SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 --------------

                                   FORM 10-KSB
                                 AMENDMENT NO.1


     [ X ] ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
EXCHANGE ACT OF 1934.

     For the fiscal year ended March 31, 2004


     [ ]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
EXCHANGE ACT OF 1934.

                For the transition period from ______ to _______


                         Commission File Number 0-49659

                                    XRG, INC.
                                    ---------
                 (Name of Small Business Issuer in Its Charter)

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


5301 Cypress Street, Suite 111 Tampa, Florida             33607
---------------------------------------------             -----
  (Address of principal executive offices)             (Zip Code)


     Registrant's telephone Number, including area code: (813) 637-0700

     Securities registered pursuant to Section 12(b) of the Exchange Act: None

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

     [   ] Yes [ X ] No

     Check if no  disclosure  of  delinquent  filers in  response to Item 405 of
Regulation S-B is contained in this form,  and no disclosure  will be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  of  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB [ X ]

     State  issuer's  revenues  for its most recent  fiscal year ended March 31,
2004........$4,682,277

     Aggregate  market value of the voting stock held by  non-affiliates  of the
registrant at June 30, 2004 was $10,895,746.

     The  number of shares  outstanding  of the  registrant's  common  stock was
242,396,710 as of June 30, 2004.

     Transitional Small Business Disclosure Format (check one):

     Yes     No   X
        ----    ----

<PAGE>

                               FORM 10-KSB - Index
                                 AMENDMENT NO.1


                                     PART I


          Page

Item 1.           Business...................................................  1

Item 2.           Description of Property.................................... 12

Item 3.           Legal Proceedings.......................................... 12

Item 4.           Submission of Matters to a Vote of Security Holders........ 13


                                     PART II


Item 5.           Market Price of the Registrant's Securities and
                  Related Stockholder Matters................................ 13

Item 6.           Management's Discussion and Analysis of
                  Financial Condition and Results of Operations.............. 15

Item 7.           Financial Statements and Supplementary Data................ 21

Item 8.           Changes in and Disagreements with Accountants on Accounting
                           and Financial Disclosures......................... 21

Item 8a.          Disclosure Controls and Procedures......................... 21

                                    PART III


Item  9.          Directors and Executive Officers of the Registrant......... 21

Item 10.          Executive Compensation..................................... 23

Item 11.          Security Ownership of Certain Beneficial Owners
                          and Management..................................... 25

Item 12.          Certain Relationships and Related Transactions............. 26

Item 13.          Exhibits, Consolidated Financial Statements,
                  Schedules and Reports on Form 8-K.......................... 27

Item 14.          Principal Accountants Fees and Services.................... 29


Signatures................................................................... 30


<PAGE>



--------------------------------------------------------------------------------

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This Annual Report on Form 10-KSB and the documents incorporated herein by
reference contain forward-looking statements that have been made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations, estimates and
projections about XRG, Inc.'s industry, management's beliefs, and assumptions
made by management. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates," variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and assumptions that are difficult to predict; therefore,
actual results and outcomes may differ materially from what is expressed or
forecasted in any such forward-looking statements.


                                     PART I
                                     ------

ITEM 1.  BUSINESS


Introduction

         XRG, Inc. is a Delaware Corporation founded in November 2000 that is
concentrating on the acquisition, consolidation, and operation of short and long
haul truckload carriers. Our acquisition strategy targets both asset and
non-asset based truckload carriers in the contiguous 48 states.

         We believe that we have identified a significant opportunity to
consolidate profitable, established medium-sized truckload carriers that have
developed long-term customer relationships. We seek carriers that possess strong
market positions, sound management and a commitment to a high level of quality
and service. The trucking industry has exhibited strong growth due to the trend
toward just-in-time inventories, and increases in the requirements for
transportation of commodities. Truckload carriers have become the critical link
in the distribution chain between manufacturers and/or distributors and the
marketplace.

         The universe of truckload carriers is dominated by small to
medium-sized independent carriers with gross revenues of less than $20 million.
We believe that we have identified a significant opportunity to acquire
profitable, established medium-sized (under $75M in revenue) truckload carriers.
The opportunity is significant because shippers are increasingly outsourcing
their company fleets and relying on larger carriers that provide sophisticated
information systems and value-added services. Therefore, smaller carriers are
faced with increased competition from carriers that can provide these
value-added services forcing them to search for an exit strategy or partnering
with a carrier that can strengthen their competitiveness in order to sustain
their existing business.

         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.

                                       1
<PAGE>


Recent Acquisitions

         We completed the following acquisitions during the first quarter ended
June 30, 2004:

<TABLE>
<CAPTION>
                                                                                           Long Term
                                                      Common       Working               Debt/Equipment
                        Structure of     Cash @       Shares       Capital     Broker    Leases Assumed  Type of
     Acquisition         Transaction      Close       Issued     Contribution   Fees      (Estimate)    Equipment    Equipment
----------------------- -------------- ------------ ------------ ------------ ---------- ------------  ----------- ------------
<S>                     <C>            <C>          <C>          <C>          <C>        <C>           <C>         <C>
RSV, Inc.               Merger                   0    2,000,000     $175,000    $15,750   $2,148,889   Van/Asset   42 Tractors
                                                                                                       based
Express Freight                                                                                        Van/Non-asset
Systems, Inc.           Merger          $2,000,000    7,500,000      300,000    207,000    2,980,000  *based       106 O/O

Highway Transport,      Asset                                                                          Flatbed/    32 Tractors,
Inc.                    Purchase                 0      350,000      175,000     15,750    1,365,591   Asset based 12 O/O
                        Asset                                                                          Van/Non-asset
Highbourne Corporation  Purchase                 0      200,000      175,000     15,750            0   based       46 O/O

Carolina Truck          Asset                                                                          Van/Asset   7 Tractors,
Connection, Inc.        Purchase                 0    1,200,000      156,000     14,750      473,763   based       2 O/O
                                       ------------ ------------ ------------ ---------- -----------  ------------ ------------
                                        $2,000,000   11,250,000     $981,000   $269,000   $6,968,243
</TABLE>

*Relates to a Master Lease agreement for approximately 270 trailers to be paid @
$55,000 per month for 36 * months with a $1,000,000 buyout payment at the end of
the lease.


History and Development

         XRG, Inc. began operations by providing administrative services to KDK
Transport, Inc. through its XRG G&A, Inc. subsidiary in January 2002. These
services included invoicing, collections, regulatory compliance, credit reviews,
processing payments and commissions for a large flatbed truckload carrier at a
service fee equal to 3% of KDK Transport, Inc.'s gross billings. During the
fiscal year ended March 31, 2003, we generated approximately $686,000 in
revenues from these administrative services. This Administrative Services
Agreement was mutually terminated during the fourth quarter ended March 31,
2003. During our fiscal year ended March 31, 2003, we did not generate any
revenues from the acquisition and operation of truck-load carriers.


o        EQUIPMENT PURCHASE FROM J. BENTLY COMPANIES, INC.

         In June 2003, we executed a purchase agreement with J. Bently
Companies, Inc., a truckload carrier in Sweetwater, Tennessee to acquire
equipment consisting of approximately 275 trailers. The purchase price of these
assets was approximately $3,400,000, including the assumption of approximately
$2,200,000 of equipment debt, the payment of $50,000 in cash, and the issuance
of $1,150,000 worth of shares of XRG common stock with registration rights. An
additional 2,200,000 shares of our common stock was to be escrowed as collateral
for the equipment loans. The agreement relating to this equipment purchase
contained a true-up adjustment provision, which required us to issue additional
shares of our common stock based upon the then prevailing market price such that
the total value of our common stock equals $1,150,000 at adjustment dates of six
and twelve months from the closing date. In addition, In May 2003, we entered
into a fleet owner agreement with J. Bently Companies, Inc. to manage the
utilization of these purchased assets for a two-year period. Pursuant to the
terms of this agreement, XRG will pay to J. Bently Companies, Inc. 67% of gross
freight revenues as compensation for the movement of freight. During August
2003, we made the $50,000 cash payment and issued 1,150,000 shares of our Common
Stock to the J. Bently Companies, Inc. shareholders which is classified as a
transportation equipment deposit in our financial statements until we are able
to obtain a clear title to these assets.

                                       2
<PAGE>

         On August 30, 2003, we entered into an Independent Contractor Agreement
with J. Bently under our wholly owned subsidiary XRG Logistics, Inc. in which we
pay a commission of 2% of gross revenue to J. Bently for its shipper contacts.
On September 1, 2003, we began operating pursuant to the Fleet Owner and
Independent Contractor Agreements under our wholly owned subsidiary XRG
Logistics, Inc.

         On April 12, 2004, we entered into a Purchase Agreement Addendum with
J. Bently Companies, Inc. which deleted the original registration rights and the
true up provisions. We issued an additional 800,000 shares in consideration for
the terms of this Addendum. We also forgave $1,049,642 in advances to J. Bently
Companies, Inc..


o        STOCK ACQUISITION OF R&R EXPRESS INTERMODAL, INC.

         On August 20, 2003, we entered into a Stock Purchase Agreement with R&R
Express Intermodal, Inc., a Pittsburgh, Pennsylvania intermodal truckload
carrier. On January 1, 2004, we modified the original Stock Purchase Agreement
and fulfilled the closing conditions of the Definitive Stock Purchase Agreement
Addendum and completed this acquisition. Under the terms of the acquisition, the
Pittsburgh, Pennsylvania based intermodal carrier became a wholly owned
subsidiary of XRG, Inc. R&R Express Intermodal, Inc. provides drayage for
containers from railroad yards and ports and has annual revenues of
approximately $4 million.

         In accordance with the terms of the Stock Purchase Agreement, the
originally announced stock-for-stock transaction was modified to $100,000 in
cash and 100,000 shares of our common stock pursuant to the Stock Purchase
Agreement Addendum dated January 1, 2004. On April 12, 2004, we entered into
entered into a Purchase Agreement Addendum with R&R Express Intermodal, Inc.
which deleted the original registration rights and the true up provisions. We
issued an additional 50,000 shares in consideration for the terms of this
Addendum.


o        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 fleet with a pool of approximately 270
trailers which shall be leased to the Registrant from an entity owned by the
prior shareholders of EFS pursuant to a Master Equipment Lease Agreement
("MELA"). The MELA requires us to pay Express Leasing Systems, Inc.
approximately $55,000 per month for a term of 36 months. This MELA contains a
$1,000,000 buyout at lease end.

         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.
$300,000 of the proceeds from the Stock Purchase Agreement was allocated to
working capital and startup cash requirements relating to EFS. EFS is 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 have 10
year employment agreements. Annual compensation ranges from $125,000 to $250,000
per annum. The agreements contain 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 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 quarter ended June 30, 2004. We have also issued a
blanket corporate guaranty pursuant to which we guarantee all obligations of XRG
or its subsidiary pursuant to the terms of the Merger Agreement, including but
not limited to, the MELA, 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.

         EFS annual revenues are approximately $18,000,000 as of its most
current fiscal year. A segment of EFS business is involved in warehousing and
storage located in Long Beach, California. These operations should be compatible
and benefit our current operations. The merger with EFS is our most significant
acquisition.

                                       3
<PAGE>


o        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. There was no cash paid at closing to the 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 RSV shareholder has agreed to an
extension of time to complete a refinancing.

         RSV is a asset based carrier with approximately 42 tractors
headquartered in Kings Point, Tennessee. We estimate RSV's annual revenues at
approximately $5,000,000.


o        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 restricted
common stock. We assumed approximately $1,360,000 of HTI's obligations relating
to its equipment and other commercial obligations. We also entered into a
commercial sublease agreement for the HTI facilities with one of the HTI
shareholders. This sublease has a term through March 31, 2006 with monthly fixed
annual rent of $1,750 per month. The Registrant also entered into 3 year
employment agreements with the two HTI shareholders. One employment agreement
has annual compensation of $125,000, the other employment agreement has annual
compensation of $75,000. HTI primarily operates a flatbed operation. We estimate
HTI's annual revenues at approximately $3,000,000.


o        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 restricted common stock to the two stockholders of HBC.
Inasmuch as this is a non-asset based carrier, we did not assume any long-term
equipment or other liabilities in connection with this acquisition. We agreed to
lease the current HCB facilities from one of the HBC shareholders for a 24 month
term with $3,000 monthly payments. We entered into two year employment
agreements with each of the HBC shareholders at rates of $32,000 and $85,000 per
annum respectively. We have also agreed to pay the major HBC shareholder an
annual commission equal to two percent of the gross revenue billed each year
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. We estimate HBC's annual
revenues at approximately $5,000,000.


o        ASSET ACQUISITION OF CAROLINA TRUCK CONNECTION, INC.

         On April 29, 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 restricted common stock to the two shareholders of CTC.
We assumed approximately $474,000 of long-term debt and equipment leases
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


                                       4
<PAGE>


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. We also entered into
employment/consulting agreements with the CTC shareholders. We estimate CTC's
annual revenues at approximately $1,500,000.


Business Strategy

         Management believes that significant acquisition opportunities
currently exist within the truckload carrier industry. The truckload transport
industry is a substantial, highly fragmented industry. The total truckload
market in the US generated over $400 billion in revenue this past year. The top
100 carriers accounted for less than $70 billion, and the top ten carriers
accounting for less than 3% of revenue. There are an estimated 350,000 carriers,
the majority of which have small fleets or are owner operators. In evaluating
specific carriers for acquisition, we will consider the following factors:

o        Past & present financial and operational performance.
o        Experience and successes of key management and personnel.
o        Management team's ability to operate according to the XRG
          guidelines and take advantage of its proprietary technology.
o        Compatibility or synergies with XRG's management and operating
          philosophies.
o        Reputation.
o        Quality of customer base.
o        Loyalty & relationships with driver base.
o        Efficiencies, fleet age & specialization.

         Other factors such as the target's geographic location, potential for
expansion, vertical and horizontal integration and competitive market position,
are also considered in the evaluation.

         The following are three types of acquisition targets that we will be
seeking:

o                 Non-asset based carriers whose clients are agents with or
                  without their own equipment. The revenue equipment is leased
                  to the carrier, however it is either owned by an
                  owner-operator, or the agent who employs drivers to operate
                  its equipment. In this situation we will be acquiring or
                  assuming agency leases, employee bases, leases on physical
                  facilities, equipment leases, independent contractor leases
                  operating licenses, trade names, and sales personnel.

o                 Non-asset based carriers whose customers are traditional
                  shippers, and who employ owner-operators to haul the freight.
                  These owner-operators are again leased to the carrier. In this
                  situation we will be acquiring customer bases, employee bases,
                  leases on physical facilities, operating licenses, trade
                  names, and sales personnel.

o                 Asset based carriers that own their own equipment, and have
                  shippers as customers. In this scenario we would operate the
                  carrier similar to a non-asset based carrier described above
                  and require that management be responsible for operating the
                  carrier at 85% of gross revenues. In this situation, we will
                  be acquiring customer bases, employee bases, tractors and
                  trailers, leases on physical facilities, equipment leases,
                  operating licenses, trade names, and sales personnel.

         We believe that we will attract established, profitable, trucking
companies with long-established customer bases and driver relationships by
providing the founder of these companies with a method for a re-capitalization
or an exit strategy. We will focus our efforts on privately owned closely held
trucking companies that typically generate revenues of $75 million or less. In
many cases, these targeted acquisitions will be family owned businesses in which


                                       5
<PAGE>

the founder is planning for his or her retirement. XRG's acquisition strategy
will allow these companies to be acquired and operated autonomously which
essentially will provide them the ability to continue to operate as a "family"
business. Founders will have the option of retiring or remaining involved with
the business. In either case, they will receive consideration for their business
and XRG will rely on the management team to continue operating the business. XRG
will only target acquisitions that contain management teams that can effectively
continue to operate the trucking company if the founder chooses to retire.

         It is our belief that many of these small trucking companies have grown
to their limit based upon the financial resources that are available to them.
Historically, bank credit and costly insurance liability premiums have dictated
their growth constraints. We believe that XRG will obtain economies of scale in
this regard as we acquire these companies and will be able to obtain better
credit and insurance premiums, as well as, providing these acquired trucking
companies with the financial resources for future growth. However, there is no
assurance that XRG will be successful in attracting and acquiring these trucking
companies, and if so, there is no assurance that we will obtain economies of
scale associated with better credit and insurance rates. In addition, there is
no assurance that we can obtain financial resources to provide for future growth
once these companies are acquired.

         We believe that there are several reasons why established, profitable,
truckload carriers with long-established customer bases would want to be
acquired by XRG, Inc. Liability insurance for trucking companies has risen
substantially in recent years which has made it difficult for small trucking
companies to absorb these costs. The primary claims consist of cargo loss and
damage and auto liability (personal injury and property damage). After several
years of aggressive pricing, insurance carriers have raised premiums which has
increased trucking companies' insurance and claims expense. The terrorist
attacks of September 11, 2001, in the United States, and subsequent events,
resulted in additional increases, especially for small trucking companies. It is
our belief that future insurance increases may cause these companies to be less
profitable, therefore, limiting their marketability and exit strategies, as well
as, reducing their ability to raise capital through debt or equity placements to
expand or maintain their businesses. We believe that after consolidating several
of these trucking companies, XRG will be in a better position to negotiate lower
insurance premiums. However, there is no assurance that XRG will be able to
obtain favorable insurance premiums and control future increases in insurance
premiums.

         Small trucking companies have a difficulty acquiring "backhauls" which
refer to a load of freight that permits a truck to return to the company's
headquarters with a loaded truck, rather than an empty one. By completing
acquisitions and implementing our information system at each location, we
believe that we can improve the dispatch system to help carriers with load
matching thereby improving utilization. There are no assurances that our
information system will be capable of improving the dispatch system thereby
improving utilization for various acquired trucking companies.

         Increased competition from larger trucking companies has reduced
margins for the smaller operators. We seek to regain these margins through
acquisitions and economies of scale to better compete with larger truck-load
carriers. We believe that by centralizing the administrative services through
our subsidiary XRG G&A, Inc. for invoicing, collections, regulatory compliance,
credit reviews, processing payments and commissions, and managing safety
compliance programs will allow us to reduce costs and will be an important
aspect for increasing margins of the companies we acquire. However, there is no
assurance that we will realize efficiencies associated with centralizing the
administrative services of acquired companies.

