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 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
We were formed to offer energy consulting
services to smaller sized middle market companies, which are companies generating less than $5,000,000 a year in revenues.
The Company will analyze customer’s energy consumption and recommend energy saving solutions.
Subsequent Event
Acquisition of XR Energy of Texas, Inc.
On March 11, 2014, the Company executed
an Acquisition Agreement (the “Agreement”) with XR Energy of Texas Inc. (“XRT”) and its shareholders holding
100% of the issued and outstanding shares (the Shares”) dated February 28, 2014. XRT represented to the Company that it is
a Texas corporation that owns certain oil and natural gas leases located in Texas. The Agreement calls for the Company to
deliver to XRT 30,000,000 newly issued shares in the name of XRT Shareholders (29,000,000 shares to Sterling Royalties LLC
and 1,000,000 shares to Global Media Network USA, Inc.) in exchange for 100% of the XRT shares. Concurrently, the Company’s
controlling shareholders are to deliver and assign a total of 19,000,000 shares registered in their names to the Company for cancellation.
Closing of the Agreement is anticipated sometime in May 2014.
XRT represented to the Company that it
is a Texas corporation that owns certain oil and natural gas leases located in Texas.
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.
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Results of Operations
Comparison of Three Months Ended March
31, 2014 and 2013:
Revenues
For the three months ended March 31, 2014,
we had $1,044 in income as compared to $1,777 of income for the three months ended March 31, 2013. This income was collected
from East Coast Power, LLC.
Total operating expenses
For the three months ended March 31, 2014 total
operating expenses were $10,854 which primarily consisted of $8,400 for professional fees, $372 in transfer agent fees, $525 for
rent and utilities, $1,191 for filing fees and $312 for interest expense, as compared to $17,350 of operating expenses for the
three months ended March 31, 2013 which consisted primarily of $6,750 for professional fees, $9,500 for transfer agent fees and
$525 for rent and utilities. The decrease in operating expenses was primarily a result of a decrease in transfer agent fees.
Net loss
Net loss for the
three months ended March 31, 2014 was $9,810, as compared to net loss of $15,573 for the three months ended March 31,
2013. The decrease in net loss was primarily the result of a decrease in the amount of transfer agent fees.
Liquidity and Capital Resources
As of March 31, 2014, the Company had
a cash balance of $2,189. The continuation of the Company as a going concern is dependent upon the continued financial
support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity
financing, and generating profitable operations from the Company’s 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 August 12, 2014.
We currently have no other commitments
with any person for any capital expenditures.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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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.