Massive Interactive, Inc. - FORM 10-Q

Attached files

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EX-31.1 - CERTIFICATION PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - Massive Interactive, Inc.	exhibit_31-1.htm
EX-32.2 - CERTIFICATION PURSUANT TO 18 U.S.C. ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. - Massive Interactive, Inc.	exhibit_32-2.htm
EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. - Massive Interactive, Inc.	exhibit_32-1.htm
EX-31.2 - CERTIFICATION PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - Massive Interactive, Inc.	exhibit_31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

EXCHANGE ACT OF 1934

For the quarter ended June 30, 2013

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Commission file number 0-53892

Xtreme Oil & Gas, Inc.

(Name of small business issuer in its charter)

Nevada		20-8295316
(State or other jurisdiction of incorporation or organization)		(I.R.S Employer Identification No.)

5700 W. Plano Parkway, Suite 3600	75093
(Address of principal executive offices)	(Zip Code)

(214) 432-8002
(Registrant’s telephone number, including area code)

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 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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 x No o

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	o	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	x

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

State the number of shares outstanding of each of the issuer's classes of common equity as of August 14, 2013: 189,114,691.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

XTREME OIL & GAS , INC.
BALANCE SHEETS
As of June 30, 2013 and December 31, 2012

	2013		2012
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	31,984	$	26,354
Cash - restricted		25,313		75,313
Accounts receivable – trade, net		22,430		27,257
Other receivable		55,300		-
Total Current Assets		135,027		128,924

PROPERTY AND EQUIPMENT:
Furniture and fixtures		53,044		53,044
Oil and natural gas properties (successful efforts method)		6,912,118		8,584,572
		6,965,162		8,637,616
Less-accumulated depreciation, depletion and amortization		113,747		112,467
Net property and equipment		6,851,415		8,525,149

Deposits		6,537		57,887
TOTAL ASSETS	$	6,992,979	$	8,711,960

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	126,487	$	1,811,271
Deposits payable		-		1,126,320
Advances, related parties		-		101,093
Accounts payable – related parties		-		391,418
Short-term notes payable		-		114,000
Short-term notes payable – related parties		-		250,000
Convertible notes payable, net of debt discount		282,445		1,750,615
Derivative liability		26,086		405,473
Total Current Liabilities		435,018		5,950,190

LONG-TERM LIABILITIES
Asset retirement obligation		300,000		300,000
Total-long term liabilities		300,000		300,000
TOTAL LIABILITIES		735,018		6,250,190

Commitments and contingencies

STOCKHOLDERS' EQUITY:
Preferred A stock, $0.001 par value, 49,999,000 shares authorized; 3,694,000 and 0 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively		3,694		-
Non-transferable preferred stock, $0.001 par value, 1,000 shares authorized, 1,000 shares issued and outstanding		1		1
Common stock, $0.001 par value; 200,000,000 shares authorized; 189,114,691 and 47,198,692 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively		189,115		47,198
Additional paid-in capital		41,400,662		36,208,959
Accumulated deficit		(35,335,511)		(33,794,388)
Total Stockholders' Equity		6,257,961		2,461,770
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	6,992,979	$	8,711,960

See accompanying notes to financial statements.

XTREME OIL & GAS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)

	Three months ended June 30, 2013			Three months ended June 30, 2012			Six months ended June 30, 2013			Six months ended June 30, 2012
Revenues:
Income from sales of working interest, net	$	21,514		$	161,755		$	65,876		$	1,032,480
Oil and gas sales		4,451			25,710			9,053			46,835
TOTAL REVENUES		25,965			187,465			74,929			1,079,315

EXPENSES:
Production costs		1,190			24,203			1,649			35,886
Workover costs		-			(43,425	)		-			22,536
Depreciation, depletion and amortization expense		640			27,411			1,280			70,925
General and administrative expenses		1,430,919			336,858			1,674,471			743,866
Loss on disposal of properties		68,123			7,174			68,123			20,963
TOTAL OPERATING EXPENSES		1,500,872			352,221			1,745,523			894,176

INCOME (LOSS) FROM OPERATIONS		(1,474,907	)		(164,756	)		(1,670,594	)		185,139

OTHER INCOME/(EXPENSE)
Gain on settlement		-			24			-			478,939
Gain on debt forgiveness		(35,863	)		-			8,525			-
Amortization of debt discounts		-			(245,880	)		-			(538,886	)
Interest expense, net		38,747			(70,117	)		(23,724	)		(134,946	)
Derivative income		95,378			2,508,577			135,174			1,425,209
Loss on extinguishment of debt		-			(22,565	)		-			(80,507	)
Total other income (expense)		98,262			2,170,039			119,975			1,149,809

