**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-QSB**




(Mark
      One)


[x] QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934




For
      the
      quarterly period ended September 30, 2005.


OR




[
      ] 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 0-26845**





**Theater
      Xtreme Entertainment Group, Inc.**


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


(Exact
      name of small business issuer as specified in its charter)





Florida


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


(State
      or
      other jurisdiction of incorporation or organization)





65-0913583


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


(IRS
      Employer Identification No.)





250
      Corporate Boulevard, Suites E & F, Newark, Delaware 19702


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


(Address
      of principal executive offices)





(302)
      455-1334


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


(Issuer’s
      telephone number)


N/A


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


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





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past twelve 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. _ X _
      Yes ___
      No





Indicate
      by check mark whether the registrant is a shell company as defined in Rule
      12b-2
      of the Exchange Act.


__
      Yes
      _X_ No





APPLICABLE
      ONLY TO CORPORATE ISSUERS





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: As of October 24, 2005, there were
      approximately 17,279,672 shares of common stock, $0.001 par value, issued and
      outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes ___ No X





**THEATER
      XTREME ENTERTAINMENT GROUP, INC.**





Form
      10-QSB Index


September
      30, 2005








Part
                I: Financial Information
            PageItem
                1. Financial Statements
            2Balance
                Sheet as of
                September 30, 2005 and June 30, 2005 (Unaudited)
            2Statements
                of Operations for the
                ThreeMonths
                Ended September 30, 2005 and 2004 (Unaudited)
            3Statement
                of Changes in Stockholders’ Equity for
                theThree
                Months Ended
                September 30, 2005 (Unaudited)
            4Statement
                of Cash Flows for the Three Months
                EndedSeptember
                30, 2005 and 2004
                (Unaudited)
            5Notes
                To Financial Statements (Unaudited)
            6Item
                2. Management’s Discussion and Analysis or Plan
                of Operation
            10Item
                3. Controls and Procedures
            12Part
                II: Other InformationItem
                6. Exhibits
            14Signatures
            15











**PART
      I**


**FINANCIAL
      INFORMATION**





**Item
      1. Financial Statements**




**THEATER
                  XTREME ENERTAINMENT GROUP,
                  INC.****BALANCE
                  SHEET****SEPTEMBER
                  30, 2005 AND JUNE 30,
                  2005****SEPTEMBER
                  30,**
              
              **JUNE
                  30,****2005**
              
              **2005****Assets**
              
              **(UNAUDITED)**
              
              **(AUDITED)**Current
                  Assets:Cash
                  and equivalents
              
              $
              112,260
              
              $
              112,874Accounts
                  receivable, net of allowance of $4,281, and $4,851
              
              
              54,479
              
              
              22,797Inventory
              
              
              568,866
              
              
              460,111Prepaid
                  expenses
              
              
              72,143
              
              
              123,444Total
                  current assets
              
              
              807,748
              
              
              719,226Property
                  and Equipment, net
              
              
              408,308
              
              
              267,700Other
                  Assets:Deposits
              
              
              20,720
              
              
              20,720$
              1,236,776
              
              $
              1,007,646**Liabilities
                  and Stockholders' Equity**Current
                  Liabilities:Accounts
                  payable and accrued expenses
              
              $
              554,477
              
              $
              323,132Payroll
                  tax liabilities
              
              
              72,353
              
              
              31,769Current
                  portion of notes payable
              
              
              17,968
              
              
              12,010Due
                  to officer
              
              
              243
              
              
              243Deferred
                  franchise fees
              
              
              93,750
              
              
              72,500Deferred
                  sales
              
              
              419,341
              
              
              496,362Total
                  current liabilities
              
              
              1,158,132
              
              
              936,016Long-term
                  Liabilities:Notes
                  payable, net of current portion
              
              
              61,680
              
              
              40,614Total
                  long-term liabilities
              
              
              61,680
              
              
              40,614Total
                  liabilities
              
              
              1,219,812
              
              
              976,630Stockholders'
                  Equity:Preferred
                  stock, no par value, 5,000,000 shares authorized,no
                  shares issued and outstanding
              