         In acquiring a particular business, XRG follows a disciplined approach
utilizing specific operating and financial criteria. We develop pro forma
financial statements for acquisition candidates that reflect estimates of
revenue and costs under the target Company's current ownership and utilize such
information to determine a reasonable purchase price. The following outlines the
material steps of our disciplined approach:

o                 We identify a potential candidate primarily through our
                  contacts in the industry, including brokers, and other
                  industry professionals. This cost is minimal, and the time
                  varies depending on the status of other acquisitions in the
                  process. Generally, the number of potential candidates exceeds
                  our ability to make introductions, and new opportunities are
                  constantly presented.

o                 We review the candidates' most recent financial information to
                  determine if the carrier operates profitably, or if not,
                  whether we can provide assistance in improving operating
                  ratios. We generally determine whether a candidate fits our
                  acquisition parameters within a week of receiving the
                  requested information. Current management is involved in this
                  process; therefore no additional costs are incurred.

                                       6
<PAGE>

o                 If a candidate is determined to be a likely fit, we arrange a
                  one day on site meeting to extract more information about the
                  carrier, meet the owners, and familiarize ourselves with the
                  current operating staff. This process requires one to two days
                  of travel, and costs are generally limited to travel and
                  overnight expenses that typically do not exceed $2,500.

o                 Upon review of information gathered from the on site visit we
                  determine if the candidate fits our criteria for a credible
                  acquisition target. In particular, we look for the following:

                    a.   Profitability
                    b.   Capability of onsite management
                    c.   Quality  of  customers  and  their  associated   credit
                         worthiness.
                    d.   Valuations  and  selling  price   expectations  of  the
                         founder.
                    e.   Reasons for wanting to sell.
                    f.   Driver base

o                 If the candidate is a viable target, we prepare an offer that
                  is constructed to meet his or her price under our terms. We
                  then submit the offer to the owner, negotiate any adjustments,
                  and work toward a signed letter of intent. This process is the
                  most lengthy and may take from a few weeks to as much as six
                  months to complete. This process is conducted by current
                  management and generally no additional costs are incurred.

o                 If the letter of intent is agreed to by both parties,
                  documentation is prepared by our attorneys while on site due
                  diligence is conducted. This process may take 30-60 days, and
                  may cost $20,000 to $30,000.

o                 Finally, assuming that the due diligence does not uncover any
                  misstatements, and the final purchase agreements do not vary
                  significantly from the original proposal, the acquisition is
                  closed within 30 days after the purchase agreement is signed
                  by XRG and the trucking acquisition.

         We believe that we can assemble the most talented personnel, minimize
downside risk of volume loss to competitors, and provide opportunities for
increased profitability with our operating formula which includes the following
elements:

o                 We seek and identify trucking company operations for potential
                  acquisition that have maintained their operating costs at 75%
                  of gross revenue and sales, marketing, and dispatch costs at
                  10% of their gross revenues. After these potential targets are
                  acquired, any savings below this 85% threshold will be shared
                  with current management of the operation as an incentive in
                  the form of a bonus. In our experience, a typical operator can
                  maintain costs at 82% to 83% of revenues.

o                 We consolidate the management of insurance, financing costs,
                  and backroom administrative services at a central
                  administrative office in Pittsburgh, Pennsylvania at a cost of
                  approximately 8% to 10% of the acquired company's gross
                  revenues. We expect to gain economies of scale as we grow
                  internally through acquisitions. We believe that our costs of
                  providing these services will decrease as we achieve lower
                  insurance costs through greater bargaining power, however,
                  there is no assurances that we will be able to achieve this.

         We are optimistic that our business strategy and operating formula will
entice many small trucking companies to be acquired by us. To-date we have
completed six acquisitions. There is no assurance that our business strategy and
operating formula are viable, or whether, we will be able to continue to
complete additional acquisitions in the future. Currently, we provide our
administrative services to one customer. We have identified two trucking
companies for potential acquisition that fit our criteria.

         We plan to retain all key personnel of acquired businesses and provide
them with significant operating responsibility to assure the seamless
continuation of service levels in order to maintain customer relationships. We
benefit from our strong management team supported by an autonomous regional team
that has the knowledge and expertise to appropriately meet the needs of their
local customers.

                                       7
<PAGE>

         XRG typically seeks either employment or non-compete agreements with
former owners and management, as the situation dictates. Key technical and
management personnel are offered employment agreements, along with incentives to
encourage their continued loyalty to the company. Significant performance
incentive bonuses could be realized by any savings below our 85% threshold which
will be shared with the current management of the operation. For example, an
acquired trucking company that generates $10 million in revenues would provide
$300,000 per year at an 82% cost threshold in incentive bonuses to be shared
with the trucking company's management. Our largely performance based
compensation arrangement aligns XRG's cash requirements with the successes of
its acquisitions. In addition, we centralize certain financial, accounting,
legal, administrative, employee benefit, and sales functions to create a more
efficient operating structure in our administration.

Sales, Marketing, and Distribution

         Our primary marketing emphasis is to develop and maintain close working
relationships with our acquired trucking company's sales departments which, in
turn, have strong relationships with their logistic and shipping departments.
Sales to our acquired trucking company's customer base are made directly by
their sales staff and XRG will provide resources and assistance, as required, to
this staff. These teams service customers and assist them in programs to provide
the most efficient logistics services possible. We plan on acquiring members of
this team by acquiring trucking companies and utilizing their sales personnel.
Therefore, XRG is in a position to attract the most experienced sales personnel
that will be most familiar with the individual acquisition's trucking
operations.

         XRG intends on developing a marketing department that will actively
take advantage of opportunities for new business, share sales leads, and provide
other cross marketing. Consolidation economies will allow for more competitive
pricing and payment terms with both customers and vendors. We will also develop
a detailed and budgeted marketing program for each acquired business based on
the needs and opportunities of the local market. We believe that selected
acquisition candidates have tremendous opportunities to increase market share
internally by implementing these various programs, however, there is no
assurance that we will be able to successfully implement our marketing programs.

Operations

         XRG, as it grows through acquisitions, will be able to realize
efficiencies that carriers could not benefit from individually. Examples of
these economies will be the pooling of marketing and technical expertise;
savings associated with sophisticated information systems that provide real time
information on pricing, and equipment utilization, and the better use of a
larger shipper base for more profitable backhauls.

         We have integrated a state-of-the-art information system that provides
all critical operational information on a single screen to manage all loads and
equipment. This system provides access for entering customer, vendor, and
employment information, pre-planning, editing and dispatching loads, managing
tractors, trailers and drivers, processing check calls, loaded calls and
deliveries. This information will flow from each acquisition's dispatch
department to a consolidated database where information will be simultaneously
available to all departments. The utilization of electronic transfer of
information will reduce redundancies and the time required to perform each
administrative task associated with the operation of the acquired truckload
carriers.

Our information system is designed to:

     o    Develop  greater  levels of driver  retention  with its  sophisticated
          Driver Advance/Settlement module.

     o    Increase   our  market  share  by  the   implementation   of  Internet
          communication between XRG's truckload carriers and shipper customers.

     o    Eliminate redundancies in administrative and accounting functions.

         XRG intends on developing an autonomous management structure to best
sustain existing customer relationships. This philosophy requires that newly
acquired carriers maintain their individual identities. Each of these businesses
operates as a separate subsidiary and division of XRG. Advertising and other


                                       8
<PAGE>

promotional materials, including invoices, purchase orders, and other paperwork
may depict the acquired company's existing logo and name. This strategy helps to
continue the customer goodwill each acquired company has built up over the
years. While our operating style allows local operators significant
responsibility in daily operating decisions, financial parameters jointly
established during the budgeting process are monitored by senior management
through our centralized management information systems.

         In addition, XRG established a compensation structure designed to
maintain and create "ownership incentives" for divisional personnel. We plan on
rewarding personnel with bonuses tied to the achievement of certain objectives
and by developing an employee incentive stock option plan. Option plans, and
other incentive programs, are offered in addition to the stock that the owners
receive as part of the purchase price of their businesses. It is our philosophy
to structure acquisitions such that the sellers remain with us, and that they
accept our securities as part of their sale proceeds. We believe that this helps
to insure an orderly, and profitable transition, and will increase the former
owner's incentive to continue to grow his or her business and benefit from
future stock appreciation. We plan on acquiring trucking companies using our
cash, stock, bank financing, and owner financing. Management determines the mix
of these financing alternatives on a case-by-case basis depending on the owner's
needs and our availability of capital.

         The key elements of our operating strategy include the following:

          o    Expand sales for acquired divisional carriers.

          o    Acquire  additional  truckload carriers allowing XRG to diversify
               product lines and expand geographical markets.

          o    Pursue  long-term  relationships  with new customers  through new
               marketing programs.

         The greatest barrier to national market dominance by any one, truckload
carrier, is the enormous cost in equipment procurement, maintenance, and most
importantly utilization.

         Utilization refers to the number of miles a tractor and trailer travel
under load as a percentage of total miles driven. Proper utilization will be the
responsibility of the dispatch department which plans either in advance, or as
the initial shipment is being moved, the return trip with as little deadhead
(unloaded miles) as possible. It will be imperative to have a system in place so
that a dispatcher can monitor available loads and available equipment to be
loaded to assist in the planning process. Proper utilization provides greater
efficiencies that will enhance our revenues as more shipments can be
accommodated. In addition, under utilization could have a negative effect on the
profitability of XRG, Inc. There is no assurance that acquired companies will be
able to maintain profitable operations after being acquired.

         Small truckload carriers operate throughout the United States,
conducting their businesses with local customers. Consolidating these small
carriers will provide them with the size and capital structure to compete more
effectively in their local markets, while maintaining the close relationships
that these companies developed over the years. Management believes that the
"divisions of" strategy separates XRG from other consolidation players, because
it allows the management, and employees of the acquired company to continue
those services that its customers have relied upon. This philosophy also allows
the company to maintain its own unique culture and environment that the
company's employees have become comfortable with, and depend upon. XRG
management believes that the typical strong bond between the acquired companies
and its employees must be maintained. This should then allow for a smooth and
seamless acquisition process. Within a larger organization, the acquired
companies benefit from a professional sales force, sophisticated management
information systems, and a larger universe of shippers to make use of for more
profitable backhauls.

         XRG's divisions will remain autonomous from a management perspective,
however, many accounting and administrative functions will be consolidated at
the corporate offices. Such functions include:

o        Purchasing
o        Accounts Receivables
o        Accounts Payable
o        Payroll

         We intend to acquire carriers, which have a strong presence in a number
of unrelated markets. This approach will allow us to diversify the type of
shipper we conduct business with to reduce the risks of unfavorable market


                                       9
<PAGE>

conditions or downturns in specific markets. In addition, we will be able to
pool our technical expertise across these markets. XRG focuses its marketing
efforts on maintaining long-term relationships with existing customers while
pursuing new customers in all of our future target markets. Our customers
typically have relationships with a limited number of carriers. Bills of lading
depicting the name of the carrier are issued upon picking up the load. Signed
delivery receipts are released by the consignee upon the completed delivery of
the freight, at which time, the cost of the load, will be invoiced by the
carrier. Customers typically provide the carrier with periodic forecasts of
their requirements, which are updated regularly.

         Rates are typically negotiated with the shipper, and are based on the
type of freight to be hauled, the length of haul, the area of delivery, and any
other unique aspects of the load. As shippers typically seek rate reductions
from time to time, our ability to improve operating performance is generally
dependent on increasing efficiency through increased automation. Since a
majority of our fleet consists of owner-operators and we do not own the
equipment, the costs of "purchased transportation" (all costs associated with
the operation of the equipment) are fixed, operational efficiencies are the
responsibility of the owner-operator.

Competition

         The trucking industry is highly competitive and includes thousands of
trucking companies. It is estimated that the annual revenue of domestic
truckload carriers amounts to approximately $400 billion per year. The Company
has a small but growing share of the markets targeted by the Company. The
Company competes primarily with other truckload carriers. Railroads,
less-than-truckload carriers, and private carriers also provide competition, but
to a much lesser degree. Competition for the freight transported by the Company
is based primarily on service and efficiency and, to some degree, on freight
rates alone.

         Industry-wide truck capacity in the truckload sector is being limited
due to a number of factors. There are continuing cost issues and concerns with
the new EPA-compliant diesel engines and the new hours of service regulations.
Trucking company failures in the last four years are continuing at a pace higher
than the previous fifteen years. Some truckload carriers are having difficulty
obtaining adequate trucking insurance coverage at a reasonable price. Equipment
lenders have tightened their credit policies for truck financing. Many truckload
carriers slowed their fleet growth in the last three years and some carriers
have downsized their fleets to improve their operating margins and returns. Our
competitive strength will be our ability to provide reliable service, while
maintaining superior delivery on a just-in-time or scheduled lead-time basis.

         We compete with, and expect to continue to compete with, numerous
national, regional and local trucking companies, many of which have
significantly larger operations, greater financial, marketing, human, and other
resources than us. We anticipate that competition may increase in the future.
There can be no assurance that we will successfully compete in any market in
which we conduct or may conduct operations.


Regulation

         The trucking industry is subject to regulatory and legislative changes
that can have a materially adverse effect on operations. Historically, the
Interstate Commerce Commission ("ICC") and various state agencies regulated
truckload carriers' operating rights, accounting systems, rates and charges,
safety, mergers and acquisitions, periodic financial reporting and other
matters. In 1995, federal legislation was passed that preempted state regulation
of prices, rates, and services of motor carriers and eliminated the ICC. Several
ICC functions were transferred to the Department of Transportation ("DOT"), but
a lack of regulations implementing such transfers currently prevents us from
assessing the full impact of this action.

         Each acquired truckload carrier is regulated by the United States
Department of Transportation ("DOT") and by various state agencies. The DOT has
broad powers, generally governing activities such as the regulation of, to a
limited degree, motor carrier operations, rates, accounting systems, periodic
financial reporting and insurance. Subject to federal and state regulatory
authorities or regulation, we may transport most types of freight to and from
any point in the United States over any route selected by us.

         The trucking industry is subject to possible regulatory and legislative
changes (such as increasingly stringent environmental and/or safety/security
regulations or limits on vehicle weight and size) that may affect the economics
of the industry by requiring changes in operating practices or by changing the
demand for common or contract carrier services or the cost of providing
truckload services.

                                       10
<PAGE>

         Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT. All of our drivers will be required to have national
commercial driver's licenses and will be subject to mandatory drug and alcohol
testing. The DOT's national commercial driver's license and drug and alcohol
testing requirements may adversely affect the availability of qualified drivers
to XRG.

         The Federal Motor Carrier Safety Administration (FMCSA) of the U.S.
Department of Transportation issued a final rule on April 24, 2003 that made
several changes to the regulations which govern truck drivers' hours of service
(HOS). For all non-local trucking companies, this was the most significant
change to the hours-of-service rules in over 60 years. Previously, drivers were
allowed to drive 10 hours after 8 hours off-duty. The new rules allow drivers to
drive 11 hours after 10 hours off-duty. In addition to this, drivers may not
drive after 14 consecutive hours on-duty, following 10 hours off-duty as opposed
to 15 hours on-duty, following 8 hours off-duty. There have been no changes in
the rules that limit a driver to a maximum of 70 hours in eight consecutive
days. A new rule allows a driver who takes at least 34 consecutive hours off
duty to restart his or her on-duty cycle for the 70 hour rule. A driver's 15
hour daily work cycle in the old system is considered cumulative, not
consecutive, and does not take into account off-duty time during the 15 hour
period. Under the new rules, a driver's 14 hour daily work cycle is considered
consecutive, and off-duty time counts against the 14 hour period. Therefore,
loading/unloading delays, shipments that require multiple stop deliveries, and
other non-driving activities may limit drivers' available hours. On January 4,
2004, the new federal regulations that govern driver HOS became effective. The
Company is unable to predict the ultimate impact of the new hours of service
rules. These changes could have an adverse effect on the operations and
profitability of the Company.

         Motor carrier operations may also be subject to environmental laws and
regulations, including laws and regulations dealing with underground fuel
storage tanks, the transportation of hazardous materials and other environmental
matters. It will be our intention to transport a minimum amount of
environmentally hazardous substances. If we should fail to comply with
applicable regulations, we could be subject to substantial fines or penalties
and to civil and criminal liability.

         Our operations may involve certain inherent environmental risks. We may
maintain bulk fuel storage and fuel islands at several of our acquired
facilities. Our operations may involve the risks of fuel spillage or seepage,
environmental damage, and hazardous waste disposal, among others.

Employees

         As of June 30, 2004, we employed approximately 133 drivers, 6 mechanics
and maintenance personnel, 89 general and administrative personnel for our
trucking operation. We also contract with approximately 170 independent
contractors (owner-operators) for services that provide both a tractor and a
qualified driver or drivers. None of our employees are represented by a
collective bargaining unit, and we consider relations with our employees to be
good.

Risks Related to our Business

     o    Losses from  Operations  and  Accumulated  Deficit.  We have  incurred
          substantial  losses  since  we  were  formed.  From  the  date  of our
          formation   through   March  31,  2004,  we  incurred  net  losses  of
          $21,147,869,  $15,405,274  of this  loss is  related  to the  previous
          dormant  operations of XRG  International,  Inc. Our losses during the
          year ended  March 31, 2004 and 2003,  were  $4,450,213  and  $829,828,
          respectively.  There can be no assurance that the Company will be able
          to achieve profitable operations.

     o    Need for Additional Financing. We will require additional financing in
          the future to  support  our  operations  and any  expansion  plans may
          result  in  additional  dilution  to  shareholders.  There  can  be no
          assurance that our operations  will supply the revenues  necessary for
          such  purpose.  There can be no assurances  given that such  financing
          will be available in the amounts required or, if available,  that such
          financing may be obtained on terms satisfactory to XRG.

     o    Loss of Key Personnel.  The loss of the services of Mr.  Brennan,  our
          Chief Executive  Officer,  could have a material adverse effect on the
          Company.  XRG does not maintain any key man life insurance on the life
          of Mr. Brennan. In addition,  there is no assurance we will be able to
          attract  other  competent  and  qualified  employees  on terms  deemed
          acceptable to us to implement our expansion plans.