Net income (loss) from continuing operations		(1,376,645	)		2,005,283			(1,550,619	)		1,334,948
Net income from discontinued operations		9,625			22,563			9,496			437,936
Net income (loss)	$	(1,367,020	)	$	2,027,846		$	(1,541,123	)	$	1,772,884

Earnings per common share – basic & diluted
Net income (loss) from continuing operations	$	(0.01	)	$	0.04		$	(0.02	)	$	0.03
Net income from discontinued operations	$	0.00		$	0.00		$	0.00		$	0.01
Net income (loss)	$	(0.01	)	$	0.04		$	(0.02	)	$	0.04

Weighted average common shares - basic		143,850,921			45,394,239			100,215,235			45,383,703
Weighted average common shares - diluted		144,893,674			45,394,239			100,215,235			45,383,703

See accompanying notes to financial statements.

XTREME OIL & GAS, INC.
STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2013 and 2012
(Unaudited)
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations	$	(1,550,619	)	$	1,334,948
Income from discontinued operations		9,496			437,936
Net income (loss)		(1,541,123	)		1,772,884
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization		1,280			70,925
Gain on debt forgiveness		(26,966	)		-
Loss on debt extinguishment		-			80,507
Common stock issued for services		18,938			37,731
Preferred stock issued for services		1,484,660			-
Gain on settlement		-			(927,771	)
Income from sale of working interest		(68,477	)		(1,032,480	)
Bad debt expense		11,021			-
Loss on disposal of properties		68,123			28,617
Amortization of debt discount		-			538,886
Derivative income		(135,174	)		(1,425,209	)
Changes in operating assets and liabilities:
Accounts receivable - trade		(6,194	)		(5,564	)
Other receivable		(55,300	)		-
Development work in process		-			(82,786	)
Prepaid expenses		-			(325,000	)
Accounts payable and accrued expenses		(188,195	)		205,188
Accounts payable – related parties		(32,500	)		151,200
Deposits		51,350			-
Deposits payable		4,069			1,510,475
Net cash provided by (used in) operating activities		(414,488	)		597,603

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets		341,000			150,000
Capital expenditures		(14,822	)		(997,842	)
Restricted cash		50,000			-
Net cash provided by (used in) investing activities		376,178			(847,842	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on convertible notes payable		-			(538,896	)
Proceeds from short-term notes payable – related parties		50,000			250,000
Payments to advances – related parties		(15,760	)		-
Proceeds from advances – related parties		9,700			70,000
Net cash provided by (used in) financing activities		43,940			(218,896	)

Net change in cash		5,630			(469,135	)
CASH AT BEGINNING PERIOD		26,354			484,970
CASH AT END OF PERIOD	$	31,984		$	15,835

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest expense	$	23,724		$	138,946
Cash paid for income taxes	$	-		$	-

Deposits applied to sale of assets	$	70,487		$	2,585,719
Development work in process reclassified to oil and gas properties	$	-		$	505,038
Common stock issued for convertible notes payable and accrued interest	$	1,505,700		$	-
Inventory reclassified to oil and gas properties	$	-		$	62,028
Notes payable-related party issued for oil and gas properties	$	-		$	75,600
Note payable-related party issued for oil and gas properties applied to sale of assets	$	-		$	1,050,720
Issuance of Preferred A Stock for settlement of debt	$	2,083,801		$	-

See accompanying notes to financial statements.

XTREME OIL & GAS, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions of Regulation S-K. They do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended December 31, 2012 included in the Company’s Form 10-K. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

Accounting Estimates

The preparation of the accompanying unaudited financial statements requires the use of estimates that affect the reported amounts of assets, liabilities, revenues, expenses and contingencies. These estimates include, but are not limited to, estimates related to revenue recognition, allowance for doubtful accounts, inventory valuation, tangible and intangible long-term asset valuation, obligations and commitments. Estimates are updated on an ongoing basis and are evaluated based on historical experience and current circumstances. Changes in facts and circumstances in the future may give rise to changes in these estimates which may cause actual results to differ from current estimates.

Reclassifications

Certain amounts in the prior period financial statements may have been reclassified to conform to the current period presentation. These reclassifications have no impact on net loss.

Recent Accounting Pronouncements

Management does not expect the impact of any other recently issued accounting pronouncements to have a material impact on its financial condition or results of operations.