              
              -
              
              
              -Common
                  stock, $.001 par, 50,000,000 shares authorized;17,023,956,
                  16,291,814 shares issuedand
                  outstanding
              
              
              17,024
              
              
              16,292Additional
                  paid in capital
              
              
              2,098,350
              
              
              1,843,157Accumulated
                  deficit
              
              
              (2,098,410
              )
              
              (1,828,433
              )Total
                  stockholders' equity
              
              
              16,964
              
              
              31,016$
              1,236,776
              
              $
              1,007,646


The
      accompanying notes are an integral part of these financial
      statements.




2





**THEATER
                  XTREME ENTERTAINMENT GROUP,
                  INC.****STATEMENTS
                  OF OPERATIONS****THREE
                  MONTHS ENDED SEPTEMBER
                  30****(UNAUDITED)**2005
              
              2004Revenues
              
              $
              1,020,853
              
              $
              379,968Cost
                  of revenues
              
              
              573,901
              
              
              248,786Occupancy
                  expenses
              
              
              74,948
              
              
              50,819Selling,
                  general and administrative expenses
              
              
              640,781
              
              
              266,9201,289,630
              
              
              566,525Loss
                  from operations
              
              
              (268,777
              )
              
              (186,557
              )Interest
                  income
              
              
              46
              
              
              49Interest
                  expense
              
              
              (1,246
              )
              
              (5,001
              )Net
                  loss
              
              $
              (269,977
              )
              $
              (191,509
              )Basic
                  and diluted:Loss
                  per common share
              
              $
              (0.02
              )
              $
              (0.02
              )Weighted
                  average shares
              
              
              16,783,721
              
              
              9,775,000




The
      accompanying notes are an integral part of these financial
      statements.


3


**THEATER
                  XTREME ENTERTAINMENT GROUP,
                  INC.****STATEMENT
                  OF STOCKHOLDERS'
                  EQUITY****THREE
                  MONTHS ENDED SEPTEMBER 30,
                  2005****(UNAUDITED)**Additional
              
              
              
              TotalCommon
              
              Paid-in
              
              Accumulated
              
              Stockholders'Stock
              
              Capital
              
              Deficit
              
              Equity
                  (Deficit)Balance
                  at June 30, 2005
              
              $
              16,292
              
              $
              1,843,157
              
              $
              (1,828,433
              )
              $
              31,016Issuance
                  of common stock,private placement
              
              
              732
              
              
              255,193
              
              
              -
              
              
              255,925Net
                  loss for the three months endedSeptember 30, 2005
              
              
              -
              
              
              -
              
              
              (269,977
              )
              
              (269,977
              )Balance
                  at September 30, 2005
              
              $
              17,024
              
              $
              2,098,350
              
              $
              (2,098,410
              )
              $
              16,964





The
      accompanying notes are an integral part of these financial
      statements.





4




**THEATER
                  XTREME ENTERTAINMENT GROUP,
                  INC.****STATEMENTS
                  OF CASH
                  FLOWS****THREE
                  MONTHS ENDED SEPTEMBER
                  30****(UNAUDITED)**2005
              
              2004**Cash
                  flows from operating activities:**Net
                  Loss
              
              $
              (269,977
              )
              $
              (191,509
              )Adjustments
                  to reconcile net loss tonet
                  cash used in operating activities:Depreciation
              
              
              25,196
              
              
              7,998Decrease
                  (Increase) in assetsAccounts
                  receivables
              
              
              (31,682
              )
              
              7,061Inventory
              
              
              (108,755
              )
              
              (57,170
              )Prepaid
                  expenses
              
              
              51,301
              
              
              (5,000
              )Increase
                  (Decrease) in liabilitiesAccounts
                  payable and accrued expenses
              
              
              231,345
              
              
              29,647Payroll
                  tax liabilities
              
              
              40,584
              
              
              (306
              )Due
                  to officer
              
              
              -
              
              
              (13,804
              )Deferred
                  franchise fees
              
              
              21,250
              
              
              25,000Deferred
                  sales
              
              
              (77,021
              )
              