                                       11
<PAGE>

     o    Future  Acquisitions.  We plan on expanding  our business  through the
          acquisition  of  trucking  businesses.  In  attempting  to locate  and
          consummate  such   acquisitions,   we  may  be  competing  with  other
          prospective purchasers of the acquisition candidate, many of which may
          have  greater  resources  than  us.  There  can be no  assurance  that
          suitable  acquisition  candidates  can be  identified  and acquired on
          terms  favorable  to  us,  or  that  the  acquired  operations  can be
          profitably  operated  or  integrated  into the  XRG's  operations.  In
          addition,  any internally  generated  growth  experienced by XRG could
          place significant  demands on our management,  thereby  restricting or
          limiting our available  time and  opportunity to identify and evaluate
          potential  acquisition  candidates.  The ability of XRG to  consummate
          acquisitions will depend on our ability to obtain sufficient financing
          on acceptable terms, of which there can be no assurance. To the extent
          management  is  successful  in  identifying   suitable  companies  for
          acquisition,  we may deem it  necessary  or  advisable to finance such
          acquisitions   through  the  issuance  of  Common  Stock,   securities
          convertible  into Common Stock,  or debt  financing,  or a combination
          thereof.  In such cases,  the issuance of Common Stock or  convertible
          securities  could result in further  dilution to the purchasers at the
          time of such issuance or  conversion.  The issuance of debt to finance
          acquisitions  may result,  among other things,  in the  encumbrance of
          certain  of XRG's  assets,  may  impede  our  ability  to obtain  bank
          financing, and decrease our liquidity.

     o    Penny Stock  Rules.  The SEC and the NASD have adopted  certain  rules
          affecting "penny stocks".  As a result of the rules regulating  "penny
          stocks", the market liquidity for our securities is adversely affected
          by limiting the ability of broker-dealers to sell XRG's securities and
          the ability of  purchasers  to sell their  securities in the secondary
          market.


ITEM 2.  DESCRIPTION OF PROPERTY

         Our principal executive offices are located at 5301 Cypress Street,
Suite 111, Tampa, Florida 33607. Our general and administrative offices are
located at 3 Crafton Square, Pittsburgh, Pennsylvania 15205.

         The following table provides information regarding the Company's
facilities and/or offices:

         Company Location                     Office   Shop    Fuel
         ----------------                     ------   ----    ----
         Sweetwater, Tennessee                 Yes     Yes      No
         Evergreen, Alabama                    Yes     Yes      No
         Fletcher, North Carolina              Yes      No      No
         Kingsport, Tennessee                  Yes     Yes      No
         Chattanooga, Tennessee                Yes     Yes      No
         Pittsburgh, Pennsylvania              Yes      No      No
         Champaign, Illinois                   Yes      No      No


         Our Sweetwater, Tennessee facility contains approximately 13,000 square
feet of space and 7 acres of land. No formal lease exists at this facility.

         On April 1, 2004, we entered into a commercial sub-lease agreement with
Highway Transport, Inc in Evergreen, Alabama. This lease is for facilities
consisting of a truck yard, trailer storage yard, administrative facilities and
a shop and has fixed lease payments of $1,750 per month and expires March 31,
2006.

         On April 26, 2004, we entered into a commercial sub-lease agreement
with Carolina Truck Connection, Inc. in Fletcher, North Carolina. This lease is
for facilities consisting of a truck yard, trailer storage yard and
administrative facilities and has fixed lease payments of $1,500 per month and
expires in 24 months.

         On April 28, 2004, we entered into a commercial lease agreement with
Richard S. Venable, a shareholder of RSV, Inc. in Kingsport, Tennessee. This
lease is for facilities consisting of a truck yard, trailer storage yard,
administrative facilities and a shop and has fixed lease payments of $3,300 per
month and expires May 31, 2005.

                                       12
<PAGE>

         On April 21, 2004, we entered into a commercial lease agreement with
Sharon H. Limerick, a shareholder of Express Freight Systems, Inc. in
Chattanooga, Tennessee. This lease is for facilities consisting of a truck yard,
trailer storage yard, administrative facilities and a shop and has fixed lease
payments of $6,000 per month and expires April 30, 2010.

         No formal lease exists at our Pittsburgh, Pennsylvania facility.

         On April 1, 2004, we entered into a commercial sub-lease agreement with
Sherri J. Kenner, a shareholder of Highbourne Corporation in Champaign,
Illinois. This lease is for facilities consisting of a truck yard, trailer
storage yard and administrative facilities and has fixed lease payments of
$3,000 per month and expires March 31, 2006.


ITEM 3.  LEGAL PROCEEDINGS.

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

         In May, 2003, a legal action was filed in Franklin County, Ohio,
against XRG, Inc. (and against our president, based on a personal guaranty) by
the landlord of our former office space in Pittsburgh, Pennsylvania. The
landlord claimed approximately $63,000 in unpaid rent. In January, 2004, the
court granted our motion to dismiss the case for lack of proper jurisdiction in
the State of Ohio. In February 2004, the landlord filed a legal action in
Allegheny County, Pennsylvania. We filed a Complaint in Allegheny County in
Common Please court for breach of lease and filed a counterclaim for damages.
This legal action is in the preliminary stages. We believe that we have
meritorious defenses against the above claims and intend to vigorously contest
them. Negative outcomes of the litigation matters discussed above are not
considered probable or cannot be reasonably estimated. Accordingly, we have not
recorded reserves regarding these matters in our financial statements as of
March 31, 2004. We record a liability when a loss is known or considered
probable and the amount can be reasonably estimated. If a loss is not probable
or a probable loss cannot be reasonably estimated, a liability is not recorded.
While it is not possible to predict the outcome of the action discussed above,
we believe that costs associated with them will not have a material adverse
impact on our consolidated financial position, but may be material to the
consolidated results of operations or cash flows of any one period.

         In July 2003, a legal action was filed in Hillsborough County, Florida,
against XRG, Inc. by the landlord of our current office space in Tampa, Florida.
This legal action was for eviction and unpaid rent. A judgment was rendered
against us and we subsequently paid the amount of the judgment in full in
October 2003. A satisfaction of judgment has been entered in the case.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURTIY HOLDERS.

         On or about March 26, 2004 we received written consents in lieu of a
meeting of stockholders from holders of a majority of the shares of Voting
Securities representing in excess of 51% of the total issued and outstanding
shares of voting stock of XRG, Inc. approving our Certificate of Amendment to
our Certificate of Incorporation, pursuant to which the number of shares of
Common Stock that we are authorized to issue will be increased from 100,000,000
shares to 300,000,000 shares.

         This amendment was adopted by our Board of Directors and the majority
stockholders (the "Majority Stockholders") of our Company in accordance with the
General Corporation Law of the State of Delaware. The Majority Stockholders own
5,900,000 shares of Common Stock and 5,000,000 shares of Voting Preferred Stock,
or approximately 77.2% of our outstanding Voting Securities. No other votes were
required or necessary to adopt these amendments.

                                       13
<PAGE>

                                     PART II


ITEM 5. MARKET PRICE OF AND  DIVIDENDS  ON THE  REGISTRANT'S  COMMON  EQUITY AND
OTHER SHAREHOLDER MATTERS


Market Value

         Our Common Stock is traded on the OTCBB under the symbol "XRGC". Our
Common Stock commenced trading on March 20, 2003. The following table sets
forth, the high and low bid prices of the Common Stock for the periods shown as
reported by the National Quotation Bureau. The bid prices quoted on the OTCBB
reflect inter-dealer prices without retail mark-up, mark-down or commission and
may not represent actual transactions.

                                                         High Bid     Low Bid
 Fiscal Year Ended March 31, 2003                        --------     -------
 --------------------------------
 Fourth Quarter (January 1, 2003 to March 31, 2003)       $ 0.40       $0.25

 Fiscal Year Ending March 31, 2004
 ---------------------------------
 First Quarter (April 1, 2003 to June 30, 2003)             1.25        0.25
 Second Quarter (July 1, 2003 to September 30, 2003)        1.40        0.56
 Third Quarter (October 1, 2003 to December 31, 2003)       0.85        0.33
 Fourth Quarter (January 1, 2004 to March 31, 2004)         0.41        0.19


Description of Securities

         On or about March 26, 2004 we received written consents in lieu of a
meeting of stockholders from holders of a majority of the shares of Voting
Securities representing in excess of 51% of the total issued and outstanding
shares of voting stock of XRG, Inc. approving our Certificate of Amendment to
the Certificate of Incorporation, pursuant to which the number of shares of
Common Stock that we are authorized to issue was increased from 100,000,000
shares to 300,000,000 shares.


Common Stock

         As of June 30, 2003, there were 242,396,710 shares of Common Stock, par
value of $.001 per share outstanding, held of record by approximately 2,700
stockholders.

         The holders of Common Stock are entitled to one vote per share for the
selection of directors and all other purposes and do not have cumulative voting
rights. The holders of Common Stock are entitled to receive dividends when, as,
and if declared by the Board of Directors, and in the event of the liquidation
by XRG, Inc., to receive pro-rata, all assets remaining after payment of debts
and expenses. Holders of the Common Stock do not have any pre-emptive or other
rights to subscribe for or purchase additional shares of capital stock, no
conversion rights, redemption, or sinking-fund provisions. In the event of
dissolution, whether voluntary or involuntary, of XRG, each share of the Common
Stock is entitled to share ratably in the assets available for distribution to
holders of the equity securities after satisfaction of all liabilities. All the
outstanding shares of Common Stock are fully paid and non-assessable.


Preferred Stock

         Our Board of Directors (without further action by the shareholders) has
the option to issue from time to time authorized un-issued shares of Preferred
Stock and determine the terms, limitations, residual rights, and preferences of
such shares.

                                       14
<PAGE>

         In June 2003, the Board of Directors approved and adopted resolutions
establishing and designating 5,000,000 shares of Series A Preferred Stock $.001
par value. The holders of Series A Preferred Stock are entitled to ten votes for
each share held on all matters on which the holders of the Company's Common
Stock are entitle to vote and shall vote together with the holders of Common
Stock and not as a separate class or series. Series A Preferred Stock shall have
no dividend, conversion, or redemption rights and no liquidation preferences.

           In July 2003, Donald G. Huggins, Jr., Kevin Brennan, and Stephen
Couture each subscribed to purchase 1,666,666.66 shares for an aggregate of
5,000,000 shares of Series A Voting Preferred Stock. These officers and
directors subscribed to purchase these shares of Series A Voting Preferred Stock
for the aggregate par value of the shares or $5,000.

         The Voting Preferred Stock was issued to assure complete and unfettered
control of the Company by its holders. The issuance of the Voting Preferred
Stock constitutes an anti-takeover device since the approval of any merger or
acquisition of the Company will be completely dependent upon the approval of the
holders of this Voting Preferred Stock.

         In April 2004, Donald G. Huggins, Jr., Kevin Brennan, and Stephen
Couture agreed to cancel all of their shares of Series A Preferred Stock in
exchange for 15,000,000 shares of Common Stock. The Registrant has also agreed
not to issue any shares of Preferred Stock for a period of one (1) year. 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.


Certain Provisions of the Certificate of Incorporation and Bylaws

         Our Certificate of Incorporation provides that no directors shall be
personally liable to XRG or our stockholders for monetary damages for breach of
fiduciary duty as a director except as limited by Delaware law. Our Bylaws
provide that we shall indemnify to the full extent authorized by law each of our
directors and officers against expenses incurred in connection with any
proceeding arising by reason of the fact that such person is or was an agent of
the corporation.

         Insofar as indemnification for liabilities may be invoked to disclaim
liability for damages arising under the Securities Act of 1933, as amended, or
the Securities Act of 1934, (collectively, the "Acts") as amended, it is the
position of the Securities and Exchange Commission that such indemnification is
against public policy as expressed in the Acts and are therefore, unenforceable.


Dividends

         We do not anticipate the payment of cash dividends in the foreseeable
future. Payment of cash dividends is within the discretion of our Board of
Directors and will depend upon, among other factors, earnings, capital
requirement and the provisions of Delaware law. There are no restrictions other
than set forth herein that are applicable to the ability of us to pay dividends
on our common stock. Future issuance and or sales of substantial amounts of
common stock could adversely affect prevailing market prices in our common
stock.


Transfer Agent

         Our transfer agent is Florida Atlantic Stock Transfer, Inc., 7130 Nob
Hill Road, Tamarac, Florida 33321.


Shares Eligible for Future Sale

         We believe all of the outstanding shares of common stock aggregating
242,396,710 shares of common stock as of June 30, 2004, will be eligible for
sale pursuant to Rule 144 under the Securities Act of 1933, subject to
restrictions of offers and sales of such securities by "insiders" as that term
is defined under the Securities Act of 1934.

                                       15
<PAGE>

Penny Stock Considerations

         Penny Stock Regulation Broker-dealer practices in connection with
transactions in "Penny Stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
risk associated with the penny stock market. The broker-dealer must also provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer must make a
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules.

         XRG's securities will likely have a trading price of less than $5.00
per share and will not be traded on any exchanges, therefore we will be subject
to Penny Stock Rules. As a result of the aforesaid rules regulating penny
stocks, the market liquidity for our securities could be severely adversely
affected by limiting the ability of broker-dealers to sell our securities and
the ability of shareholders sell their securities in the secondary market.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

IMPORTANT NOTE ABOUT FORWARD-LOOKING STATEMENTS

         The following discussion and analysis should be read in conjunction
with our audited financial statements as of March 31, 2004 and the notes
thereto, all of which financial statements are included elsewhere in this form
10-KSB. In addition to historical information, the following discussion and
other parts of this Form 10-KSB contain forward-looking information that
involves risks and uncertainties. Our actual results could differ materially
from those anticipated by such forward-looking information due to factors
discussed under "Business" and elsewhere in this Form 10-KSB.

         The statements that are not historical constitute "forward-looking
statements". Said forward-looking statements involve risks and uncertainties
that may cause the actual results, performance or achievements of the Company
and its subsidiaries to be materially different from any future results,
performance or achievements, express or implied by such forward-looking
statements. These forward-looking statements are identified by their use of such
terms and phrases as "expects", "intends", "goals", "estimates", "projects",
"plans", "anticipates", "should", "future", "believes", and "scheduled".

         The variables which may cause differences include, but are not limited
to, the following: general economic and business conditions; competition;
success of operating initiatives; operating costs; advertising and promotional
efforts; the existence or absence of adverse publicity; changes in business
strategy or development plans; the ability to retain management; availability,
terms and deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employment benefit costs;
availability and costs of raw materials and supplies; and changes in, or failure
to comply with various government regulations. Although the Company believes
that the assumptions underlying the forward-looking statements contained herein
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-KSB will prove to be accurate.

         In light of the significant uncertainties inherent in the
forward-looking statements included herein the inclusion of such information
should not be regarded as a representation by the Company or any person that the
objectives and expectations of the Company will be achieved.

                                       16
<PAGE>

GENERAL

         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 $42 million run rate in fiscal 2005. We have established and began
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.) 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 details our current operations:

<TABLE>
<CAPTION>


-------------------------------------- ------------------ ------------ ---------------------- ---------- ----------------------
               Company                   Headquarters      Carrier      Owner/Operators or    Trailers     Closing Date
                                           Location          Type         Owned Tractors
-------------------------------------- ------------------ ------------ ---------------------- ---------- ----------------------
<S>                                    <C>                <C>          <C>                    <C>        <C>
J. Bently Companies, Inc.              Sweetwater, TN     Van          17 Owner Operators,    209        September 1, 2003*
                                                                       46 Fleet  Contracted
                                                                       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        47         April 2, 2004
                                                                       Owner Operators
-------------------------------------- ------------------ ------------ ---------------------- ---------- ----------------------
Express Freight Systems                Chattanooga, TN    Van          106 Owner Operators    242        April 21, 2004
-------------------------------------- ------------------ ------------ ---------------------- ---------- ----------------------
Carolina Truck Connection (CTC)        Fletcher, NC       Van          7 Tractors, 2 Owner    40         April 30, 2004
                                                                       Operators
-------------------------------------- ------------------ ------------ ---------------------- ---------- ----------------------
RSV                                    Kingsport, TN      Van          42 Tractors            -          April 30, 2004
-------------------------------------- ------------------ ------------ ---------------------- ---------- ----------------------
</TABLE>

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

Revenue

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


Revenue Equipment

         We operate approximately 332 tractors at June 30, 2004, of which
approximately 81 are company-owned equipment and 251 are provided by independent
contractors (owner operators) or by a fleet agreement. Of our trailers, at June
30, 2004, approximately 584 were financed under operating leases.

         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.
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.

                                       17
<PAGE>

         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 March
31, 2004, the allowance for doubtful accounts was $83,000 or approximately 5% 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.


RESULTS OF OPERATIONS

Year ended March 31, 2004 compared to the year ended March 31, 2003

         XRG generated $4,682,277 in revenues during the fiscal year ended March
31, 2004 as compared to $686,030 during the fiscal year ended March 31, 2003.
Our revenues increased $3,996,247 or 582% from fiscal year 2003 to 2004. This
increase is the result of revenues attributable to the truckload carrier
operations of our XRG Logistics, Inc. subsidiary pursuant to a Fleet Owner
Agreement with J. Bently Companies, Inc that provided of revenue $2,576,215
during the current fiscal year. Our R&R Express Intermodal, Inc. subsidiary
which the acquisition closed on January 1, 2004 provided $1,366,932 during the
current fiscal year. We expect our revenues to significantly increase during the
2005 fiscal year due to our acquisition strategy. We completed five truckload
carrier acquisitions in April 2004.