2. HISTORY AND NATURE OF BUSINESS

Xtreme Oil & Gas, Inc. (the “Company” formerly Xtreme Technologies, Inc.), a Nevada corporation formed on October 3, 2006 is organized to engage in the acquisition, operation and development of oil and natural gas properties located in Texas and the southeast region of the United States. Effective December 29, 2006, Xtreme Technologies, Inc., a then Washington corporation, acquired Emerald Energy Partners, Inc., (“Emerald”) a Nevada corporation, in exchange for the issuance of 7,960,000 shares of the Company’s common stock and changed the Company’s name to Xtreme Oil & Gas, Inc. (“Xtreme”).

For accounting purposes this transaction was treated as an acquisition of Xtreme Technologies, Inc. and a re-capitalization of Emerald. Emerald is the accounting acquirer and the results of its operations carry over. Accordingly, the operations of Xtreme Technologies, Inc. were not carried over and were adjusted to $0 at the date of the merger.

Recent Events

On April 15, 2013, the Company entered into an agreement with Torchlight Energy, Inc. (“Torchlight”) related to Xtreme’s Kansas, or Smokey Hills, prospect and all of the Company’s properties in Oklahoma.

Torchlight has acquired one-half of the Company’s interest in the Smokey Hills prospect and assumed the Company’s obligation to complete the first well drilled on the prospect plus additional costs previously billed to Xtreme by the operator. Torchlight has assumed Xtreme’s obligation under its working interest in the prospect to drill the planned second well.

With respect to the Oklahoma properties, the Company has conveyed half of its working interest and all related equipment in the Lenhart well to Torchlight and Torchlight has acquired all of the Company’s interest in the Robinson and Hancock wells. Torchlight has also acquired 90% of the Overriding Royalty Interest in the Company’s Salt Water Disposal Well and Facility, as defined, but such interest is junior to the interests of investors in the well. In its discretion, Torchlight will pay the cost to re-enter the Lenhart well.

XTREME OIL & GAS, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

2. HISTORY AND NATURE OF BUSINESS - continued

These transactions provide the resources to develop further wells that working interest owners in the various prospects own.

Cash payments to the Company, totaled $341,000. Other consideration paid on behalf of the Company to third parties totaled, $1,262,143. These payments have been completed.

The agreement also grants to Torchlight the option to acquire for $4,000,000 in Torchlight Common Stock the balance of the Company’s interest in the Smokey Hills prospect if the first well drilled reaches 300 barrels of equivalent per day. Torchlight also has the option to acquire the balance of the working interest in the Lenhart prospect for $1,000,000 in Torchlight Common Stock should that well reach 50 barrels of oil equivalent production per day. Both production goals must reach the level of defined production within 30 days of completion.

On May 9, 2013, completion work began on the Smokey Hills project and fracking was completed on June 14, 2013. The Operator has determined not to complete the first well and is reviewing whether to conduct vertical drilling operations around the first well.

Torchlight Energy is currently the operator of the Lenheart Oil Well project. They have re-entered the wellbore and begun completion operations into the Bartlesville formation.

The Company shall continue development opportunities of its largest prospect by asset valuation, the West Thrift Units.

On March 28, 2013, the Company formed a committee to advise the Company with respect to the Torchlight transaction discussed above. The committee consists of three stockholders of the Company, Brandon Chabner, Keith Houser, and Ben Doherty.

As part of the review of the Torchlight transaction, Torchlight had asked that Mr. McAndrew act as a consultant to Torchlight, necessitating a release by the Company of the Mr. McAndrew’s covenant not to compete with the Company. The committee approved that release. Accordingly, though Mr. McAndrew will remain the Company’s Chief Executive Officer and an employee of the Company, he will act as a consultant to Torchlight.

On May 2, 2013, we sold our wholly owned subsidiary, Xtreme Operating Co., LLC, to Heritage Oil and Gas, Inc., (“Heritage”) for $50,000 on an as is basis. Results of operations for our subsidiary are being shown as discontinued operations in the accompanying financial statements. Heritage assumed liabilities of $139,159 as part of the sale.

Nature of Business

Since its formation, the Company has been involved in the acquisition and management of fee mineral acreage and the exploration for and development of oil and natural gas properties, principally involving drilling wells located on the company’s mineral acreage. The Company’s mineral properties and other oil and natural gas interests are all located in the United States, primarily in Oklahoma, Kansas, and Texas. The majority of the Company’s oil and natural gas production is from its Texas wells for 2013 and 2012. Substantially all the Company’s oil and natural gas production is sold by the Company directly to independent purchasers.

The Company from time to time sells or otherwise disposes of its interest in oil and natural gas properties as part of the normal course of business.

