UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

 

FORM 10-Q

_________________

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: June 30, 2014

 

or

 

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

 

For the transition period from: ______ to ______

 

XR ENERGY INC.

(Exact name of registrant as specified in its charter)

 

Nevada		333-178156		27-0851973
(State or Other Jurisdiction		(Commission		(I.R.S. Employer
of Incorporation or Organization)		File Number)		Identification No.)

  

8411 Sterling Street Suite 102, Irving TX 75063

(Address of Principal Executive Offices) (Zip Code)

 

Telephone (972) 929-4444

(Registrant’s telephone number, including area code)

 

373 Smithtown Bypass, Suite 198 Hauppaguge, NY 11788

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

_________________

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 43,918,800 shares of common stock issued and outstanding as of August 19, 2014.

 

 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION			3
Item 1.	Financial Statements			3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			15
Item 4.	Controls and Procedures			15
PART II – OTHER INFORMATION				16
Item 1.	Legal Proceedings			16
Item 1A.	Risk Factors			16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			16
Item 3.	Defaults Upon Senior Securities			16
Item 4.	Mine Safety Disclosures			16
Item 5.	Other Information			16
Item 6.	Exhibits			17
SIGNATURES				18

 

2

 

PART I. FINANCIAL INFORMATION

 

Safe Harbor Statement

 

This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

 

These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: growth and anticipated operating results; developments in our markets and strategic focus; product development and reseller relationships and future economic and business conditions. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.

 

ITEM 1. Financial Statements

 

The unaudited interim financial statements of XR Energy, Inc. (the “Company,” “XR,” “we,” “our,” or “us”) follow. All currency references in this report are in U.S. dollars unless otherwise noted.

 

3

 

XR Energy, Inc. and Subsidiary

Condensed Consolidated Balance Sheet

As of June 30, 2014

 

				June 30,
				2014
				(Unaudited and Unreviewed)
Assets
Current Assets
	Cash and Cash Equivalents			$	-
	Accounts Receivable				19,479
	Accrued Commissions Receivable				1,052
		Total Current Assets			20,531
	Leasehold Interests, Net				125,000
	Customer Lists, Net				4,861
		Total Assets		$	150,392
Liabilities and Stockholders' Equity (Deficit)
	Current Liabilities
	Accounts Payable and Accrued Expenses			$	44,643
	Note Payable				7,500
		Total Current Liabilities			52,143
		Total Liabilities			52,143
Stockholders' Equity (Deficit)
	Series A Convertible Preferred Stock, par value $.0001, 50,000,000 shares authorized, 10,000,000 shares issued and outstanding				1,000
	Common Stock, $.0001 par value, 500,000,000 shares authorized, 43,918,800 shares issued and outstanding				4,392
	Additional Paid-In Capital				14,050,711
	Accumulated Deficit				(13,957,854	)
		Total Stockholders' Equity (Deficit)			98,249
		Total Liabilities and Stockholders' Equity (Deficit)		$	150,392

 

See accompanying notes to the condensed consolidated financial statements

 

4

 

XR Energy, Inc. and Subsidiary

Condensed Consolidated Statements of Operations

For The Periods Ended June 30, 2014

(Unaudited and Unreviewed)

 

						For The Period
		For The Three				February 7, 2014
		Months Ended				(Inception) To
		June 30, 2014				June 30, 2014
Sales of Oil		$	20,420			$	20,420
Commission Income			351				351
Total Revenues			20,771				20,771
Oil Lease Operating Costs			12,396				12,396
General anl Administrative Expenses			15,759				16,896
Total Costs and Expenses			28,155				29,292
Loss From Operations			(7,384	)			(8,521	)
Other Income (Expenses);
Issuance of Series A Convertible Preferred Stock to The Majority Shareholder			(10,200,000	)			(10,200,000	)
Loss on Impairment of Goodwill Related to The Reverse Acquisition of XR Energy, Inc.			(3,749,333	)			(3,749,333	)
(Loss) Before Income Taxes			(13,956,717	)			(13,957,854	)
Provision (Credit) For Income Taxes			-				-
Net (Loss)			(13,956,717	)			(13,957,854	)
Net (Loss ) Per Common Share;
Basic and Diluted		$	(0.41	)		$	(0.43	)
Weighted Average Common Shares Outstanding;
Basic and Diluted			34,144,396				32,619,028

 

