted common stock valued at
market on the day of payment. The Registrant also agreed to a quarterly bonus
program based upon quarterly operating results.

         On October 4, 2004, the Company ("Carrier") mutually entered into a
five year Terminal Agreement with the shareholders Highbourne Corporation under
AGB Transportation Services, LLC ("Agent"). This Terminal Agreement entitles the
Highbourne Corporation shareholders as Agent to receive a commission of 85% of
revenues on shipments that are secured, processed and supervised under the
direction of the Agent. Under this agreement, Carrier is not responsible for any
expenses incurred for the operation of the Agent's terminal. We are responsible
for all legal documentation and paperwork and we are the primary obligor on
shipments, to pay commissions on line hauls, including accessorial charges and
to provide the Agent weekly summaries of accounts standings and an account of
commissions due. For shipments under this Terminal Agreement we are the primary
obligor in regards to the delivery of the shipment, establishing customer
pricing, and has credit risk on the shipments. We record both revenues for the
dollar value of services we bill to the customer and purchased transportation
expense for the costs of transportation we pay to the agent upon delivery of the
shipment. Fuel surcharges billed to customers for freight hauled by this
Terminal Agreement are excluded from revenue and paid in entirety to Agent.

         We have been operating under this Terminal Agreement since October 4,
2004. Pursuant to this agreement, Agent agreed to a reduced rent of the current
Highbourne Corporation facilities of $1,000 per month. In addition, the
employment agreements with each of the Highbourne Corporation shareholders at
rates of $32,000 and $85,000 per annum respectively were mutually terminated.

ASSET ACQUISITION OF CAROLINA TRUCK CONNECTION, INC.

         On April 30, 2004 we closed an Asset Purchase Agreement with Carolina
Truck Connection, Inc., a North Carolina corporation ("CTC"). We issued 60,000
shares of our restricted common stock to the two shareholders of CTC. We also
entered into employment/consulting agreements with the CTC shareholders. The two
year employment agreement includes base compensation of $62,000. The consulting
agreement requires compensation at an hourly rate of $100 and terminates on
December 31, 2005. We assumed approximately $490,000 of long-term debt relating
to this Asset Purchase Agreement with CTC. We are obligated to remove the
majority CTC shareholder as a guarantor on this debt within 45 days. This period
can be extended for an additional 45 days if we are able to establish
commercially reasonable best efforts in facilitating a pay-off, refinancing or
satisfaction of this debt. Previously, Barron advanced us $225,809.96 pursuant
to a Promissory Note dated September 10, 2004 (of which $45,000 has been repaid)
and a $166,275 Promissory Note dated October 1, 2004. The proceeds of these
notes were used to refinance certain of the tractor trailer equipment of
Carolina Truck Connection, Inc. ("CTC") which we assumed pursuant to our Asset
Purchase Agreement with CTC in April 2004. We have agreed that Barron shall take
a lien upon possession of the CTC tractor/trailer equipment titles which were
released from the prior lender from the proceeds of these notes. Barron has
agreed to extend the maturity dates of these notes to March 31, 2005.


GENERAL

MANAGEMENT'S INTERIM OPERATING PLAN

         We acquired the operations of six trucking companies and the
transportation equipment of one trucking company between September 2003 and
April 2004. Through acquisitions we expanded from approximately $4.5 million in
revenue in our fiscal year ended March 31, 2004 to approximately $46 million run
rate in fiscal 2005. We have established and begun to implement the first phase
of a profit improvement plan to achieve a more streamlined and efficient
operation. As part of this plan, we will identify savings opportunities
associated mostly with redundancies and economies of scale. We are focusing
these efforts on improvement in operating ratios and tractor utilization
(average revenue per tractor per week.) The first stage of this plan focused on
the restructuring of our acquisition of Express Freight Systems, Inc., on August
16, 2004. In addition, the Company restructured its asset purchase of Highbourne
Corporation on October 11, 2004. These restructurings fix our operating costs
for these companies through an agency arrangement under terminal agreements. The
Company's profit improvement plan may decrease its operating losses in the
future, however, there is no assurance that this plan will be effective in
obtaining profitability for the Company.

         During 2005, we will focus on the second phase of the plan, which
includes upgrading our tractor fleet, and continuing to focus on revenue
enhancements and cost controls. The following table summarizes our current
truckload carrier operations:


                                       20
<PAGE>

<TABLE>
<CAPTION>


          Company               Headquarters     Carrier Type   Owner/Operators or Owned    Trailers   Closing Date
          -------               -------------    ------------   -------------------------   --------   ------------
                                  Location                               Tractors
                                  --------                               --------
<S>                        <C>                <C>            <C>                         <C>        <C>

J. Bently Companies, Inc.*    Sweetwater, TN     Van            17 Owner Operators, 46      209        September 1,
                                                                Fleet Contracted                       2003*
                                                                Tractors, 7 Company
                                                                Tractors

R&R Express Intermodal, Inc.  Pittsburgh, PA     Intermodal     34 Owner Operators          -          January 1,
                                                                                                       2004

Highbourne Corporation        Champaign, IL      Van            34 Owner Operators          46         April 2, 2004

Highway Transport             Evergreen, AL      Flatbed        32 Tractors, 12 Owner       47         April 2, 2004
                                                                Operators, 1 Company
                                                                        Tractors

Express Freight Systems       Chattanooga, TN    Van            106 Owner Operators         242        April 21,
                                                                                                       2004

Carolina Truck Connection     Fletcher, NC       Van            7 Tractors, 2 Owner         40         April 30,
(CTC)                                                           Operators, 7 Company                   2004
                                                                        Tractors

RSV                           Kingsport, TN      Van            42 Tractors                 -          April 30,
                                                                                                       2004

</TABLE>

         *Began operating under a Fleet Owner and Independent Contractor
Agreement on this date.

Revenue

         We generate substantially all of our revenue by transporting freight
for our customers. Generally, we are paid by the mile or by the load for our
services. The main factors that affect our revenue are the revenue per mile we
receive from our customers, the percentage of miles for which we are
compensated, and the number of miles we generate with our equipment. These
factors relate, among other things, to the U.S. economy, inventory levels, the
level of truck capacity in our markets, specific customer demand, and our
average length of haul. We also derive revenue from fuel surcharges, loading and
unloading activities, equipment detention, general and administrative services,
and other accessorial services.

Revenue Equipment

         We operate approximately 268 tractors at December 31, 2004, of which
approximately 100 are company-owned equipment and 168 are provided by
independent contractors (owner operators) or by a fleet agreement. Of our
trailers, at December 31, 2004, 457 were financed under operating, capital
leases and short-term rental arrangements.

Independent contractors (owner operators) provide a tractor and a driver and are
responsible for all operating expenses in exchange for a fixed payment per mile.
We do not have the capital outlay of purchasing the tractor. The payments to
independent contractors and the financing of equipment under operating leases
are recorded in cost of revenues. Expenses associated with owned equipment, such
as interest and depreciation, are not incurred, and for independent contractor
tractors, driver compensation, fuel, and other expenses are not incurred. The
majority of our current fleet is owner operator based.

Critical Accounting Policies and Estimates

         Our financial statements reflect the selection and application of
accounting policies, which require management to make significant estimates and
assumptions. We believe that the following are some of the more critical
judgment areas in the application of our accounting policies that currently
affect our financial condition and results of operations.