XTREME OIL & GAS, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

3. OIL AND NATURAL GAS PROPERTIES

The Company has the following oil and natural gas properties:

Oil and gas property:	December 31, 2012		Additions		Dispositions		June 30, 2013
West Thrifty / Quita Field	$	4,984,040	$	-	$	-	$	4,984,040
Texas 5 Star		528,089		-		-		528,089
Quita Ellenberger Project		116,375		-		-		116,375
Smoky Hill		1,278,458		11,981		645,220		645,219
Hancock/Robinson		62,323		-		62,323		-
Lionheart		1,289,126		832		651,563		638,395
Gotcheye SWD Project		326,161		-		326,161		-
Total	$	8,584,572	$	12,813	$	1,685,267	$	6,912,118

Saltwater Disposal Property

During the second quarter 2012, the Company began full time operations taking saltwater from multiple water hauling companies in the area. We acquired a 10% working interest from the ADA Energy Services and took over operations on May 29, 2012 in exchange for a 5 cent per barrel of water disposed fee payable upon collecting revenue from disposal customers. With Torchlight’s acquisition of our saltwater disposal well we do not anticipate additional saltwater disposal wells in the foreseeable future. Torchlight is currently the operator of this project.

4. RELATED PARTY TRANSACTIONS AND NOTES PAYABLE

Effective as of December 1, 2009, the Company entered into employment agreements with our Chief Executive Officer, Willard G. McAndrew, our Chief Operating Officer, Nicholas DeVito, and our corporate Secretary, Phyllis Wingate. Each of these agreements had a term of five years. The Company entered into a similar agreement with Mr. Wurtele, our Chief Financial Officer, effective December 1, 2011. In the summer of 2012, the Company ceased to pay each of these individuals and was in breach of its agreement with each of them.

Effective May 15, 2013, the Company entered into a mutual release with each of the individuals whereby each of these individuals would be issued a new class of stock, Series A Preferred Stock, as compensation for back pay, consideration that was to be paid under the contract for breach, and, in certain circumstances, other obligations owned by the Company to the individuals. The agreement also releases each from an obligation not to engage in a conflict of interest. Each of the employees, other than Ms. Wingate, agreed to continue employment at an hourly rate for the time devoted to the necessary functioning of the Company but for at least $500 per month, but such employment may be ended at the election of Xtreme or the employee. The hourly rate of Messrs. McAndrew, DeVito, and Wurtele is $112.50, $93.75, and $62.50.

Each share of Series A Preferred Stock is convertible into 100 shares of Common Stock, subject to proportionate reduction where there is a reverse stock split. Once there are a sufficient number of shares authorized for the conversion, the holder may convert the shares at the holder’s discretion. The Series A Preferred Stock must be converted to Common Stock on April 14, 2014, unless there is not a sufficient number of shares authorized, but, in any event, must be converted after that date upon an adequate number of shares being authorized.

Based on the conversion price of the Company’s Convertible Debt, the Company issued to Willard McAndrew, Nicholas DeVito, Roger Wurtele, and Phyllis Wingate 1,250,000; 1,500,000; 400,000; and 84,000 shares of Series A Preferred Stock, respectively valued at $1,649,340. Under current accounting standards ASC 470-50-40-2 the extinguishment of related party debt for equity securities is considered a capital transaction and, accordingly, no gain or loss on the extinguishment is recognized in the statements of operations.

XTREME OIL & GAS, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

5. CONVERTIBLE NOTES PAYABLE

On September 12, 2011, the Company raised $2,360,000 in convertible notes. The notes bear an interest rate of 12% per annum and mature on September 12, 2013. Under the convertible note agreements, the lender has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s common stock; provided however, that in no event shall the lender be entitled to convert any portion of the notes that would result in the beneficial ownership by it and its affiliates to be more than 9.99% of the outstanding shares of the Company's common stock. The notes are convertible at a fixed conversion price of $0.28 per share. In addition, the Company issued warrants to acquire 6,810,269 shares of the Company’s common stock at a strike price of $0.28 per share. The warrants expire on September 12, 2016. The conversion price of the notes and warrants will be reduced in the event the Company issues or sells any shares of common stock less than the conversion price.

The Company delayed scheduled payments on the convertible notes for the months from June 2012 through June 2013. This resulted in a default on the note agreement. Interest is being accrued at a rate of 18% as a result of the default.

6. DERIVATIVE INSTRUMENTS

The Company’s debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

The identification of, and accounting for, derivative instruments is complex. Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For bifurcated conversion options that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using binomial option pricing model. That model requires assumptions related to the remaining term of the instrument and risk-free rates of return, our current Common Stock price and expected dividend yield, and the expected volatility of our Common Stock price over the life of the option.