See accompanying notes to the condensed consolidated financial statements

 

5

 

XR Energy, Inc. and Subsidiary

Condensed Consolidated Statement of Stockholders' Equity

For The Period February 7, 2014 (Inception) To June 30, 2014

(Unaudited and Unreviewed)

 

			Common Stock								Series A Convertible Preferred								Additional								Total
			Number of				Par				Number of				Par				Paid-In				Accumulated				Stockholders'
			Shares				Value				Shares				Value				Capital				Deficit				Equity
	Issuance of common shares for services			1,000,000			$	100											$	900							$	1,000
	Issuance of common shares to acquire leasehold interests effective June 1, 2014			29,000,000				2,900												122,100								125,000
	Common shares retained by pre-reverse acquisition shareholders			3,818,800				382												3,703,078								3,703,460
	Conversion of convertible promissory note and related accrued interest			10,100,000				1,010												25,633								26,643
	Issuance of Series A Convertible Preferred Stock to the majority shareholder											10,000,000			$	1,000				10,199,000								10,200,000
	Net (loss) for the period February 7, 2014 (inception) to June 30, 2014																						$	(13,957,854	)			(13,957,854	)
Balance, June 30, 2014				43,918,800			$	4,392				10,000,000			$	1,000			$	14,050,711			$	(13,957,854	)		$	98,249

 

See accompanying notes to condensed consolidated financial statements

 

6

 

XR Energy, Inc. and Subsidiary

Condensed Consolidated Statement of Cash Flows

For The Period February 7, 2014 (Inception) To June 30, 2014

(Unaudited and Unreviewed)

 

Cash Flows from Operating Activities:
	Net (Loss)				$	(13,957,854	)
	Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
		Issuance of Series A Convertible Preferred Stock to the Majority Shareholder				10,200,000
		Issuance of Common Shares for Services				1,000
		Amortization of Customer Lists				139
		Loss on Impairment of Goodwill Related to The Reverse Acquisition of XR Energy, Inc.				3,749,333
		Changes in Operating Assets and Liabilities:
			Accounts Receivable			(19,479	)
			Accrued Commissions Receivable			(351	)
			Accounts Payable and Accrued Expenses			27,212
		Total Adjustments				13,957,854
		Net cash provided by (used in) operating activities				-
Net increase (decrease) in cash and cash equivalents						-
Cash and Cash Equivalents, Beginning of Period						-
Cash and Cash Equivalents, End of Period					$	-
	Supplemental disclosures:
		Interest and Taxes paid:
			Interest Expense		$	-
			Income Taxes		$	571
Non-Cash Financing and Investing Activities
	Amount Due Former Officer Paid Directly By Third Party In Connection With The Reverse Acquisition				$	7,500
	Common Shares Issued In Satisfaction of Convertible Note and Accrued Interest				$	26,643
	Common Shares Issued To Acquire Leasehold Interests				$	125,000
	Common Shares Retained By Pre-Reverse Acquisition
		Shareholders Related To The Reverse Acquisition of XR Energy, Inc.			$	3,703,460

 

See accompanying notes to the condensed consolidated financial statements

 

7

 

XR Energy, Inc. and Subsidiary

Notes to Condensed Consolidated Financial Statements

For The Period February 7, 2014 (Inception) To June 30, 2014 (Unaudited and Unreviewed)

 

(1) Organization and Business Description

 

XR Energy, Inc. (“XR” or the “Company”) was incorporated under the laws of the State of Nevada on August 31, 2009. XR offers energy consulting services to smaller sized middle market companies in the New York Metropolitan Area and earns a commission from the related utility, or Energy Service Company (“ESCO”), for energy supply brokered and sold to its customers.

 

Effective June 1, 2014 (pursuant to an Acquisition Agreement dated March 11, 2014), XR acquired 100% of the outstanding capital stock of XR Energy of Texas, Inc (“XRT”) in exchange for XR delivering 30,000,000 of newly issued shares of XR common stock to the former XRT shareholders (see Note 3). After the exchange, the former XRT shareholders owned approximately 88.7% of the issued and outstanding shares of XR common stock. Accordingly, the Company has deemed XRT to be the accounting acquirer for financial reporting purposes. The accompanying consolidated financial statements reflect the assets, liabilities and operations of XRT from its inception on February 7, 2014 to June 1, 2014 and XRT and XR thereafter.