              47,331Net
                  cash used in operating activities
              
              
              (117,759
              )
              
              (150,752
              )**Cash
                  flows from investing activities:**Purchase
                  of property and equipment
              
              
              (165,804
              )
              
              (41,230
              )Net
                  cash used in investing activities
              
              
              (165,804
              )
              
              (41,230
              )**Cash
                  flows from financing activities:**Repayment
                  of notes payable
              
              
              -
              
              
              (1,521
              )Proceeds
                  from notes payable
              
              
              27,024
              
              
              1,391Proceeds
                  from convertible notes payable
              
              
              -
              
              
              100,000Proceeds
                  from issuance of common stock
              
              
              255,925
              
              
              -Net
                  cash provided by financing activities
              
              
              282,949
              
              
              99,870Net
                  decrease in cash
              
              
              (614
              )
              
              (92,112
              )Cash
                  and equivalents, beginning of period
              
              
              112,874
              
              
              119,228Cash
                  and equivalents, end of period
              
              $
              112,260
              
              $
              27,116**Supplemental
                  disclosure:**Cash
                  paid for interest
              
              $
              1,246
              
              $
              5,001**Supplemental
                  disclosure of non-cash****investing
                  and financing activites:**Liabilities
                  assumed as part of merger
              
              $
              13,026
              
              $
              -Acquisition
                  of property and equipmentby
                  issuance of notes payable
              
              $
              36,530
              
              $
              37,716


The
      accompanying notes are an integral part of these financial
      statements.




5


**THEATER
      XTREME ENTERTAINMENT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**(UNAUDITED)**





**Note
      1: Nature of Operations and Significant Accounting
      Policies**





*Basis
      of Presentations.* The
      accompanying unaudited financial statements have been prepared in accordance
      with U.S. generally accepted accounting principles for interim financial
      information and with the instructions for Form 10-QSB and Item 310(b) of
      Regulation S-B. Accordingly, they do not include all of the information and
      footnotes required by generally accepted accounting principles for complete
      financial statements. In the opinion of management, all adjustments (consisting
      of normal recurring accruals) considered necessary for a fair presentation
      have
      been included. Operating results for the three months ended September 30, 2005
      are not necessarily indicative of the results that may be expected for the
      year
      ended June 30, 2006. The unaudited financial statements should be read in
      conjunction with the financial statements and footnotes thereto included in
      the
      Company’s annual report on Form 10-KSB dated June 30, 2005.





*Nature
      of operation.* Theater
      Xtreme Entertainment Group, Inc. (the “Company”), a Florida corporation, is a
      retail store and franchise marketing company engaged in retail sales and
      distribution through the operation of its home cinema design centers, the sale
      of franchise stores and wholesale product distribution to franchisees. The
      Company opened its first Company retail store, “design center”, in September
      2003 in Newark, Delaware. In August 2004, the Company opened a second
      Company-owned design center in Wilmington, Delaware and a third in Bel-Air,
      Maryland in September 2005. The Company has sold five franchises, two of which
      are open and operating. The Company has designed and created large-format home
      theater entertainment systems offering new technology at prices affordable
      to
      many families. The Company expects to offer franchise licenses nationwide as
      well as open additional stores in the Mid-Atlantic region.







*Use
      of Estimates.* The
      preparation of financial statements in conformity with generally accepted
      accounting principles 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 financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from these estimates.





*Revenue
      Recognition.* Retail
      sales include all sales from Company-owned design centers. The following is
      a
      summary of earned revenues for the three months ended September 30:





2005
            
            2004Retail
                sales
            
            $
            924,803
            
            $
            379,968Wholesale
                sales
            
            
            67,024
            
            
            NoneFranchise
                licenses and royalties
            
            
            29,026
            
            
            NoneTotal
                revenues
            
            $
            1,020,853
            
            $
            379,968





Retail
      sales represent the sale and installation of home-theater equipment. In
      accordance with the SEC’s Staff Accounting Bulletin No. 104 (SAB 104)
“ *Revenue
      Recognition,”* the
      Company recognizes revenue when persuasive evidence of a customer arrangement
      exists or acceptance occurs, receipt of goods by customer occurs, the price
      is
      fixed or determinable, and the sales revenues are considered collectible.
      Revenue is recognized on such sales when the equipment is delivered and the
      installation is substantially completed. Generally, these events occur on the
      same date. Revenues are recognized pro-rata on larger, more complex systems
      where installation occurs over a period of time.





