Securities Registration Statement (s-1)

Date : 01/12/2018 @ 3:25PM
Source : Edgar (US Regulatory)
Stock : X Rail Entertainment, Inc. (PC) (XREE)
Quote : 0.01  0.0 (0.00%) @ 1:35PM
X Rail Entertainment, Inc. share price Chart

Securities Registration Statement (s-1)



  As filed with the Securities and Exchange Commission on January 12, 2018


Registration No. ____________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549



FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


X RAIL ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)

Nevada
(State of other jurisdiction of incorporation)

4700
Primary Standard Industrial Classification Code Number

88-0203182
I.R.S. Employer Identification Number

9480 S. Eastern Ave. Suite 205
Las Vegas, NV  89123
702-583-6715
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Michael Barron
Chief Executive Officer
9480 S. Eastern Ave. Suite 205
Las Vegas, NV  89123
702-583-6715
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Frederick C. Bauman
Bauman & Associates Law Firm
6440 Sky Pointe Dr., Ste. 140-149
Las Vegas, NV 89131
702-533-8372


 
(COVER CONTINUES ON FOLLOWING PAGE)
From time to time after the effective date of this registration statement.
(Approximate date of commencement of proposed sale to the public)

I f any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act:

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

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.  

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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Calculation of Registration Fee

Title of Each Class of Securities to be Registered
 
Amount to be Registered (1)
   
Proposed Maximum Offering
Price per Share (2)
   
Proposed Aggregate Maximum Offering Price
   
Amount of Registration
Fee (3)
 
Common stock, $.00001 par value
   
416,538,466
   
$
.0171
   
$
7,122,808
   
$
886.79
 

(1)  Represents shares of our common stock being registered for resale that have been issued or will be issued to the sole Selling Stockholder named in the registration statement.
 
(2)  Price per share shown is the average of the high and low prices reported in the consolidated reporting system as reported on the OTC Markets OTC Pink on December 29, 2017.
 
(3)  Estimated solely for the purposes of computing the registration fee in accordance with Rule 457(c) of the Securities Act of 1933, as amended.


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The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities under this prospectus until the registration statement of which it is a part and filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.


PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED JANUARY 12, 2018

X RAIL ENTERTAINMENT, INC.

416,538,466 Shares of Common Stock

Offered by Selling Stockholders

This prospectus relates to the resale from time to time by the selling shareholders identified herein of up to an aggregate of 416,538,466 shares of common stock consisting of:

a)
261,538,466 shares of our common stock underlying a 12% Convertible Note (the "EMA Note") payable to EMA Financial ("EMA") with an initial principal sum of $85,000.
b)
80,000,000 shares of our common stock underlying a Convertible Equity Line of Credit extended by GPL Ventures, LLC ("GPL") for up to $50,000,000.   GPL has agreed to purchase these shares if put to it by us pursuant to the terms of the Securities Purchase Agreement (the "SPA") we entered into with GPL on January 5, 2018. Subject to the terms and conditions of the SPA, we have the right to "put," or sell, up to $50,000,000 worth of shares of our common stock to GPL. This arrangement is sometimes referred to as an "SPA." For more information on the selling stockholder, please see the section of this prospectus entitled "Selling Security Holders" beginning on page 12.   We will not receive any proceeds from the resale of these shares of common stock offered by GPL. We will, however, receive proceeds from the sale of shares directly to GPL pursuant to the SPA. When we put an amount of shares to GPL, the per share purchase price that GPL will pay to us in respect of such put will be determined in accordance with a formula set forth in the Equity Purchase Agreement. There will be no underwriter's discounts or commissions so we will receive all of the proceeds of our sale to GPL. The purchase price to be paid by GPL will be equal to 75% multiplied by the average of the two lowest closing prices of our common stock for the 10 trading days prior to the notice from us (the "Market Price").   We will be entitled to put to GPL on each put 200% of the average of the dollar volume on the principal trading exchange for our common stock for the 10 trading days preceding the put date; provided that the number of shares to be purchased by GPL shall not exceed the number of such shares that, when added to the number of shares of our common stock then beneficially owned by GPL, would exceed 4.99% of the number of shares of our common stock outstanding. GPL may sell any shares offered under this prospectus at prevailing market prices or privately negotiated prices. GPL is an "underwriter" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), in connection with the resale of our common stock under the SPA. For more information, please see the section of this prospectus titled "Plan of Distribution" beginning on page 28.
c)
75,000,000 shares of our common stock underlying a 10% Convertible Note (the "GPL Note") payable to GPL Ventures LLC ("GPL") with a principal sum of $150,000.
The transactions by which the selling stockholders acquired their securities from us were exempt under the registration provisions of the Securities Act.
 