         Preparation of the consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions affecting the reported
amounts of assets, liabilities, revenues, and expenses and related contingent
liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to revenues, bad debts, income taxes, contingencies, and
litigation. The Company bases its estimates on historical experience and on



                                       21
<PAGE>


various other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions.

         We record an allowance for doubtful accounts based on (1) specifically
identified amounts that we believe to be uncollectible and (2) an additional
allowance based on certain percentages of our aged receivables, which are
determined based on historical experience and our assessment of the general
financial conditions affecting our customer base to be uncollectable. At
December 31, 2004, the allowance for doubtful accounts was $133,746 or
approximately 2.6% of total trade accounts receivable. If actual collections
experience changes, revisions to our allowance may be required. After reasonable
attempts to collect a receivable have failed, the receivable is written off
against the allowance. In addition, we review the components of other
receivables, consisting primarily of advances to drivers and agents, and write
off specifically identified amounts that we believe to be uncollectible.

         We recognize operating revenues (including fuel surcharge revenues) and
related direct costs when the shipment is delivered. For shipments where a
third-party provider is utilized under an agency arrangement to provide some or
all of the service and the Company is the primary obligor in regards to the
delivery of the shipment, establishing customer pricing, and has credit risk on
the shipments, the Company records both revenues for the dollar value of
services billed by the Company to the customer and purchased transportation
expense for the costs of transportation paid by the Company to the agent upon
delivery of the shipment. Accordingly, revenue and the related direct freight
expenses of our business and our agency arrangements are recognized on a gross
basis upon completion of freight delivery. Fuel surcharges billed to customers
for freight hauled by our agency arrangements are excluded from revenue and paid
in entirety to the Agents.

         For the stock options issued to employees, we have elected to apply the
intrinsic value based method of accounting prescribed by Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Under the intrinsic value based method, compensation
cost is measured on the date of grant as the excess of the quoted market price
of the underlying stock over the exercise price. Such compensation amounts are
amortized over the respective vesting periods of the options.

         Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net undiscounted cash
flows expected to be generated by the asset. Our judgment concerning future cash
flows is an important part of this determination. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less the costs to sell.

RESULTS OF OPERATIONS

Three months ended December 31, 2004 compared to three months ended December 31,
2003

         XRG generated $12,130,523 in revenues during the three month period
ended December 31, 2004 as compared to $908,066 during the three month period
ended December 31, 2003. Our revenues increased $11,222,457 or 1,236.0% from the
three month period ended December 31, 2003 to the same period in 2004. This
increase is the result of revenues attributable to five new truckload carrier
operations that were completed in April 2004 and two existing truckload
operations. We expect our revenues to significantly increase during our 2005
fiscal year as part of our acquisition plan.

         Cost of revenues were $8,078,692 and $228,130 resulting in a gross
margin of $4,051,831 and $679,935 during the three month period ended December
31, 2004 and 2003, respectively. Gross margin increased significantly during the
three month period ended December 31, 2004 as compared the three month period
ended September 30, 2004 as a result of our Terminal Services Agreements with
Express Freight Systems, Inc. (August 16, 2004) and Highbourne Corporation
(October 4, 2004). These agreements eliminated the effects of unprofitable
shipments primarily by capping our purchased transportation costs at 85% Cost of
revenues during the three month period ended December 31, 2004 were primarily
costs associated with purchased transportation. The major components of
purchased transportation costs during the period ended December 31, 2004 were
owner-operator settlements of approximately $4,429,000, equipment costs of
approximately $733,000, fuel costs of approximately $409,000, agent commissions
of approximately $1,419,000, and company driver payroll costs of approximately
$1,068,000. We expect our cost of revenues to significantly increase during our
2005 fiscal year as part of our acquisition plan.


                                       22
<PAGE>


         For the three month period ended December 31, 2004, total selling,
general and administrative expenses were $3,521,524 as compared to $281,921 for
the same period of the previous year, an increase of $3,239,603 or 1,149.0%.
This increase is primarily the result of general and administrative costs
associated with our new acquisitions including insurance costs of approximately
$373,000 and payroll costs of approximately $410,000 during the three month
period ended December 31, 2004.

         Interest expense for the three month period ended December 31, 2004 and
2003 was $482,296 and $153,799, respectively. This increase of $328,497 is
primarily the result of interest on loans and bank service charges. In addition,
we incurred factor fees of $176,438 during the three month period ended December
31, 2004.

         We had net income of $48,011 for the three month period ended December
31, 2004 as compared to net income of $244,215 for the three month period ended
December 31, 2003. This decrease in our net income over that of the three month
period ended December 31, 2003 is the result of general and administrative costs
associated with our new acquisitions, and personnel costs associated with the
integration of these acquisitions. In addition, we incurred higher interest
expenses associated with factoring fees and bank charges.

         The basic income per share was $-0- for the three month period ended
December 31, 2004 compared to a basic income per share of $.22 for the three
month period ended December 31, 2003. The basic weighted average shares
outstanding for the three month period ended December 31, 2004 was 13,920,467 as
compared to 1,110,354 for the three month period ended December 31, 2003.

Nine months ended December 31, 2004 compared to nine months ended December 31,
2003

         XRG generated $33,985,161 in revenues during the nine month period
ended December 31, 2004 as compared to $1,206,291 during the nine month period
ended December 31, 2003. Our revenues increased $32,778,870 or 2,717.0% from the
nine month period ended December 31, 2003 to the same period in 2004. This
increase is the result of revenues attributable to five new truckload carrier
operations that were completed in April 2004 and two existing truckload
operations. We expect our revenues to significantly increase during our 2005
fiscal year as part of our acquisition plan.

         Cost of revenues were $26,470,154 and $251,100 resulting in a gross
margin of $7,515,007 and $955,190 during the nine month period ended December
31, 2004 and 2003, respectively. Cost of revenues during the nine month period
ended December 31, 2004 were primarily costs associated with purchased
transportation. The major components of purchased transportation costs during
the period ended December 31, 2004 were owner-operator settlements of
approximately $14,468,000, equipment costs of approximately $2,208,000, fuel
costs of approximately 1,728,000, agent commissions of approximately $1,963,000,
and company driver payroll costs of approximately $3,093,000. We expect our cost
of revenues to significantly increase during our 2005 fiscal year as part of our
acquisition plan.

         For the nine month period ended December 31, 2004, total selling,
general and administrative expenses were $10,166,562 as compared to $1,507,546
for the same period of the previous year, an increase of $8,659,016 or 574.0%.
This increase is primarily the result of shares and warrants issued for services
and compensation valued at approximately $1,291,000, general and administrative
costs associated with our new acquisitions including insurance costs of
approximately $1,242,000 and payroll costs of approximately $1,902,000 during
the nine month period ended December 31, 2004.

         We recorded a settlement loss of $744,582 for the nine month period
ended December 31, 2004 as compared to $-0- for the same period of the previous
year. This settlement loss is associated with the issuance of shares for the
termination of an employment agreement and shares issued for services previously
rendered.

         Interest expense for the nine month period ended December 31, 2004 and
2003 was $1,606,750 and $222,741, respectively. This increase of $1,384,009 is
primarily the result of interest on loans and bank service charges. In addition,
we incurred factor fees of approximately $500,000 during the nine month period
ended December 31, 2004.

