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 September 30, 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 October 31, 2004 was 273,663,378.

         Transitional Small Business Disclosure Format:

Yes               No     X
     ---                ---

<PAGE>

                           XRG, Inc. and Subsidiaries

                                      Index



                                                                           Page
Part I - Financial Information                                             ----
------------------------------

Item 1.  Consolidated Financial Statements (Unaudited)

         Consolidated Balance Sheet -
           September 30, 2004..............................................   1

         Consolidated Statements of Operations -
           Three and Six months ended September 30, 2004 and 2003..........   2

         Consolidated Statements of Cash Flows -
           Three and Six months ended September 30, 2004 and 2003..........   3

         Notes to Consolidated Financial Statements........................   6

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations.............................  19

Item 3.  Controls & Procedures.............................................  31

Part II - Other Information
---------------------------

Item 1. Legal Proceedings..................................................  31

Item 2. Change in Securities and Use of Proceeds...........................  32

Item 3. Defaults Upon Senior Securities....................................  34

Item 5. Other Information..................................................  34

Item 6. Exhibits and Reports on Form 8-K...................................  34


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


                                       i
<PAGE>

<TABLE>
<CAPTION>

                                            XRG, Inc. and Subsidiaries
                                            Consolidated Balance Sheet


                                                                                 September 30,2004
                                                                                --------------------
<S>                                                                          <C>
Assets                                                                              (Unaudited)
Current assets:
    Accounts receivable, net of allowance of $29,000                            $      4,223,621
    Other current assets                                                                 483,593
                                                                                --------------------
Total current assets                                                                   4,707,214

Fixed assets, net of accumulated depreciation                                          5,094,545

Other assets
    Goodwill                                                                           4,542,563
    Other assets                                                                          35,392
                                                                                --------------------
Total other assets                                                                     4,577,955
                                                                                --------------------

                                                                                $     14,379,714
                                                                                ====================

Liabilities and Stockholders' Equity

Current liabilities:
    Current portion of long-term debt                                           $      2,219,423
    Current portion of long-term convertible debt; net
     of unamortized discount of $73,724                                                  290,000
    Current portion of capital lease obligations                                           7,756
    Bank overdraft                                                                       473,850
    Accounts payable                                                                     612,292
    Accrued expenses                                                                     675,538
    Accrued purchased transportation                                                      53,726
    Accrued payroll expenses                                                             301,613
    Factor line of credit                                                              3,430,628
    Related party advances and payables                                                  255,126
                                                                                --------------------

Total current liabilities                                                              8,319,952
                                                                                --------------------

Long-term liabilities:
    Notes payable                                                                      2,002,407
    Convertible notes payable                                                            100,000
    Other long-term liabilities                                                           55,923
                                                                                --------------------
Total long-term liabilities                                                            2,158,330

                                                                                --------------------
Total liabilities                                                                     10,478,282
                                                                                --------------------

Stockholders' equity:
    Series A Preferred stock; $.001 par value; 5,000,000 shares authorized;                    -
    Preferred stock; $.001 par value; 45,000,000 shares authorized;                            -
    Common stock; $.001 par value; 500,000,000 shares authorized;
      265,003,379 shares issued and 260,793,379 outstanding                              265,003
    Common stock to be issued                                                            614,550
    Additional paid-in capital                                                        30,559,490
    Subscription receivable                                                               (5,000)
    Accumulated deficit                                                              (26,352,611)
    Treasury stock, at cost, 4,210,000 shares                                         (1,180,000)
                                                                                --------------------
 Total stockholders' equity                                                            3,901,432
                                                                                --------------------

                                                                                $     14,379,714
                                                                                ====================
</TABLE>


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


                                       1
<PAGE>

<TABLE>
<CAPTION>

                                                                      XRG, Inc. and Subsidiaries
                                                                Consolidated Statements of Operations
                                                                             (Unaudited)

                                                 Three months ended September 30,                Six months ended September 30,
                                        ---------------------------------------------    ------------------------------------------
                                                  2004                     2003                   2004                    2003
                                        ---------------------     -------------------    -------------------      -----------------


<S>                                    <C>                       <C>                    <C>                      <C>
Revenues                               $          11,488,526    $            298,225   $         21,854,638     $          298,225

Cost of revenues                                   9,184,197                  22,970             18,391,462                 22,970
                                        ---------------------     -------------------    -------------------      -----------------

Gross profit                                       2,304,329                 275,255              3,463,176                275,255


Selling, general and
 administrative expenses                           2,905,568               1,063,135              6,645,038              1,225,625
Settlement loss                                      744,582                       -                744,582                      -
                                         ---------------------     -------------------    -------------------      -----------------
                                                   3,650,150               1,063,135              7,389,620              1,225,625
                                         ---------------------     -------------------    -------------------      -----------------

Loss from operations                              (1,345,821)               (787,880)            (3,926,444)              (950,370)

Interest expense                                    (731,892)                (32,437)            (1,124,454)               (68,942)
Intrinsic value of convertible debt
 and debt discount for value
   of detachable warrants                            (80,119)               (122,532)              (153,844)              (551,798)
                                        ---------------------     -------------------    -------------------      -----------------
                                                    (812,011)               (154,969)            (1,278,298)              (620,740)
                                        ---------------------     -------------------    -------------------      -----------------

Net loss applicable to common
shareholders                          $           (2,157,832)   $           (942,849)  $         (5,204,742)    $       (1,571,110)
                                        =====================     ===================    ===================      =================