6


**THEATER
      XTREME ENTERTAINMENT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**(UNAUDITED)**





Customer
      deposits on orders that are not completed are shown as deferred revenue. Also
      included in deferred sales is an amount that represents the unexpired (unearned)
      portions of paid customer extended service contracts. In addition, the Company
      has deferred revenues from the sales of franchise licenses. Such revenues will
      be recognized when the related franchise design center opens for business,
      as
      that is when the Company has substantially completed its obligations to these
      franchisees.





The
      following is a summary of amounts included in deferred sales at September 30,
      2005 and June 30, 2005:




September
                30, 2005
            
            June
                30, 2005Deferred
                retail sales
            
            $
            396,507
            
            $
            460,877Unearned
                service contract revenue
            
            
            22,834
            
            
            35,485Total
                deferred sales
            
            $
            419,341
            
            $
            496,362





*Loss
      Per Share.* The
      Company follows SFAS 128, “Earnings Per Share,” resulting in the presentation of
      basic and diluted earnings (loss) per share. The basic loss per share
      calculations include the change in capital structure that resulted from the
      merger for all periods presented. For the three months ended September 30,
      2005
      and 2004, the basic and diluted loss per share are the same, because the assumed
      conversion of stock equivalents would be antidilutive as the Company experienced
      a net loss for these periods.





*Income
      Taxes* .
      The
      Company accounts for income taxes under SFAS No. 109, “Accounting for Income
      Taxes”, which requires an asset and liability approach to financial accounting
      and reporting for income taxes. Deferred income tax assets and liabilities
      are
      computed annually for temporary differences between the financial statement
      and
      tax bases of assets and liabilities that will result in taxable or deductible
      amounts in the future based on enacted tax laws and rates applicable to the
      periods in which the differences are expected to affect taxable income.
      Valuation allowances are established when necessary to reduce deferred tax
      assets to the amount expected to be realized. Income tax expense is the tax
      payable or refundable for the period plus or minus the change during the period
      in deferred tax assets and liabilities.





*Advertising
      Costs.* Advertising
      and sales promotion costs are expensed as incurred. Advertising and promotional
      expense totaled $123,819 and $46,878 for the three month periods ended September
      30, 2005 and 2004, respectively.







*Recently
      Issued Accounting Pronouncements:* In
      December 2004, the FASB revised SFAS 123, “Accounting for Stock-Based
      Compensation” to require all companies to expense the fair value of employee
      stock options. SFAS 123R is effective at the beginning of the next fiscal year
      beginning after December 15, 2005 for a small business issuer.


7


**THEATER
      XTREME ENTERTAINMENT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**(UNAUDITED)**





The
      following recently issued accounting pronouncements are currently not applicable
      to the Company. In January 2003, subsequently revised December 2003, the FASB
      issued FASB Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable
      Interest Entities - An Interpretation of AARB N. 51.” FIN 46R requires that if
      any entity has a controlling financial interest in a variable interest entity,
      the assets, liabilities and results of activities of the variable interest
      entity should be included in the consolidated financial statements of the
      entity. FIN 46R provisions are effective for all arrangements entered into
      after
      January 31, 2003. FIN 46R provisions are required to be adopted for the first
      period ending after December 15, 2004 for a small business issuer. FAS 150,
      “Accounting for Certain Financial Instruments with Characteristics of both
      Liabilities and Equity”, requires financial instruments within its scope to be
      classified as liabilities (or assets in some circumstances). The Statement
      is
      effective for financial instruments entered into or modified after May 31,
      2003,
      and otherwise effective at the beginning of the first interim period beginning
      after June 15, 2003, except for certain mandatorily redeemable financial
      instruments. It is to be implemented by reporting the cumulative effect of
      a
      change in an accounting principle for financial instruments created before
      the
      issuance date of the Statement and still existing at the beginning of the
      interim period of adoption. Restatement is not permitted. The effective date
      of
      certain provisions of Statement 150 for certain mandatorily redeemable financial
      instruments has been deferred by FSP FAS 150-3. Under the FSP, certain
      mandatorily redeemable shares are subject to the provisions of Statement 150
      for
      the first fiscal period beginning after December 15, 2004. Other mandatorily
      redeemable shares are deferred indefinitely but may be subject to classification
      or disclosure provisions of the Statement.








