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U. S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 AMENDMENT NO. 3
TO
 FORM 10-QSB
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2004
 
 o
    
    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.
  DELAWARE
    
    58-2583457(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 601 Cleveland Street, Suite 501, Clearwater, FL 33607
 (727) 475-3060
  o þ
   o þ




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PagePart I  Financial InformationItem 1. Condensed Consolidated Financial Statements (Unaudited)Condensed Consolidated Balance Sheet  June 30, 2004
    
    
    1Condensed Consolidated Statements of Operations  Three months ended June 30, 2004 and 2003
    
    
    2Condensed Consolidated Statements of Cash Flows  Three months ended June, 2004 and 2003
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Controls & Procedures
    
    
    19Part II  Other InformationItem 1. Legal Proceedings
    
    
    22Item 2. Change in Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits and Reports on Form 8-K
    
    
    23Signatures
    
    
    24Ex-31.1: Section 302 CertificationEx-32.1: Section 906 Certification
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AssetsCurrent assets:Cash
    
    $
    130,483Accounts receivable, net of allowance of $174,000
    
    
    4,279,900Other current assets
    
    
    366,962Total current assets
    
    
    4,777,345Fixed assets, net of accumulated depreciation
    
    
    5,558,426Other assetsGoodwill and other intangible assets
    
    
    6,388,521Other assets
    
    
    1,327,200Total other assets
    
    
    7,715,721$
    18,051,492Liabilities and Stockholders EquityCurrent liabilities:Current portion of long-term debt
    
    
    618,489Current portion of long-term convertible debt; net of unamortized
discount of $153,843
    
    
    261,157Accounts payable
    
    
    561,378Factorer line of credit
    
    
    2,233,786Accrued purchased transportation
    
    
    685,868Accrued payroll expenses
    
    
    473,869Accrued expenses  financings
    
    
    241,690Accrued expenses
    
    
    137,897Related party advances and payables
    
    
    255,126Bank overdraft  Express Freight Systems, Inc.
    
    
    100,647Factorer line of credit  Express Freight Systems, Inc.
    
    
    1,152,813Notes payable  Express Freight Systems, Inc.
    
    
    1,192,412Current portion of capital lease obligations  Express Freight Systems, Inc.
    
    
    419,620Accounts payable  Express Freight Systems, Inc.
    
    
    601,412Accrued expenses  Express Freight Systems, Inc.
    
    
    964,533Total current liabilities
    
    
    9,900,697Long-term liabilities:Notes payable
    
    
    1,344,641Notes payable  Express Freight Systems, Inc.
    
    
    461,442Capital lease obligations  Express Freight Systems, Inc.
    
    
    1,895,546Other long-term liabilities
    
    
    22,769Total long-term liabilities
    
    
    3,724,398Total liabilities
    
    
    13,625,095Stockholders equity:Series A Preferred stock; $.001 par value; 5,000,000 shares authorized;
no shares issued and outstandingPreferred stock; $.001 par value; 45,000,000 shares authorized;
no shares issued and outstanding
    
    
    Common stock; $.001 par value; 300,000,000 shares authorized;
242,576,711 shares issued and 242,236,711 outstanding
    
    
    242,576Common stock payable
    
    
    1,102,501Additional paid-in capital
    
    
    28,007,227Subscription receivable
    
    
    (5,000
    )Accumulated deficit for unrelated dormant operations
    
    
    (15,405,274
    )Accumulated deficit
    
    
    (8,846,835
    )Deferred stock compensation and consulting
    
    
    (513,798
    )Treasury stock, at cost, 340,000 shares
    
    
    (155,000
    )Total stockholders equity
    
    
    4,426,397$
    18,051,492
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Three months ended June 30,2004
    
    
    2003Revenues
    
    $
    9,521,308
    
    
    $
    Cost of revenues
    
    
    8,695,353
    
    
    
    Gross profit
    
    
    825,955
    
    
    
    Selling, general and administrative expenses
    
    
    3,501,812
    
    
    
    162,490Loss from operations
    
    
    (2,675,857
    )
    
    
    (162,490
    )Interest expense
    
    
    (354,658
    )
    
    
    (36,505
    )Intrinsic value of convertible debt and debt
discount for value of detachable warrants
    
    
    (73,725
    )
    
    
    (429,266
    )(428,383
    )
    
    
    (465,771
    )Net loss applicable to common shareholders
    
    $
    (3,104,240
    )
    
    $
    (628,261
    )Basic loss per common shareholders
    
    $
    (0.03
    )
    
    $
    (0.06
    )Weighted average number of common shares outstanding
    
    
    89,275,213
    
    
    
    10,693,097
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Three Month Period EndedJune 30,2004
    
    
    2003Operating activitiesNet loss
    
    $
    (3,104,240
    )
    
    $
    (628,261
    )Adjustments to reconcile net loss to net cash
used by operating activities:Depreciation and amortization
    
    
    213,555
    
    
    