Basic and diluted loss
 per common shareholders              $                (0.01)   $              (0.05)  $              (0.03)    $            (0.11)
                                        =====================     ===================    ===================      =================

Basic and diluted weighted average
 number of common shares outstanding             258,373,089              17,435,202            174,286,167             13,865,017
                                        =====================     ===================    ===================      =================

</TABLE>

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

                                       2
<PAGE>

<TABLE>
<CAPTION>

                                                              XRG, Inc. and Subsidiaries
                                                         Consolidated Statements of Cash Flows
                                                                     (unaudited)



                                                                                                Six months ended September 30,
                                                                                        -------------------------------------------
                                                                                                  2004                    2003
                                                                                        --------------------    -------------------

Operating activities
<S>                                                                                 <C>                      <C>
         Net loss                                                                   $            (5,204,742) $          (1,571,110)
                                                                                        --------------------    -------------------
         Adjustments to reconcile net loss to net cash used by operating
           activities:
                Depreciation and amortization                                                       466,524                  6,811
                Bad debt                                                                              8,000                      -
                Common stock, options and warrants issued for services and compensation             889,200                856,076
                Stock issued in lieu of interest                                                    158,000                  4,955
                Amortization of discount and intrinsic value of convertible notes                    73,725                551,798
                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                                                              (879,640)                     -
                  Other assets                                                                     (258,253)                     -
                Increase (decrease), net of effect of acquisitions:
                  Accounts payable                                                                 (154,097)                40,827
                  Accrued expenses and other liabilities                                             88,032                  9,340
                                                                                        --------------------    -------------------
           Total adjustments                                                                      1,282,753              1,469,807

                                                                                        --------------------    -------------------
            Net cash used by operating activities                                                (3,921,989)              (101,303)
                                                                                        --------------------    -------------------

Investing activities
         Purchase of equipment                                                                      (12,923)                (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                                                  (1,973,136)               (51,305)
                                                                                        --------------------    -------------------

Financing activities
         Bank overdraft                                                                             422,519                      -
         Increase in advances to J. Bently Companies, Inc.                                                -               (355,758)
         Factoring line of credit                                                                   625,811                      -
         Net borrowings (payments) on stockholder advances                                          (15,000)                 7,500
         Proceeds from common stock issued and to be issued and options exercised                 5,425,865                403,918
         Proceeds from issuance of notes payable, net                                               255,336                170,000
         Principal payments on notes payable                                                       (659,949)               (20,000)
         Payment for treasury stock                                                                 (95,000)                     -
         Payments on capital lease                                                                  (64,457)                     -
                                                                                        --------------------    -------------------
         Net cash provided by financing activities                                                5,895,125                205,660
                                                                                        --------------------    -------------------

         Net increase in cash                                                                             -                 53,052

         Cash at beginning of period                                                                      -                 16,563
                                                                                        --------------------    -------------------

         Cash at end of period                                                          $                 -     $           69,615
                                                                                        ====================    ===================
</TABLE>


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

                                       3
<PAGE>
                           XRG, Inc. and Subsidiaries


          Consolidated Statements of Cash Flows (Unaudited) (Continued)


                                                        Six Months Ended
                                                          September 30,
                                                     2004              2003
                                                --------------------------------
Supplemental disclosures of cash flow
    information and noncash investing
    and financing activities:

        Cash paid during the period
        for interest                              $244,467          $36,188
                                                ================================


     During the first quarter of 2004, note holders converted  $490,000 in notes
     payable into 2,450,000 shares of common stock.

     During the first quarter of 2004, the Company issued  25,000,000  shares of
     common stock in exchange for the cancellation of 5,000,000 shares of Series
     A Preferred Stock.

     During the first quarter of 2004, the Company issued  60,000,000  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  11,600,000  shares of
     common stock in conjunction with several acquisitions (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  3,750,000  shares of common stock which was recorded as treasury
     stock at September 30, 2004.

     During the six  months  ended  September  30,  2004,  the  Company  granted
     warrants to purchase  approximately  22,460,831  shares of its common stock
     for offering costs fees. These warrants were valued at $5,205,003.

     During the six months ended  September 30, 2004, the Company issued 500,000
     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  111,154,333
     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 1,000,000 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.

                                       4
<PAGE>

     During the second quarter of 2004,  the Company  agreed to issue  1,916,667
     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.


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

                                       5
<PAGE>

                           XRG, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            Six Months Ended September 30, 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 six months ended September 30, 2004 and 2003, (b) the
financial position at September 30, 2004, and (c) cash flows for the three and
six-month periods ended September 30, 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 six-month
period ended September 30, 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 $5,205,000 for the six months ended September
30, 2004, has an accumulated deficit at September 30, 2004 of approximately
$26,352,000, which consists of approximately $15,405,000 from unrelated dormant
operations and $10,947,000 from current operations; and a negative tangible net
worth of approximately $641,000 as of September 30, 2004. In addition, the
Company has negative working capital of approximately $3,613,000 at September
30, 2004 and has used approximately $3,921,000 of cash from operations for the
six months ended September 30, 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.

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


                                       6
<PAGE>

of the underlying stock over the exercise price. Such compensation amounts are
amortized over the respective vesting periods of the options.

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 six months ended
September 30, 2004 and 2003:

On July 1, 2004, five year options to purchase 400,000 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 two
days.