We are an "emerging growth company" under applicable Securities and Exchange Commission rules and will be subject to reduced public company reporting requirements.

Investing in our common stock involves a high degree of risk.  You should consider carefully the risk factors beginning on page 3 of this prospectus before purchasing any of the shares offered by this prospectus.

Our common stock is quoted on the OTC Pink under the symbol "XREE". The last reported sale price of our common stock on the OTC Pink on December 29, 2017, was $0.0171 per share.

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.
                                     
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. 


The date of this prospectus is January 12, 2018
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  TABLE OF CONTENTS

 
Page
   
Prospectus Summary
 1
   
Risk Factors
 3
   
Forward-Looking Statements
 10
   
Use of Proceeds
 10
   
Selling Stockholders
 12
   
Description of Business
 13
   
Description of Property
 15
   
Legal Proceedings
 15
   
Market for Common Equity and Related Shareholder Matters
 15
   
Penny Stock Rules
 16
   
Management's Discussion and Analysis of Financial Condition and Results of Operations
 18
   
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 21
   
Directors and Executive Officers
 21
   
Executive Compensation
 24
   
Plan of Distribution
 28
   
Security Ownership of Certain Beneficial Owners and Management
 29
   
Certain Relationships and Related Transactions and Director Independence
 30
   
Disclosure of Commission Position on Indemnification for Securities Act Liabilities
 30
   
Legal Matters
 31
   
Experts
 31
   
Additional Information
 31
 
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You may only rely on the information contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus is correct as of any time after its date.

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PROSPECTUS SUMMARY

This summary highlights certain information contained elsewhere in this prospectus. Because it is a summary, it may not contain all of the information that is important to you. Before investing in our common stock, you should read this entire offering carefully, especially the sections entitled "Risk Factors" beginning on page 6 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 35, as well our financial statements and related notes included elsewhere in this prospectus.

As used in this prospectus, references to "the Company," "XREE", "we", "our," "ours" and "us" refer to X Rail Entertainment, Inc., and its subsidiaries, unless otherwise indicated.

Company Overview

X Rail Entertainment, Inc. is in the specialty passenger train business and has three operating divisions, The X Train, currently in the planning stages, will be an excursion railroad between metropolitan areas and resort/casino destinations, X Wine Railroads, which is a rail excursion from metropolitan areas to wine regions, and Club X Train, currently in the planning stages, will be a riders membership club for X Train customers.

X Train

The X Train will be an excursion passenger rail service between Los Angeles and Las Vegas. We expect service to begin in June 2018. XREE plans to have its casino guests ride the exclusive train service and to manage the host activity of its guests throughout their stay in the resort/casino. We anticipate that, in addition to the service between Los Angeles and Las Vegas, future X Train runs will be added in the coming years.

We expect to operate the X Train as an Amtrak train listed on the Amtrak national timetable. X Train will provide a complete bundled package of services including ticket, rooms and transfers to & from the station and weekend events such as access to nightclubs, golf outings and restaurants. It will be scheduled as a Friday through Sunday service with passengers in Los Angeles boarding the train at Union Station and arriving at a new station to be built in Las Vegas and owned and operated by the X Train. Only the X Train will be able to use our station in Las Vegas. A typical X Train will carry 10 passenger cars and will include food service and will carry on average, 500 passengers per trip. This number can be increased by adding more cars to the route.

Our LA to Vegas business plan emanates from a regional transportation feasibility study published in 2007, which suggested that a well-run rail service between Los Angeles and Las Vegas could garner up to 30% of the approximately 12 million passengers who regularly drive between these two metropolitan areas. See: www.rtcsouthernnevada.com. We believe that with our current business plan, we would be able to break-even, on an operating basis, with approximately 2,000 riders per year.

To commence commercial service of the Los Angeles to Las Vegas route, we will need to negotiate and secure the necessary rights, equipment and facilities. These items include: securing a regularly scheduled train agreement from Amtrak to operate our excursion service on a weekly basis beginning with one round trip train per week and increasing to six round trips per week over the next several years as demand dictates, securing operating rights to run our trains over tracks owned by private railroads, obtaining the capability to operate train equipment safely and in conformity with applicable government regulations, and purchasing or leasing appropriate locomotive and passenger cars designed to move passengers over the route in comfort and securing leases on terminal facilities and passenger depots in Los Angeles and in Las Vegas. We expect the X Train to begin running in June 2018.