    3,373Bad debt
    
    
    8,000
    
    
    
    Common stock and warrants issued for services and compensation
    
    
    876,000
    
    
    
    Stock issued in lieu of interest
    
    
    66,000
    
    
    
    17,832Amortization of discount and intrinsic value of convertible notes
    
    
    73,725
    
    
    
    429,266Amortization of deferred financing fees
    
    
    20,442
    
    
    
    Amortization of deferred stock compensation and consulting
    
    
    163,689
    
    
    
    (Increase) decrease, net of effect of acquisitions:Accounts receivable
    
    
    (1,094,095
    )
    
    
    Other assets
    
    
    (122,894
    )
    
    
    Increase (decrease), net of effect of acquisitions:Accounts payable
    
    
    343,556
    
    
    
    42,473Accrued expenses and other liabilities
    
    
    897,972
    
    
    
    472Total adjustments
    
    
    1,445,950
    
    
    
    493,416Net cash used by operating activities
    
    
    (1,658,290
    )
    
    
    (134,845
    )Investing activitiesPurchase of equipment
    
    
    (3,144
    )
    
    
    Cash paid for acquisition of businesses, net of cash acquired
    
    
    (2,000,000
    )Deposit on purchase of transportation equipment
    
    
    
    
    
    
    (50,000
    )Net cash used by investing activities
    
    
    (2,003,144
    )
    
    
    (50,000
    )Financing activitiesIncrease in bank overdraft
    
    
    (561,842
    )
    
    
    Net proceeds from factoring line of credit
    
    
    581,782
    
    
    
    Net borrowings on stockholder advances
    
    
    (15,000
    )
    
    
    Proceeds from common stock issued and to be issued and options exercised
    
    
    4,087,476
    
    
    
    45,000Proceeds from issuance of notes payable, net
    
    
    29,526
    
    
    
    130,120Principal payments on notes payable
    
    
    (220,568
    )
    
    
    Payment for treasury stock
    
    
    (45,000
    )
    
    
    Payments on capital lease
    
    
    (64,457
    )
    
    
    Net cash provided by financing activities
    
    
    3,791,917
    
    
    
    175,120Net increase (decrease) in cash
    
    
    130,483
    
    
    
    (9,725
    )Cash at beginning of period
    
    
    
    
    
    
    16,563Cash at end of period
    
    $
    130,483
    
    
    $
    6,838
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Three Months EndedJune 30,2004
    
    
    2003Supplemental disclosures of cash flow information and non-cash investing
and financing activities:Cash paid during the period for interest
    
    $
    206,563
    
    
    $
    18,201
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Trailers
    
    
    1,814,900Tractors
    
    
    3,696,500Machinery and equipment
    
    
    13,451Office equipment and software
    
    
    254,175Leasehold improvements
    
    
    19,9005,798,926Accumulated depreciation
    
    
    (240,500
    )Total Fixed assets, net
    
    $
    5,558,426
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June 30, 2004Equipment
    
    $
    3,673,900Less accumulated amortization
    
    
    116,112$
    3,557,788
  Year EndingJune 30,2005
    
    $
    729,9712006
    
    
    666,6602007
    
    
    1,499,995Total minimum lease payments
    
    
    2,896,626Less amount representing interest
    
    
    581,460Present Value of net minimum lease payments
    
    
    2,315,166Less amount currently due
    
    
    419,620$
    1,895,546
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XRG, Inc.
    
    $
    261,157Carolina Truck Connection, Inc.  Notes payable; interest
ranging from 6.48% to 8.53%; Monthly payments of approximately
$11,000; due at various dates between September 2005 to
December 2008; Secured by equipment
    
    
    475,728Express Freight Systems, Inc.  Notes payable; interest ranging from prime plus
2% to 7.5%; Monthly payments of approximately $15,000; Balloon of $1,000,000 due
upon equity funding; Other notes due at various dates between September 2005 to
December 2008; Secured by equipment
    
    
    1,653,854Highway 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
    
    
    1,487,402$
    3,878,141
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Express Freight Systems, Inc
      8




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Accounts receivable
    
    $
    1,609,474Other current assets
    
    
    99,031Fixed assets
    
    
    3,739,650Goodwill and other intangibles
    
    
    5,679,625Total assets acquired
    
    
    11,127,780Accrued expenses and payables
    
    
    (1,857,781
    )Factorer line of credit
    
    
    (1,501,129
    )Capital lease obligations
    
    
    (2,371,397
    )Notes payable
    
    
    (662,623
    )Total liabilities assumed
    
    
    (6,392,930
    )Total purchase price
    
    $
    4,734,850
 RSV, Inc
   
 Highway Transport, Inc
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Other current assets
    