In connection with the issuance of the notes and warrants, the conversion features are accounted for as derivative liabilities at the date of issuance and adjusted to fair value through earnings at each reporting date, due to reset and conversion features. The conversion price will be reduced in the event the Company issues or sells any shares of common stock less than the conversion price. The fair value was estimated on the date of grant using a binomial option-pricing model using the following weighted-average assumptions: expected dividend yield of 0%; expected volatility of 290%; risk-free interest rate of 0.05% and an expected holding period of 24 months for the notes and 60 months for the warrants. The resulting values, at the date of issuance, were allocated to the proceeds received and applied as a discount to the face value of the notes and warrants. The Company recorded a derivative expense on the notes of $649,212 at inception and a further derivative expense on the warrants of $2,431,437 at inception.

In regards to the September 12, 2011 notes, the Company recognized a derivative liability of $227,070 on December 31, 2012 and a change in fair value of $374,888 for the six months ended June 30, 2013, and redemptions of $588,676 for the six months ended June 30, 2013 resulting in a derivative liability of $13,282 at June 30, 2013.

In regards to the September 12, 2011 warrants, the Company recognized a derivative liability of $178,403 on December 31, 2012 and a change in fair value of $165,599 for the six months ended June 30, 2013, resulting in a derivative liability of $12,804 at June 30, 2013.

XTREME OIL & GAS, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

6. DERIVATIVE INSTRUMENTS - continued

The following tables illustrate the fair value adjustments that were recorded related to the derivative financial instruments associated with the convertible debenture financings:

	Six months ended June 30, 2013
Derivative liability	December 31, 2012		Fair Value Adjustments			Redemptions			June 30, 2013
Notes	$	227,070	$	374,888		$	(588,676	)	$	13,282
Warrants		178,403		(165,599	)		-			12,804
	$	405,473	$	(209,289	)	$	(588,676	)	$	26,086

7. STOCKHOLDERS’ EQUITY

Capital Structure

The Company is authorized to issue up to 200,000,000 shares of common stock, $0.001 par value per share. The holders of the common stock do not have any preemptive right to subscribe for, or purchase, any shares of any class of stock.

The Company is authorized to issue up to 49,999,000 shares of preferred stock, $0.001 par value per share of which 3,694,000 were issued and outstanding as of June 30, 2013.

The Company has one class of Preferred Stock and Nontransferable Preferred Stock. The Nontransferable Preferred Stock, consisting of 1,000 shares, is all owned by Mr. McAndrew, the Company’s chief executive officer.

Common Stock

During the six months ended June 30, 2013, we issued 998,625 shares of our common stock to consultants for services rendered to the Company valued at $18,938.

During the six months ended June 30, 2013, we issued 140,917,374 shares of our common stock to various convertible note holders converting outstanding principal of $1,384,863 and accrued interest of $120,837. The shares were valued at approximately $0.01 per share, based on market price.

Preferred A Stock

In the second quarter of 2013, we issued 3,694,000 shares of our preferred stock, valued at $2,083,801 to seven related and unrelated parties in exchange for full mutual releases and extinguishment of $3,568,461 in liabilities owed to these individuals. The shares of preferred stock convert into common stock at $0.01 per share (subject to any stock split the Company’s Board of Directors approves) and have a par value of $0.001. The Company may seek to increase its authorized capital to effect the transaction.

XTREME OIL & GAS, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

8. CONTINGENCIES

On March 30, 2010, each of Baker Hughes, Pan American Drilling, Native American Drilling and other service providers began legal proceedings against us in Logan County District Court in Oklahoma demanding judgment for past due invoices in excess of $75,000. We have settled with all service providers in this suit and have come to agreement with Baker Hughes on a settlement. We completed the settlement with Baker Hughes on June 15, 2013 and secured a full release and dismissal of the lawsuit with prejudice.

On May 6, 2013, we entered into a Letter of Intent to sell the Texas oil properties including Xtreme Operating Co., LLC to Heritage Oil & Gas. We closed on the sale of Xtreme Operating Co., LLC on May 20, 2013. The sale of the Texas oil properties will be completed upon execution of final documents and shareholder approval. The Company shall continue development opportunities of its largest prospect by asset valuation, the West Thrift Units.

In the second quarter of 2013, we issued 3,694,000 shares of our preferred stock to seven related and unrelated parties in exchange for full mutual releases and extinguishment of $3,568,461 in liabilities owed to these individuals. The shares of preferred stock convert into common stock at $0.01 per share (subject to any stock split the Company’s Board of Directors approves) and have a par value of $0.001. The Company may seek to increase its authorized capital to effect the transaction.