X Wine Railroad

The Company's X Wine Railroad service from LA Union Station to Santa Barbara California ran on a scheduled basis, once a month on Saturdays, with individual riders (retail) as well as charters for corporate outings and special events (corporate). The X Wine Railroad provides a unique wine tasting experience to riders who take the train aboard special period classic railcars and an excursion to the Los Olivos wine area of Southern California. Over 250 private wineries reside in the area and the X Wine Railroad provides private access to these vineyards on an exclusive basis. Ticket prices are $369 per person, all inclusive. Since February 2017 this train has run once and the Company expects to continue to run this train intermittently, depending on demand. X Wine provides an all-inclusive day trip including a gourmet breakfast, wine tasting in the wineries, wine and cheese lunch at the wineries, and a gourmet dinner on the train's return trip.
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Club X Train

Club X Train, which is still in the planning stage, will be a one stop shop for all Las Vegas rooms, activities, tours, show tickets and packages. Las Vegas shows, hotel rooms, tours, nightclubs and attractions will all available for members of ClubXTrain.com. This will be the only site riders need to plan their Vegas vacation getaway.

We anticipate that when a customer purchases a train ticket on either the X Train (once it commences operations) or any of the X Wine Railroad excursions, such tickets will include enrollment in our Club X membership club. Members will receive points from each excursion they ride and will be provided discounts on products and services we provide. The more they ride, the more points they will receive. Club X train will be the customer's ticket within Vegas for access to nightclubs, hosted bottle service, pool parties, gentlemen's clubs and the Club X Train Crawl: a high end to visiting three nightclubs in one night. Customers will outline their desired plan for the evening and Club X Train will take care of arranging all the details.  We expect to commence offering Club X Train service when the X Train commences running, currently anticipated to be June 2018.

The Company maintains offices at 9480 S Eastern Ave, Suite 205, Las Vegas, Nevada 89123.

Implications of Being an Emerging Growth Company

We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

being permitted to present two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure;
   
reduced disclosure about our executive compensation arrangements;
   
exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and
   
exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the last day of the fiscal year in which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior September 30th. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

Where You Can Find Us

The company website is www.xrailentertainment.com and our booking website is www.vegasxtrain.com . The X Wine Railroad site is www.winerailroad.com   The Club X Train website is www.clubxtrain.com . The contents of these websites are not incorporated into this prospectus.  X Train Vacations, is a licensed IATAN travel agency, owned by X Rail Entertainment, Inc.

About This Offering

This prospectus covers the resale of 416,538,466 shares of common stock by the selling stockholders named herein.
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RISK FACTORS


An investment in the Company's common stock involves a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus. Our business, operating results and financial condition could be harmed and the value of our stock could go down as a result of these risks. This means you could lose all or a part of your investment. 

Risks Related to Our Business

We have an unproven business model and a limited operating history upon which an evaluation of our prospects can be made.

Our future operations are contingent upon generating revenues and raising capital for operations.  Because we have a limited operating history, it is difficult to evaluate our business and future prospects and there are substantial risks, uncertainties, expenses and difficulties that we are subject to. There can be no assurance that at this time we will operate profitably or that we will have adequate working capital to meet our obligations as they become due. Investors must consider the risks and difficulties frequently encountered by early stage companies. We cannot be certain that our business strategy will be successful or that we will successfully address the risks we face. In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.

We have a history of losses and can provide no assurance of our future operating results.

We began to generate revenues in January 2017.  For the nine months ended September 30, 2017, we incurred a net loss of $2,608,267. For the years ended December 31, 2016 and December 31, 2015, we incurred net losses of $2,567,469 and $315,016. As of September 30, 2017, we had an aggregate accumulated deficit of $10,547,428.

Our independent registered auditors have expressed substantial doubt about our ability to continue as a going concern.

Our audited financial statements for the years ended December 31, 2016 and 2015, include an explanatory paragraph that such financial statements were prepared assuming that we would continue as a going concern. As discussed in Note 2 to the financial statements for the years ended December 31, 2016 and 2015, included with this prospectus, because of our lack of revenue and capital deficiency there is substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we are unable to continue as a going concern, shareholders may lose their entire investments.