    $
    38,910Fixed assets
    
    
    1,355,200Goodwill and other intangibles
    
    
    390,993Total assets acquired
    
    
    1,785,103Accrued expenses and payables
    
    
    (96,000
    )Notes payable
    
    
    (1,593,903
    )Total liabilities assumed
    
    
    (1,689,903
    )Total purchase price
    
    $
    95,200
 Highbourne Corporation
   Goodwill and other intangibles
    
    $
    47,600Total assets acquired
    
    
    47,600Total liabilities assumed
    
    
    Total purchase price
    
    $
    47,600
 Carolina Truck Connection, Inc
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Fixed assets
    
    $
    556,500Goodwill and other intangibles
    
    
    248,700Total assets acquired
    
    
    805,200Notes payable
    
    
    (489,000
    )Total liabilities assumed
    
    
    (489,000
    )Total purchase price
    
    $
    316,200
   2004
    
    
    2003Revenues
    
    $
    10,336,863
    
    
    $
    8,950,519Net loss applicable to common shareholders
    
    $
    (3,203,122
    )
    
    $
    (756,620
    )Basic loss per share
    
    $
    (0.04
    )
    
    $
    (0.04
    )
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Debt/EquipmentStructure
    
    
    
    
    
    Common
    
    
    Funds to be
    
    
    
    
    
    
    Leasesof
    
    Cash @
    
    
    Shares
    
    
    Used In
    
    
    Broker
    
    
    Assumed
    
    
    Type ofAcquisition
    
    Transaction
    
    Close
    
    
    Issued
    
    
    Operations
    
    
    Fees
    
    
    (Estimate)
    
    
    Equipment
    
    EquipmentExpress
Freight
Systems, Inc.
    
    Merger
    
    $
    2,000,000
    
    
    
    7,500,000
    
    
    
    300,000
    
    
    
    207,000
    
    
    
    3,034,000
    *
    
    Van/Non-asset based
    
    106 O/OHighway
Transport,
Inc.
    
    Asset Purchase
    
    
    0
    
    
    
    350,000
    
    
    
    175,000
    
    
    
    15,750
    
    
    
    1,594,000
    
    
    Flatbed/Asset based
    
    32 Tractors, 12 O/OHighbourne
Corporation
    
    Asset Purchase
    
    
    0
    
    
    
    200,000
    
    
    
    175,000
    
    
    
    15,750
    
    
    
    0
    
    
    Van/Non-asset  based
    
    34 O/OCarolina
Truck
Connection,
Inc.
    
    Asset Purchase
    
    
    0
    
    
    
    1,200,000
    
    
    
    156,000
    
    
    
    14,750
    
    
    
    489,000
    
    
    Van/Asset based
    
    7 Tractors, 2 O/O$
    2,000,000
    
    
    
    9,250,000
    
    
    $
    806,000
    
    
    $
    253,250
    
    
    $
    5,117,000
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*
    
    Relates to a Master Lease agreement for approximately 270 trailers to be paid at $55,000 per
month for 36 months with a $1,000,000 buyout payment at the end of the lease.           14




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Headquarters
    
    
    
    Owner/Operators or
    
    
    
    
    
    ClosingCompany
    
    Location
    
    Carrier Type
    
    Owned Tractors
    
    Trailers
    
    DateJ. Bently Companies, Inc.*
    
    Sweetwater, TN
    
    Van
    
    17 Owner Operators,
46 Fleet
Contracted Tractors
    
    
    209
    
    
    September
1, 2003*R&R Express Intermodal, Inc.
    
    Pittsburgh, PA
    
    Intermodal
    
    34 Owner Operators
    
    
    
    
    
    January 1,
2004Highbourne Corporation
    
    Champaign, IL
    
    Van
    
    34 Owner Operators
    
    
    46
    
    
    April 2,
2004Highway Transport
    
    Evergreen, AL
    
    Flatbed
    
    32 Tractors, 12
Owner Operators
    
    
    47
    
    
    April 2,
2004Express Freight Systems
    
    Chattanooga, TN
    
    Van
    
    106 Owner Operators
    
    
    242
    
    
    April 21,
2004Carolina Truck Connection
    
    Fletcher, NC
    
    Van
    
    7 Tractors, 2 Owner
Operators
    
    
    40
    
    
    April 30,
2004
 
 *
    
    Began operating under a Fleet Owner and Independent Contractor Agreement on this date.          16




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
    
    faulty human judgment and simple errors, omissions or mistakes;
    
    collusion of two or more people;
    
    inappropriate management override of procedures; and
    
    risk that enhanced controls and procedures may still not be adequate to assure timely
and reliable financial information.
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Item 1.
Legal Proceedings.
   
 Item 2.
Change in Securities and Use of Proceeds.
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Item 3.
Defaults Upon Senior Securities.
  
 Item 5.
Other Information
 
 Item 6.
Exhibits and Reports on Form 8-K
    
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XRG, Inc.Dated: December 19, 2005/s/ Richard FrancisRichard FrancisPresident, CEO, CFO and Director/s/ Jay OstrowJay OstrowPrincipal Accounting Officer, Controller
 24