 

Effective May 31, 2014, XRT acquired certain oil leasehold interests located in Texas from Sterling Properties, LLC (“Sterling”) in exchange for XRT delivering 96,667 shares of XRT common stock to Sterling, representing approximately 96.7% of the issued and outstanding shares of XRT common stock after the exchange. Sterling is owned by family of Akram Chaudhary, the Company’s Chief Executive Officer.

 

Going Concern Uncertainty

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates the Company continuing as a going concern. As of June 30, 2014, the Company had cash of $0 and a working capital deficit of $31,612. For the period February 7, 2014 (inception) through June 30, 2014, the Company had a loss from operations of $8,521. These factors raise substantial doubt as to the ability of the Company to continue as a going concern. However, the Company plans to improve its financial condition by raising additional capital by selling shares of its common stock. Also, the Company plans to acquire additional oil leasehold interests in order to attain profitable operations. However, there is no assurance that the Company will be successful in accomplishing these objectives. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

(2) Interim Financial Statements

 

The accompanying unaudited interim financial statements of XR Energy, Inc. (the “Company”) have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for annual audited financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

 

8

 

XR Energy, Inc. and Subsidiary

Notes to Condensed Consolidated Financial Statements

For The Period February 7, 2014 (Inception) To June 30, 2014 (Unaudited and Unreviewed)

 

The results of operations for the periods ended June 30, 2014 are not necessarily indicative of the results to be expected for the period ending December 31, 2014. The accompanying unaudited interim financial statements should be read in conjunction with the Company’s audited financial statements and notes related thereto for the years ended December 31, 2012 and 2013 included in our Form 10-K filed with the SEC.

 

(3) Acquisition of XR Energy of Texas, Inc.

 

As described in Note 1 above, XR Energy of Texas, Inc. (“XRT”) was deemed to have acquired XR Energy, Inc. (“XR”) effective June 1, 2014. The identifiable net assets of XR at the June 1, 2014 date of acquisition date were;

 

Accounts receivable		$	701
Customer list			5,000
Total Assets		$	5,701
Accounts payable and accrued expenses		$	10,963
Due to officer			15,611
Convertible note payable			25,000
Total Liabilities			51,574
Negative Identifiable Net Assets		$	(45,873	)

 

As the Company believed that the fair value of XR was $0 at June 1, 2014, goodwill of $3,749,333 (excess of $3,703,460 fair value of 3,818,800 shares of XR common stock retained by pre-reverse acquisition shareholders over the negative $45,873 value of XR’s identifiable net assets other than goodwill) was written off as an impairment loss on the date of acquisition.

 

The operating results of XR have been included in the Company’s condensed consolidated financial statements only from the June 1, 2014 date of acquisition. The following pro-forma information summarizes the results of operations for the period February 7, 2014 (inception) to June 30, 2014 as if the acquisition had occurred on February 7, 2014. The pro-forma information is not necessarily indicative of the results that would have been reported had the transaction actually occurred on February 7, 2014, nor is it intended to project results of operations for any future period.

 

Revenues		$	22,516
Net loss		$	(13,957,854	)
Net loss per
Common share		$	(.43

 

(4) Related Party Transactions

 

Included in Accounts Payable and Accrued Expenses at June 30, 2014 is $8,925 due to a company which is owned by the former Chief Executive Officer of XR for rent and related costs for office space utilized by XR under a verbal month-to-month agreement. This agreement terminated effective March 31, 2014.

 

9

 

XR Energy, Inc. and Subsidiary

Notes to Condensed Consolidated Financial Statements

For The Period February 7, 2014 (Inception) To June 30, 2014 (Unaudited and Unreviewed)

 

(5) Leasehold Interests, Net

 

Leasehold interests, net as of June 30. 2014 consisted of the following;

 

Chrane leases (Taylor County, Texas) –
75% net revenue interest in seven (7) producing oil wells		$	65,000
Brown Snyder lease (Jones County, Texas) –
75% net revenue interest in one (1) producing oil well			40,000
Burnett Tidewater leases (Wichita County, Texas) –
75% net revenue interest in seven (7) producing oil wells			20,000
L.F. Taylor lease (Haskell County, Texas) –
75% net revenue interest in one (1) producing oil well			-
Total			125,000
Less: Accumulated depreciation, depletion and amortization			-
Leasehold interests, net		$	125,000

 

The above leasehold interests were acquired effective May 31, 2014 from Sterling. Sterling acquired the leases from various entities controlled by the Company’s Chief Executive Officer, Akram Chaudhary (“Chaudhary”). Accordingly, the leasehold interests acquired from Sterling were recorded at the estimated original cost to Chaudhary’s affiliates in arms length transactions less estimated applicable depreciation, depletion and amortization commencing from the respective original acquisition dates.