<TABLE>
<CAPTION>

                                                 Three months ended                 Six months ended
                                                    September 30,                     September 30,
                                                    -------------                     -------------
                                                 2004           2003              2004              2003
                                                 ----           ----              ----              ----

<S>                                        <C>             <C>              <C>                <C>
Net loss, as reported                        $(2,157,832)   $(942,849)        $(5,204,742)      $(1,571,110)
Deduct:  Fair value of stock-based employee
          compensation costs                     (13,205)           -             (13,205)                -
Plus:    Intrinsic value of compensation
          costs included in net loss              13,200            -              13,200                 -

                                           --------------- --------------   ---------------   ---------------
   Pro forma net loss                        $(2,157,837)   $(942,849)        $(5,204,747)      $(1,571,110)
                                           =============== ==============   ===============   ===============

Loss per share:
 Basic and Diluted - as reported             $     (0.01)   $   (0.05)        $     (0.03)      $     (0.11)
                                           =============== ==============   ===============   ===============
 Basic  and Diluted - pro forma              $     (0.01)   $   (0.05)        $     (0.03)      $     (0.11)
                                           =============== ==============   ===============   ===============
</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 loss by the basic and diluted
weighted average number of shares outstanding during the three and six months
ended September 30, 2004 and 2003. Common stock equivalents in the three and six
month periods ended September 30, 2004 and 2003 were anti-dilutive due to the
net losses sustained by us during these periods, thus the diluted weighted
average common shares outstanding in these periods are the same as the basic
weighted average common shares outstanding. At September 30, 2004 and 2003,
30,519,164 and -0- potential common shares, respectively, are excluded from the
determination of diluted net loss per share, as the effect of such shares is
antidilutive.

                                       7
<PAGE>

3.      Fixed assets

As of September 30, 2004, the Company had the following fixed assets:

      Trailers                                    $     3,680,800
      Tractors                                          1,556,500
      Machinery and equipment                               8,000
      Office equipment and software                       221,909
                                                  ----------------
                                                        5,467,209
      Accumulated depreciation                            372,664
                                                  ----------------
      Total Fixed assets, net                     $     5,094,545
                                                  ================

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 $467,000 and $6,800 for the six months ended
September 30, 2004 and 2003, respectively.

4.      Capital lease obligations

As part of the EFS acquisition, the company financed the tractor and trailer
assets acquired through a capital lease that expires in 2007. Therefore, the
assets were recorded at fair value. The liability was recorded at the present
value of the minimum lease payments. The asset is 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, at which time the Company is required to purchase
the equipment for $1,000,000. During the second quarter of 2004, the Company
entered into an amendment to the agreement with the Express Freight Systems,
Inc. 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 Express Freight Systems, Inc.
prior shareholders (See acquisition note below).

5.      Notes Payable

During the first quarter of 2004, certain note holders converted notes totaling
$490,000 to common stock. The Company issued 2,450,000 shares of its common
stock to these note holders for this conversion.

                                       8
<PAGE>

The following table outlines the notes payable balance for each entity at
September 30, 2004:

<TABLE>
<CAPTION>

<S>                                                                                <C>
XRG, Inc.                                                                          $        336,276

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 and a balloon payment of $226,000 due by
November 10, 2004; Secured by equipment.                                                    446,907

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.                                                                 643,869

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.                                                               1,326,730

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.                                                                     1,858,048
                                                                                          ---------

                                                                                    $     4,611,830
                                                                                          =========
</TABLE>

On September 10, 2004, the Company executed a promissory note with our major
shareholder to refinance $225,810 of the CTC debt. Fifty (50%) of the proceeds
of any new debt or equity raised subsequent to the funding of this note must be
used to reduce the amount due on the note within three (3) days of receipt. The
remaining principal was due by November 10, 2004, however, our major shareholder
has agreed to verbally extend this principal payment until January 2005.

6.  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 63,333,333 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 60,000,000 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


                                       9
<PAGE>

effectiveness of said Registration Statement for two (2) years. The Investor is
also granted incidental piggyback registration rights. Liquidating damages for
non-filing of a Registration Statement amount to approximately $195,000 as of
October 15, 2004. The Company filed a Registration Statement on November 12,
2004 and its major shareholder has verbally agreed to waive these liquidating
damages.

In connection with the 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. Liquidating damages for
lack of appointment of Independent Directors amount to approximately $195,000 as
of October 15, 2004. 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 111,154,333 shares of common stock which were
recorded in common stock payable at March 31, 2004.

In 2004, the Company issued 25,000,000 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.

The Company has agreed not to issue any shares of Preferred Stock for a period
of one year from June 2004.

In 2004, the Company raised $1,120,000 for 9,333,335 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
465,728 shares of its common stock related to the exercise of warrants.

In 2004, the Company issued 11,600,000 shares of common stock with a total value
recorded at $2,703,850 in conjunction with several acquisitions.

In 2004, the Company issued 4,400,000 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 300,000 shares of its common stock valued at $66,000
for interest on notes payable and recorded a common stock payable for 500,000
shares of its common stock valued at $92,000 for interest on notes payable.

                                       10
<PAGE>

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 500,000 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 14,500,000 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 3,625,000 shares of Common Stock at $0.10 per share. At September
30, 2004, 12,500,000 of these shares were issued and 2,000,000 shares were
recorded in the common stock payable account.

In 2004, the Company granted warrants to purchase approximately 22,460,831
shares of its common stock for offering costs fees. These warrants were valued
at $5,205,003. In 2004, the Company issued warrants to purchase 933,333 of its
shares of common stock at an exercise price of $0.10 per share. These warrants
previously had an exercise price of $0.12 to $0.15 per share and were repriced
to $.10 per share. The difference in the value of these warrants using the $0.10
price per share was immaterial.