SUBSEQUENT EVENTS

Reverse Split

The Company has sought approval to complete a 1 for 100 reverse split of all outstanding shares of the Company's Common Stock by filing a Certificate of Amendment with the Nevada Secretary of State. Each issued and outstanding share of Common Stock would automatically be changed into a fraction of a share of Common Stock in accordance with the ratio of 1 for 100. The par value of the Common Stock would remain unchanged at $0.001 per share, and the number of authorized shares of Common Stock would remain unchanged as well. Any fractional shares resulting from the Reverse Split will be rounded up to the nearest whole number. The Reverse Split would become effective after filing a Certificate of Amendment with the Nevada Secretary of State and upon the completion of the review and comment process with FINRA. The Company will apply the effects retroactively upon receiving final approval from FINRA. As of the date of this filing, the Company has not received approval from FINRA.

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

SAFE HARBOR STATEMENT

This Quarterly Report on Form 10-Q (the “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Discussions containing such forward-looking statements may be found in Part I. Items 2 and 3 hereof, as well as within this Report generally. All statements, other than statements of historical facts, concerning, among other things, planned capital expenditures, potential increases in oil and natural gas production, the number and location of wells to be drilled in the future, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could” and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements. One should consider carefully the statements under the “Risk Factors” section of our Annual Report on Form 10-K filed with the SEC (the “Form-10K”), which describe factors that could cause our actual results to differ from those anticipated in the forward-looking statements, including, but not limited to, the following factors:

our ability to successfully develop our undeveloped acreage primarily held in Texas;

volatility in commodity prices for oil and natural gas;

the possibility that the industry may be subject to future regulatory or legislative actions (including any additional taxes and changes in environmental regulation);

the presence or recoverability of estimated oil and natural gas reserves and the actual future production rates and associated costs;

the potential for production decline rates for our wells to be greater than we expect;

our ability to generate sufficient cash flow from operations, borrowings or other sources to enable us to fully develop our undeveloped acreage positions;

our ability to replace oil and natural gas reserves;

environmental risks;

drilling and operating risks;

exploration and development risks;

competition, including competition for acreage in resource-style areas;

management’s ability to execute our plans to meet our goals;

our ability to retain key members of senior management and key technical employees;

our ability to obtain goods and services, such as drilling rigs and tubulars, and access to adequate gathering systems and pipeline take-away capacity, necessary to execute our drilling program;

our ability to secure firm transportation for natural gas we produce and to sell natural gas at market prices;

general economic conditions, whether internationally, nationally or in the regional and local market areas in which we do business, may be less favorable than expected, including the possibility that the economic recession and credit crisis in the United States will be prolonged, which could adversely affect demand for oil and natural gas and make it difficult to access financial markets;

continued hostilities in the Middle East and other sustained military campaigns or acts of terrorism or sabotage; and

other economic, competitive, governmental, legislative, regulatory, geopolitical and technological factors that may negatively impact our business, operations or pricing.

Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in the section entitled “Risk Factors” included in the Form 10-Q. All forward-looking statements are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere in this document. Other than as required under the securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. - continued

Overview

Xtreme Oil & Gas, Inc. is an independent energy company focused on the acquisition, development, ownership, operation and investment in energy-related businesses and assets, including, without limitation, the acquisition, exploration and development of natural gas and crude oil, and other related businesses which management believes have potential for improved production rates and resulting income by application of both conventional and non-conventional improvement and enhancement techniques. As of June 30, 2013, we own working interests in over 10,000 acres of oil and gas leases in Kansas, Texas and Oklahoma. Xtreme plans to pursue continued sales of its properties while potentially retaining non-operated interests that may produce future cash flows.

Our revenues are derived from the sale of oil and gas products and sale of interests, principally in drilling programs. In 2008 we derived a small amount of revenue from contract drilling on one project, the Oil Creek, but have no plans to engage in contract drilling in the future.

When we sell working interests in our leases, we maintain a deposits payable liability and recognize revenue as the development related to the working interest is completed. After completion, costs incurred to maintain wells and related equipment and lease and well operating costs are charged to expense as incurred.

We have been an operating company since 2006 with the acquisition of Emerald Energy and have had revenues from operations for more than four years.

Results of Operations.

For the Six months Ended June 30, 2013 compared to 2012

Revenues

For the six months ended June 30, 2013, revenue was $74,929 a decrease of $1,004,386 from $1,079,315 for the six months ended June 30, 2012. Decrease in revenue was due primarily to the oil properties being shut down since mid-2012. Oil and gas revenues are principally from the Saltwater Disposal project. The decline is also attributable to the fact that in the earlier period we sold working interests in various prospects we held, sales that did not occur in the period ended June 30, 2013.

Expenses

Oil production costs for the six months ended June 30, 2013 totaled $1,649, a decrease of $34,237 from $35,886 for the six months ended June 30, 2012. The decrease is due to reduced production activity on all of our properties.