         Related expenses were $3,283,415 and $789,924 resulting in a gross
margin of $1,398,862 and ($103,894) during the years ended March 31, 2004 and
2003, respectively. Related expenses during the year ended March 31, 2004 were
primarily costs associated with purchased transportation. The components of
purchased transportation during the year ended March 31, 2004 were
owner-operator settlements of $1,284,918, equipment rental costs of $691,892,
owner-operator settlements of $549,000, and company driver payroll of $442,852.
Related expense during our fiscal year ended March 31, 2003 were costs
associated with administrative services we provided to one customer. We expect
our related expenses to significantly increase during the 2005 fiscal year due
to our acquisition strategy.

         For the year ended March 31, 2004, total selling, general and
administrative expenses were $3,838,338 as compared to $584,661 for the previous
year, an increase of $3,253,677 or 557%. This increase is primarily the result
of shares issued for services valued at approximately $1,526,519 during the year
ended March 31, 2004.

         We recorded bad debt expense of $1,049,642 for the fiscal year ended
March 31, 2004. On April 12, 2004, we entered into a Purchase Agreement Addendum
with J. Bently Companies, Inc. that deleted the original registration rights and
the true up provisions. We issued an additional 800,000 shares and forgave
$994,794 in advances to J. Bently Companies, Inc. in consideration for the terms
of this Addendum.

         Interest expense for the year ended March 31, 2004 and 2003 was
$183,836 and $105,464, respectively. This increase of $78,372 is associated with
an increase in the average notes payable outstanding each month during fiscal
year ending 2004 compared to the same period during 2003. During April of 2004,
approximately $500,000 of notes payable were converted into common stock which
will reduce the interest expense in the next quarter.

                                       18
<PAGE>

         We recorded $777,259 and $35,809 related to the amortization of
intrinsic value of convertible debt and debt discount for the value of
detachable warrants during the fiscal years ending March 31, 2004 and 2003,
respectively.

         We had a net loss of $4,450,213 for the year ended March 31, 2004 as
compared to a loss of $829,828 for the year ended March 31, 2003. This increase
in our operating loss over that of the year ended March 31, 2003 is the result
of an increase in consulting services paid with our common stock, travel, and
office costs, personnel costs associated with the implementation of our
information systems as well as higher interest expenses associated with our
long-term debt.

         The basic loss per share was $.25 for the year ended March 31, 2004
compared to a basic loss per share of $.09 for the year ended March 31, 2003.
The basic weighted average shares outstanding for the year ended March 31, 2004
was 18,108,493 as compared to 9,312,297 for the year ended March 31, 2003.


Year ended March 31, 2003 compared to the year ended March 31, 2002

         We generated $686,030 in revenues during our fiscal year ended March
31, 2003 from our administrative services provided to one customer. Related
expenses were $789,924 resulting in a negative gross margin of $103,894. These
services were an important foundation for the eventual acquisition of trucking
companies. Our administrative services for this one customer ceased during the
fourth quarter ended March 31, 2003. We continue to focus our efforts primarily
on identifying profitable truckload carriers throughout the United States for
acquisition and securing financing to support our business.

         For the year ended March 31, 2003, total selling, general and
administrative expenses were $584,661 as compared to $280,493 for the same
period of the previous year, an increase of $304,168 or 108%. This increase is
the result of an increase in payroll, consulting, travel, office, legal, and
accounting costs.

         Interest expense for the year ended March 31, 2003 and 2002 was
$141,273 and $46,013, respectively. This increase of $95,260 or 207% is
associated with an increase in long-term debt of $458,000 from March 31, 2002 to
March 31, 2003 and amortization expense associated with the discount on
long-term debt.

         We had a net loss of $829,828 for the year ended March 31, 2003 as
compared to a loss of $324,136 for the prior year period. This increase in the
operating loss over that of the preceding year period is the result of an
increase in consulting, travel, office, legal, and accounting costs, as well as
higher interest expenses associated with increases in our long-term debt.

         The loss per share was $0.09 per share for the year ended March 31,
2003 as compared to a loss per share of $0.04 for the year ended March 31, 2002.
The weighted average shares outstanding for the year ended March 31, 2003 was
9,312,297 as compared to 7,498,156 for the preceding year period ended March 31,
2002.


Liquidity and Capital Resources

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

         During June 2003, we converted approximately $753,000 of notes into our
common stock at a price of $.50 per common share.

         During the year ended March 31, 2004, we issued $270,000 of convertible
notes payable net of costs. In connection with the notes, the Company issued
detachable warrants to purchase 1,800,000 shares of the Company's restricted
common stock.

         During the year ended March 31, 2004, the Company issued a $100,000
convertible note to one individual. In connection with this note, the Company
issued detachable warrants to purchase 100,000 shares of the Company's
restricted common stock.

                                       19
<PAGE>

         During the year ended March 31, 2004, we raised $463,368 pursuant to a
stock purchase agreement in exchange for 1,845,000 shares of our restricted
common stock. We agreed to increase the shares issued as part of this stock
purchase by 20% because of our failure to complete a registration statement. We
issued an additional 377,000 shares as part of this increase. In addition, we
received $80,000 to issue 320,000 shares of our common stock.

         During December 2003, we entered into a short-term bridge loan with The
Fortuis Foundation Fund, L.P. for an aggregate of up to $550,000 through the
issuance of loan notes. The note term is for three months, renewable for three
additional periods commencing with the end of the first term and bears interest
at a rate of 12% per annum and are secured by a lien on our equipment, property
and fixtures. Funds were to be utilized primarily for completing acquisitions
and general working capital purposes. The first advance of $350,000 under this
loan did not clear our bank which resulted in an overdraft balance in our cash
account at December 31, 2003. We settled this overdraft balance in full at March
31, 2004 and entered into a release and settlement agreement with the bank.

         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. At March 31, 2004, the $3,250,000 is recorded as
common stock payable and as a stock subscription receivable which was received
into escrow on April 1, 2004 and distributed to us on April 2, 2004 through
April 30, 2004.

         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 grants 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 grants
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 contains a cashless
exercise provision. Each of the Warrants is 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 contains
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.

         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.

         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. Provided that we comply with the
independent director covenant, the Investor has agreed to allow up to fifteen
percent (15%) of the voting rights for our shares to be voted by our Board of
Directors for one (1) year.

         The Investor also required that certain of our current insiders agree
to cancel all of their shares of Series A Preferred Stock in exchange for
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.

                                       20
<PAGE>

         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 quarter ended June 30, 2004, we raised $1,072,000 in
exchange for 8,933,333 shares of Common Stock pursuant to a Stock Purchase
Agreement from various investors. 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.

     For the year ended March 31, 2004 we used $1,166,421 in cash from operating
activities as compared to $718,969 used in fiscal 2003. Investing activities for
the present fiscal year included  equipment deposits of $50,000 and the purchase
of office equipment of $29,055 as well advances to J. Bently  Companies,  Inc in
the amount of $994,794.  Financing  activities for the year ended March 31, 2004
provided  $2,223,707  primarily  from  proceeds  from common stock  issued,  the
issuance of notes  payable and a  factoring  line of credit.  For the year ended
March 31,  2004,  cash  decreased  $16,563 as  compared  to $298,616 in the same
period of the prior year.

         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 working capital from 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. Seasonal variations may result from weather or from customer's
reduced shipments after the busy winter holiday season.


Inflation

         We believe that the impact of inflation on our operations is not
material.


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The information required by this item is presented at page F-1 of this
Report, following Part III hereof.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

         None.


ITEM 8a.    DISCLOSURE CONTROLS AND PROCEDURES

     (a) Evaluation of disclosure controls and procedures.  As of the end of the
period covered by this report, the Company carried out an evaluation,  under the
supervision and with the  participation of the Company's  management,  including
the  Company's  Chief  Executive  Officer and Chief  Financial  Officer,  of the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the Chief  Executive  Officer and Chief  Financial  Officer  concluded  that the
Company's  disclosure  controls and procedures  other than  described  below are
effective  in timely  alerting  them to  material  information  relating  to the
Company required to be included in the Company's periodic SEC filings.

                                       21
<PAGE>

     (b) Changes in internal  controls over financial  reporting.  In connection
with the new rules,  we are in the process of further  reviewing and documenting
our  disclosure  controls and  procedures,  including our internal  controls and
procedures  for  financial  reporting,  and may from time to time  make  changes
designed to enhance their  effectiveness  and to ensure that our systems  evolve
with our  business.  In  connection  with our  ongoing  evaluation  of  internal
controls over financial  reporting,  certain internal control matters were noted
that required corrective actions.

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

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

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

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

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

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

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

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

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

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

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

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

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



                                       22
<PAGE>
        o  risk that enhanced controls and procedures may still not be adequate
           to assure timely and reliable financial information.

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

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

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

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

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

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

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

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

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

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


                                       23
<PAGE>

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

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

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

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

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

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

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


<PAGE>


                                    PART III
                                    --------

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS , PROMOTERS AND CONTROL PERSONS.

Directors and Executive Officers of the Company

         The following table sets forth certain information with respect to each
person who is a director or an executive officer as of March 31, 2004.

            NAME                      AGE               POSITION
            ----                      ---               --------

Kevin P. Brennan                      52     President, Chief Executive Officer,
                                             Director

Stephen R. Couture                    34     Vice President of Finance,
                                             Chief Financial Officer,
                                             Director, Treasurer, Secretary

Donald G. Huggins, Jr.                55     Chairman of the Board

Neil Treitman                         50     Chief Operations Officer

         Executive officers are elected by the Board of Directors and serve
until their successors are duly elected and qualify, subject to earlier removal
by the Board of Directors. Directors are elected at the annual meeting of
shareholders to serve for their term and until their respective successors are
duly elected and qualify, or until their earlier resignation, removal from
office, or death. The remaining directors may fill any vacancy in the Board of
Directors for an unexpired term. See "Board of Directors" for a discussion of
the Directors' terms.


Business Experience of  Executive Officers and Directors

         Kevin P Brennan, President, Chief Executive Officer, Director. Mr.
Brennan was Chief Financial Officer and co-founder of Express America, a
non-asset based transportation company. Mr. Brennan hired and directed a staff
that developed the proprietary automated information systems that enabled the
company to control and monitor over 100 divisions, which included both asset and
non-asset based trucking companies. Mr. Brennan organized and designed the
company's accounting systems so that within six months the company was able to
be audited by a big eight public accounting firm. This enabled Mr. Brennan to
begin negotiating with a number of major financial institutions, and ultimately
obtain a multimillion-dollar credit facility with the Bank of New England, as


                                       24
<PAGE>

well as an equity investment with the bank's venture capital arm, New England
Capital. He was responsible for negotiating the purchase and finance of over 100
tractors and trailers for the company. Mr. Brennan provided consulting services
in the truckload transport industry, assisting companies in the acquisition of
truckload carriers. He provided expertise in negotiating and valuing the deals,
conducting the necessary due diligence, and assisting in arranging financing for
the transactions. He was involved in several successfully completed transactions
throughout the Eastern United States. For the last five years he has worked for
XRG, Inc. For the previous two years, Mr. Brennan was employed with Cherry,
Bekaert, and Holland, L.L.P. certified public accountants. Mr. Brennan has over
10 years of public accounting experience, including auditing of public
companies, and is a licensed CPA. He attended Ohio University, and graduated
with high honors from Robert Morris University, Pittsburgh, PA with a BSBA in
Accounting.

         Mr. Stephen R. Couture, Vice President of Finance, Chief Financial
Officer, Treasurer, Director Mr. Couture is a principal in Couture & Company,
Inc., a corporate financial consulting firm founded in 1980. He has consulted
for numerous public and private companies primarily in the Tampa Bay, Florida
region since 1993. Mr. Couture has been involved with structuring financings,
assisting with mergers and acquisitions, private and public security placements,
and development of company business plans. Mr. Couture earned a Masters in
Business Administration, emphasis in finance and accounting, from the University
of Tampa and a Bachelor of Science degree in management systems, from Rensselaer
Polytechnic Institute.

         Mr. Donald G. Huggins, Jr., Chairman of the Board. Mr. Huggins is a
financial and management consultant who was responsible for bringing XRG to the
investment public. He provides advisory services and introductions for the
Company to financial institutions, strategic partners, and potential merger
opportunities and assists in developing business for clients. Mr. Huggins is
currently President of Private Capital Group Inc., Clearwater, Florida. Mr.
Huggins has served from 1991 to 1997 as Chief Operating Officer, Chief Financial
Officer and Director of Business Development and Strategic Alliances for Innova
Pure Water, Inc. a publicly traded, water filtration technology enterprise,
located in Clearwater, Florida. Prior to his Innova tenure, Mr. Huggins' career
was focused on organizing and acquiring premium real estate development
projects, through a rollup strategy, for his privately held development company.

         Mr. Neil Treitman, Chief Operating Officer, has headed organizations
since 1990 that have been the General Partner of entities controlled by
PacifiCorp Financial and SunAmerica Life Company, as well as several smaller
ventures. He is an officer and director of Capital Development Services Int.
(CDSICorp) a company formed to develop investment opportunities. His management
experience includes property acquisitions and finance as well as hands-on
management of a truckload transport company. As the owner of a small (20 truck)
carrier in the Northwest, Mr. Treitman managed all aspects of its operations
including dispatch, recruiting, and customer relationships. He has focused his
attention on creating the electronic infrastructure that will integrate the XRG
subsidiaries and evaluating acquisition candidates to establish XRG's framework.
Mr. Treitman attended Drexel University's School of Business Administration and
received his Professional Designation as a Certified Commercial Investment
Member (CCIM) of the National Board of Realtors in 1980.


Board of Directors

         Our Bylaws fix the size of the Board of Directors at no fewer than one
and no more than seven members, to be elected annually by a plurality of the
votes cast by the holders of Common Stock, and to serve until the next annual
meeting of stockholders and until their successors have been elected or until
their earlier resignation or removal. Currently, there are three (3) directors.
Two of these directors were originally elected on October 29, 2001. Our third
director was elected in June, 2002. We do not have separate audit or
compensation committees at the present time. We do not have any independent
directors at the present time.


ITEM 10.  EXECUTIVE COMPENSATION


Executive Compensation

         The following table shows the compensation paid by us for the year
ended March 31, 2004 and 2003, to or for the account of our officers.

                                       25
<PAGE>

<TABLE>
<CAPTION>


                           SUMMARY COMPENSATION TABLE

                                    Annual Compensation                        Long-Term Compensation Awards
                                    -------------------                        -----------------------------
                                                                      Restricted
                                                     Other Annual     Stock       Options/    LTIP        All Other
Name & Principal                Salary     Bonus     Compensation     Award(s)    SARs        Payouts     Compensation
Position                Year      ($)       ($)          ($)             ($)       (#)          ($)          ($)
---------------         ----    ------     -----     ------------     ----------  -------     -------     ------------
<S>                     <C>     <C>        <C>       <C>              <C>         <C>         <C>         <C>
Kevin Brennan
President, CEO          2004    $140,000     ---         ---           $48,750       ---         ---           ---

                        2003    $103,000     ---         ---             ---         ---         ---           ---

Donald G. Huggins, Jr.
Chairman                2004       ---       ---         $76,500       $48,750       ---         ---           ---

                        2003       ---       ---         $82,000         ---         ---         ---           ---


Stephen R. Couture      2004       ---       ---         $57,500       $48,750       ---         ---           ---
Vice President,
Finance, CFO
                        2003       ---       ---         $80,546         ---         ---         ---           ---


Neil Treitman           2004    $140,000     ---           ---         $48,750       ---         ---           ---
Chief Operations
Officer
                        2003     $42,000     ---           ---           ---      450,000(1)     ---           ---
</TABLE>
------------------------

(1)      Based on our calculation using the Black Scholes Option Pricing Model,
         the value of these options were deemed immaterial.


Employment and Other Agreements

         In July 2003, we entered into an employment agreement with Neil
Treitman, our Chief Operating Officer. This agreement has a term of three (3)
years, and commences on July 1, 2003. Under this agreement, Mr. Treitman is
entitled to an annual base salary of not less than $120,000. Mr. Treitman was
granted stock options to purchase 450,000 shares of our common stock. This
option is non-qualified, carries a term of five years, and was issued at par
value on March 1, 2003. Mr. Treitman is entitled to additional bonus
compensation as determined by the Company's Board of Directors or Compensation
Committee. Such bonuses may be paid in cash or issued in shares of our Common
Stock on such terms as approved by our Board of Directors. Mr. Treitman is
entitled to reimbursement for ordinary, necessary and reasonable business
expenses in connection with his services. He may participate in any retirement,
medical, dental, welfare and stock options plans, life and disability insurance
coverages and other benefits afforded our employees. He is entitled to an
automobile allowance of $600 per month during the term of his agreement. Mr.
Treitman was issued a restricted stock grant of 550,000 shares of our common
stock on March 18, 2003. In addition, Mr. Treitman was granted stock options to
purchase 450,000 shares of our common stock as a performance bonus. This option
is non-qualified, carries a term of five years, and was issued at par value on
March 1, 2003. Mr. Treitman has agreed not to compete with us during the term of
this agreement and for a period of two (2) years after termination of this
agreement.

         In March 2004, we entered into an employment agreement with Kevin
Brennan, our Chief Executive Officer. This agreement has a term of five (5)
years, and commences on March 1, 2004. Under this agreement, Mr. Brennan is
entitled to an annual base salary of $185,000. Mr. Brennan is entitled to
additional bonus compensation of 1/2% of the gross revenue billed in the most


                                       26
<PAGE>

recent fiscal year by each newly acquired company. Such bonuses shall be paid at
the closing of each acquisition in 50% cash and 50% XRG, Inc. common stock at
market value during the first six months of the agreement and 25% cash and 75%
XRG, Inc. common stock at market value thereafter. Mr. Brennan is entitled to
reimbursement for ordinary, necessary and reasonable business expenses in
connection with his services. He may participate in any retirement, medical,
dental, welfare and stock options plans, life and disability insurance coverages
and other benefits afforded our employees. He is entitled to an automobile
allowance of $1,500 per month during the term of his agreement.