Pursuant to the terms of the EFS Merger Agreement the former EFS shareholders
were issued 7,500,000 shares of the Registrant's common stock. 3,750,000 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 3,750,000 shares
valued at $975,000 are recorded as treasury stock. In 2004, the Company also
acquired 316,364 shares of stock for $95,000 which brings the total treasury
stock to 4,210,000 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 1,000,000 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 400,000 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.

In 2004, the Company agreed to issue 1,916,667 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. At September 30, 2004, 1,866,667 of these
shares were issued and 50,000 were recorded at a value of $50 in the common
stock payable account. In addition, five-year warrants were issued to these
investors representing the right to purchase 2,800,000 shares of Common Stock at
$0.10 per share. Also, 1,800,000 warrants issued to investors during the first
quarter of 2004 that had an exercise price of $0.15 per share were reissued at
$0.10 per share.

7.  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:

                                       11
<PAGE>


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 7,500,000 shares of the Company's common stock as part
of the merger and employment agreements.  These shares were valued at $1,950,000
in total  based upon the  quoted  trading  price on the  acquisition  date.  The
Company  also  issued  350,000  shares  for  acquisition  costs  related to this
acquisition.  The 350,000  shares were valued at $91,000 in total based upon the
quoted trading price on the  acquisition  date. The total purchase price for EFS
was $5,041,000.

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. 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.

                                       12
<PAGE>

On August 16, 2004, the Company and the former EFS Shareholders mutually agreed
to amend the original Merger Agreement and simultaneously executed a Terminal
Services Agreement. Major elements of this amendment includes:

o        The mutual termination of the Master Equipment Lease Agreement("MELA").

o        The 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        Pursuant to the terms of the EFS Merger Agreement $2,000,000 from the
         Stock Purchase Agreement was paid to the former shareholders of EFS
         that they will retain as purchase consideration. In addition, the
         former EFS shareholders were issued 7,500,000 shares of the
         Registrant's common stock. 3,750,000 shares of our common stock was
         forfeited and returned to the Company as part of the amendment. The
         additional $1,000,000 payment to the former EFS shareholders was
         mutually terminated as part of this amendment. This reduced the
         purchase price from $5,041,000 to $3,066,000.

o        All six employment agreements were mutually terminated by the Company
         and the former EFS shareholders and employees.

o        Former EFS shareholders personally assumed all overdraft bank
         liabilities and bank loans, as well as, all bank loans of Express
         Freight Systems, Inc. In addition, former EFS shareholders assumed all
         trade payables and accruals prior to March 1, 2004. All bad debts and
         charge-backs attributable to receivables outstanding as of April 21,
         2004 were assumed by the former EFS Shareholders.

o        XRG, Inc. ("Carrier") and the former EFS shareholders ("Agent")
         executed a Terminal Agreement which entitles the former EFS
         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 term of the Terminal Agreement is ongoing with severe
         penalties if Agent terminates or violates the default provisions with
         damages of $2 million if occurring in the first year, and $400,000 less
         each year thereafter. The former EFS shareholders are held personally,
         jointly and severally, liable for these damages upon termination or
         default.


The Company  included the results of EFS in its financial  statements  beginning
April 21,  2004 (the  closing  date of the  transaction).  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.  The  Company is in the process of  evaluating  the fair value of the
fixed  assets  purchased,  thus  the  purchase  price  allocation  has not  been
finalized and is subject to change.

                                       13
<PAGE>

Accounts receivable                                    $           1,609,474
Other current assets                                                  99,031
Other assets                                                          55,171
Goodwill and other intangibles                                     2,918,135
                                                          -------------------
    Total assets acquired                                          4,681,811
                                                          -------------------
Accrued expenses and payables                                       (114,682)
Factorer line of credit                                           (1,501,129)
                                                          -------------------
    Total liabilities assumed                                     (1,615,811)
                                                          -------------------
Total purchase price                                   $           3,066,000
                                                          ===================


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 2,000,000 shares of its common
stock to the two RSV shareholders. These shares were valued at $600,000 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.

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.  The Company is in the process of evaluating
the fair value of the fixed assets purchased, thus the purchase price allocation
has not been finalized and is subject to change.

Cash                                                 $             39,787
Other current assets                                              147,528
Fixed assets                                                    2,030,000
Goodwill and other intangibles                                    848,532
                                                        ------------------
    Total assets acquired                                       3,065,847
                                                        ------------------
Accrued expenses and payables                                    (499,833)
Notes payable                                                  (1,966,014)
                                                        ------------------
    Total liabilities assumed                                  (2,465,847)
                                                        ------------------
Total purchase price                                 $            600,000
                                                        ==================

                                       14
<PAGE>



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 350,000  shares of its
common stock. These shares were valued at $98,000 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.  The Company
is in the process of  evaluating  the fair value of the fixed assets  purchased,
thus the purchase  price  allocation  has not been  finalized  and is subject to
change.

Other current assets                                 $             38,910
Fixed assets                                                    1,355,200
Goodwill and other intangibles                                    393,793
                                                        ------------------
    Total assets acquired                                       1,787,903
                                                        ------------------
Accrued expenses and payables                                     (96,000)
Notes payable                                                  (1,593,903)
                                                        ------------------
    Total liabilities assumed                                  (1,689,903)
                                                        ------------------
Total purchase price                                 $             98,000
                                                        ==================


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 200,000  shares of common stock to the two  stockholders  of HBC. These
shares were valued at $56,000 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.