General and administrative expenses totaled $1,674,471 for the six months ended June 30, 2013, an increase of $930,605, from $743,866 for the six months ended June 30, 2012. These general and administrative expense differences are largely driven by additional cost incurred during the six months ended June 30, 2013 in connection with the mutual release agreements entered into with various individuals as discussed in Note 4 of the accompanying financial statements.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. - continued

Other Income/(Expense)

Other income and expense are largely driven by our debt offering in September 2011. Total other income for the six months ended June 30, 2013 was $119,975 a decrease of $1,029,834 from total other income of $1,149,809 for the six months ended June 30, 2012. This decrease was primarily due to a reduction in derivative income related to our September 2011 debt offering.

Gain on settlement for the six months ended June 30, 2012 relates to the net cost recovery after expenses for litigation and repairs incurred by the Company from the damages to the Lionheart. There was no such settlement during the six months ended June 30, 2013.

Net income (loss)

For the six months ended June 30, 2013, we had a net loss from continuing operations of $1,550,619 compared to net income from continuing operations of $1,334,948 for six months ended June 30, 2012. This decrease in net income from continuing operations was due primarily to the decrease in derivative income related of convertible debt instruments during the period ended June 30, 2013 and additional costs incurred in connection with the mutual release agreements entered into with various individuals as discussed in Note 4 of the accompanying financial statements.

For the six months ended June 30, 2013, we had a net income from discontinued operations of $9,496 compared to net income from discontinued operations of $437,936 for six months ended June 30, 2012. Income from discontinued operations at June 30, 2012 was primarily due to gain on debt forgiveness. As part of the sale of Xtreme Operating Co., LLC, Heritage assumed liabilities of $139,159. This was recorded as a gain and is being shown as part of gain on debt forgiveness in the accompanying financial statements.

For the Three months Ended June 30, 2013 compared to 2012

Revenues

For the three months ended June 30, 2013, revenue was $25,965 a decrease of $161,500 from $187,465 for the three months ended June 30, 2012. Decrease in revenue was due primarily to the oil properties being shut down since mid-2012. Oil and gas revenues are principally from the Saltwater Disposal project. The decline is also attributable to the fact that in the earlier period we sold working interests in various prospects we held, sales that did not occur in the period ending June 30, 2013.

Expenses

Oil production costs for the three months ended June 30, 2013 totaled $1,190, a decrease of $23,013 from $24,203 for the three months ended June 30, 2012. The decrease is due to reduced production activity on all of our properties.

General and administrative expenses totaled $1,430,919 for the three months ended June 30, 2013, an increase of $1,094,061, from $336,858 for the three months ended June 30, 2012. These general and administrative expense differences are largely driven by additional costs incurred in connection with the mutual release agreements entered into with various individuals as discussed in Note 4 of the accompanying financial statements during the three months ended June 30, 2013.

Other income/(expense)

Other income and expense are largely driven by our debt offering in September 2011. Total other income for the three months ended June 30, 2013 was $98,262, a decrease of $2,071,777 from total other income of $2,170,039 for the three months ended June 30, 2012. This decrease was primarily due to a reduction in derivative income related to our September 2011 debt offering.

Net income (loss)

For the three months ended June 30, 2013, we had net loss from continuing operations of $1,376,645 compared to net income from continuing operations of $2,005,283 for three months ended June 30, 2012. This decrease in net income was due primarily to non-cash derivative income related of convertible debt instruments during the period ended June 30, 2013.

For the three months ended June 30, 2013, we had net income from discontinued operations of $9,625 compared to net income from continuing operations of $22,563 for three months ended June 30, 2012

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. - continued

Liquidity and Capital Resources

Our plan has been for our field operations to provide sufficient liquidity for daily operating capital and further development. We have also sold working interests in our properties and incurred debt to also provide capital to acquire properties and develop them when the cash flow from those operations would sustain our operations and provide for growth. Currently all of our properties need additional capital to develop, and we have failed to make payments on indebtedness incurred in September 2011, indebtedness in which we are in default.

In need of capital to develop properties and expand, in June 2012 we pursued several funding opportunities based on the belief that the assets owned, if developed, would satisfy our current operating and development needs and provide for our growth. We are currently pursuing sales of our properties and conversions from debt to equity to reduce our debt.

Financing Plans

Cash flow used by operations was $414,488 for the six months ending June 30, 2013. Cash flow provided by investing activities was $376,178 for the six months ended June 30, 2013. Cash flow provided by financing activities was $43,940 for the six months ended June 30, 2013.