 

(6) Note Payable

 

Note Payable at June 30, 2014 represents the balance due Beacon Capital, LLC (“Beacon”) that resulted from a payment made directly to the former Chief Executive Officer of XR at closing of the reverse acquisition for monies owed by XR. The amount due is non-interest bearing and is payable on demand.

 

(7) Convertible Note Payable

 

As of September 13, 2013, XR had borrowed $25,000 and had accrued interest in the amount of $808 related to a Promissory Note payable to the former Chief Executive Officer (the “Holder”). On September 13, 2013, the Holder sold this Promissory Note to an unrelated third party (Beacon) for face value. The purchaser and XR agreed to extend the due date for an additional six months through March 12, 2014 (“Maturity Date”) under the same terms and conditions. On November 25, 2013, this note was amended to add a conversion feature whereby the note was convertible in whole or in part, at the sole discretion of the holder, beginning after the Maturity Date into shares of common stock at a conversion price of $.0025 per share. Since the common stock had not yet begun trading, XR did not recognize any beneficial conversion feature debt discount from this November 25, 2013 amendment. On March 4, 2014, XR and Beacon Capital, LLC agreed to extend the Maturity Date of the Convertible Promissory Note for an additional six months to September 12, 2014. This note, plus accrued interest of $1,643, was fully converted on June 11, 2014 for 10,100,000 shares of common stock.

 

10

 

XR Energy, Inc. and Subsidiary

Notes to Condensed Consolidated Financial Statements

For The Period February 7, 2014 (Inception) To June 30, 2014 (Unaudited and Unreviewed)

 

(8) Capital Stock

 

Effective May 14, 2014, the Company increased its authorized shares of common stock from 100,000,000 to 500,000,000 shares and authorized 50,000,000 shares of preferred stock, with a par value of $.0001.

 

On June 1, 2014, the Company delivered to XRT 30,000,000 newly issued shares in the name of XRT Shareholders in exchange for 100% of the XRT shares. Concurrently, the Company’s controlling shareholders delivered and assigned a total of 19,000,000 shares registered in their names to the Company for cancellation. The transaction was accounted for as a reverse acquisition in which XRT is deemed to be the accounting acquirer. The capital balances have been retroactively adjusted to reflect the reverse acquisition.

 

On June 5, 2014, the Board authorized and issued 10,000,000 shares of Series A Convertible Preferred Stock to Sterling Properties, LLC, the majority shareholder of the Company and an entity owned by the family of the Company’s Chief Executive Officer. The Series A Preferred Stock has 25 votes for each share, but no less than the majority of voting rights, has a liquidation preference of $0.0001 per share and does not participate in any dividend declared with respect to the common stock. Also, each outstanding share of Series A Preferred Stock is convertible at the option of the holder into one share of the Company’s common stock. As a result, the Company recognized a non-cash charge of $10,200,000 based on the fair-market value of the underlying common stock on the date of issuance, which was $1.02 per share. This non-cash charge was recorded as an Other Expense with a corresponding offset to Additional Paid-in Capital.

 

(9) Earnings (Loss) Per Share

 

Basic net income (loss) per share (“EPS”) is determined by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings (loss) by the weighted average number of common shares used in the basic EPS calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method.

 

As of June 30, 2014 there were 10,000,000 potentially dilutive common shares that were excluded from the EPS calculation because their inclusion would have been anti-dilutive for the periods ended June 30, 2014.

 

 

11

 

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

 

As used in this Form 10-Q, references to “XR Energy,” the “Company,” “we,” “our” or “us” refer to XR Energy Inc. unless the context otherwise indicates.

 

Forward-Looking Statements

 

The following discussion and analysis and results of operations should be read in conjunction with our unaudited financial statements and accompanying notes and the other financial information which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

For a description of such risks and uncertainties, refer to our Registration Statement on Form S-1 which was declared effective by the Securities and Exchange Commission on July 19, 2012 (registration statement no. 333-178156). While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws.