**Note
      2: Equity**





During
      the three months ended September 30, 2005, the Company sold 732,142 of its
      common shares at a purchase price of $0.35 per share pursuant to an offering
      of
      common stock pursuant to an Offering Memorandum dated April 26, 2005. Net
      proceeds for these shares amounted to $255,925.





At
      June
      30, 2005, there were 890,000 stock options outstanding under the 2005 Stock
      Option Plan. There were no stock options granted during the three months ended
      September 30, 2005.





**Note
      3: Income Taxes**





Deferred
      income taxes reflect the net effect of an operating loss carryforward. There
      are
      no significant temporary differences between the carrying amount of assets
      and
      liabilities for financial reporting purposes and the amount used for income
      tax
      purposes.





The
      components of the deferred assets are as follows at September 30, 2005 and
      June
      30, 2005:





September
                30, 2005
            
            June
                30 2005Net
                operating loss carryforward
            
            $
            750,000
            
            $
            658,000Less
                valuation allowance
            
            
            (750,000
            )
            
            (658,000
            )$
            0
            
            $
            0





8


**THEATER
      XTREME ENTERTAINMENT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**(UNAUDITED)**





A
      valuation allowance was required since the ultimate realization of deferred
      tax
      assets is dependent upon future taxable income and management believes that
      it
      is more likely than not that the deferred tax asset will not be realized through
      future taxable income. There is no income tax benefit for the losses for the
      three months ended September 30, 2005 and September 30, 2004, since management
      has determined that the realization of the net deferred tax asset is not assured
      and has created a valuation allowance for the entire amount of such
      benefits.





At
      June
      30, 2005, the Company had a net operating loss carryforward for Federal and
      state income tax purposes of approximately $1,828,000 which, if not used, will
      expire in the fiscal year ending June 30, 2026.





**Note
      4: Subsequent Events**





On
      October 10, 2005, the Company increased the number of shares of its offering
      of
      common stock to 3,614,285 shares from 2,900,000 shares, at a purchase price
      of
      $0.35 per share. Further, on October 28, 2005, the Company increased the number
      of shares of its offering of common stock to 3,757,142 shares from 3,614,285
      shares, at a purchase price of $0.35 per share. Management expects this offering
      will be closed in late November, 2005. Net proceeds, in the aggregate, are
      expected not to exceed $1,271,000.





In
      October 2005, the Company issued to certain of its employees options to purchase
      430,000 shares of the Company’s common stock at an exercise price of $0.35 per
      share. These options expire in 10 years. Of these options, 80,000 will vest
      over
      the next four years and 350,000 will vest over the next three years, and are
      exercisable contingent on the employee being employed as of the vesting
      anniversary date. In accordance with the fair value method of accounting for
      stock options, the expense will be recognized when the contingency has been
      met.





In
      October 2005, the Company issued to an employee of one of its franchisees
      options to purchase 10,000 shares of its common stock at a purchase price of
      $0.35 per share. These options will expire in 10 years and will vest over the
      next three years.





On
      October 19, 2005, the Company increased the number of shares reserved for its
      Stock Option Plan to 1,700,000 shares from 1,400,000 shares. On November 8,
      2005, the Company further increased the number of shares to 2,000,000 shares
      from 1,700,000. Such increase is contingent upon shareholder approval at the
      Company's 2005 Annual Meeting of Shareholders.