                                       15
<PAGE>

The Company  included the results of HBC in its financial  statements  beginning
April  1,  2004  (the  closing  date was  April 2,  2004.  The  following  table
summarizes  the  estimated  fair values of the assets  acquired and  liabilities
assumed at the date of acquisition.  The Company is in the process of evaluating
the  intangibles  purchased,  thus the purchase  price  allocation  has not been
finalized and is subject to change.

Goodwill and other intangibles                 $             56,000
                                                  ------------------
    Total assets acquired                                    56,000
                                                  ------------------
    Total liabilities assumed                                    (-)
                                                  ------------------
 Total purchase price                           $            56,000
                                                  ==================


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
1,200,000  shares of its  common  stock to the two  shareholders  of CTC.  These
shares were valued at $372,000 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. In order to secure this obligation,  the Company has
granted  the CTC  shareholder  a security  interest in the  acquired  assets and
equipment  from CTC  pursuant to the Asset  Purchase  Agreement.  The  Company's
failure to consummate a  refinancing,  pay-off or  satisfaction  of the CTC debt
within such  timeframe  entitles the CTC  shareholder,  subject to the terms and
conditions  of the  Security  Agreement,  to a  return  of the  CTC  assets  and
equipment.  Although  the  Company  believes  it will be able to  refinance  the
subject  debt,  based upon current  communications  with  lenders and  financing
sources,  there is no assurance that such financing will occur within the agreed
upon  timeframes.  The failure to  consummate  a  refinancing,  satisfaction  or
pay-off of such liabilities could result in a foreclosure upon the CTC equipment
and assets pursuant to the terms of the related Security Agreement.  The Company
also entered into employment/consulting agreements with the CTC shareholders.

On September 10, 2004, we executed a promissory note with our major  shareholder
to refinance approximately $225,000 of the CTC debt. Fifty (50%) of the proceeds
of any new debt or equity raised  subsequent to the funding of this note must be
used to reduce the amount due on the note within three (3) days of receipt. This
Promissory  note removes the majority CTC  shareholder  from the majority of the
long-term  debt and  satisfies  the security  interest  conditions  of the Asset
Purchase Agreement.

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.  The Company is in the process of evaluating
the fair value of the fixed assets purchased, thus the purchase price allocation
has not been finalized and is subject to change.

                                       16
<PAGE>

Fixed assets                                   $            556,500
Goodwill and other intangibles                              304,500
                                                  ------------------
    Total assets acquired                                   861,000
                                                  ------------------
Notes payable                                              (489,000)
                                                  ------------------
    Total liabilities assumed                              (489,000)
                                                  ------------------
Total purchase price                           $            372,000
                                                  ==================

8. 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 six months ended
                                             September 30,                           September 30,
                                       2004                2003                 2004               2003
                                    -------------------------------          ---------------------------------
<S>                              <C>                 <C>                   <C>                <C>
Revenues                         $   11,488,526      $  10,379,476         $    23,092,595    $    20,631,091
Net loss applicable to common
 shareholders                    $   (2,157,832)     $  (1,400,260)        $    (5,274,960)   $    (2,207,743)


Basic loss per share             $       (0.01)      $       (0.08)        $         (0.03)   $         (0.10)

</TABLE>


9. Subsequent Events

On October 1, 2004, the Company executed a promissory note with our major
shareholder for $166,275 for a down payment on 15 commercial tractors. Interest
on this note is 6% per annum and included a loan origination fee of 7.5%. The
entire principal, origination fee, and interest is due on December 1, 2004.
Fifty (50%) of the proceeds of any new debt or equity raised subsequent to the
funding of this note must be used to reduce the amount due on the note within
three (3) days of receipt.

In October 2004, we raised $1,275,000 in exchange for 12,750,000 shares of
Common Stock pursuant to a Stock Purchase Agreement from various investors.
There were Finder's Fees associated with this financing consisting of $85,000
and Common Stock Purchase Warrants representing the right to purchase 6,375,000
shares of Common Stock at $0.10 per share callable at $0.25 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.

On October 4, 2004, the Company ("Carrier") mutually entered into a five year
Terminal Agreement with the shareholders of Highbourne Corporation under AGB


                                       17
<PAGE>

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.

                                       18
<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:

                                       19
<PAGE>

<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      2,000,000       $1,966,000        Van/Asset      42 Tractors
                                                                                    based
Express Freight                                                                     Van/Non-asset
Systems, Inc.         Merger      $2,000,000      3,750,000                0  *     based          106 O/O
                                                                                                   32
Highway Transport,    Asset                                                         Flatbed/Asset  Tractors,
Inc.                  Purchase             0        350,000        1,594,000        based          12 O/O
Highbourne            Asset                                                         Van/Non-asset
Corporation           Purchase             0        200,000                0        based          34 O/O
                                                                                                   7
Carolina Truck        Asset                                                         Van/Asset      Tractors,
Connection, Inc.      Purchase             0      1,200,000          489,000        based          2 O/O
                                 ------------ -------------- ----------------
                                  $2,000,000      7,500,000       $4,049,000
</TABLE>

*    On August 16, 2004,  This Merger  Agreement  was amended  which reduced the
     common  shares  issued * to 3,750,000  and  eliminated  Long-Term  Debt and
     Equipment Leases Assumed to $-0-.

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 Registrant 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 7,500,000 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.