 

Business Overview

 

XR Energy, Inc. (“XR” or the “Company”) was incorporated under the laws of the State of Nevada on August 31, 2009. XR offers energy consulting services to smaller sized middle market companies in the New York Metropolitan Area and earns a commission from the related utility, or Energy Service Company (“ESCO”), for energy supply brokered and sold to its customers.

 

Recent Developments

 

Acquisition of XR Energy of Texas, Inc.

 

Effective June 1, 2014 (pursuant to an Acquisition Agreement dated March 11, 2014), XR acquired 100% of the outstanding capital stock of XR Energy of Texas, Inc (“XRT”) in exchange for XR delivering 30,000,000 of newly issued shares of XR common stock to the former XRT shareholders. After the exchange, the former XRT shareholders owned approximately 88.7% of the issued and outstanding shares of XR common stock. Accordingly, the Company has deemed XRT to be the accounting acquirer for financial reporting purposes. The consolidated financial statements reflect the assets, liabilities and operations of XRT from its inception on February 7, 2014 to June 1, 2014 and XRT and XR thereafter.

 

Effective March 20, 2014, Tara Muratore resigned as a director and Chief Financial Officer of the Company and was replaced by David Taylor. Effective April 4, 2014, Anthony Muratore resigned as a director and Chief Executive Officer of the Company and was replaced by Akram Chaudhary, the Chief Executive Officer of XRT.

 

12

 

Results of Operations

 

For The Period February 7, 2014 (Inception) Through June 30, 2014

 

Revenues

 

Revenues for the period totaled $20,771 of which $20,420 was directly related to sales of crude oil in XRT that began in June and $351 was related to commission income generated in XR in June. 

 

Oil Lease Operating Costs

 

Oil lease operating costs for the period were $12,396, or 60% of crude oil sales generated by XRT, which resulted in a gross margin of $8,024, or 40%.

 

General and Administrative Expenses

 

General and administrative expenses for the period were $16,896 of which $8,074 was incurred by XRT, primarily professional fees of $6,335, and $8,822 was incurred by XR, primarily professional fees of $5,750.

 

Loss From Operations

 

The loss from operations for the period was $8,521 that resulted primarily from the loss generated by XR of $8,471.

 

Other Income (Expenses)

 

Includes an expense related to issuance of Series A Convertible Preferred during the second quarter of 2014 that was calculated based on the fair-market-value of the underlying common stock on the date of issuance. This non-cash charge of $10,200,000 was not included in general and administrative expenses so that the periods presented would be more comparable. Also includes an expense related to the loss on impairment of goodwill of $3,749,333 related to the reverse merger transaction.

 

 For The Three Months Ended June 30, 2014

 

Revenues

 

Revenues for the period totaled $20,771 of which $20,420 was directly related to sales of crude oil in XRT that began in June and $351 was related to commission income generated in XR in June. 

 

13

 

Oil Lease Operating Costs

 

Oil lease operating costs for the period were $12,396, or 60% of crude oil sales generated by XRT, which resulted in a gross margin of $8,024, or 40%.

 

General and Administrative Expenses

 

General and administrative expenses for the period were $15,759 of which $6,937 was incurred by XRT, primarily professional fees of $5,500, and $8,822 was incurred by XR, primarily professional fees of $5,750.

 

Loss From Operations

 

The loss from operations for the period was $7,384 that resulted from the loss generated by XR of $8,471.

 

Other Income (Expenses)

 

Includes an expense related to issuance of Series A Convertible Preferred during the second quarter of 2014 that was calculated based on the fair-market-value of the underlying common stock on the date of issuance. This non-cash charge of $10,200,000 was not included in general and administrative expenses so that the periods presented would be more comparable. Also includes an expense related to the loss on impairment of goodwill of $3,749,333 related to the reverse merger transaction.