         In March 2004, we entered into an employment agreement with Stephen
Couture, our Chief Financial Officer. This agreement has a term of five (5)
years, and commences on March 1, 2004. Under this agreement, Mr. Couture is
entitled to an annual base salary of $125,000 with 15% a year increases. Mr.
Couture shall be entitled to minimum cumulative quarter-end or annual cash
bonuses payable at each quarter-end period, or annually, at his option. Such
bonuses are to be paid from funds specifically allocated by the Company for
bonus payments ("Bonus Pool"). Such bonuses may be paid in cash or in shares of
the Company's common stock (valued at 50% of the closing bid price at the last
day of the Company's quarter-end or fiscal year, as appropriate) at his option.
Mr. Couture is entitled to reimbursement for ordinary, necessary and reasonable
business expenses in connection with his services. He may participate in any
retirement, medical, dental, welfare and stock options plans, life and
disability insurance coverages and other benefits afforded our employees. He is
entitled to an automobile allowance of $1,000 per month during the term of his
agreement.

         In March 2004, we entered into a consulting agreement with Donald G.
Huggins, Jr., our Chairman of the Board. This agreement has a term of five (5)
years, and commences on March 1, 2004. Under this agreement, Mr. Huggins is
entitled to a annual consulting fees of $150,000. Mr. Huggins shall be entitled
to minimum cumulative quarter-end or annual cash bonuses payable at each
quarter-end period, or annually, at his option. Such bonuses are to be paid from
funds specifically allocated by the Company for bonus payments ("Bonus Pool").
Such bonuses may be paid in cash or in shares of the Company's common stock
(valued at 50% of the closing bid price at the last day of the Company's
quarter-end or fiscal year, as appropriate) at his option. Mr. Huggins is
entitled to reimbursement for ordinary, necessary and reasonable business
expenses in connection with his services. He is entitled to an automobile
allowance of $1,000 per month during the term of his agreement.


Stock Options

         XRG intends to adopt a stock option plan in 2004, which authorizes the
grant of incentive stock options under Section 422 of the Internal Revenue Code
(the "Plan"). A total of 10% of the outstanding shares have been reserved and
may be issued under the Plan. The Plan will provide that (a) the exercise price
of options granted under the Plan shall not be less than the fair market value
of the shares on the date on which the option is granted unless an employee,
immediately before the grant, owns more than 10% of the total combined voting
power of all classes of stock of XRG or any subsidiaries, whereupon the exercise
price shall be at least 110% of the fair market value of the shares on the date
on which the option is granted; (b) the term of the option may not exceed ten
years and may not exceed five years if the employee owns more than 10% of the
total combined voting power of all classes of stock of XRG or any subsidiaries
immediately before the grant; (c) the shares of stock may not be disposed of for
a period of two years from the date of grant of the option and for a period of
one year after the transfer of such shares to the employee; and (d) at all time
from the date of grant of the option and ending on the date three months before
the date of the exercise, the employee shall be employed by XRG, or a subsidiary
of XRG, unless employment is terminated because of disability, in which case
such disabled employee shall be employed from date of grant to a year preceding
the date of exercise, or unless such employment is terminated due to death.


Director Compensation

         A director who is an employee receives no additional compensation for
services as director or for attendance at or participation in meetings except
reimbursement of out-of-pocket expenses and options. Outside directors will be
reimbursed for out-of-pocket expenditures incurred in attending or otherwise
participating in meetings and may be issued stock options for serving as a
director. We have no other arrangements regarding compensation for services as a
director.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of June 30, 2004,
regarding current beneficial ownership of the shares of any class of our Voting
Securities by (i) each person known by us to own more than 5% of the outstanding


                                       27
<PAGE>

shares of our Voting Securities, (ii) each of our executive officers and
directors, and (iii) all of our executive officers and directors as a group.
Except as noted, each person has sole voting and sole investment or dispositive
power with respect to the shares shown. The information presented is based on
242,396,710 outstanding shares of Common Stock.


-------------------------------------------------------------------------------
                                                    Common Stock
-------------------------------------------------------------------------------
Name and Address of Beneficial Owner (1)       Number   Percent of All Voting
                                                        Securities (2)
-------------------------------------------------------------------------------
Donald G. Huggins, Jr. (3)(4)                13,333,333         5.5%
-------------------------------------------------------------------------------
Kevin P. Brennan                             10,583,334         4.4%
-------------------------------------------------------------------------------
Stephen R. Couture                            9,733,333         4.0%
-------------------------------------------------------------------------------
Neil Treitman                                 1,500,000         1.0%
-------------------------------------------------------------------------------
Barron Partners, LP(5)                      168,333,333        69.5%
-------------------------------------------------------------------------------
All executive officers and directors of
 the company as a group (4 persons)          35,150,000        14.5%
-------------------------------------------------------------------------------

(1) Except as otherwise indicated, the address of each beneficial owner is c/o
XRG, Inc., 5301 Cypress Street, Suite 111, Tampa, Florida 33607.

(2) Calculated on the basis of 242,396,710 shares of common stock issued and
outstanding as of June 30, 2004 except that shares of common stock underlying
options and warrants exercisable within 60 days of the date hereof are deemed to
be outstanding for purposes of calculating the beneficial ownership of
securities of the holder of such options or warrants.

(3) Mr. Huggins' wife Margaret J. Huggins is the stockholder. Mr. Huggins
disclaims beneficial ownership of his wife's stock.

(4) Private Capital Group, Inc., a firm that Mr. Huggins is President owns
2,000,000 shares of common stock. Mr. Huggins's wife Margaret J. Huggins is the
sole shareholder of Private Capital Group, Inc.

(5) 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.

         These shares of Common Stock held by beneficial owners are "Restricted"
within the meaning of Rule 144 adopted under the Securities Act (the "Restricted
Shares"), and may not be sold unless they are registered under the Securities
Act or sold pursuant to an exemption from registration, such as the exemptions
provided by Rule 144 and Rule 701 promulgated under the Securities Act. The
Restricted Shares were issued by the Company in private transactions in reliance
upon exemptions from registration under the Securities Act and may only be sold
in accordance with the provisions of Rule 144 or Rule 701 of the Securities Act.

         In general, under Rule 144 as currently in effect any person (or
persons whose shares are aggregated), including an affiliate, who has
beneficially owned shares for a period of at least one year is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of:

         (1)      1% of the then-outstanding shares of common stock; and

         (2) the average weekly trading volume in the common stock during the
four calendar weeks immediately preceding the date on which the notice of such
sale on Form 144 is filed with the Securities and Exchange Commission.

         Sales under Rule 144 are also subject to provisions relating to notice
and manner of sale and the availability of current public information about us.
In addition, a person (or persons whose shares are aggregated) who has not been
an affiliate of us at any time during the 90 days immediately preceding a sale,
and who has beneficially owned the shares for at least two years, would be
entitled to sell such shares under Rule 144(k) without regard to the volume
limitation and other conditions described above. While the foregoing discussion
is intended to summarize the material provisions of Rule 144, it may not
describe all of the applicable provisions of Rule 144, and, accordingly, you are
encouraged to consult the full text of that Rule.

                                       28
<PAGE>

         The possibility of future sales by existing stockholders under Rule 144
or otherwise may, in the future, have a depressive effect on the market price of
the Common Stock, and such sales, if substantial might also adversely affect the
Company's ability to raise additional capital.


ITEM 12:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         We have related party advances and payables to stockholders in the
amount of $270,126 as of March 31, 2004 for certain advances given to us and for
consulting services rendered during the year ended March 31, 2004. These
advances and payables are due on demand, unsecured, and non-interest bearing.

         Our President and Chief Executive Officer was issued 250,000 shares of
our Common Stock valued at $48,750 for past services rendered during the year
ended March 31, 2004.

         Our Chairman of the Board of Directors was issued 250,000 shares of our
Common Stock valued at $48,750 for past services rendered during the year ended
March 31, 2004.

         Our Chief Operating Officer was issued 550,000 shares of our Common
Stock valued at $550 for past services rendered during the year ended March 31,
2003. In addition, this individual was granted stock options to purchase 450,000
shares of our Common stock as a performance bonus. These options were exercised
during the year ended March 31, 2004 at an exercise price of $0.001.

         Our Chief Financial Officer was issued 250,000 shares of our Common
Stock valued at $250 for services rendered during the year ended March 31, 2003.
During March 2004, we issued 250,000 shares of our Common Stock valued at
$48,750 for services rendered during the year.

         Michael T. Cronin, Esq., who is a partner in the law firm which serves
as our corporate and securities counsel owns 550,000 shares of our common stock.
These shares were issued for legal services rendered.

         We relied upon Section 4(2) for the issuance of the above securities.

         We believe that all of the transactions with our officers and directors
were fair and in the best interests of XRG, such transactions may not
necessarily have been on the same terms as if negotiated from unaffiliated third
parties. However, management believes that these terms are no less favorable
than those that would have been available from unaffiliated third parties.
Although no other transactions are contemplated, it is XRG's policy that all
future transactions with our officers, directors or affiliates would be approved
by members of our board of directors not having an interest in the transaction,
and will be on terms no less favorable than could be obtained from unaffiliated
third parties.


ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.

(a) The following documents are filed as part of this report:

         (1)(2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

         Financial Statements filed as part of this Report are set forth in Item
         7 and are presented at page F-1 of this Report; which list is
         incorporated herein by reference. The Financial Statement Schedules and
         the Report of Independent Auditors as to Schedules follow the Exhibits.

         (3) EXHIBITS.

                                       29
<PAGE>

(b) Reports on Form 8-K

         A Form 8-K dated February 9, 2004 was filed during the fourth quarter
         of fiscal 2004. The Report listed Items 2 and 7.

         A Form 8-K dated August 22, 2003 was filed during the third quarter of
         fiscal 2004. The Report listed Items 5 and 9.

(c) Exhibits. See the Indexes to Exhibits below.


INDEX TO EXHBITS.
<TABLE>
<CAPTION>

                       EXHIBITS AND SEC REFERENCE NUMBERS

Number           Title of Document                                                                        Location
------           -----------------                                                                        --------
<S>             <C>                                                                                      <C>

3.1              Certificate of Incorporation of USA Polymers, Inc. (2)

3.2              Amendment to Certificate of Incorporation of USA Polymers, Inc. changing name to XRG,
                 Inc. (2)

3.3              Agreement and Plan of Merger of XRG, Inc. and XRG International, Inc. (2)

3.4              Certificate of Merger of XRG, Inc. and XRG International, Inc. - Delaware. (2)

3.5              Certificate of Merger of XRG, Inc. and XRG International, Inc. - New Jersey. (2)

3.6              Amendment to Certificate of Incorporation to Increase Authorized Shares of XRG, Inc.
                 (2)

3.7              Bylaws of XRG, Inc. (2)

3.8              Amendment to Certificate of Incorporation to Increase Authorized Shares of XRG, Inc.
                 dated July 7, 2003. (3)

3.9              Certificate of Designation, Preferences and Rights of Series A Preferred Stock of XRG,
                 Inc. (3)

10.1             Lease Agreement between Pittsburgh Properties, Ltd. and XRG, Inc. dated August 28,
                 2001. (2)

10.2             Administrative Services Agreement between XRG G&A, Inc. and KDK Transport, Inc. dated
                 February 1, 2002. (1)

10.3             Lease Agreement between Highwoods/Florida Holdings, L.P. and XRG, Inc. dated September
                 5, 2002. (3)

10.4             Asset Purchase Agreement between J. Bently Companies, Inc. and XRG, Inc. (3)

10.5             Fleet Owner Agreement between J. Bently Companies, Inc. and XRG, Inc. (3)

10.5.5           Asset Acquisition Agreement Addendum between J. Bently Companies, Inc. and XRG, Inc.
                 (4)

10.6             Employment Agreement between Neil Treitman and XRG, Inc. (3)

10.7             Stock Option Agreement between Michael T. Cronin and XRG, Inc. (3)

                                       30
<PAGE>

10.8             Stock Option Agreement between Neil Treitman and XRG, Inc. (3)

10.9             Employment Agreement between Kevin Brennan and XRG, Inc. (4)

10.10            Employment Agreement between Stephen Couture and XRG, Inc. (4)

10.11            Consultant Agreement between Donald G. Huggins, Jr. and XRG, Inc. (4)

31.1             Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                 Act of 2002.(5)

31.2             Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                 Act of 2002.(5)

32               Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002.(5)
</TABLE>

1.            Incorporated by reference to the Registrant's Form 10-KSB filed on
              July 10, 2002.

2.            Incorporated by reference to the Registrant's Registration
              Statement on Form 10-SB, File No. 0-49659, filed March 4, 2002.

3.            Incorporated by reference to the Registrant's Form 10-KSB filed on
              July 14, 2003.

4.            Incorporated by reference to the Registrant's Form 10-KSB filed on
              July 14, 2004.

5.            Filed herewith


Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The following table sets forth fees billed to us by our auditors during
the fiscal years ended March 31, 2004 and March 31, 2003 for: (i) services
rendered for the audit of our annual financial statements and the review of our
quarterly financial statements, (ii) services by our auditor that are reasonably
related to the performance of the audit or review of our financial statements
and that are not reported as Audit Fees, (iii) services rendered in connection
with tax compliance, tax advice and tax planning, and (iv) all other fees for
services rendered. "All other fees" includes fees related to (or paid for) in
the fiscal year ended March 31, 2004 and fees related to in fiscal year ended
March 31, 2003.


                                  March 31, 2004            March 31, 2003
                                  --------------            --------------

(i)      Audit Fees                   $49,630                  $25,815
(ii)     Audit Related Fees             3,740                       --
(iii)    Tax Fees                          --                       --
(iv)     All Other Fees                    --                       --



                                       31
<PAGE>

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                                              XRG, Inc.

Date:   March 31, 2005                               By:      /s/ Kevin Brennan
                                                              -----------------
                                                              Kevin Brennan
                                                              President & CEO

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

         SIGNATURE                                   TITLE             DATE
         ---------                                   -----             ----

/s/ Kevin Brennan            President and Chief Executive
--------------------------   Officer (Principal Executive         March 31, 2005
Kevin Brennan                Officer) and Director

/s/ Stephen Couture          Vice President, Finance, Chief       March 31, 2005
--------------------------   Financial Officer and Director
Stephen Couture


                                       32

                           XRG, Inc. and Subsidiaries

                        Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003











                                    Contents



Report of Independent Registered Public Accounting Firm......................F-1

Consolidated Financial Statements:

    Consolidated Balance Sheet...............................................F-2
    Consolidated Statements of Operations....................................F-3
    Consolidated Statements of Changes in Stockholders' Equity...............F-4
    Consolidated Statements of Cash Flows..............................F-5 - F-6
    Notes to Consolidated Financial Statements........................F-7 - F-13


<PAGE>


             Report of Independent Registered Public Accounting Firm




Board of Directors
XRG, Inc. and Subsidiaries
Clearwater, Florida


We have audited the accompanying consolidated balance sheet of XRG, Inc. and
Subsidiaries as of March 31, 2004 and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the years ended
March 31, 2004 and 2003. These consolidated financial statements are the
responsibility of the management of XRG, Inc. and Subsidiaries. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of XRG, Inc. and
Subsidiaries as of March 31, 2004 and the results of its operations and its cash
flows for the years ended March 31, 2004 and 2003 in conformity with United
States generally accepted accounting principles.




Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
June 23, 2004


                                      F-1
<PAGE>

<TABLE>
<CAPTION>

                                   XRG, Inc. and Subsidiaries
                                   Consolidated Balance Sheet
                                         March 31, 2004

<S>                                                                         <C>
Assets
Current assets:
   Accounts receivable, net of allowance of $83,000                          $         1,584,331
   Stock subscription receivable                                                       3,250,000
   Prepaid expenses                                                                       91,444
                                                                                -----------------
Total current assets                                                                   4,925,775

Fixed assets, net of accumulated depreciation                                            117,487

Other assets
   Deferred financing fees, net                                                           61,325
   Goodwill                                                                               21,603
   Transportation equipment deposits                                                     791,000
                                                                                -----------------
Total other assets                                                                       873,928
                                                                                -----------------

                                                                             $         5,917,190
                                                                                =================

Liabilities and Stockholders' Equity

Current liabilities:
   Bank overdraft                                                                         55,374
   Current portion of long-term debt                                                     362,500
   Accounts payable                                                                      576,683
   Accrued expenses                                                                      432,766
   Factorer line of credit                                                             1,303,688
   Related party advances and payables                                                   270,126
                                                                                -----------------
Total current liabilities                                                              3,001,137
                                                                                -----------------

Long-term liabilities:
   Convertible notes payable; net of unamortized discount
     of  $227,568                                                                        377,432
                                                                                -----------------
Total long-term liabilities                                                              377,432

                                                                                -----------------
Total liabilities                                                                      3,378,569
                                                                                -----------------

Stockholders' equity:
   Series A Preferred stock; $.001 par value; 5,000,000 shares authorized;
     5,000,000 shares issued and outstanding                                               5,000
   Preferred stock; $.001 par value; 45,000,000 shares authorized;
     0 shares issued and outstanding                                                           -
   Common stock; $.001 par value; 300,000,000 shares authorized;
     25,533,316 shares issued and 25,413,316 outstanding                                  25,533
   Common stock payable                                                                4,258,321
   Additional paid-in capital                                                         20,055,123
   Subscription receivable                                                                (5,000)
   Accumulated deficit for unrelated dormant operations                              (15,405,274)
   Accumulated deficit                                                                (5,742,595)
   Deferred stock compensation and consulting                                           (542,487)
   Treasury stock, at cost, 120,000 shares                                              (110,000)
                                                                                -----------------
Total stockholders' equity                                                             2,538,621
                                                                                -----------------

                                                                             $         5,917,190
                                                                                =================
</TABLE>


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

                                      F-2
<PAGE>

                           XRG, Inc. and Subsidiaries
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                                                         Years Ended March 31,
                                                                                ----------------------------------------
                                                                                      2004                   2003
                                                                                -----------------      -----------------

<S>                                                                          <C>                    <C>
Revenues
      Trucking revenue                                                        $        4,682,277     $          686,030
                                                                                -----------------      -----------------

Cost of revenues                                                                       3,283,415                789,924
                                                                                -----------------      -----------------

Gross profit (loss)                                                                    1,398,862               (103,894)