                                       20
<PAGE>

         The EFS Merger Agreement provides us with certain rights of
indemnification in connection with the breach of a representation or warranty by
EFS or its shareholders. We have withheld $100,000 in a cash escrow agreement to
satisfy unpaid taxes and other liabilities. $10,640 of these taxes and
liabilities were paid from escrow during the six month period ended September
30, 2004. We have also issued a blanket corporate guaranty pursuant to which we
guarantee 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 contains cross default
provisions.

         On August 16, 2004, the Company and the former EFS Shareholders
mutually agreed to amend the original Merger Agreement and simultaneously
executed a Terminal Services Agreement. Major elements of this amendment
includes:

o    The mutual  termination of the 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 and contained a $1,000,000 buyout
     at lease end. This lease consisted of a pool of approximately  270 trailers
     from an entity owned by the prior  shareholders  of EFS.  This  termination
     provides a provision that all trailers under the MELA are made available to
     us for the movement of our freight.

o    The 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    3,750,000  shares of our common stock will be forfeited  and returned to us
     as part of the amendment.  The additional  $1,000,000 payment to the former
     EFS shareholders was mutually terminated as part of this amendment.

o    All six employment agreements were mutually terminated by us and the former
     EFS shareholders and employees.

o    Former EFS shareholders  personally  assumed all overdraft bank liabilities
     and bank loans, as well as, all bank loans of Express Freight Systems, Inc.
     In  addition,  former  EFS  shareholders  assumed  all trade  payables  and
     accruals  prior  to  March  1,  2004.   All  bad  debts  and   charge-backs
     attributable  to receivables  outstanding as of April 21, 2004 were assumed
     by the former EFS Shareholders.

o    XRG, Inc. ("Carrier") and the former EFS shareholders  ("Agent") executed a
     Terminal  Agreement  on August  16,  2004  which  entitles  the  former EFS
     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 term of
     the Terminal Agreement is ongoing with severe penalties if Agent terminates
     or violates the default  provisions with damages of $2 million if occurring
     in the first year, and $400,000 less each year  thereafter.  The former EFS
     shareholders are held personally,  jointly and severally,  liable for these
     damages upon termination or default.

                                       21
<PAGE>

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 2,000,000 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.

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  350,000  shares of our 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
200,000 shares of 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 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.

                                       22
<PAGE>

         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.


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
1,200,000  shares of our common  stock to the two  shareholders  of CTC. We also
entered into  employment/consulting  agreements  with the CTC  shareholders.  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. In
order to secure this obligation,  we have granted the CTC shareholder a security
interest in the  acquired  assets and  equipment  from CTC pursuant to the Asset
Purchase  Agreement.  The  Registrant's  failure to  consummate  a  refinancing,
pay-off or satisfaction  of the CTC debt within such timeframe  entitles the CTC
shareholder, subject to the terms and conditions of the Security Agreement, to a
return of the CTC assets and  equipment.  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 financing will occur within
the  agreed  upon   timeframes.   The  failure  to  consummate  a   refinancing,
satisfaction or pay-off of such  liabilities  could result in a foreclosure upon
the CTC  equipment  and assets  pursuant  to the terms of the  related  Security
Agreement.  The CTC shareholder has agreed to an extension of time to complete a
refinancing. On September 10, 2004, we executed a promissory note with our major
shareholder to refinance approximately $225,000 of this debt. Fifty (50%) of the
proceeds of any new debt or equity raised subsequent to the funding of this note
must be used to  reduce  the  amount  due on the note  within  three (3) days of
receipt.

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 and internal growth 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 4, 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.

                                       23
<PAGE>

         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:
<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, 5 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 1, 2004
                                                                Operators, 5 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 28,
(CTC)                                                           Operators, 5 Company                   2004
                                                                Tractors
----------------------------- ------------------ -------------- --------------------------- ---------- --------------
RSV                           Kingsport, TN      Van            42 Tractors                 -          April 29,
                                                                                                       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 347 tractors at September 30, 2004, of which
approximately 96 are company-owned equipment and 251 are provided by independent
contractors (owner operators) or by a fleet agreement. Of our trailers, at
September 30, 2004, 584 were financed under operating, capital leases and
short-term rental arrangements.

                                       24
<PAGE>

         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
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
September 30, 2004, the allowance for doubtful accounts was $29,000 or
approximately .7% 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 state our property and equipment at acquisition cost and compute
depreciation for book purposes by the straight-line method over estimated useful
lives of the  assets.  In  accordance  with SFAS No.  144,  "Accounting  for the
Impairment  or Disposal of Long-Lived  Assets,"  long- lived assets are reviewed
for impairment whenever events or changes in circumstances indicate the carrying
amount of the asset may not be recoverable.  Recoverability of assets to be held
and used is measured by  comparison  of the  carrying  amount of an asset to the
future cash flows expected to be generated by the asset.  If the carrying amount
of the asset exceeds its estimated  future cash flows,  an impairment  charge is
recognized to the extent the carrying amount of the asset exceeds the fair value
of the asset. These computations are complex and subjective.


RESULTS OF OPERATIONS

Three months ended  September 30, 2004 compared to three months ended  September
30, 2003

         XRG generated $11,488,526 in revenues during the three month period
ended September 30, 2004 as compared to $298,225 during the three month period
ended September 30, 2003. Our revenues increased $11,190,301 or 3752% from the
three month period ended September 30, 2003 to the same period in 2004. This
increase is the result of revenues attributable to five new truckload carrier


                                       25
<PAGE>

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 $9,184,197 and $22,970 resulting in a gross
margin of $2,304,329 and $275,255 during the three month period ended September
30, 2004 and 2003, respectively. Related expenses during the three month period
ended September 30, 2004 were primarily costs associated with purchased
transportation. The major components of purchased transportation costs during
the period ended September 30, 2004 were owner-operator settlements of
$5,078,226, equipment rental costs of $686,982, and company driver payroll costs
of $1,066,580. We expect our cost of revenues to significantly increase during
our 2005 fiscal year as part of our acquisition plan.