         We recorded $153,844 and $-0- related to the amortization of intrinsic
value of convertible debt and debt discount for the value of detachable warrants
during the nine month period ended December 31, 2004 and 2003, respectively.




                                       23
<PAGE>


         We had a net loss of $5,156,731 for the nine month period ended
December 31, 2004 as compared to a loss of $1,326,895 for the nine month period
ended December 31, 2003. This increase in our operating loss over that of the
nine month period ended December 31, 2003 is the result of an increase in
consulting services rendered that were paid with our common stock, general and
administrative costs associated with our new acquisitions, and travel and
personnel costs associated with the integration of these acquisitions. In
addition, we incurred higher interest expenses associated with factoring fees
and bank charges.

         The basic loss per share was $.49 for the nine month period ended
December 31, 2004 compared to a basic loss per share of $1.59 for the nine month
period ended December 31, 2003. The basic weighted average shares outstanding
for the nine month period ended December 31, 2004 was 10,456,005 as compared to
832,791 for the nine month period ended December 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

         To date, we have funded our capital requirements and our business
operations with funds provided by borrowings and equity investments.

         We executed a Stock Purchase Agreement with Barron Partners, LP (the
"Investor") on March 31, 2004. During April, under the terms of this Agreement,
we issued the Investor 5,416,667 shares of its Common Stock for an aggregate
purchase price of $3,250,000.

         We issued the Investor two (2) warrants exercisable for shares of our
Common Stock (the "A Warrant" and "B Warrant" - collectively the "Warrants").
The A Warrant granted the Investor the right to acquire up to 2,708,300 shares
of our Common Stock at an exercise price of $2.00 per share. The B Warrant
granted the Investor the right to purchase up to 2,708,300 shares of our Common
Stock at an exercise price of $5.00 per share. Each of the Warrants contained a
cashless exercise provision. Each of the Warrants was callable by us if the
closing market price of the Common Stock exceeds $1.00 for the A Warrant and
$2.00 for the B Warrant for twenty (20) consecutive trading days. Each of the
Warrants contained proportionate ratcheting anti-dilution protection for future
issuances of equity securities and for our failure to meet certain earnings per
share projections.

         On June 15, 2004 we entered into an agreement with Barron Partners, LP
to have the number of shares underlying the warrants owned by Barron reduced to
3,166,667 and the exercise price of the warrant shares reduced to $0.20.
Simultaneously the Reporting Person exercised all of the 3,166,667 warrants in a
cashless tender and acquired 3,000,000 shares through this exercise.

         There were Finder's Fees associated with this financing consisting of
$325,000 and Common Stock Purchase Warrants representing the right to purchase
541,667 shares of Common Stock at $0.60 per share and Common Stock Purchase
Warrants representing the right to purchase 200,000 shares of Common Stock at
$0.20 per share both with a five year term.

         We also entered into a Registration Rights Agreement with the Investor.
We are obligated to file a Registration Statement within ninety (90) days of the
final acquisition closing, or on or about July 27, 2004 for the purpose of
registering for resale the common shares and the shares underlying the Warrants
issued to the Investor. The Registration Rights Agreement contains a liquidated
damages provision if we fail to have the subject Registration Statement declared
effective on or before December 26, 2004 and to maintain the effectiveness of
said Registration Statement for two (2) years. The Investor is also granted
incidental piggyback registration rights. The Company filed a Registration
Statement on November 12, 2004. At a Board of Directors meeting held on February
16, 2005, the Board approved the withdrawal of the current Registration
Statement as it has not been declared effective. . Barron Partners, LP has
agreed to waive all the liquidated damages penalties incurred from the initial
penalty date until December 31, 2004. The total liquidated damages waived by
Barron is approximately $340,000.

         In connection with the Stock Purchase Agreement, we agreed to cause the
appointment of at least three (3) independent directors and to appoint an audit
committee and compensation committee consisting of a majority of outside
members. Provided that we comply with the independent director covenant, the
Investor has agreed to allow up to fifteen percent (15%) of the voting rights
for its shares to be voted by our Board of Directors for one (1) year.

         The Investor also required that certain of our current insiders agree
to cancel all of their shares of Series A Preferred Stock in exchange for
750,000 shares of Common Stock. We also agreed not to issue any shares of
Preferred Stock for a period of one (1) year. No insiders could sell any of
their securities prior to November 30, 2004. The Investor has also required us
to eliminate the floating conversion feature for all outstanding securities. In


                                       24
<PAGE>



June 2004, the exchange of Series A Preferred Stock for Common Stock was
increased to 1,250,000 shares as a result of the exchange and cancellation of
warrants for common stock of our major shareholder. The Common Stock related to
this exchange was issued during the six month period ended September 30, 2004.

         The Common Stock and the Warrants were issued to the Investor in a
private placement transaction pursuant to Section 4(2) and Rule 506 of
Regulation D under the Securities Act of 1933, as amended. The Investor has
represented that it is an "accredited investor" as that rule is defined under
Rule 501(a) of Regulation D. As a direct result of the transactions referred to
above, Barron Partners, LP, became a "control person" of the Registrant as that
term is defined in the Securities Act of 1933, as amended.

         During the nine month period ended December 31, 2004, we raised
$3,870,000 in exchange for 1,935,000 shares of Common Stock pursuant to a Stock
Purchase Agreement from various investors. There were Finder's Fees associated
with this financing consisting of $317,000 and Common Stock Purchase Warrants
representing the right to purchase 192,530 shares of Common Stock at $2.00 to
$8.00 per share for a five year term. These shares were issued to the Investors
in a private placement transaction pursuant to Section 4(2) and Rule 506 of
Regulation D under the Securities Act of 1933, as amended. All Investors have
represented that they are "accredited investors" as that rule is defined.

         On January 5, 2005, Ken Steele, an existing shareholder advanced us
$500,000 pursuant to a Promissory Note that was originally repayable on February
5, 2005. The original interest rate on this Note was 18%. The Note carries a 24%
default interest rate commencing as of February 5, 2005. This note requires
warrants to acquire 60,000 shares of common stock at an exercise price of $2.40.
In addition, for each month that this Note is not paid, we are required to issue
this shareholder 20,000 shares of common stock and additional warrants to
acquire 60,000 shares of common stock at an exercise price of $2.40. The
warrants include cashless exercise provisions, anti-dilution and adjustment
provisions equivalent to most favorable anti-dilution rights on any outstanding
warrants or equity securities. This shareholder is granted demand registration
rights on these securities. We also agreed to grant this shareholder security
interests in vehicle license plates, operating permits, equipment and accounts
receivable. This shareholder has agreed to extend the maturity date of this note
until March 31, 2005.

         On February 23, 2005 we entered into a $1,180,000 note payable with
Barron Partners, LP, our major shareholder. The note bears interest at 10.0%
with an origination fee of 7.0%. The note is due in sixty days with a default
interest rate of 17.0%. This note is secured by all of our assets. We are
authorized to borrow an additional $800,000 from our majority shareholder on the
same terms and conditions as set forth in the $1,180,000 note. Any additional
equity or debt financing up to $800,000 provided by any source will be used for
working capital purposes. Thereafter, the proceeds of capital raised from any
source will be allocated 70% to repay the outstanding indebtedness to Barron and
Steele on a prorata basis.