Expenses
      Selling, general and administrative expenses                                     3,838,338                584,661
      Bad debt expense                                                                 1,049,642                      -
                                                                                -----------------      -----------------
                                                                                       4,887,980                584,661

                                                                                -----------------      -----------------
Loss from operations                                                                  (3,489,118)              (688,555)

Interest expense                                                                        (183,836)              (105,464)
Intrinsic value of convertible debt and debt discount for
 value of detachable warrants                                                           (777,259)               (35,809)
                                                                                -----------------      -----------------

Net loss applicable to common shareholders                                    $       (4,450,213)    $         (829,828)
                                                                                =================      =================

Basic loss per common share                                                   $            (0.25)    $            (0.09)
                                                                                =================      =================

Basic weighted average number of
      common shares outstanding                                                       18,103,520              9,312,297
                                                                                =================      =================

</TABLE>


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

                                      F-3
<PAGE>


                            XRG, Inc. and Subsidiaries
           Consolidated Statements of Changes in Stockholders' Equity

                        For the year ended March 31, 2004

<TABLE>
<CAPTION>

                                                              Common Stock
                                                          -------------------                 Common        Stock
                                                           Number of             Treasury     Stock     Subscription
                                                            Shares     Amount     Stock       Payable     Receivable
                                                          ----------  ---------------------  ----------  ----------

<S>                                                      <C>       <C>      <C>           <C>          <C>
Balance, March 31, 2002                                   9,262,912 $  9,263 $           - $         -  $        -

Stock issued for services at $.001                        1,386,864    1,387

Stock to be issued for interest                                                                 57,649

Issuance of warrants with convertible debt

Beneficial conversion feature of convertible debt

Net loss for the year
                                                          ----------  -------  ------------  ----------  ----------

Balance, March 31, 2003                                   10,649,776  10,650             -      57,649           -

XRG, Inc. preferred stock issued                                                                            (5,000)

Stock Subsciption                                                                            3,250,000

XRG, Inc. stock issued for interest                         243,570      244                   (57,649)

XRG, Inc. stock issued for warrant exchange               4,732,000    4,732

XRG, Inc. stock issued for warrants exercised               234,272      234

XRG, Inc. stock issued for options exercised                550,000      550

Beneficial conversion  feature of convertible debt

Discount on debt for value of warrants issued to debtholders

Value of warrants issued for services

Value of warrants issued for deferred financing fee

XRG, Inc. stock issued for cash                           1,845,000    1,845

XRG, Inc. stock to be issued for cash                                                          230,000

XRG, Inc. stock issued for note conversion                1,386,000    1,386

XRG, Inc. stock issued for deposit on transportation
 equipment                                                1,150,000    1,150                   304,000

XRG, Inc. stock issued for acquisition                      200,000      200                    19,000

XRG, Inc. stock issued for services and software          4,542,698    4,542

XRG, Inc. stock to be issued for services                                                      455,000

XRG, Inc. stock to be issued to certain shareholders                                               321

Treasury stock acquired                                                           (110,000)

Amortization of deferred consulting and compensation

Net loss for period

                                                         ----------- --------  ------------  ----------  ----------
Balance at March 31, 2004                                25,533,316  $25,533    $ (110,000) $4,258,321   $  (5,000)
                                                         =========== ========  ============  ==========  ==========
</TABLE>

<TABLE>
<CAPTION>


                                            Accumulated
       Preferred Stock                      Deficit for
   ------------------------  Additional      Unrelated                        Deferred
    Number of                 Paid-in        Dormant       Accumulated    Stock Consulting
     Shares       Amount      Capital       Operations       Deficit      and Compensation       Total
   -----------  ----------- ------------  --------------- -------------- -------------------------------

<S>            <C>          <C>          <C>              <C>            <C>            <C>
 $          -  $         -  $15,402,648  $   (15,405,274) $    (462,554) $           -  $      (455,917)

                                                                                                  1,387

                                                                                                 57,649

                                 20,209                                                          20,209

                                229,791                                                         229,791

                                                               (829,828)                       (829,828)
   -----------  ----------- ------------  --------------- -------------- -------------- ----------------

            -            -   15,652,648      (15,405,274)    (1,292,382)             -         (976,709)

    5,000,000        5,000                                                                            -

                                                                                              3,250,000

                                 57,405                                                               -

                                 (4,732)                                                              -

                                 44,766                                                          45,000

                                                                                                    550

                                507,780                                                         507,780

                                283,404                                                         283,404

                                111,743                                                         111,743

                                 35,900                                                          35,900

                                459,405                                                         461,250

                                                                                                230,000

                                691,614                                                         693,000

                                435,850                                                         741,000

                                137,800                                                         157,000

                              1,641,861                                       (297,500)       1,348,903


                                                                              (320,000)         135,000

                                   (321)                                                              -

                                                                                               (110,000)

                                                                                75,013           75,013

                                                             (4,450,213)                     (4,450,213)

   -----------  ----------- ------------  --------------- -------------- -------------- ----------------
    5,000,000 $      5,000  $20,055,123     $(15,405,274)   $(5,742,595)     $(542,487)      $2,538,621
   ===========  =========== ============  =============== ============== ============== ================

</TABLE>

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

                                      F-4
<PAGE>


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



                                                                                         Years Ended March 31,
                                                                                   -----------------------------------
                                                                                         2004               2003
                                                                                   -----------------   ---------------

<S>                                                                           <C>                   <C>
Operating activities
        Net loss                                                               $         (4,450,213) $       (829,828)
                                                                                   -----------------   ---------------

        Adjustments to reconcile net loss to net cash used by operating
          activities:
             Depreciation and amortization                                                   17,915             8,240
             Bad debt                                                                     1,049,642                 -
             Common stock and warrants issued for services and compensation               1,422,646             1,387
             Common stock to be issued for services and compensation                        135,000                 -
             Stock issued in lieu of interest                                                     -            57,649
             Amortization of discount and intrinsic value of convertible notes              777,259            36,357
             Amortization of deferred financing fees                                          8,475                 -
             Amortization of deferred stock compensation and consulting                      75,013                 -
             (Increase) decrease, net of effect of acquisition:
               Accounts receivable                                                       (1,193,213)           15,693
               Prepaid expenses                                                             (49,248)                -
             Increase (decrease), net of effect of acquisition:
               Accounts payable                                                             519,962            (9,515)
               Accrued expenses                                                             345,341             1,048
               Related party payables                                                       175,000                 -
                                                                                   -----------------   ---------------
          Total adjustments                                                               3,283,792           110,859
                                                                                   -----------------   ---------------

                                                                                   -----------------   ---------------
          Net cash used by operating activities                                          (1,166,421)         (718,969)
                                                                                   -----------------   ---------------

Investing activities
        Advances to J. Bently Companies, Inc.                                              (994,794)                -
        Purchase of equipment                                                               (29,055)          (37,647)
        Deposit on purchase of transportation equipment                                     (50,000)                -
                                                                                   -----------------   ---------------
        Net cash used by investing activities                                            (1,073,849)          (37,647)
                                                                                   -----------------   ---------------

Financing activities
        Bank overdraft                                                                      114,155                 -
        Factoring line of credit                                                            935,652                 -
        Net borrowings on related party advances                                             63,500                 -
        Proceeds from common stock issued and options exercised                             506,800                 -
        Proceeds from common stock to be issued                                             230,000                 -
        Proceeds from issuance of notes payable                                             565,000           493,000
        Principal payments on notes payable                                                 (47,500)          (35,000)
        Loan costs                                                                          (33,900)                -
        Payment for treasury stock                                                         (110,000)                -
                                                                                   -----------------   ---------------
        Net cash provided by financing activities                                         2,223,707           458,000
                                                                                   -----------------   ---------------

        Net decrease in cash                                                                (16,563)         (298,616)

        Cash at beginning of period                                                          16,563           315,179
                                                                                   -----------------   ---------------

        Cash at end of period                                                   $                 -  $         16,563
                                                                                   =================   ===============
</TABLE>


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

                                      F-5
<PAGE>


                           XRG, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

                                                     Years Ended March 31,
                                                    2004             2003
                                                ------------      ------------
Supplemental disclosures of cash flow
    information and noncash investing
    and financing activities:

        Cash paid during the year for interest $     91,645      $     63,178
                                                ============      ============

       During the years ended March 31, 2004 and 2003, the Company recorded a
       discount on convertible notes payable of $791,184 and $250,000,
       respectively, which related to the beneficial conversion feature of the
       notes payable and the warrants issued with these notes. The discount is
       being amortized over the life of the related notes.

       During the year ended March 31, 2004, certain noteholders converted
       $693,000 in notes payable into 1,386,000 shares of common stock that was
       issued during the year. The holders of the notes have surrendered the
       outstanding notes solely for common stock of the Company.

       During the year ended March 31, 2004, 4,732,000 shares of the Company's
       common stock were issued in exchange for warrants. These warrants were
       exchanged for a like number of shares of common stock on a one for one
       basis for no additional consideration.

       During the year ended March 31, 2004, the Company issued 1,150,000 shares
       of common stock recorded at $1,150,000 for deposits on transportation
       equipment purchased from J. Bently Companies, Inc. During April 2004, the
       Company modified the agreement with J. Bently Companies, Inc. to issue
       800,000 shares of additional common stock and eliminate the true up
       provision in the agreement. Therefore the deposit on the transportation
       equipment was repriced based upon the terms of this revised agreement and
       the common stock shares were recorded at $437,000 which is a reduction of
       $713,000. The Company recorded a common stock payable of $304,000 for the
       800,000 additional shares of common stock to be issued for additional
       consideration for the transportation equipment purchased from J. Bently
       Companies, Inc.

       During the year ended March 31, 2004, the Company issued 200,000 shares
       valued at $200,000 for a deposit on the acquisition of R&R Express
       Intermodal, Inc. In December 2003, the Company modified the Stock
       Purchase Agreement with R&R Express Intermodal, Inc. to purchase 100,000
       of these shares for $100,000 which is reflected as treasury stock at
       cost. During April 2004, the Company modified the Stock Purchase
       Agreement with R&R Express Intermodal, Inc. to issue 50,000 shares of
       additional common stock and eliminate the true up provision in the
       agreement. Therefore the purchase price of R&R Express Intermodal, Inc/
       was repriced based upon the terms of this revised agreement and the
       100,000 shares of common stock were recorded at $138,000 which is a
       reduction of $62,000. The Company recorded a common stock payable of
       $19,000 for 50,000 additional shares of common stock to be issued for
       additional consideration for the purchase of R&R Express Intermodal, Inc.

                                      F-6
<PAGE>

       During the year ended March 31, 2004, the Company purchased software
       related to the trucking industry by issuing 100,000 shares of common
       stock valued at $38,000.

        During the years ended March 31, 2004 and 2003, the Company financed the
        purchase of computer equipment in the amount of $8,461 and $20,017,
        respectively.

        During the year ended March 31, 2004, the Company granted warrants to
        purchase approximately 133,333 shares of its common stock to the
        placement agent of the private placement. These warrants were valued at
        $35,900 and were recorded as deferred financing fees and will be
        amortized over the term of the related notes payable.

        The Company recorded a stock payable for 321,000 shares of common stock
        as additional shares to certain existing shareholders.

        The Company executed a Stock Purchase Agreement with Barron Partners, LP
        (the "Investor") on March 31, 2004. During April, under the terms of
        this Agreement, the Company issued the Investor 108,333,333 shares of
        its Common Stock for an aggregate purchase price $3,250,000. At March
        31, 2004, the $3,250,000 is recorded as Common Stock Payable and as a
        Stock subscription receivable which was received into escrow on April 1
        2004 and distributed to XRG on April 2, 2004 through April 30, 2004.

        During the year ended March 31, 2004, the Company issued 1,725,000
        shares of common stock in exchange for consulting services valued at
        $617,500, of which $542,487 is recorded as deferred compensation since
        the services have yet to be provided.


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

                                      F-7
<PAGE>

                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003


1.      Background Information

XRG, Inc. (the "Company") was incorporated in the state of Delaware in November
2000. The Company acquires and operates both asset and non-asset based
truck-load carriers, and markets sophisticated logistical expertise to freight
shippers in the contiguous 48 states. The corporate headquarters are located in
Tampa, Florida. Prior to the quarter ended September 30, 2003, the Company
devoted substantially all of its efforts to establishing its freight
transportation business and, therefore, was in the development stage since 1999.
During the quarter ended September 30, 2003, the Company's planned principal
operations commenced and significant revenues were realized which allowed the
Company to emerge from its development stage status.

XRG International, Inc, a non-reporting, non-trading public company, was
originally incorporated in the state of New Jersey in December 1976. This
company operated several unrelated business ventures until its operations became
dormant. During 1999 a change in control of the XRG International Inc. took
place, and on May 1, 1999, XRG International, Inc. was reactivated to develop
plans to pursue consolidation opportunities within several industries including
the freight transportation industry. On December 28, 2001, XRG, Inc. merged with
XRG International, Inc. and the Company changed its name to XRG, Inc. The merger
has been accounted for at historical cost since both entities were under common
control.

2.      Significant Accounting Policies

The significant accounting policies followed are:

        Principles of Consolidation
        ---------------------------
        The consolidated financial statements include the accounts of XRG, Inc.
        and its wholly owned subsidiaries, XRG G&A, Inc, XRG Logistics and R&R
        Express Intermodal, Inc. All significant intercompany accounts and
        transactions have been eliminated.

        Use of Estimates
        ----------------
        The preparation of consolidated financial statements in conformity with
        accounting principles generally accepted in the United States of America
        requires management to make estimates and assumptions that affect the
        reported amounts of assets and liabilities and disclosure of contingent
        assets and liabilities at the date of the consolidated financial
        statements and the reported amounts of revenues and expenses during the
        reporting period. Actual results could differ from those estimates.

        Concentration of Credit Risks
        -----------------------------
        Financial instruments, which potentially subject the Company to
        concentrations of credit risk, are cash and cash equivalents and
        accounts receivable.

        The Company sells services and extends credit based on an evaluation of
        the customer's financial condition and ability to pay the Company in
        accordance with the payment terms without requiring collateral. The
        Company provides for estimated losses on accounts receivable considering
        a number of factors, including the overall aging of accounts


                                      F-8
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003

        receivables, customers payment history and the customer's current
        ability to pay its obligations. Exposure to losses on receivables is
        principally dependent on each customer's financial condition. The
        Company monitors its exposure for credit losses and maintains allowances
        for anticipated losses. Based upon management's review of accounts
        receivable the allowance for doubtful accounts of $83,000 is considered
        adequate. The Company does not accrue interest on past due receivables.

        Concentration of credit risk with respect to trade receivables is
        limited due to the Company's large number of customers and wide range of
        industries and locations served. Two customers individually comprised
        more than 10% of the Company's accounts receivable balance at March 31,
        2004. One customer's balance represented 13.3% and the other 15.2% of
        total accounts receivable at March 31, 2004.

        One customer represented 10.3% of the Company's total revenue at March
        31, 2004 and no customer represented more than ten percent of the
        Company's revenues for the year ending March 31, 2003.

        Cash is maintained with multiple financial institutions in the United
        States. Deposits with a bank may exceed the amounts of insurance
        provided on such deposits. Generally, the deposits may be redeemed on
        demand and, therefore, bear minimal risk.

        Revenue Recognition
        -------------------
        Operating revenues for the Company are recognized on the date the
        freight is delivered or the services are performed. Related costs of
        delivery of shipments in transit or services in progress are accrued as
        incurred and expensed when the revenue is recognized.

        Estimated Fair Value of Financial Instruments
        ---------------------------------------------
        The Company's financial instruments include cash, receivables, current
        assets, current liabilities including current notes payable. Management
        believes the estimated fair value of these financial instruments at
        March 31, 2004 approximate their carrying value as reflected in the
        consolidated balance sheets due to the short-term nature of these
        instruments. It is not practicable for the Company to estimate the fair
        value of our long-term convertible notes payable as there are not
        currently any quoted market prices available.

        Fixed Assets
        ------------
        Equipment is recorded at cost. Depreciation is calculated by the
        straight-line method over the estimated useful lives of the assets,
        generally three to seven years. Additions to and major improvements of
        equipment are capitalized. Maintenance and repairs are charged to
        expense as incurred. As equipment is sold or retired, the applicable
        cost and accumulated depreciation are eliminated from the accounts and
        any gain or loss is recorded.

        Long Lived Assets
        -----------------
        Management periodically reviews the Company's long-lived assets for
        indications of impairment whenever circumstances and situations change
        such that there is an indication that the carrying amounts may not be


                                      F-9
<PAGE>

                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003

        recoverable. If the non-discounted future cash flows of the long-lived
        assets are less than their carrying amount, their carrying amounts are
        reduced to fair value and an impairment loss is recognized. Management
        does not believe there is any impairment of long lived assets at March
        31, 2004.

        Goodwill
        --------
        Goodwill consists of the excess of cost over the fair value of net
        assets acquired in business combinations.

        The Company follows the provision of Statement of Financial Accounting
        Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets. SFAS
        No. 142 requires an annual impairment test for goodwill and intangible
        assets with indefinite lives. Under the provisions of SFAS No. 142, the
        first step of the impairment test requires that the Company determine
        the fair value of each reporting unit, and compare the fair value to the
        reporting unit's carrying amount. To the extent a reporting unit's
        carrying amount exceed its fair value, an indication exists that the
        reporting unit's goodwill may be impaired and the Company must perform a
        second more detailed impairment assessment. The second impairment
        assessment involves allocating the reporting unit's fair value to all of
        its recognized and unrecognized assets and liabilities in order to
        determine the implied fair value of the reporting unit's goodwill as of
        the assessment date. The implied fair value of the reporting unit's
        goodwill is then compared to the carrying amount of goodwill to quantify
        an impairment charge as of the assessment date. Management does not
        believe there is any impairment of goodwill at March 31, 2004.

        Factoring Arrangement
        ---------------------
        The Company has entered into agreements with a factoring company to
        provide for the borrowing against eligible receivables of up to ninety
        percent of the face value of qualified receivables. The Company
        maintains any advances under these agreements as an obligation due under
        factoring arrangement and any receivables, net of allowances for losses,
        as assets pursuant to SFAS No. 140 "Accounting for Transfers and
        Servicing of Financial Assets and Extinguishment of Liabilities," as
        such amounts are sold with recourse and therefore are reported in
        accordance with the provisions of applicable rules and guidelines.