         For the three month period ended September 30, 2004, total selling,
general and administrative expenses were $2,905,412 as compared to $1,063,135
for the same period of the previous year, an increase of $1,842,277 or 173%.
This increase is primarily the result of shares and warrants issued for services
and compensation valued at approximately $876,000, general and administrative
costs associated with our new acquisitions including insurance costs of
$601,867, payroll costs of $585,387, and agent commissions of $296,306 during
the three month period ended September 30, 2004.

         We recorded a settlement loss of $744,582 for the three month period
ended September 30, 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 three month period ended September 30, 2004
and 2003 was $731,892 and $32,437, respectively. This increase of $699,455 is
primarily the result of interest on loans and bank service charges. In addition,
we incurred factorer fees of $141,717 during the three month period ended
September 30, 2004.

         We recorded $80,119 and $122,532 related to the amortization of
intrinsic value of convertible debt and debt discount for the value of
detachable warrants during the three month period ended September 30, 2004 and
2003, respectively.

         We had a net loss of $2,157,832 for the three month period ended
September 30, 2004 as compared to a loss of $942,849 for the three month period
ended September 30, 2003. This increase in our operating loss over that of the
three month period ended September 30, 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 $.01 for the three month period ended
September 30, 2004 compared to a basic loss per share of $.05 for the three
month period ended September 30, 2003. The basic weighted average shares
outstanding for the three month period ended September 30, 2004 was 258,373,089
as compared to 17,435,202 for the three month period ended September 30, 2003.

                                       26
<PAGE>

Six months ended  September 30, 2004 compared to six months ended  September 30,
2003

         XRG generated $21,854,638 in revenues during the six month period ended
June 30, 2004 as compared to $298,225 during the six month period ended
September 30, 2003. Our revenues increased $21,556,413 or 7,228% from the six
month period ended September 30, 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 $18,391,462 and $22,970 resulting in a gross
margin of $3,463,176 and $275,255 during the six month period ended September
30, 2004 and 2003, respectively. Related expenses during the six month period
ended September 30, 2004 were primarily costs associated with purchased
transportation. The major components of purchased transportation costs during
the period ended September 30, 2004 were owner-operator settlements of
$9,838,956, equipment rental costs of $ 2,036,590, and company driver payroll
costs of $2,025,170. We expect our cost of revenues to significantly increase
during our 2005 fiscal year as part of our acquisition plan.

         For the six month period ended September 30, 2004, total selling,
general and administrative expenses were $6,645,038 as compared to $1,225,625
for the same period of the previous year, an increase of $5,419,413 or 442%.
This increase is primarily the result of shares and warrants issued for services
and compensation valued at approximately $876,000, general and administrative
costs associated with our new acquisitions including insurance costs of
$1,401,091, payroll costs of $1,593,258, and agent commissions of $544,562
during the six month period ended September 30, 2004.

         We recorded a settlement loss of $744,582 for the six month period
ended September 30, 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 six month period ended September 30, 2004 and
2003 was $1,124,454 and $68,942, respectively. This increase of $1,055,512 is
primarily the result of interest on loans and bank service charges. In addition,
we incurred factorer fees of $251,489 during the six month period ended
September 30, 2004. During the six month period ended September 30, 2004,
approximately $500,000 of notes payable were converted into our common stock.

         We recorded $153,844 and $551,798 related to the amortization of
intrinsic value of convertible debt and debt discount for the value of
detachable warrants during the six month period ended September 30, 2004 and
2003, respectively.

                                       27
<PAGE>

         We had a net loss of $5,204,742 for the six month period ended
September 30, 2004 as compared to a loss of $1,571,110 for the six month period
ended September 30, 2003. This increase in our operating loss over that of the
six month period ended September 30, 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 $.03 for the six month period ended
September 30, 2004 compared to a basic loss per share of $.11 for the six month
period ended September 30, 2003. The basic weighted average shares outstanding
for the six month period ended September 30, 2004 was 174,286,167 as compared to
13,865,017 for the six month period ended September 30, 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 108,333,333 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 54,166,000 shares
of our Common Stock at an exercise price of $.10 per share. The B Warrant
granted the Investor the right to purchase up to 54,166,000 shares of our Common
Stock at an exercise price of $.25 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
63,333,333 and the exercise price of the warrant shares reduced to $0.01.
Simultaneously the Reporting Person exercised all of the 63,333,333 warrants in
a cashless tender and acquired 60,000,000 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
10,833,333 shares of Common Stock at $0.03 per share and Common Stock Purchase
Warrants representing the right to purchase 6,000,000 shares of Common Stock at
$0.01 per share both with a five year term.

                                       28
<PAGE>

         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.  Liquidating damages for non-filing of
a  Registration  Statement  amount to  approximately  $195,000 as of October 15,
2004.  We filed a  Registration  Statement  on  November  12, 2004 and our major
shareholder has verbally agreed to waive these liquidating damages.

         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. If no such directors are appointed, we 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. Liquidating damages for lack of
appointment of Independent Directors amount to approximately $195,000 as of
October 15, 2004. 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.  We appointed 3 directors on November 15, 2004 and our major shareholder
has verbally agreed to waive these liquidating damages.