         On February 24, 2005 we finalized a closing and funding of a Contract
of Sale/Security Agreement with Capco Financial Company. The purpose of this
financing arrangement was to replace the Company's our existing factoring
arrangements. Pursuant to this agreement, we have the right to advance against
80% of our eligible accounts receivable. We are subject to lock-box arrangements
and funds from the collection of our receivables will be deposited in a lockbox
account and advanced to us based upon availability. The interest rate is equal
to a daily fee equal to the Greater Bay Bank, N.A. prime rate plus 7% divided by
365 (equivalent to a monthly discount fee of Greater Bay Bank, N.A. prime rate
plus 7% divided by 12). Based upon current market rates this effective interest
rate is substantially less than the effective cost of funds paid to our current
factorers. The Capco financing should improve our cash flow position because of
the anticipated lower cost of funds and the elimination of the factoring
reserves. We have granted Capco a security interest in all of our assets.

         In connection with this financing, a $75,000 commitment fee was paid to
Capco at closing and the Company agreed to issue Capco common stock purchase
warrants with a value equal to $150,000. Said warrant will have an exercise
price equal to 120% of the 30 day average of the closing bid price of the
Company's common stock prior to the closing of this facility. In addition, a
finder has requested a cash fee equal to 3% of the initial draw down which
equals $114,364.11 and a cash fee equal to 3% of additional draw downs on this
facility up to a $10 million maximum. The Company agreed in principal to said
fees. The finder requested additional warrants which the Company is not willing
to issue. The Company is currently negotiating with this finder a resolution of
its fees.

         On February 18, 2005 we filed a request that Registration Statement No.
333-12412 filed under cover of Form SB-2 be withdrawn pursuant to Rule 477. This
was a selling shareholder registration statement. Our current understanding is
that Barron Partners, LP has agreed to waive all the liquidated damages
penalties incurred from the initial penalty date until December 31, 2004. The
total liquidated damages waived by Barron is approximately $340,000. Barron is



                                       25
<PAGE>

accruing its penalties from January 1, 2005 to February 16, 2005. Barron has
agreed to waive its penalties from February 17, 2005 until XRG's fiscal year
end, which is March 31, 2005. Barron's forbearance of waiving its penalties from
February 16, 2005 to March 31, 2005 is predicated upon all other investors with
registration rights waiving their penalty rights during same period as waived by
Barron. There is no assurance that other investors will agree to waive their
liquidated damages provisions for failure to register these shares in connection
with the withdrawal of the above referenced registration statement. Liquidated
damages due Barron is approximately $292,500 per quarter. Liquidated damages due
to other investors are approximately $20,000 per month. Our failure to timely
file a selling shareholder registration statement and have such registration
statement declared effective on a timely basis will have a material adverse
affect on our operations due to the amount of liquidated damages that we will
incur for failure to fulfill our registration rights obligations with these
investors.

         During the nine month period ended December 31, 2004, we used
$4,193,981 in cash from operating activities as compared to $204,799 provided by
operating activities during the same period in 2003. Investing activities for
the present nine month period primarily consisted of acquisitions of truckload
carriers of $1,960,213 and purchases of equipment of $567,673. Financing
activities for nine month period ended December 31, 2004 provided $6,721,867
primarily from proceeds from common stock issued. In addition, a factoring line
of credit provided $683,151. For the nine month period ended December 31, 2004,
cash increased $-0- as compared to a decrease of $16,563 in the same period of
the prior year.

         Our financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate our continuation as a going concern. We incurred operating losses of
approximately $3,396,000 for the nine months ended December 31, 2004, have an
accumulated deficit at December 31, 2004 of approximately $26,305,000, which
consists of approximately $15,405,000 from unrelated dormant operations and
$10,900,000 from current operations; and a tangible net worth of approximately
$705,000 as of December 31, 2004. In addition, we have negative working capital
of approximately $2,218,000 at December 31, 2004 and have used approximately
$4,194,000 of cash from operations for the nine months ended December 31, 2004.
These factors raise substantial doubt about our ability to continue as a going
concern. Our financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or the amounts and
classification of liabilities that might be necessary in the event we cannot
continue in existence.

         We anticipate raising capital in the next twelve months from a
combination of the issuance of our common stock and debt. We anticipate that
capital raised from the issuance of common stock, debt, and future working
capital provided by completed truck-load carrier acquisitions, will sustain our
operations over the next twelve months. This estimate is a forward-looking
statement that involves risks and uncertainties. The actual time period may
differ materially from that indicated as a result of a number of factors so that
we cannot assure that our cash resources will be sufficient for anticipated or
un-anticipated working capital and capital expenditure requirements for this
period.

Seasonality

         In the transportation industry, results of operations frequently show a
seasonal pattern. Our operating results in the first and fourth calendar
quarters are normally lower due to reduced demand during the winter months.
Harsh weather can also adversely affect our performance by reducing demand and
our ability to transport freight and increasing operating expenses.

Inflation

         Most of our expenses are affected by inflation, which generally results
in increased operating costs. In response to fluctuations in the cost of
petroleum products, particularly diesel fuel, we have implemented a fuel
surcharge in our contractual agreements. The fuel surcharge is designed to
offset the cost of fuel above a base price and increases as fuel prices escalate
over the base. We believe that the net effect of inflation on our results of
operations is minimal.

Item 3.  Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an
evaluation of the effectiveness of the design and operation of its disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. This evaluation
was done under the supervision and with the participation of the Company's
Principal Executive Officer and Principal Financial Officer. Based on this
evaluation, our Chief Executive Officer and the Chief Financial Officer
concluded that our disclosure controls and procedures other than described below
are effective for gathering, analyzing and disclosing the information that we
are required to disclose in the reports we file under the Securities Exchange
Act of 1934, within the time periods specified in the SEC's rules and forms. Our



                                       26
<PAGE>



Chief Executive Officer and the Chief Financial Officer also concluded that our
disclosure controls and procedures other than described below are effective in
timely alerting them to material information relating to our company required to
be included in our periodic SEC filings. In connection with the new rules, we
are in the process of further reviewing and documenting our disclosure controls
and procedures, including our internal controls and procedures for financial
reporting, and may from time to time make changes designed to enhance their
effectiveness and to ensure that our systems evolve with our business. In
connection with our ongoing evaluation of internal controls over financial
reporting, certain internal control matters were noted that required corrective
actions.

On February 1, 2005 we received a letter from the Division of Corporate Finance
of the Securities and Exchange Commission regarding Item 4.01 of Form 8-K
relating to a change in our auditors filed October 14, 2004 and on Internal
Control Weaknesses and Management Reportable Conditions letter issued by our
prior auditors.

Our former auditors, Pender Newkirk & Company, CPAs ("PNC") advised us of
weaknesses in our internal accounting controls necessary for the preparation of
financial statements during our fiscal year ended March 31, 2004. In the 2004
Reporting Package dated August 7, 2004 our former auditors identified certain
reportable conditions that were considered material weaknesses in our internal
controls subsequent to filing our form 10-KSB on July 14, 2004. Our former
auditors reviewed our disclosures on internal controls in Item 8(a) 10-KSB prior
to filing. However, we are disclosing the reasons why the disclosure controls
and procedures were ineffective during our fiscal year ended March 31, 2004, and
what measures we have taken to improve our internal controls and procedures
during our fiscal year ending March 31, 2005.