        Income Taxes
        ------------
        Deferred income tax assets and liabilities are recognized for the
        estimated future tax consequences attributable to differences between
        the consolidated financial statements carrying amounts of existing
        assets and liabilities and their respective income tax basis. Deferred
        tax assets and liabilities are measured using enacted tax rates expected
        to apply to taxable income in the years in which those temporary
        differences are expected to be recovered or settled. The effect on
        deferred tax assets and liabilities of a change in tax rates is
        recognized as income or expense in the period that included the
        enactment date.

                                      F-10
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003

        Valuation allowances have been established against the Company's
        deferred tax assets due to uncertainties in the Company's ability to
        generate sufficient taxable income in future periods to make realization
        of such assets more likely than not. The Company has not recognized an
        income tax benefit for our operating losses generated during 2004 and
        2003 based on uncertainties concerning the Company's ability to generate
        taxable income in future periods. There was no income tax receivable at
        March 31, 2004 and 2003. In future periods, tax benefits and related
        deferred tax assets will be recognized when management considers
        realization of such amounts to be more likely than not.

        Stock-Based Transactions
        ------------------------
        The Company issues stock in lieu of cash for certain transactions.
        Generally, the fair value of the stock, based upon the quote fair market
        value is used to value the transactions.

        Loss Per Share
        --------------
        Loss per share is based on the weighted average number of common shares
        outstanding. All loss per share amounts in the consolidated financial
        statements are basic loss per share, as defined by SFAS No. 128,
        "Earnings Per Share." Potential securities were not considered in the
        calculation since their effect would be anti-dilutive.

        Beneficial Feature of Convertible Debt
        --------------------------------------
        The Company records the intrinsic value of the beneficial feature of
        convertible debentures as additional paid in capital and amortizes the
        interest over the life of the debentures.

        Options and Warrants
        --------------------
        Financial Accounting Standards Board Statement No. 123, "Accounting for
        Stock-Based Compensation" (FASB No. 123), provides that expense equal to
        the fair value of all stock-based awards on the date of the grant be
        recognized over the vesting period. Alternatively, for stock-based
        awards issued to employees, this statement allows entities to continue
        to apply the provisions of Accounting Principles Board Opinion No. 25,
        "Accounting for Stock Issued to Employees" (APB Opinion No. 25), whereby
        compensation expense is recorded on the date the options are granted to
        employees equal to the excess of the market price of the underlying
        stock over the exercise price. The Company has elected to continue to
        apply the provisions of APB Opinion No. 25 for stock-based awards issued
        to employees. Had the Company applied the fair value recognition
        provisions of FASB No. 123 to stock-based awards issued to employees it
        would not have a material effect on the financial statements.

        During the years ended March 31, 2004 and 2003, the Company recognized
        $283,404 and $20,209 as a discount on notes payable for warrants issued
        with convertible debt. The Company also issued stock options for the
        year ended March 31, 2003, however the fair value was not material to
        the financial statements and no expense was recorded. There was no
        options granted during the year ended March 31, 2004.

                                      F-11
<PAGE>

                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003

       Recently Issued Pronouncements
       ------------------------------
       In December 2002, the Financial Accounting Standards Board (FASB) issued
       SFAS 148, "Accounting for Stock-Based Compensation-Transition and
       Disclosure". This Statement amends FASB Statement No. 123, "Accounting
       for Stock-Based Compensation", to provide alternative methods of
       transition for a voluntary change to the fair value based method of
       accounting for stock-based employee compensation. In addition, this
       Statement amends the disclosure requirements of Statement 123 to require
       prominent disclosures in both annual and interim financial statements
       about the method of accounting for stock-based employee compensation and
       the effect of the method used on reported results. The Company adopted
       SFAS 148 on April 1, 2003.

       In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
       Variable Interest Entities, an Interpretation of Accounting Research
       Bulletin No. 51" (the "Interpretation"). The Interpretation requires the
       consolidation of variable interest entities in which an enterprise
       absorbs a majority of the entity's expected losses, receives a majority
       of the entity's expected residual returns, or both, as a result of
       ownership, contractual, or other financial interests in the entity.
       Currently, entities are generally consolidated by an enterprise that has
       controlling financial interest through ownership of a majority voting
       interest in the entity. The Interpretation was originally immediately
       effective for variable interest entities created after January 31, 2003,
       and effective in the fourth quarter of the Company's fiscal 2003 for
       those created prior to February 1, 2003. However, in October 2003, the
       FASB deferred the effective date for those variable interest entities
       created prior to February 1, 2003, until the Company's first quarter of
       fiscal 2004. The Company has substantially completed the process of
       evaluating this interpretation and believes its adoption will not have a
       material impact on its consolidated financial statements.

       In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
       Financial Instruments with Characteristics of both Liabilities and
       Equity". This statement establishes standards for how an issuer
       classifies and measures in its statement of financial position certain
       financial instruments with characteristics of both liabilities and
       equity. In accordance with the standard, a financial instrument that
       embodies an obligation for the issuer is required to be classified as a
       liability (or an asset in some circumstances). SFAS No. 150 is effective
       for financial instruments entered into or modified after May 31, 2003,
       and otherwise is effective at the beginning of the first interim period
       beginning after June 15, 2003. The adoption of SFAS No. 150 did not have
       any impact on the Company's financial statements.

3.      Fixed assets

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

     Office equipment                              78,682
     Software                                      65,750
                                            ----------------
                                                  144,432
                                            ----------------
     Accumulated depreciation                     (26,945)
                                            ================
     Total Fixed assets, net              $       117,487
                                            ================

Depreciation totaled $17,915 and $4,605 for the years ended March 31, 2004 and
2003, respectively.

                                      F-12
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003


4.      Goodwill

The Company recorded goodwill of $21,603 related to its acquisition of R&R
Express Intermodal, Inc. during the year ended March 31, 2004 (See Note 13).

5.      Obligations Due Under Factoring Arrangement

The Company factors a significant portion of its accounts receivable. During the
year ended March 31, 2004, the Company utilized the services of a couple
factoring companies. Accounts receivable are factored to companies with full
recourse for unpaid invoices in excess of 75 days old. The most recent agreement
provides for the payment of factoring fees. As of March 31, 2004, the Company
had $1,303,688 due under its factoring arrangements.

6.      Notes Payable and Long-Term Debt

Notes payable and long-term debt consists of the following at March 31, 2004:

<TABLE>
<CAPTION>


<S>                                                                                  <C>
Notes  payable;  interest  ranging from 12.0% to 15.0%;  interest  only payments
payable  quarterly;  principal  due at various  dates  between  October 2003 and
November  2004;  unsecured;  certain  notes are in  default  at March 31,  2004,
subsequent  to the year  ended  March 31,  2004,  $15,000  of these  notes  were
converted  into 75,000  shares of common  stock during April 2004 and $57,500 of
these notes were paid in cash.                                                            $102,500

Convertible  notes  payable;  interest  12.0%;  interest only  payments  payable
quarterly;  principal due at various dates between  December 2004 and July 2005;
at maturity,  the note holder will be paid the remaining  unpaid principal at an
150% redemption premium plus accrued interest;  one year from the closing of the
Company's  first  trucking  acquisition,  the note holder can convert the unpaid
principal and accrued interest at a conversion price equal to 50% of the average
closing bid price of the Company's Common Stock;  unsecured;  subsequent to year
ended March 31,  2004,  $485,000 of these notes were  converted  into  2,375,000
shares of the Company's common stock.                                                      495,000

Convertible  unsecured  notes  payable;  interest  15%;  the  first 6 months  of
interest was put into escrow;  principal and remaining  interest is due December
31, 2004;  these notes may be converted  into the  Company's  common stock based
upon a $0.15 price per share;  these debt  holders have the right to require the
Company to  purchase  all or any portion of the notes for cash at each month end
beginning six months from  issuance;  Company is obligated to utilize 80% of the
cash  proceeds  from  future  issuances  of certain  equity or debt  securities,
exercise of warrants or options to repay the principal  and accrued  interest on
these notes prior to their maturity.                                                       270,000

Convertible note payable; interest 10%, interest only payments payable annually;
principal due on November 11, 2005,  collateral is senior position in the assets
of XRG,  Inc.  This note is  convertible  into the  Company's  common stock at a
conversion price of $0.42 per share.                                                       100,000
</TABLE>

                                      F-13
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003
<TABLE>
<CAPTION>

<S>                                                                                 <C>
                                                                                       ----------------
                                                                                           967,500
Less unamortized discount                                                                 (227,568)
                                                                                       ----------------
Total notes and notes payable                                                      $       739,932
Less current portion                                                                      (362,500)
                                                                                       ----------------
Long-term portion of notes and notes payable                                               377,432
                                                                                       ================
</TABLE>

The following is a schedule by year of the principal payments required on these
notes payable and long-term debt as of March 31, 2004:

<TABLE>
<CAPTION>

<S>                                                                                               <C>
            2005 ($340,000 of these notes are classified as long term as these notes were                  697,500
                    converted to common stock during April 2004)
            2006                                                                                           270,000
                                                                                                    ----------------
            Total note and notes payable                                                                   967,500
            Less unamortized discount                                                                     (227,568)
                                                                                                    ----------------
            Total notes and notes payable                                                          $       739,932
                                                                                                    ================
</TABLE>

During the year ended March 31, 2004, the Company issued $170,000 of convertible
notes payable. In connection with these notes, the Company issued detachable
warrants to purchase 340,000 shares of the Company's restricted common stock at
an exercise price of $0.001 per share.

During the year ended March 31, 2004, the Company issued a $100,000 convertible
note to one individual with a conversion price of $.42 per share. In connection
with this note, the Company issued detachable warrants to purchase 100,000
shares of the Company's restricted common stock at an exercise price of $.42 per
share.

During the year ended March 31, 2004, the Company issued $270,000 of convertible
notes payable. In connection with these notes, the Company issued three-year
detachable warrants to purchase approximately 1,800,000 shares of the company's
restricted common stock at an exercise price of $0.15 per share. The Company
recorded deferred financing costs of $69,800 related to these notes of which
$35,900 was the value of warrants issued to the placement agent. These deferred
financing costs will be amortized over the term of the notes payable.

During the year ended March 31, 2004, the Company recorded a discount on
convertible notes payable for $507,780 which related to the beneficial
conversion feature of notes payable. The value of the detachable warrants
granted in conjunction with the notes payable issued during the fiscal year 2004
was $283,404 based on the Company's calculation under the Black-Scholes option
pricing model and was allocated to the note proceeds as a part of the discount
on notes payable. These discounts are being amortized over the life of the
related notes.

During the year ended March 31, 2004, certain note holders converted $693,000 in
notes payable into 1,386,000 shares of common stock that was issued during the
year. The holders of the notes have surrendered the outstanding notes solely for
common stock of the Company. The Company recognized the beneficial conversion
feature of these notes which totaled $337,200 as interest expense at the time
the notes were converted.

                                      F-14
<PAGE>

                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003


7.      Lease Commitments

All of the Company's operating leases are less than one year. The Company rents
equipment and facilities under operating leases with lease terms of less than
one year.

Rent expense amounted to $754,707 and $25,642 for the years ended March 31, 2004
and 2003, respectively.

8.      Related Party Transactions

The Company has related party advances and payables to stockholders in the
amount of $270,126 as of March 31, 2004 for certain advances given to the
Company and for consulting services rendered during the year ended March 31,
2004. These advances and payables are due on demand, unsecured, and non-interest
bearing.

The Company's President and Chief Executive Officer was issued 250,000 shares of
the Company's Common Stock valued at $48,750 for past services rendered during
the year ended March 31, 2004.

The Company's Chairman of the Board of Directors was issued 250,000 shares of
the Company's Common Stock valued at $48,750 for past services rendered during
the year ended March 31, 2004.

The Company's Chief Operating Officer was issued 550,000 shares of the Company's
Common Stock valued at $550 for past services rendered during the year ended
March 31, 2003. In addition, this individual was granted stock options to
purchase 450,000 shares of the Company's Common stock as a performance bonus.
These options were exercised during the year ended March 31, 2004 at an exercise
price of $0.001. The Company has entered into an employment agreement with this
officer.

The Company's Chief Financial Officer was issued 250,000 shares of the Company's
Common Stock valued at $250 for services rendered during the year ended March
31, 2003. During March 2004, the Company issued 250,000 shares of its Common
Stock valued at $48,750 for services rendered during the year.

In March 2003, the Company issued 100,000 shares of its Common Stock valued at
$100 to an individual who is a partner in the law firm which serves as our
corporate and securities counsel. In addition, this individual was granted stock
options to purchase 100,000 shares of the Company's Common Stock. These options
were exercised during the year ended March 31, 2004 at an exercise price of
$0.001. This stock and options were for partial consideration for legal services
rendered during the year ended March 31, 2003. During the year ended March 31,
2004, the Company issued 300,000 shares of its Common Stock valued at $78,000
for services performed during the year.

In January 2003, the Company issued 301,864 shares of its Common Stock valued at
$302 to the wife of the former President and Chief Executive Officer of XRG
International, Inc. These shares were in full satisfaction relating to
consulting services provided prior to January 1, 2003.

                                      F-15
<PAGE>

                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003

The Company's President and CEO, Chairman of the Board, and Vice President,
Finance and CFO are the holders of an aggregate of 5,000,000 shares of Series A
Voting Preferred Stock issued in July 2003. Each of these officers acquired
1,666,666 shares of Series A Voting Preferred Stock for the aggregate par value
of $5,000. The Voting Preferred Stock has ten votes per share on all matters
submitted to a vote of other holders of Common Stock. Besides preferential
voting rights, the Voting Preferred Stock has no dividend rights, redemption
provisions, sinking fund provisions or conversion, or preemptive or exchange
rights. The Voting Preferred Stock is not subject to further calls or
assessments by the Company.

The terms of the above may not necessarily have been on the same terms as if
negotiated from unaffiliated third parties.

9.      Income Taxes

The Company has net operating loss carryforwards of approximately $5,990,000 at
March 31, 2004 that expire from 2004 to 2024. Annual utilization of the
Company's net operating loss carryforwards will be limited due to a change in
ownership control of the Company's common stock, which took place in 1999. Under
federal tax law, this change of ownership of the Company will significantly
restrict future utilization of the net operating loss carryforwards.

A valuation allowance is required by FASB No. 109 if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax asset will not be realized. The need for the valuation allowance is
evaluated periodically by management. Based on available evidence, management
concluded that a valuation allowance of 100 percent for March 31, 2004 was
necessary.

At March 31, 2004 our non-current net deferred income tax assets (assuming an
effective income tax rate of approximately 38%) consisted of the following:

<TABLE>
<CAPTION>

<S>                                                                                <C>
Non-current deferred income tax asset:
                                                                                             Amounts
                                                                                        ------------------
Deferred income tax asset:
   Net operating loss carry forwards                                                 $         2,276,000
   Allowance for doubtful accounts                                                                69,000
                                                                                        ------------------
   Total deferred income tax asset                                                             2,345,000

Deferred income tax liability:
   Difference between book and tax for fixed assets                                               (7,000)
                                                                                        ------------------
   Total deferred income tax liability                                                            (7,000)
                                                                                        ------------------

                                                                                        ------------------
Less valuation allowance                                                                      (2,338,000)
                                                                                        ------------------
Net deferred income tax asset                                                        $                 -
                                                                                        ==================
</TABLE>

Differences between the federal benefit computed at a statutory rate and our
effective tax rate and provision are as follows as of March 31, 2004 and 2003:

                                      F-16
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003
<TABLE>
<CAPTION>


<S>                                                                                  <C>                    <C>
                                                                                               2004                  2003
                                                                                        ---------------       ----------------
              Statutory benefit                                                    $        (1,513,072)              (281,000)
              State tax benefit, net of federal effect                                        (178,000)               (33,000)
              Increase in deferred income tax valuation allowance                            1,314,300                300,000
              Non-deductible expenses                                                          295,000                 14,000
              Loss of net operating loss carryforward                                           81,700
                                                                                       -----------------      -----------------
                                                                                   $                 -                      -
                                                                                       =================      =================
</TABLE>

10.     Stock Options and Warrants

The Company grants warrants and options to purchase shares of its common stock
to various employees and other individuals based on the discretion of the
Company's Board of Directors.

On January 9, 2004, the Company filed a form S-8 to register 3,000,000 shares of
common stock to be issued in conjunction with the Company's 2004 Non-Qualified
Stock Option Plan. This Plan was established for non-employee directors,
consultants and advisors to provide them nonstatutory stock options.

During the year ended March 31, 2004 and 2003, the Company issued warrants to
purchase 2,390,000 and 1,555,770 shares, respectively of its common stock to
note holders who lent monies to the Company. During the year ended March 31,
2004, the Company granted warrants to purchase 659,091 shares of its common
stock to a consultant for services performed through March 31, 2004. These
services were valued at $111,743 and were recorded as consulting expense during
the year ended March 31, 2004. During the year ended March 31, 2004, the Company
granted warrants to purchase approximately 133,333 shares of its common stock to
a placement agent as part of their fee for raising the $270,000 of notes
payable. These warrants were valued at $35,900.

During the year ended March 31, 2004, 4,732,000 shares of the Company's common
stock were issued in exchange for warrants. These warrants were exchanged for a
like number of shares of common stock on a one for one basis for no additional
consideration.

During the year ended March 31, 2004, 234,272 shares of the Company's common
stock were issued for warrants that were exercised. These warrants were
exercised at an average exercise price of $0.19.

During the year ended March 31, 2004, 550,000 shares of the Company's common
stock were issued for options that were exercised. These warrants were exercised
at an exercise price of $0.001.