Convertible notes payable are presented in the accompanying financial statements net of debt discount. Principal balance at June 30, 2013 was $282,445. The Company delayed scheduled payments on the convertible notes for the months beginning June 2012 to June 2013. This resulted in a default on the note agreement. Interest is being accrued at a rate of 18% as a result of the default. A significant amount of the convertible notes outstanding converted subsequent to June 30, 2013, and we are pursuing the conversion of all such notes that remain outstanding. The Company may seek to increase its authorized capital to effect the transaction.

Our cash requirements, mostly for corporate expenses, are projected to be approximately $25,000 per month or $300,000 for the next 12 months. As of June 30, 2013, we are unable to determine whether we will generate sufficient cash from our oil and gas operations to fund our operations for the next twelve months. Revenue from existing oil production is non-existent on a monthly basis, and we cannot predict whether our cash flows from the future sales of assets and debt conversions into equity will be sufficient to meet our monthly cash requirements.

To continue with our business plan including the funding of operations, we expect to continue selling properties and converting debt to equity. To that end we have entered into an agreement, effective April, 15, 2013 related to the sale of our Kansas and Oklahoma properties. See Notes to Financial Statements, Note 2, History and nature of business.

We have substantial indebtedness to officers and directors of our company and others and have converted that indebtedness to preferred stock.

If required, our ability to obtain additional financing from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects for business growth. The necessary additional financing may not be available or may be available only on terms that would result in excessive further dilution to the current owners of our common stock or at unreasonable costs of capital.

ITEM 4. Controls and Procedures

As of the end of the quarter ended June 30, 2013, our Chief Executive Officer, Willard G. McAndrew, and Chief Financial Officer, Roger Wurtele, with the participation of our Chief Operating Officer, reviewed our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon our evaluation, the Chief Executive Officer and the Chief Financial Officer believe that, as of the end of the period covered by this report our disclosure controls and procedures are effective at the reasonable assurance level to ensure that information required to be included in this report is (i) accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer and (ii) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors, mistakes or intentional circumvention of the established processes.

Changes in Internal Control over Financial Reporting

There have been no significant changes in our internal controls or other factors during the fiscal quarter ended June 30, 2013 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES

We issued the unregistered securities described below. We believe that each of the securities transactions described below was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) as a transaction not involving any public offering and Regulation D promulgated under the Securities Act of 1933. In each case, the number of investors was limited, the investors were either all accredited and/or otherwise qualified, had access to material information about the issuer, and restrictions were placed on the resale of the securities sold.

Shares issued for Cash

In the six months ended June 30, 2013, we did not sell any shares to investors for cash.

Shares issued for Services

In the six months ended June 30, 2013, we issued 998,625 restricted shares of our common stock to consultants valued at $18,938.

Shares issued upon conversion of Notes

In the six months ended June 30, 2013, we issued 140,917,374 free trading shares of our common stock valued at $1,505,700 to various convertible note holders converting outstanding principal and interest. The shares were valued at approximately $0.01 per share, based on market price.

Preferred A Shares Issued

We believe that each of the securities transactions described below was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) as a transaction not involving any public offering and Regulation D promulgated under the Securities Act of 1933. In each case, the number of investors was limited, the investors were either all accredited and/or otherwise qualified, had access to material information about the issuer, and restrictions were placed on the resale of the securities sold.

ITEM 5. OTHER INFORMATION

With respect to certain transactions with Torchlight Energy, Inc. See Notes to Financial Statements, Note 2, History and nature of business.

On May 2, 2013, we entered into a letter of intent with Heritage Oil and Gas, Inc., (“Heritage”) to sell, subject to shareholder approval, for $325,000 cash and a one-eighth overriding royalty interest, our West Thrifty/Quita properties in Texas. The letter of intent requires Heritage to carry our existing working interest owners to the tanks with an obligation to drill and develop the property in a timely manner. We have sold to Heritage for $50,000 our Texas operating company on an as is basis.

ITEM 6. EXHIBITS

Exhibit No.	Description
31.1	Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification Pursuant to 18 U.S.C. adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification Pursuant to 18 U.S.C. adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Plano, State of Texas.

	Xtreme Oil & Gas, Inc.:

Date: August 14, 2013	By:	/s/ Willard G. McAndrew III
		Name: Willard G. McAndrew III
		Title: Chief Executive Officer


Date: August 14, 2013	By:	/s/ Roger Wurtele
		Name: Roger Wurtele
		Title: CFO, Principal Accounting Officer

In accordance with the Securities and Exchange Act, this Form 10K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	Xtreme Oil & Gas, Inc.:

Date: August 14, 2013	By:	/s/ Willard G. McAndrew III
		Name: Willard G. McAndrew III
		Title: Director

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