     Internal controls considered to be a material weakness in the 2004
Reporting Package are as follows:

              1.  During the audit, PNC encountered that detail schedules and
                  other documentation supporting general ledger accounts did not
                  always agree with the general ledger balances, causing
                  numerous adjusting entries to the final general ledger. In
                  addition, many account balances required extensive
                  reconciliation and outside corroboration to finalize financial
                  information.

                  These issues caused significant delays in producing financial
                  statements at the end of the accounting period and will
                  continue to cause delays, as well as allow for possible
                  irregularities, including fraud, to exist and continue without
                  notice.

              2.  Due to the limited number of people working in XRG's offices,
                  many critical duties were combined. During the audit, certain
                  companies within the consolidated group had a single
                  individual prepare and sign checks, reconcile bank accounts,
                  perform payroll duties and maintain the general ledger.

              3.  The Company did not verify that all legal requirements were
                  met prior to issuing shares of stock in exchange for
                  convertible debt. As a result of this deficiency, the Company
                  issued stock in error to certain convertible debt holders. PNC
                  also discovered that some debt holders who were issued stock
                  were subsequently paid cash for the same debt securities.

              4.  The Company does not prepare a disclosure, a 10-KSB, nor a
                  MD&A checklist to assist in preparing financial statements and
                  the 10-KSB.

              5.  During sales cut-off testing, PNC noted numerous sales for the
                  year ended March 31, 2004 that  were recorded subsequent to
                  year-end.

              6.  PNC identified inaccurate payroll tax returns filed for XRG,
                  Inc. and XRG Logistics, Inc.

     We are continuing the process of identifying and implementing corrective
     actions identified to improve the design and effectiveness of our internal
     controls, including the enhancement of systems and procedures. Significant
     additional resources will be required to establish and maintain appropriate
     controls and procedures and to prepare the required financial and other
     information during this process.

     Even after corrective actions have been implemented, the effectiveness of
     our controls and procedures may be limited by a variety of risks including:

        o  faulty human judgment and simple errors, omissions or mistakes;
        o  collusion of two or more people;
        o  inappropriate management override of procedures; and



                                       27
<PAGE>
        o  risk that enhanced controls and procedures may still not be adequate
           to assure timely and reliable financial information.

     If we fail to have effective internal controls and procedures for financial
     reporting in place, we could be unable to provide timely and reliable
     financial information.

     The following measures have been taken to improve our internal controls and
     procedures during our fiscal year ending March 31, 2005, however, there is
     no assurance that these measures will correct our internal control
     deficiencies:

              1.  We have implemented and are currently using the Strategy 5
                  software platform, a fully integrated transportation
                  management system. Strategy 5 serves as our primary
                  dispatching, operating and billing software package for the
                  majority of our trucking operating divisions. This system was
                  purchased from Strategy Systems Inc. in October of 2002. The
                  dispatch software provides a robust and an almost complete
                  package for managing every aspect of a trucking operation
                  including dispatch operations, settlements, maintenance,
                  billing, A/P, General Ledger, checkbook, and management
                  reporting. Our Strategy 5 server is located at XRG, Inc.
                  offices in Clearwater, Florida and a backup server is
                  installed in Pittsburgh, Pennsylvania for system redundancy
                  and disaster recovery.

                  We have implemented LOADZ, a proprietary trucking application
                  (much like Strategy 5) designed, developed and supported by
                  one individual over the course of 20 years. This system
                  extracts data from Strategy 5 and functions as our general
                  ledger to perform financial statement consolidations. LOADZ
                  was never fully implemented at XRG and serves only in general
                  ledger capacities. LOADZ offered several benefits as follows:

                   o  Provided a module for agency settlements (for non-asset
                      based trucking terminals) which are not particularly
                      suited for Strategy 5.
                   o  Would offer an accounting platform and general ledger
                      capabilities for consolidating many truckload carrier
                      terminals.

                  The implementation of the LOADZ accounts payable and general
                  ledger modules were completed in July 2004, however, none of
                  the other features and functionality of the LOADZ system were
                  implemented or utilized by us during this fiscal year ending
                  March 31, 2005. This system worked effectively in
                  consolidating and reporting our financial information for the
                  quarters ended June 30, 2004, September 30, 2004, and December
                  31, 2004.

                  In November of 2004 we purchased and began the implementation
                  of ACCPAC Pro Series, Version 7.3. This accounting package was
                  selected because of management's dissatisfaction with the
                  sophistication of both Strategy 5 and LOADZ general ledgers
                  and because it is a standardized and proven accounting
                  package. In addition, we are able to outsource the integration
                  of ACCPAC with Strategy 5 with highly experienced consultants
                  that have completed numerous integrations such as ours. The
                  implementation requires mapping and database connectivity into
                  Strategy 5 database and is currently underway and is expected
                  to be fully functional in March 2005.

                  It is expected that upon full implementation of the ACCPAC
                  accounting system, we will reduce our time and effort involved
                  in reconciling schedules and subsidiary ledgers with our
                  general ledger. In addition, by automating this process, we
                  will reduce the number of adjusting journal entries and
                  therefore decrease our closing cycle in producing our
                  consolidated financial statements.

              2.  In December 2004, we hired Jay Ostrow, a highly qualified and
                  experienced chief financial officer and corporate controller.
                  Mr. Ostrow currently serves as our corporate controller and
                  has been instrumental in preparing our December 31, 2004
                  quarterly financial statements and notes thereto. Mr. Ostrow's
                  biography is as follows:

                  Mr. Ostrow has been providing financial management and
                  accounting services to businesses for nineteen years. From
                  2003 to 2004, Mr. Ostrow served as Chief Financial Officer and
                  Controller of P.D.C. Innovative Industries, Inc, a publicly
                  held hospitality and medical technology company located in
                  Tampa, Florida. From 2002 to 2003, Mr. Ostrow served as the
                  Director of Finance and Accounting for TVC Telecom, Inc., a
                  publicly held telecommunications provider located in Miami,
                  Florida. From 2000 to 2001, Mr. Ostrow served as the Chief
                  Financial Officer of Stampede Worldwide, Inc., a publicly held
                  technology company located in Tampa, Florida. Additionally,


                                       28
<PAGE>

                  Mr. Ostrow has provided financial management, and accounting
                  and consulting services on a contract basis for a variety of
                  Tampa Bay businesses. Mr. Ostrow has six years of public
                  accounting experience and is a graduate of The George
                  Washington University with a B.B.A. degree in accounting.

                  Mr. Ostrow is currently in the process of assembling and
                  managing a competent staff of skilled accounting personnel to
                  provide for more efficient and effective accounting controls
                  and procedures.

              3.  During the first quarter ended June 30, 2004, we were
                  successful in segregating duties in the accounting department.
                  Our accounts payable and cash management functions are
                  centralized in Clearwater, Florida. Our invoicing and
                  collections functions are centralized in Pittsburgh,
                  Pennsylvania. We have different employees handling critical
                  functions such as signing checks, processing cash
                  disbursements and maintaining books of original entry. We are
                  confident that we have proper checks and balances in place in
                  our accounting functions.