The fair value of each option and warrant granted is estimated on the grant date
using the Black-Scholes option pricing model. The following assumptions were
made in estimating fair value for the years ended March 31, 2004 and 2003:

                                      F-17
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003


                                           2004                       2003
                                           ----                       ----
        Dividend yield                          0%                        0%
        Risk-free interest rate      0.87% - 2.91%             1.57% - 2.99%
        Expected life                .25 - 5 years                 1-2 years
        Expected volatility                   257%                        0%

Following is a summary of the status of common stock option and warrant activity
for the years ending March 31, 2003 and 2004:

<TABLE>
<CAPTION>

                                                                           Warrants
                                                             --------------------------------------
                                                                                      Weighted
                                                                Number of             Average
                                                                 Warrants          Exercise Price
                                                             -----------------    -----------------
<S>                                                         <C>                 <C>
Outstanding, March 31, 2002                                         3,291,000           $   0.0002
Granted                                                             1,555,770               0.0376
Cancelled                                                           (361,200)              (0.0002)
                                                             -----------------    -----------------
Outstanding, March 31, 2003                                         4,485,570               0.0134

Granted                                                             3,182,424               0.1704
Exercised/Exchanged                                               (4,966,272)               0.0100
Cancelled                                                           (243,570)               0.2399
                                                             -----------------    -----------------
Outstanding, March 31, 2004                                         2,458,152           $   0.1709
                                                             =================    =================


Exercisable, March 31, 2004                                         2,458,152           $   0.1709
                                                             =================    =================

Weighted average fair value of warrants granted during the
year ended March 31, 2004                                                               $   0.2955
                                                                                  =================

Weighted average fair value of warrants granted during the
year ended March 31, 2003                                                               $        -
                                                                                  =================

                                                                            Options
                                                             --------------------------------------
                                                                 Number of            Weighted
                                                                                      Average
                                                                 Warrants          Exercise Price
                                                             -----------------    -----------------
Outstanding, March 31, 2002                                  $             -      $             -
Granted                                                              550,000               0.0010
                                                             -----------------    -----------------
Outstanding, March 31, 2003                                          550,000               0.0010
Exercised                                                           (550,000)              0.0010
                                                             -----------------    -----------------

Outstanding, March 31, 2004                                                -                    -
                                                             =================    =================


Weighted average fair value of options granted during the                         $             -
year ended March 31, 2004 and 2003                                                =================

</TABLE>

                                      F-18
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003


Following is a summary of the status of outstanding options and warrants at
March 31, 2004:

<TABLE>
<CAPTION>


                   Options and Warrants Outstanding                             Options and Warrants Exercisable
                   --------------------------------                             --------------------------------
                                    Weighted Average
  Range of                              Remaining           Weighted
  Exercise           Number         Contractual Life        Average               Number          Weighted Average
   Prices         Outstanding            (years)         Exercise Price         Exercisable        Exercise Price
-------------    ---------------    ------------------   ---------------      ----------------    ------------------

<S>                   <C>                 <C>            <C>                        <C>           <C>
 $   0.15             1,933,333           3.18           $0.15                      1,933,333     $0.15
 $   0.20               375,000           0.16           $0.20                        375,000     $0.20
 $   0.26                49,819           0.10           $0.26                         49,819     $0.26
 $   0.42               100,000           3.62           $0.42                        100,000     $0.42
                 ---------------                                              ----------------
                      2,458,152                                                     2,458,152
                 ===============                                              ================
</TABLE>

11.     Other equity transactions

In June 2003, the Board of Directors approved and adopted resolutions
establishing and designating 5,000,000 shares of Series A Preferred Stock $.001
par value. The holders of Series A Preferred Stock are entitled to ten votes for
each share held on all matters on which the holders of the Company's Common
Stock are entitled to vote and shall vote together with the holders of Common
Stock and not as a separate class or series. Series A Preferred Stock shall have
no dividend, conversion, or redemption rights and no liquidation preferences.

In July 2003, three of the Company's officers and directors were issued an
aggregate of 5,000,000 shares of Series A Voting Preferred Stock for the
aggregate par value of the shares or $5,000 (See note 8).

On July 7, 2003, an amendment to the Company's Certificate of Incorporation
increasing the authorized number of common shares from 15,000,000 to
100,000,000, par value $.001 and authorizing the board of directors to issue up
to 50,000,000 preferred shares, par value $.001 issuable in series with such
terms, rights and preferences as determined by subsequent resolutions of the
Board of Directors was approved in a special shareholder meeting.

On March 26, 2004 the Company received written consents in lieu of a meeting of
stockholders from holders of a majority of the shares of Voting Securities
representing in excess of 51% of the total issued and outstanding shares of
voting stock of the Company approving the Certificate of Amendment to the
Certificate of Incorporation of the Company, pursuant to which the number of
shares of Common Stock that the Company is authorized to issue will be increased
from 100,000,000 shares to 300,000,000 shares.

During the year ended March 31, 2004 the Company issued 243,570 shares of its
common stock for interest on notes payable.

During the year ended March 31, 2004, the Company raised $461,250 pursuant to a
stock purchase agreement in exchange for 1,845,000 shares of its restricted
common stock. In addition, the Company received $230,000 to issue 1,533,333
shares of the Company's common stock. These shares were not issued by March 31,
2004 and the $230,000 was recorded as a common stock payable.

                                      F-19
<PAGE>

                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003

During the year ended March 31, 2004, the Company purchased 100,000 shares of
its common stock for $100,000 pursuant to the Stock Purchase Agreement Addendum
between the Company and R&R Express Intermodal, Inc. dated January 1, 2004.
These shares are classified as treasury stock at cost in the Company's financial
statements. The Company also repurchased 20,000 shares of the Company's common
stock for $10,000 during the year ended March 31, 2004.

During the year ended March 31, 2004, 4,542,698 shares of the Company's common
stock were issued for services and software. These shares were valued at
$1,646,403. During the year ended March 31, 2004, $297,500 of these services
were recorded in deferred stock consulting and compensation account and will be
expensed over the period of the terms of the agreements.

During the year ended March 31, 2004, the Company recorded a $455,000 common
stock payable related to shares of common stock that are issuable at March 31,
2004 in accordance with certain consulting agreements. During the year ended
March 31, 2004, $320,000 of these services were recorded in deferred stock
consulting and compensation account and will be expensed over the period of the
terms of the agreements.

The Company executed a Stock Purchase Agreement with Barron Partners, LP (the
"Investor") on March 31, 2004. During April, under the terms of this Agreement,
the Company issued the Investor 108,333,333 shares of its Common Stock for an
aggregate purchase price $3,250,000. At March 31, 2004, the $3,250,000 is
recorded as Common Stock Payable and as a Stock subscription receivable which
was received into escrow on April 1 2004 and distributed to XRG on April 2, 2004
through April 30, 2004.

The Company issued the Investor two (2) warrants exercisable for shares of its
Common Stock (the "A Warrant" and "B Warrant" - collectively the "Warrants").
The A Warrant grants the Investor the right to acquire up to 54,166,000 shares
of the Company's Common Stock at an exercise price of $.10 per share. The B
Warrant grants the Investor the right to purchase up to 54,166,000 shares of the
Company's Common Stock at an exercise price of $.25 per share. Each of the
Warrants contains a cashless exercise provision. Each of the Warrants is
callable by the Company 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 contains proportionate ratcheting
anti-dilution protection for future issuances of equity securities and for our
failure to meet certain earnings per share projections.

The Company 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.

                                      F-20
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003


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. 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 the Company's
shares to be voted by our Board of Directors for one (1) year.

Subsequent to the end of the year, the Company issued 321,000 shares of common
stock as additional shares to certain existing shareholders. These shares are
recorded as common stock payable of $321 at March 31, 2004.

12.     Commitments and Contingencies

The Company has employment contracts with certain of its officers and employees.
At March 31, 2004, the Company has minimum payments related to these employment
contracts over the next five years of:

       2005   $         815,000
       2006             748,000
       2007             506,000
       2008             459,000
       2009             415,000
                 ---------------
              $       2,943,000
                 ===============

In May, 2003, a legal action was filed in Franklin County, Ohio, against XRG,
Inc. (and against our president, based on a personal guaranty) by the landlord
of our former office space in Pittsburgh, Pennsylvania. The landlord claimed
approximately $63,000 in unpaid rent. In January, 2004, the court granted our
motion to dismiss the case for lack of proper jurisdiction in the State of Ohio.
In February 2004, the landlord filed a legal action in Allegheny County,
Pennsylvania. We filed a Complaint in Allegheny County in Common Please court
for breach of lease and filed a counterclaim for damages. This legal action is
in the preliminary stages. The Company believes that it has meritorious defenses
against the above claims and intends to vigorously contest them. Negative
outcomes of the litigation matters discussed above are not considered probable
or cannot be reasonably estimated. Accordingly, the Company has not recorded
reserves regarding these matters in its financial statements as of March 31,
2004. The Company records a liability when a loss is known or considered
probable and the amount can be reasonably estimated. If a loss is not probable
or a probable loss cannot be reasonably estimated, a liability is not recorded.
While it is not possible to predict the outcome of the action discussed above,
the Company believes that costs associated with them will not have a material
adverse impact on its consolidated financial position.

In July 2003, a legal action was filed in Hillsborough County, Florida, against
XRG, Inc. by the landlord of our current office space in Tampa, Florida. This
legal action was for eviction and unpaid rent. A judgment was rendered against
us and we subsequently paid the amount of the judgment in full in October 2003.
A satisfaction of judgment has been entered in the case.

                                      F-21
<PAGE>


13.     Acquisition

On August 20, 2003, the Company entered into a Stock Purchase Agreement with R&R
Express Intermodal, Inc., a Pittsburgh, Pennsylvania intermodal truckload
carrier. R&R Express Intermodal, Inc. was purchased to increase the Company's
presence in the truck transportation market. On January 1, 2004, the Company
modified the original Stock Purchase Agreement and closed on the purchase of
100% of R&R Express Intermodal's common stock. The Company had previously issued
200,000 shares of common stock valued at $200,000 to R&R Express Intermodal,
Inc.'s shareholders. During December 2003, 100,000 of the 200,000 previously
issued shares were returned to treasury. R&R Express Intermodal, Inc. provides
truck transportation for container freight from either a railroad yard or a
port, to the freight's destination.

On April 12, 2004, the Company and R&R Express Intermodal, Inc. modified the
Stock Purchase Agreement with R&R Express Intermodal, Inc. to issue 50,000
shares of additional common stock and eliminate the true up provision in the
agreement. Therefore the purchase price of R&R Express Intermodal, Inc/ was
repriced based upon the terms of this revised agreement and the 100,000 shares
of common stock were recorded at $138,000 which is a reduction of $62,000. The
Company recorded a common stock payable of $19,000 for the 50,000 additional
shares of common stock to be issued.

The Company included the results of R&R Express Intermodal, Inc. in its
financial statements beginning January 1, 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:

Cash                                           $             58,781
Other current assets                                        488,162
Goodwill                                                     21,603
                                                  ------------------
     Total assets acquired                                   568,546
                                                  ------------------
Accrued expenses                                            (43,510)
Factorer line of credit                                    (368,036)
                                                  ------------------
    Total liabilities assumed                              (411,546)
                                                  ------------------
Total purchase price                           $            157,000
                                                  ==================


The following unaudited pro forma financial information presents the combined
results of operations of the Company as if the acquisition had occurred on April
1, 2002. R&R Express Intermodal, Inc. began operations during January 2003;
therefore the profroma results presented for the year ending March 31, 2003
include the R&R Express Intermodal, Inc. results from January 2003 (inception
date) through March 2003. The unaudited pro forma 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 results were as follows for the years ended March 31:

                                      F-22
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003

                                              2004                       2003
                                              ----                       ----
Revenues                     $             7,803,355     $           1,685,369
Net loss applicable to
 common shareholders         $            (4,132,874)    $          (1,092,735)

Basic loss per share         $                 (0.23)    $               (0.12)


14.     Equipment Purchases

In June 2003, the Company executed a purchase agreement with a truckload carrier
(J. Bently Companies, Inc.) in Sweetwater, Tennessee to acquire equipment assets
consisting of approximately 275 freight trailers. The purchase price of these
assets was approximately $3,400,000, including the assumption of approximately
$2,200,000 of equipment loans, the payment of $50,000 in cash, and the issuance
of $1,150,000 worth of shares of the Company's Common Stock. The agreement
relating to this equipment purchase contains a true up adjustment provision,
which requires us to issue additional shares of our common stock based upon the
then prevailing market price such that the total value of our common stock
equals $1,150,000 at adjustment dates of six and twelve months from the closing
date. During August 2003, the Company made the $50,000 cash payment and issued
1,150,000 shares of our Common Stock to the J. Bently Companies, Inc.
shareholders which are classified as transportation equipment deposits in our
financial statements until we are able to obtain a clear title to these assets.

On April 12, 2004 the Company modified the agreement with J. Bently Companies,
Inc. to issue 800,000 shares of additional common stock and eliminate the true
up provision of the agreement. Therefore the deposit on the transportation
equipment was repriced based upon the terms of this revised agreement and the
common stock shares were recorded at $437,000 which is a reduction of $713,000.
The Company recorded a common stock payable of $304,000 for the 800,000
additional shares of common stock to be issued. At March 31, 2004, the
transportation equipment deposits recorded on the Company's books is $791,000.

During the year ended March 31, 2004, the Company also entered into a fleet
owner agreement with the truckload carrier to manage the utilization of these
assets for a two year period. Pursuant to the terms of this agreement, the
Company pays to the truckload carrier 67% of gross freight revenues as
compensation for the movement of its freight. In addition, the Company agreed to
pay 2% of gross revenues as a commission. During the year ended March 31, 2004,
the Company advanced J. Bently Companies, Inc. $994,794. On March 31, 2004, this
advance was determined to be uncollectible and written off as a bad debt.

15.     Subsequent Events

On June 15, 2004 the Company 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 Barron Partner, LP exercised all of the 63,333,333 warrants in a
cashless tender and acquired 60,000,000 shares of the Company's Common Stock
through this exercise.

                                      F-23
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003


During April 2004, debt holders elected to convert $500,000 of their notes
payable into 2,450,000 shares of the Company's common stock.

In April 2004, certain officers of the Company agreed to cancel all of their
shares totaling 5,000,000 of Series A Preferred Stock in exchange for 15,000,000
shares of Common Stock. The Company has also agreed not to issue any shares of
Preferred Stock for a period of one year. 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 the Company's
major shareholder. The Common Stock related to this exchange was issued during
the quarter ended June 30, 2004.

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 operator base fleet with a pool of approximately 270
trailers which shall be leased to the Company from an entity owned by the prior
shareholders of EFS pursuant to a Master Equipment Lease Agreement ("MELA"). The
MELA requires us to pay Express Leasing Systems, Inc. approximately $55,000 per
month for a term of 36 months, at which time the Company has the option to
purchase the trailers for $1 million.

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 Company's common stock as part
of the merger and employment agreements.

EFS, as a wholly-owned subsidiary of ours entered into 6 new employment
agreements with the former shareholders and key employees of EFS. The major
shareholder of EFS agreed to a 3 year employment agreement. All other
individuals have 10 year employment agreements. Annual compensation ranges from
$125,000 to $250,000 per annum. The agreements contain 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 provides the Company with certain rights of
indemnification in connection with the breach of a representation or warranty by
EFS or its shareholders. The Company has withheld $100,000 in a cash escrow
agreement to satisfy unpaid taxes and other liabilities. The Company has also
issued a blanket corporate guaranty pursuant to which the Company guarantees all
obligations of its EFS subsidiary pursuant to the terms of the Merger
Agreement, including but not limited to, the MELA, 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 contains cross default
provisions.

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 of its common stock to
the two RSV shareholders. There was no cash paid at closing to the RSV

                                      F-24
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003

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.

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

Effective April 2, 2004 the Company acquired certain of the assets and assumed
certain of the liabilities of Highway Transport, Inc. ("HTI"), an Alabama
corporation in exchange for 350,000 shares of its restricted common stock. The
Company assumed approximately $1,360,000 of HTI's equipment 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.

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 restricted common stock to the two stockholders of
HBC. 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.

On April 29, 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 restricted common stock to the two shareholders of CTC.
The Company assumed approximately $474,000 of long-term debt and equipment
leases 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. 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


                                      F-25
<PAGE>
                           XRG, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                       Years Ended March 31, 2004 and 2003

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.

During the quarter ended June 30, 2004, the Company raised an additional
$1,072,000 for 8,933,333 shares of Common Stock pursuant to a Stock Purchase
Agreement from various accredited investors.


The following pro forma condensed balance sheet gives effect to the above events
as if they had occurred on March 31, 2004. These pro forma statements are based
upon the latest available balance sheets of the acquired companies.

                          XRG, Inc. and Subsidiaries
                       Pro Forma Condensed Balance Sheet
                                March 31, 2004
                                  (unaudited)
<TABLE>
<CAPTION>


                                                                As Reported in     Pro Forma
                                                                Accompanying       Adjustments for
                                                                Financial          Subsequent       Proforma
                                                                Statements         Events           Balance Sheet
                                                                ----------------   ---------------  ----------------
<S>                                                          <C>                  <C>             <C>
Assets
Cash                                                          $                         1,250,000         1,250,000
Accounts receivable, net                                              1,584,331           367,851         1,952,182
Other current assets                                                  3,341,444        (2,186,161)        1,155,283
Fixed assets, net of accumulated depreciation                           117,487         1,579,742         1,697,229
Goodwill and intangible assets                                           21,603         8,957,018         8,978,621
Other assets                                                            852,325           299,652         1,151,977
                                                                ----------------   ---------------  ----------------

                                                              $       5,917,190        10,268,102        16,185,292
                                                                ================   ===============  ================

Liabilities and Stockholders' Equity

Bank Overdraft                                                           55,374            31,456            86,830
Accounts payable and accrued expenses                                 1,009,449         2,263,698         3,273,147
Factorer line of credit                                               1,303,688           224,101         1,527,789
Related party advances and payables                                     270,126                 -           270,126
Notes payable, convertible debt and lease payments                      739,932         4,684,847         5,424,779
Stockholders' equity:                                                 2,538,621         3,064,000         5,602,621
                                                                ----------------   ---------------  ----------------

                                                              $       5,917,190        10,268,102        16,185,292
                                                                ================   ===============  ================
</TABLE>

                                      F-26