         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
15,000,000 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 25,000,000 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 six month period ended September 30, 2004, we raised
$2,620,000 in exchange for 26,200,002 shares of Common Stock pursuant to a Stock
Purchase Agreement from various investors. There were Finder's Fees associated
with this financing consisting of $262,000 and Common Stock Purchase Warrants
representing the right to purchase 2,685,500 shares of Common Stock at $0.10 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.

                                       29
<PAGE>

         During the six month period ended September 30, 2004, we used
$3,921,989 in cash from operating activities as compared to $101,303 during the
same period in 2003. Investing activities for the present six month period
primarily consisted of acquisitions of truckload carriers of $1,960,213 and
purchases of equipment of $12,923. Financing activities for six month period
ended September 30, 2004 provided $5,895,125 primarily from proceeds from common
stock issued and to be issued. In addition, a factoring line of credit provided
$625,811. For the six month period ended September 30, 2004, cash increased $-0-
as compared to an increase of $53,052 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 continuation of the Company as a going concern. We incurred
operating losses of approximately $5,205,000 for the six months ended September
30, 2004, have an accumulated deficit at September 30, 2004 of approximately
$10,947,000 and $15,405,000 from unrelated dormant operations; and a negative
tangible net worth of approximately $641,000 as of September 30, 2004. In
addition, we have negative working capital of approximately $3,613,000 and have
used approximately $3,972,000 of cash from operations for the six months ended
September 30, 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 the Company cannot continue in existence.

         We anticipate raising capital in the next twelve months from the
issuance of our common stock. We anticipate that capital raised from the
issuance of common stock 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.

                                       30
<PAGE>

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 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 Chief
Executive Officer and the Chief Financial Officer also concluded that our
disclosure controls and procedures 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. There have been no significant
changes in our internal controls or in other factors that could significantly
affect internal controls subsequent to the date of this evaluation. However, in
connection with our ongoing evaluation of internal controls over financial
reporting, certain internal control matters were noted that require corrective
actions. Although we do not consider any existing deficiencies in our current
controls and procedures to be material, we are currently improving accounting
controls and procedures. Specifically, we have implemented a new accounting
system during the period ended June 30, 2004, which placed all of our accounting
data under one operating platform. The result should substantially reduce the
need for adjusting journal entries and reconciliations in connection with the
preparation of our financial statements. Furthermore, we plan to integrate our
accounting software platforms with our trucking logistics software so that such
information may be more efficiently compiled. We expect to complete the
implementation of such improvements in our controls and procedures prior to our
first fiscal year ending on or after April 15, 2005, which is currently the
initial year of implementation of new Item 308 of Regulation SK regarding
internal control over financial reporting.


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


                                       31
<PAGE>

         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
         $13,333.00 if paid on or before November 30, 2004. As of this date,
         management has not made a decision on settling this case. We believe
         that we have meritorious defenses against the above claims and intend
         to vigorously contest them. We recorded reserves regarding these
         matters of $13,333.00 in our financial statements as of September 30,
         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 108,333,333 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 54,166,000 shares of our Common Stock at an exercise price of $.10
         per share. The B Warrant granted the Investor the right to purchase up
         to 54,166,000 shares of our Common Stock at an exercise price of $.25
         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 63,333,333 and the exercise price of the warrant
         shares reduced to $0.01. Simultaneously the Reporting Person exercised
         all of the 63,333,333 warrants in a cashless tender and acquired
         60,000,000 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 10,833,333 shares of Common Stock at $0.03 per
         share and Common Stock Purchase Warrants representing the right to
         purchase 6,000,000 shares of Common Stock at $0.01 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


                                       32
<PAGE>

         Investor is also granted incidental piggyback registration rights.
         Liquidating damages for non-filing of a Registration Statement amount
         to approximately $195,000 as of October 15, 2004.  We filed a
         Registration  Statement  on  November  12, 2004 and our major
         shareholder has verbally agreed to waive these liquidating damages.

                  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. If no such directors are appointed, we
         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. Liquidating damages for lack of appointment of
         Independent Directors amount to approximately $195,000 as of October
         15, 2004. 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. We appointed 3 directors on November 15,
         2004 and our major shareholder has verbally agreed to waive these
         liquidating damages.

                  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 15,000,000 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
         25,000,000 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) 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 six month period ended September 30, 2004, we
         raised $2,620,000 in exchange for 26,200,002 shares of Common Stock
         pursuant to a Stock Purchase Agreement from various investors. There
         were Finder's Fees associated with this financing consisting of
         $262,000 and Common Stock Purchase Warrants representing the right to
         purchase 2,685,500 shares of Common Stock at $0.10 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.


                                       33
<PAGE>

Item 3.  Defaults Upon Senior Securities.
         --------------------------------
         None


Item 5.  Other Information


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

              (a) Exhibits

               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.

              (b) Reports on Form 8-K

               During the six month period ended September 30, 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 Certifying Accountant.

               Current  Report on Form 8-K (Item 5.02) dated  November  15, 2004
               (filed  with the  Commission  on  November  15,  2004)  reporting
               the election of three board members.


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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:   11/12/2004

                                         /s/ Kevin Brennan
                                         ------------------------------------
                                             Kevin Brennan
                                             President & CEO

                                         /s/ Stephen Couture
                                         ------------------------------------
                                             Stephen Couture
                                             Vice President, Finance & CFO