              4.  In November 2004, we added 3 new board members and formed
                  formal audit and compensation committees. One new member
                  resigned on February 16, 2005 because of inadequate time
                  commitments. With the addition of these new board members all
                  new contracts are approved by our board of directors. In
                  addition, we require board approval to issue new shares of our
                  stock. This approval process requires proof that all legal
                  requirements are met prior to issuing shares of stock. In
                  addition, we require board approval to issue new shares of our
                  stock.

              5.  We currently use a 10-KSB and MD&A checklist as a guide in
                  preparing our financial statements and notes thereto. We also
                  use these checklists as a guide for drafting our 10-QSB. We do
                  not, however, physically complete a 10-KSB or MD&A checklist
                  prior to each filing. We plan on implementing a policy
                  requiring these checklists and a copy provided to our audit
                  committee prior to making our 10-KSB filing.

              6.  We currently run reports and perform analysis at the end of
                  each accounting period using our Strategy 5 system that helps
                  us identify any sales-cut off issues. Specifically, we review
                  reports that identify customer shipments for each truckload
                  terminal that are delivered to our customers and have not been
                  invoiced at period end. We accrue revenues based on this
                  testing at the end of each period.

              7.  During our first quarter ended June 30, 2004, we began using
                  Spectrum HR, an employee leasing company, to facilitate our
                  payroll processing for all employees for all divisions with
                  the exception of our executive officers. Spectrum HR remits
                  the payroll taxes and completes the payroll reports on our
                  behalf. We plan on continuing this relationship with Spectrum
                  HR, which should alleviate any problems with accurately filing
                  our payroll tax returns.


PART II - OTHER INFORMATION

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

                  From time to time, we may be involved in litigation relating
         to claims arising out of our ordinary course of business. We believe
         that there are no claims or actions pending or threatened against us,
         the ultimate disposition of which would have a materially adverse
         effect on us.

                  In May, 2003, a legal action was filed in Franklin County,
         Ohio, against XRG, Inc. (and against our president, based on a personal
         guaranty) by the landlord of our former office space in Pittsburgh,
         Pennsylvania. The landlord claimed approximately $63,000 in unpaid
         rent. In January 2004, the court granted our motion to dismiss the case
         for lack of proper jurisdiction in the State of Ohio. In February 2004,
         the landlord filed a legal action in Allegheny County, Pennsylvania. We
         filed a Complaint in Allegheny County in Common Please court for breach
         of lease and filed a counterclaim for damages. In October 2004, we
         received a settlement offer from the landlord in the amount of $13,333
         if paid on or before November 30, 2004. In November 2004, we settled
         with our former landlord for $13,333.

                  Unbeknownst to XRG, the former EFS shareholders filed suit
         against XRG and EFS in the Circuit Court of Hamilton County, Tennessee
         on August 16, 2004-Docket No. OC4C1324 alleging that XRG and EFS had
         breached their obligations under the original EFS Merger Agreement and
         related ancillary documents. In addition, EFS alleged that XRG had not
         provided sufficient funding to maintain EFS' operations and trucks and



                                       29
<PAGE>

         continuous operations, including but not limited to, funding for fuel
         purchases. EFS also alleged that XRG had not made required insurance
         premium payments and other matters. In October, we became aware of this
         lawsuit and EFS voluntarily dismissed this case without prejudice on
         October 27, 2004.

Item 2.  Change in Securities and Use of Proceeds.
         -----------------------------------------

                  We executed a Stock Purchase Agreement with Barron Partners,
         LP (the "Investor") on March 31, 2004. During April, under the terms of
         this Agreement, we issued the Investor 5,416,665 shares of its Common
         Stock for an aggregate purchase price of $3,250,000.

                  We issued the Investor two (2) warrants exercisable for shares
         of our Common Stock (the "A Warrant" and "B Warrant" - collectively the
         "Warrants"). The A Warrant granted the Investor the right to acquire up
         to 2,708,300 shares of our Common Stock at an exercise price of $2.00
         per share. The B Warrant granted the Investor the right to purchase up
         to 2,708,300 shares of our Common Stock at an exercise price of $5.00
         per share. Each of the Warrants contained a cashless exercise
         provision. Each of the Warrants was callable by us if the closing
         market price of the Common Stock exceeds $20.00 for the A Warrant and
         $40.00 for the B Warrant for twenty (20) consecutive trading days. Each
         of the Warrants contained proportionate ratcheting anti-dilution
         protection for future issuances of equity securities and for our
         failure to meet certain earnings per share projections.

                  On June 15, 2004 we entered into an agreement with Barron
         Partners, LP to have the number of shares underlying the warrants owned
         by Barron reduced to 3,166,667 and the exercise price of the warrant
         shares reduced to $2.00. Simultaneously the Reporting Person exercised
         all of the 3,166,667 warrants in a cashless tender and acquired
         3,000,000 shares through this exercise.

                  There were Finder's Fees associated with this financing
         consisting of $325,000 and Common Stock Purchase Warrants representing
         the right to purchase 541,667 shares of Common Stock at $0.60 per share
         and Common Stock Purchase Warrants representing the right to purchase
         300,000 shares of Common Stock at $0.20 per share both with a five year
         term.

                  We also entered into a Registration Rights Agreement with the
         Investor. We are obligated to file a Registration Statement within
         ninety (90) days of the final acquisition closing, or on or about July
         27, 2004 for the purpose of registering for resale the common shares
         and the shares underlying the Warrants issued to the Investor. The
         Registration Rights Agreement contains a liquidated damages provision
         if we fail to have the subject Registration Statement declared
         effective on or before December 26, 2004 and to maintain the
         effectiveness of said Registration Statement for two (2) years. The
         Investor is also granted incidental piggyback registration rights. The
         Company filed a Registration Statement on November 12, 2004. At a Board
         of Directors meeting held on February 16, 2005, the Board approved the
         withdrawal of the current Registration Statement as it has not been
         declared effective. However, the major shareholder has verbally agreed
         to waive these liquidating damages totaling $292,500 through December
         31, 2004.

                  In connection with the Stock Purchase Agreement, we agreed to
         cause the appointment of at least three (3) independent directors and
         to appoint an audit committee and compensation committee consisting of
         a majority of outside members. Provided that we comply with the
         independent director covenant, the Investor has agreed to allow up to
         fifteen percent (15%) of the voting rights for our shares to be voted
         by our Board of Directors for one (1) year.

                  The Investor also required that certain of our current
         insiders agree to cancel all of their shares of Series A Preferred
         Stock in exchange for 750,000 shares of Common Stock. We also agreed
         not to issue any shares of Preferred Stock for a period of one (1)
         year. No insiders may sell any of their securities prior to November
         30, 2004. The Investor has also required us to eliminate the floating
         conversion feature for all outstanding securities. In June 2004, the
         exchange of Series A Preferred Stock for Common Stock was increased to
         1,250,000 shares as a result of the exchange and cancellation of
         warrants for common stock of our major shareholder. The Common Stock
         related to this exchange was issued during the quarter ended June 30,
         2004.

                  The Common Stock and the Warrants were issued to the Investor
         in a private placement transaction pursuant to Section 4(2). The
         Investor has represented that it is an "accredited investor" as that
         rule is defined under Rule 501(a) of Regulation D. As a direct result
         of the transactions referred to above, Barron Partners, LP, became a


                                       30
<PAGE>

         "control person" of the Registrant as that term is defined in the
         Securities Act of 1933, as amended.