In
      October 2005, the Company sold 255,716 shares of its common stock at $0.35
      per
      share for total net proceeds of $89,500.





9


**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation**





**Forward-Looking
      Information**





The
      following Management’s Discussion and Analysis should be read in conjunction
      with the Company’s unaudited financial statements and notes for the three month
      period ended September 30, 2005 included herein and its audited financial
      statements and notes for the year ended June 30, 2005 included in its Form
      10-KSB filed with the Securities and Exchange Commission.




This
      discussion and other sections of this Quarterly Report contain, in addition
      to
      historical information, forward-looking statements within the meaning of the
      Private Securities Litigation Reform Act of 1995. Forward-looking statements
      involve known and unknown risks, uncertainties and other factors, which may
      cause the Company’s actual results, performance or achievements expressed or
      implied by these forward-looking statements to differ materially from such
      forward-looking statements. The forward-looking statements included in this
      report may prove to be inaccurate. These statements are based on a number of
      assumptions concerning future events, and are subject to a number of
      uncertainties and other factors, many of which are outside its control. Actual
      results may differ materially from such statements for a number of reasons,
      including the effects of regulation and changes in capital requirements and
      funding. In light of the significant uncertainties inherent in these
      forward-looking statements, you should not consider this information to be
      a
      guarantee by us or any other person that the Company’s objectives and plans will
      be achieved. The Company does not undertake to publicly update or revise its
      forward-looking statements even if experience or future changes make it clear
      that any projected results (expressed or implied) will not be
      realized.




**Overview**




The
      Company is a retail store and franchise marketing company engaged in retail
      sales and distribution through the operation of its home cinema design centers,
      the sale of franchise stores and wholesale product distribution to
      franchisees.




The
      Company’s design centers focus on the sale and installation of affordable large
      screen front projection in-home cinema rooms comprised of video and audio home
      theater components. A majority of its home theater systems are installed on-site
      at customer homes, with screen sizes ranging from 80 inches to over 12 feet.
      The
      Company also sells theater seating, interior décor items, accessories and its
      proprietary digital theater management system called OneViewTM. The Company
      targets its home theater system marketing toward a larger consumer base than
      traditional custom home theater companies and focuses on lower retail price
      points in a store setting where customers can easily and readily encounter
      the
      complete home theater experience in a number of home settings.




The
      Company’s first retail store, “design center,” opened on September 1, 2003 in
      Newark, Delaware, and was built to resemble an actual movie theater. A separate
      distribution center, warehouse and administrative office facility opened in
      February 2004, also in Newark, Delaware. This multi-purpose facility will
      provide installation and service, warehousing and product distribution, and
      other retail support services to a cluster of Company-owned design centers
      in
      contiguous and surrounding areas. The second Company-owned design center opened
      in August 2004 in Wilmington, Delaware and a third company-owned design center
      opened in September 2005 in Bel-Air, Maryland. The Company anticipates that
      it
      will open additional Company-owned design centers in the Mid-Atlantic region
      in
      the future.




The
      sale
      of franchises is integral to the Company’s success. The Company has sold five
      franchises through September 30, 2005, the first of which opened in May 2005
      in
      East Longmeadow, Massachusetts and the second in September 2005 in Auburn Hills,
      Michigan. Other franchised design centers are planned for opening dates in
      the
      last calendar quarter of 2005 and in early 2006. Management expects to
      significantly expand its franchising activities in 2006. These and future
      franchised retail design






10




centers
      will generally reflect enhanced physical layouts and may incorporate other
      refinements or modifications depending on the design center’s physical
      characteristics.




Effective
      February 11, 2005, Theater Xtreme, Inc. merged with and into BF Acquisition
      Group II, Inc., a Florida corporation. The merged entity changed its name to
      Theater Xtreme Entertainment Group, Inc., with its principal offices located
      at
      250 Corporate Blvd., Suites E & F, Newark, DE 19702. The following
      discussion refers to Theater Xtreme, Inc. for all periods prior to the effective
      date of the merger and to the combined company, Theater Xtreme Entertainment
      Group, Inc., thereafter.