 

Liquidity and Capital Resources

 

As of June 30, 2014, the Company had a cash balance of $0. The continuation of the Company as a going concern is dependent upon its ability to identify future investment opportunities, obtain the necessary debt or equity financing and generate earnings from future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

As of September 13, 2013, the Company had borrowed $25,000 related to a Promissory Note payable to the former Chief Executive Officer (the “Holder”). On September 13, 2013, the Holder sold this Promissory Note to an unrelated third party (Beacon Capital, LLC) for face value. The purchaser and the Company agreed to extend the due date for an additional six months through March 12, 2014 (“Maturity Date”) under the same terms and conditions. On November 25, 2013, this note was amended to add a conversion feature whereby the note is convertible in whole or in part, at the sole discretion of the holder, beginning after the Maturity Date into shares of common stock at a conversion price of $.0025 per share. Since the common stock had not yet begun trading, the Company did not recognize any beneficial conversion feature debt discount from this November 25, 2013 amendment. On March 4, 2014, the Company and Beacon Capital, LLC agreed to extend the Maturity Date of the Convertible Promissory Note for an additional six months to September 12, 2014. This note, plus accrued interest of $1,643, was fully converted on June 11, 2014 for 10,100,000 shares of common stock.

 

We currently have no other commitments with any person for any capital expenditures.

 

14

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Michael T. Studer CPA P.C. is our auditors. There have not been any changes in or disagreements with accountants on accounting and financial disclosure or any other matter.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company” as defined by Rule 229.10(f)(1), we are not required to provide the information required by this Item 3.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on our evaluation, management concluded that our internal control over financial reporting was effective as of March 31, 2014.

 

Changes in Control Over Financial Reporting

 

During our most recent fiscal quarter, there has not occurred any change in our internal control over financial reporting (as such term is defined in Rule 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

15

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

 

Item 1A. Risk Factors

 

As a “smaller reporting company” as defined by Rule 229.10(f)(1), we are not required to provide the information required by this Item 1A.

 

Purchases of equity securities by the issuer and affiliated purchasers

 

None.

 

Item 2. Unregistered Sale of Securities and Use of Proceeds

 

None.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other information

 

N/A

 

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Item 6. Exhibits

 

Exhibit No.		Description		Location
3.1		Articles of Incorporation of XR Energy, Inc		Incorporated by reference to Exhibit 3.1 to Registrant’s SEC Form S-1 filed on November 23, 2011
3.2		By-laws of XR Energy, Inc		Incorporated by reference to Exhibit 3.1 to Registrant’s SEC Form S-1 filed on November 23, 2011
4.1		Promissory Note		Incorporated by reference to Exhibit 4.1 to Registrant’s Amendment No. 1 to SEC Form S-1 filed on May 15, 2012
10.1		Consulting Agreement dated September 22, 2009 between XR Energy Inc. and RJB Consulting Inc		Incorporated by reference to Exhibit 3.1 to Registrant’s SEC Form S-1 filed on November 23, 2011
10.2		Consulting Agreement dated September 22, 2009 between XR Energy Inc. and Stephen Giametta		Incorporated by reference to Exhibit 3.1 to Registrant’s SEC Form S-1 filed on November 23, 2011
10.3		Consulting Agreement dated September 22, 2009 between XR Energy Inc. and Andew Vicari		Incorporated by reference to Exhibit 3.1 to Registrant’s SEC Form S-1 filed on November 23, 2011
10.4		Compensation Agreement dated August 2, 2010 between XR Energy Inc. and East Coast Power, LLC		Incorporated by reference to Exhibit 10.5 to Registrant’s Amendment No. 3 to SEC Form S-1 filed on June 29, 2012.
10.5		Representative & Fee Agreement dated May 23, 2012 between Lexington Power & Light LLC. and East Coast Power, LLC		Incorporated by reference to Exhibit 10.5 to Registrant’s Amendment No. 3 to SEC Form S-1 filed on June 29, 2012.
31.1		Rule 13a-14(a)/15d-14(a) Certifications of Akram Chaudhary, President		Filed herewith.
31.2		Rule 13a-14(a)/15d-14(a) Certifications of David Taylor, Treasurer		Filed herewith.
32.1		Section 1350 Certifications of Akram Chaudhary, President		Filed herewith.
32.2		Section 1350 Certifications of David Taylor, Treasurer		Filed herewith.

 

101.INS		XBRL Instance Document**		Filed herewith.
101.SCH		XBRL Taxonomy Extension Schema Document**		Filed herewith.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**		Filed herewith.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**		Filed herewith.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document**		Filed herewith.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**		Filed herewith.

 ______________

*Filed herewith.

 

**Furnished herewith.

 

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SIGNATURES

 

Pursuant to the requirements 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.

 

 

	XR ENERGY INC.
Dated: August 25, 2014	By:	/s/ Akram Chaudhary
	Name:	Akram Chaudhary
	Title:	President (principal executive officer) and Director

 

 

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