                  During the nine month period ended December 31, 2004, we
         raised $3,870,000 in exchange for 1,935,000 shares of Common Stock
         pursuant to a Stock Purchase Agreement from various investors. There
         were Finder's Fees associated with this financing consisting of
         $317,000 and Common Stock Purchase Warrants representing the right to
         purchase 192,530 shares of Common Stock at $2.00 to $8.00 per share for
         a five year term. These shares were issued to the Investors in a
         private placement transaction pursuant to Section 4(2) and Rule 506 of
         Regulation D under the Securities Act of 1933, as amended. All
         Investors have represented that they are "accredited investors" as that
         rule is defined under Rule 501(a) of Regulation D.

                  Effective January 3, 2005, our Certificate of Incorporation
         was amended in connection with a reverse one for twenty stock split.
         Our authorized number of shares was reduced from 500,000,000 to
         25,000,000 in connection with the reverse one for twenty stock split.
         Our new trading symbol became "XRGI". Our new CUSIP number is 98382P 20
         5. Our preferred stock was eliminated.

                  On January 5, 2005, Ken Steele, an existing shareholder
         advanced us $500,000 pursuant to a Promissory Note that was originally
         repayable on February 5, 2005. The original interest rate on this Note
         was 18%. The Note carries a 24% default interest rate commencing as of
         February 5, 2005. This note requires warrants to acquire 60,000 shares
         of common stock at an exercise price of $2.40. In addition, for each
         month that this Note is not paid, we are required to issue this
         shareholder 20,000 shares of common stock and additional warrants to
         acquire 60,000 shares of common stock at an exercise price of $2.40.
         The warrants include cashless exercise provisions, anti-dilution and
         adjustment provisions equivalent to most favorable anti-dilution rights
         on any outstanding warrants or equity securities. This shareholder is
         granted demand registration rights on these securities. We also agreed
         to grant this shareholder security interests in vehicle license plates,
         operating permits, equipment and accounts receivable. This shareholder
         has agreed to extend the maturity date of this note until March 31,
         2005.

                  On February 23, 2005 we entered into a $1,180,000 note payable
         with Barron Partners, LP, our major shareholder. The note bears
         interest at 10.0% with an origination fee of 7.0%. The note is due in
         sixty days with a default interest rate of 17.0%. This note is secured
         by all of our assets. We are authorized to borrow an additional
         $800,000 from our majority shareholder on the same terms and conditions
         as set forth in the $1,180,000 note. Any additional equity or debt
         financing up to $800,000 provided by any source will be used for
         working capital purposes. Thereafter, the proceeds of capital raised
         from any source will be allocated 70% to repay the outstanding
         indebtedness to Barron and Steele on a prorata basis.

                  We are authorized to borrow an additional $800,000 from Barron
         on the same terms and conditions as set forth in the $1,180,000 note.
         Any additional equity or debt financing up to $800,000 provided by any
         source will be used for working capital purposes. Thereafter, the
         proceeds of capital raised from any source will be allocated 70% to
         repay the outstanding indebtedness to Barron and Steele on a prorata
         basis.

                  On February 24, 2005 we finalized a closing and funding of a
         Contract of Sale/Security Agreement with Capco Financial Company. The
         purpose of this financing arrangement was to replace the Company's our
         existing factoring arrangements. Pursuant to this agreement, we have
         the right to advance against 80% of our eligible accounts receivable.
         We are subject to lock-box arrangements and funds from the collection
         of our receivables will be deposited in a lockbox account and advanced
         to us based upon availability. The interest rate is equal to a daily
         fee equal to the Greater Bay Bank, N.A. prime rate plus 7% divided by
         365 (equivalent to a monthly discount fee of Greater Bay Bank, N.A.
         prime rate plus 7% divided by 12). Based upon current market rates this
         effective interest rate is substantially less than the effective cost
         of funds paid to our current factorers. The Capco financing should
         improve our cash flow position because of the anticipated lower cost of
         funds and the elimination of the factoring reserves. We have granted
         Capco a security interest in all of our assets.

                  In connection with this financing, a $75,000 commitment fee
         was paid to Capco at closing and the Company agreed to issue Capco
         common stock purchase warrants with a value equal to $150,000. Said
         warrant will have an exercise price equal to 120% of the 30 day average
         of the closing bid price of the Company's common stock prior to the
         closing of this facility. In addition, a finder has requested a cash
         fee equal to 3% of the initial draw down which equals $114,364.11 and a
         cash fee equal to 3% of additional draw downs on this facility up to a
         $10 million maximum. The Company agreed in principal to said fees. The


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<PAGE>

         finder requested additional warrants which the Company is not willing
         to issue. The Company is currently negotiating with this finder a
         resolution of its fees.

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

         On January 5, 2005 Ken Steele, an existing shareholder advanced us
         $500,000 pursuant to a Promissory Note that was originally repayable on
         February 5, 2005. The original interest rate on this Note was 18%. The
         Note carries a 24% default interest rate commencing as of February 5,
         2005. We were obligated to issue Mr. Steele warrants to acquire 60,000
         shares of our common stock at an exercise price of $2.40. In addition,
         for each month that this Note is not paid, we are required to issue Mr.
         Steele 20,000 shares of our common stock and additional warrants to
         acquire 60,000 shares of our common stock at an exercise price of
         $2.40. The warrants shall include cashless exercise provisions,
         anti-dilution and adjustment provisions equivalent to most favorable
         anti-dilution rights on any outstanding warrants or equity securities.
         Mr. Steele is granted demand registration rights for his securities. We
         also agreed to grant Mr. Steele security interest in vehicle license
         plates, operating permits, equipment and accounts receivable. This
         shareholder has agreed to extend the maturity date of this note until
         March 31, 2005.

         Previously, Barron advanced us $225,809.96 pursuant to a Promissory
         Note dated September 10, 2004 (of which $45,000 has been repaid) and a
         $166,275 Promissory Note dated October 1, 2004. The proceeds of these
         notes were used to refinance certain of the tractor trailer equipment
         of Carolina Truck Connection, Inc. ("CTC") which we assumed pursuant to
         our Asset Purchase Agreement with CTC in April 2004. We have agreed
         that Barron shall take a lien upon possession of the CTC
         tractor/trailer equipment titles which were released from the prior
         lender from the proceeds of these notes. Barron has agreed to extend
         the maturity dates of these notes to March 31, 2005.

         Barron has indicated its willingness to assist in the refinancing of
         the outstanding RSV, Inc. ("RSV") debt which we were obligated to
         assume in connection with our acquisition of RSV in 2004. The current
         amount of the RSV debt that we need to refinance is approximately
         $1,900,000. In addition, we will need to pay Richard Venable, the owner
         of RSV approximately $58,000 to reimburse him for payments he has made
         to the creditor subsequent to the acquisition. Our failure to complete
         the refinancing of the RSV debt and release of Mr. Venable from his
         personal guaranties would have a material adverse affect on XRG.

         In connection with the acquisition of Highway Transport in 2004 we also
         agreed to assume the obligations for that company's tractor/trailer
         equipment. The outstanding balance due to the lender/lessors of the
         Highway Transport equipment is approximately $1,171,000 as of February
         21, 2005. This debt secures approximately 30 tractors. We are currently
         2 to 3 months delinquent in our monthly payment obligations to these
         various lenders and lessors. Our aggregate monthly payments are
         approximately $58,000. Our total current arrearage is approximately
         $105,000. We intend to use a portion of the proceeds advanced from
         Barron to satisfy part of this arrearage. We are subject to the risks
         that the existing lenders and lessors of Highway Transport will
         replevin and take repossession of this equipment if we are not able to
         satisfy the arrearages in monthly payment obligations and maintain a
         current monthly payment status in the future.