The
      Company has a limited operating history for evaluating trends and
      seasonality.




**Results
      of Operations for the three months ended September 30, 2005 compared to the
      three months ended September 30, 2004**




Recognized
      sales for the three months ended September 30, 2005 were $1,020,853 compared
      to
      $379,968 for the three months ended September 30, 2004. Gross profit amounts
      and
      percentages were $446,952 and 44% for the three months ended September 30,
      2005
      as compared to $131,182 and 35% for the three months ended September 30, 2004.
      The increase in sales reflects continued growth and the addition of the
      Company’s second design center as well as the recognition of franchise fees for
      the Auburn Hills, Michigan franchise. The fluctuation in gross profit
      percentages continues to reflect the nature of operations being in a startup
      stage.




Occupancy
      expenses for the three months ended September 30, 2005 were $74,948 compared
      to
      $50,819 for the three months ended September 30, 2004. The increase is directly
      related to the opening of the second and third Company-owned design
      centers.




Selling,
      general and administrative expenses for the three months ended September 30,
      2005 were $640,781 compared to $266,920 for the three months ended September
      30,
      2004. The increase relates to additional personnel and operating costs
      associated with the opening of the Bel-Air, Maryland design center in September,
      2005 and the expansion of Company operations toward the creation of a national
      organization. Expenses for the three months ended September 30, 2005 include
      Advertising and Promotional expenses of $123,819 compared to $46,878 spent
      during the three months ended September 30, 2005. Professional fees amounted
      to
      $57,513 for the three months ended September 30, 2005 compared to $4,728 for
      the
      three months ended September 30, 2004. Personnel costs account for the majority
      of the remaining increase in selling, general and administrative
      expenses.




**Liquidity**




The
      Company’s cash position decreased slightly to $112,260 at September 30, 2005
      from $112,874 at June 30, 2005.




The
      loss
      for the three months ended September 30, 2005 of $(269,977) and the increase
      in
      inventories $(108,755) was offset by an increase in accounts payable and accrued
      liabilities resulting in a net cash used in operating activities of $(117,759).
      During the three months ended September 30, 2005, the Company spent $165,804
      for
      the acquisition of vehicles, store equipment and leasehold
      improvements.




During
      the three months ended September 30, 2005, the Company increased its notes
      payable by $27,024 and sold 732,142 shares of its common stock at a purchase
      price of $0.35 per share each, with net proceeds amounting to $255,925.




The
      Company’s cash flow from operations since inception has been and continues to be
      negative. The Company plans to continue to expand revenue by increasing the
      number of Company-owned design centers and by selling additional franchises
      and
      increasing the product distribution network to franchisees.








11




Future
      capital requirements and the adequacy of available funds will depend on numerous
      factors and risks, including the successful expansion and increase in the number
      of Company-owned design centers, the sale of Company franchises on a national
      level, the successful development of internally branded products for
      distribution to franchisees, and the results of risks associated with the
      Company’s ability to establish meaningful consumer market identification,
      branding and penetration, its ability to adapt to rapid technological changes,
      and its ability to successfully compete against intense competitive pressures
      from potentially larger, better capitalized future competitors when such enter
      its market segment. Further, the Company’s results of operations and resulting
      capital requirements will be impacted by a wide variety of additional factors
      and risks including, but not limited to general economic conditions, decreases
      in average selling prices over the life of any particular product, new product
      and technology introductions, the ability to acquire sufficient quantities
      of a
      given product in a timely manner, the ability to develop and maintain critical
      strategic supply and co-marketing relationships and the ability to safeguard
      intellectual property.




In
      the
      event the Company’s plans change or its assumptions change or prove to be
      inaccurate or the funds available prove to be insufficient to fund operations
      at
      the planned level (due to further unanticipated expenses, delays, problems
      or
      otherwise), the Company could be required to obtain additional funds through
      equity or debt financing, through strategic alliances with corporate partners
      and others, or through other sources in order to successfully continue to
      implement its business strategies.