         We are currently in default under approximately $180,000 of convertible
         notes due to eight holders and one other promissory note of $50,000 due
         to one holder. The $180,000 of notes bear default interest of 15%.
         These notes matured on December 31, 2004. The $50,000 note matured on
         February 1, 2005. We owe this holder 7,500 shares of our common stock
         at maturity for accrued interest. We also are obligated to issue 10,000
         shares of common stock each month until this note is paid off. In
         addition, we have satisfied part of our obligations to various other
         noteholders through the conversion of such notes and the sale of the
         shares received upon conversion pursuant to Rule 144. We had included
         these noteholders in the selling shareholder registration statement
         which we have withdrawn.

         We have received a demand letter from counsel for the Placement Agent
         related to the sale of these convertible notes but no legal proceedings
         have been instituted. Our plan is to negotiate with the Placement Agent
         to resolve this matter on mutually agreeable terms. There is no
         assurance we will be able to resolve this matter and are exposed to the
         risk that such noteholders either individually or as a group will
         institute a collection lawsuit and obtain a judgment prior to the time
         we are able to generate sufficient capital to pay off these notes.


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<PAGE>

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

         On November 15, 2004, at a Special Board of Directors meeting, the
         Board of Directors of the Company elected three new directors to serve
         on its Board of Directors as announced in Form 8-K filed on November
         15, 2004.

         On November 30, 2004, XRG, Inc. accepted the resignation of Mr. Neil
         Treitman as the Chief Operating Officer of the company.

         On December 27, 2004 the Company filed a Definitive Information
         Statement on Schedule 14C with the Securities and Exchange Commission.
         The Information Statement was filed in connection with a one (1) for
         twenty (20) reverse stock split effective January 3, 2005.
         Additionally, on that date, our Certificate of Incorporation was
         amended and the authorized number of common shares was reduced from
         500,000,000 to 25,000,000. Our new trading symbol is "XRGI" on the OTC
         electronic bulletin board.

         At a Board of Directors meeting held on February 16, 2005, the Board
         approved the withdrawal of the current Registration Statement, Form
         SB-2 filed on November 12, 2004 with the Securities and Exchange
         Commission, as it has not been declared effective. The request to
         withdraw was filed on February 18, 2005.

         Barron Partners, LP has agreed to waive all the liquidated damages
         penalties incurred from the initial penalty date until December 31,
         2004. The total liquidated damages waived by Barron is approximately
         $340,000. Barron is accruing its penalties from January 1, 2005 to
         February 16, 2005. Barron has agreed to waive its penalties from
         February 17, 2005 until XRG's fiscal year end, which is March 31, 2005.
         Barron's forbearance of waiving its penalties from February 16, 2005 to
         March 31, 2005 is predicated upon all other investors with registration
         rights waiving their penalty rights during same period as waived by
         Barron. There is no assurance that other investors will agree to waive
         their liquidated damages provisions for failure to register these
         shares in connection with the withdrawal of the above referenced
         registration statement. Liquidated damages due Barron is approximately
         $292,500 per quarter. Liquidated damages due to other investors are
         approximately $20,000 per month.

         On February 16, 2005 certain officers and directors agreed to modify
         their compensatory agreements. Annual compensation was reduced from
         $500,000 to $336,250, a reduction of 32.75%.

         On February 16, 2005 the Company engaged Walker Street Associates, an
         outside consultant, to evaluate our operations and to provide
         recommendations to improve financial performance.

         During February 2005 two directors resigned from the Board of
         Directors. One director resigned due to other commitments, the other
         director was unable to agree upon an acceptable level of board
         compensation for his services.

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

              (a) Exhibits

              Exhibit 10.1 Terminal Agreement and Bullet Point Addendum between
              Express Freight Systems, Inc and Express Freight, Inc. dated
              August 16, 2004.

              Exhibit 10.2 Terminal Agreement and Addendum between AGB
              Transportation Services, LLC and XRG Logistics, Inc. dated
              October 4, 2004.

              Exhibit 31.1 Certification pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002 signed by Kevin P. Brennan and Stephen
              Couture.

              Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as
              adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
              signed by Kevin P. Brennan and Stephen Couture.



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<PAGE>


              (b) Reports on Form 8-K

              During the nine month period ended December 31, 2004, the Company
              filed with, or furnished to, the Securities and Exchange
              Commission (the "Commission") the following Current Reports on
              Form 8-K:

              Current Report on Form 8-K (Items 1, 2, and 7) dated April 30,
              2004 (filed with the Commission on April 29, 2004) reporting the
              acquisitions of Highway Transport, Inc., Highbourne Corporation,
              Express Freight Systems, Inc., Carolina Truck Connection, Inc. and
              RSV, Inc. In addition, the filing reported a Change of Control and
              the Barron Partners, LP equity investment.

              Current Report on Form 8-K (Items 5 and 7) dated May 25, 2004
              (filed with the Commission on May 27, 2004) reporting a PowerPoint
              presentation to various investors on that date.

              Current Report on Form 8-K (Items 4.01 and 9.01) dated October 12,
              2004 (filed with the Commission on October 14, 2004) reporting
              changes in Registrant's Accountant.

              Current Report on Form 8-K (Items 1.01 and 7) dated November 9,
              2004 (filed with the Commission on November 10, 2004) entry into a
              material definitive agreement.

              Current Report on Form 8-K (Items 5.02) dated November 15, 2004
              (filed with the Commission on November 15, 2004) reporting
              election of directors.

              Current Report on Form 8-K (Items 5.02 and 7.01) dated November
              30, 2004 (filed with the Commission on December 1, 2004) reporting
              election of directors and departure of principal officer.

              Current Report on Form 8-K (Items 5.03, 7.01 and 9.01) dated
              November 30, 2004 (filed with the Commission on December 1, 2004)
              reporting election of directors and departure of principal
              officer.

              Current Report on Form 8-K (Items 5.03, 7.01 and 9.01) dated
              January 3, 2005 (filed with the Commission on January 6, 2005)
              reporting that the Company's Certificate of Incorporation was
              amended in connection with a reverse one for twenty stock split.

              Current Report on Form 8-K (Items 1.01, 2.02, 3.03, 5.02) dated
              February 5, 2005 (filed with the Commission on February 25, 2005)
              reporting Recent Interim Financing Arrangements/Defaults, New
              Financing Agreement with Capco Financial Company - a Division of
              Greater Bay Bank, N.A., Consulting Agreement with Walker Street
              Associates, Changes to Current Compensatory Arrangements,
              Conversion of Accrued Compensation into Shares, Material
              Modification to Rights of Security Holders, and Resignation of
              Directors.







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<PAGE>

SIGNATURES

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


                              XRG, Inc.

Dated:   3/2/2005

                              /s/ Kevin Brennan
                              ------------------------------------
                              Kevin Brennan
                              President & Chief Executive Officer

                              /s/ Stephen Couture
                              ------------------------------------
                              Stephen Couture
                              Vice President, Finance & Chief Financial Officer

                                       35