The
      Company does not have any committed sources of additional financing, and there
      can be no assurance that additional funding will be available on acceptable
      terms, if at all. If adequate funds are not available, the Company may be
      required to further delay, scale back, or eliminate certain aspects of its
      business plan or current operations or attempt to obtain funds through
      arrangements with collaborative partners or others that may require us to
      surrender rights to Company methods, technologies, product development projects,
      certain products or existing markets. If adequate funds are not available,
      the
      business, financial condition and results of operations of the Company will
      be
      materially and adversely affected.




The
      Company has plans to increase the number of employees and/or independent
      contractors employed, contingent upon its ability to have sufficient funds
      to
      continue to implement its business strategies. The Company anticipates
      significant additional capital expenditures during the coming year in connection
      with the costs of increasing the number of Company-owned design centers, the
      anticipated cost of expanding and replicating the multi-purpose facility and
      the
      costs of implementing and possibly manufacturing Company branded products for
      distribution to franchisees and directly to retail customers.




The
      Company’s current policy is to invest its cash reserves in bank deposits,
      certificates of deposit, commercial paper, corporate notes, U.S. government
      instruments or other investment-grade instruments.




There
      can
      be no assurance that the Company will be able to successfully implement its
      business strategies or that profitability will ever be achieved. The Company
      expects that its future operating results will fluctuate significantly from
      year
      to year and will be impacted by factors beyond its control.




**Item
      3.Controls and Procedures.**





An
      evaluation was performed under the supervision and with the participation of
      the
      Company’s principal executive officer and principal financial officer of the
      effectiveness of the design and operation of the Company’s disclosure controls
      and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
      the Exchange Act) as of September 30, 2005. The evaluation revealed to the
      Company’s principal executive officer and principal financial officer that the
      design and operation of the Company’s disclosure controls and procedures were
      effective as of September 30, 2005.






12




There
      have been no significant changes in the Company’s internal controls over
      financial reporting that have materially affected, or are reasonably likely
      to
      materially affect, the Company’s internal control over financial reporting for
      the period covered by this Quarterly Report on Form 10-QSB.




**Item
      5. Other Information**





On
      October 10, 2005, the Company named Kenneth Warren as Executive Vice President
      -
      Franchising and Justin Schakelman as Vice President - Marketing and
      Communications.





On
      October 14, 2005, the Company named James J. Vincenzo as Treasurer and Chief
      Financial Officer.











13


**PART
      II**


**OTHER
      INFORMATION**





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





On
      April
      26, 2005, the Company began offering up to 2,900,000 shares of its common stock
      at a purchase price of $0.35 per share. On October 10, 2005, the Company
      increased the number of shares to 3,614,285 and, on October 28, 2005, it further
      increased the number to 3,757,142 shares. Management expects this offering
      to be
      closed in late November 2005.





The
      shares of the Company’s common stock were issued in reliance upon exemptions
      from registration available under Rule 506 of Regulation D and Section 4(2)
      of
      the Securities Act of 1933, as amended, and are “restricted
      securities”.





No
      underwriters or agents were involved in the foregoing issuances and no
      commission or other remuneration was paid or given directly or indirectly by
      the
      Company.





**Item
      6. Exhibits**





**Exhibit**
            **Description
                of Exhibit**31.1
            Certification
                pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934,
                as
                amended executed by the Chief Executive Officer of the
                Company.31.2
            Certification
                pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934,
                as
                amended executed by the Chief Financial Officer of the
                Company.32.1
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 executed by the Chief Executive Officer
                of
                the Company.32.2
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 executed by the Chief Financial Officer
                of
                the Company.





14


**SIGNATURES**





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





THEATER
                  XTREME ENTERTAINMENT GROUP, INC.November
                  14, 2005
              By:/s/
                  Scott R. OglumScott
                  R. OglumChairman
                  of the Board and Chief Executive OfficerBy:/s/
                  James J. VincenzoJames
                  J. VincenzoChief
                  Financial Officer








15