We will need to raise additional capital to fund our business.

We will need to raise additional capital to fund our operations and capital expenditures. We estimate that we will need to raise $5 million to fund our plan of operations for the next 12 months, including the payment of rail access fees and pre-paid haulage fees to Amtrak and the railroads upon which we will be operating. Such additional funding may not be available on terms acceptable to the Company, or at all. Any additional equity financing we raise may involve substantial dilution to the existing shareholders.

Implementation of our business plan depends upon our ability to enter into key contracts with certain key providers providing rights and services that are critical to our business plan.

To execute our business plan we must enter into and maintain key contracts with certain key providers including:
 
·
Amtrak for haulage agreement; and
   
·
Union Pacific for access to their railroad;

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We have entered into an MOU with Amtrak but have not yet executed an agreement with Union Pacific Railroad. There can be no assurances that we will enter into key contracts or that the key contracts will be on terms that are acceptable to us. Our ability to maintain and build relationship with our key providers will be critical to our success. Even if we enter into key contracts with our key providers, we may not be able to preserve relationships and if any of these key providers reduce their commitment to us, terminate their agreements with us or enter into similar agreements with our competitors, this will have a material adverse effect on our business, prospects, results of operations and financial condition.

In addition to the key contracts discussed above, our plans for growth and expansion may rely significantly on other agreements with other railroads and third parties, including joint ventures, strategic alliances and marketing agreements. Our ability to provide comprehensive rail service to our future customers will depend in large part upon our ability to enter into and maintain these other agreements and upon the performance of the obligations under the agreements by the other railroads and third parties.

If we commence commercial operations of the X-Train service, if sufficient numbers of travelers do not utilize our service, our business, prospects, financial condition and results of operations will be adversely affected.

Our business model depends on our ability to provide an alternative means of transportation between Los Angeles and Las Vegas. If we commence commercial operations of the X-Train service, utilization of our service will depend upon the adoption of our service by leisure travelers as a viable alternative to existing options. We cannot assure you that leisure travelers will accept our service as a replacement for traveling by car or by airplane. Achieving market acceptance for the X-Train service will require substantial sales and marketing efforts and the expenditure of significant financial and other resources to create awareness and demand by leisure travelers. If we fail to achieve broad acceptance of the X-Train service or if we fail to position X-Train as a preferred method for travel, our business, prospects, financial condition and results of operations will be adversely affected.

Our business model depends on leisure travel demand on the route from the Los Angeles area to Las Vegas. Any significant downturn in the Las Vegas travel market could have a material adverse effect on our financial condition, results of operations, or cash flows.

According to the Las Vegas Convention Visitor Authority (LVCVA), there were approximately 38.9 million travelers to Las Vegas from the Southern California region in 2011. If demand for rail travel does not keep up with amount of service offered, competitive pressure may cause reductions in average fare price.

The Las Vegas region also faces competition with legalized gaming from casinos located on Native American tribal lands. Native American tribes in California are permitted to operate casinos with video gaming machines, black jack and house-banked card games. The governor of California has entered into compacts with numerous tribes in California and has executed a number of compacts with no limits on the number of gaming machines, which was limited under the prior compacts. The federal government has approved numerous compacts in California and casino-style gaming is now legal on those tribal lands. While   the competitive impact on our operations in Las Vegas from the continued growth of Native American gaming establishments in California remains uncertain, the proliferation of gaming in California could have an adverse effect on Las Vegas travel and thus on our results of operations.

In addition, certain states have legalized, and others may legalize, casino gaming in specific areas, including metropolitan areas from which we would traditionally seek to attract customers, such as New York, Los Angeles, San Francisco and Boston. In October 2001, the New York legislature approved a bill for expanded casino gaming on Native American reservations and video lottery terminals at certain race tracks. In 2003 and 2004, Maine and Pennsylvania, respectively, approved legislation legalizing slot machines or similar electronic gaming devices at certain locations, although such legislation has not been implemented yet. A number of states have permitted or are considering permitting gaming at "racinos," on Native American reservations and through expansion of state lotteries. The current global trend toward liberalization of gaming restrictions and resulting proliferation of gaming venues could result in a decrease in the number of visitors to the Las Vegas area by attracting customers close to home and away from Las Vegas, which could adversely affect the demand for travel to Las Vegas and thereby affect our financial condition, results of operations or cash flows.

Severe weather and natural disasters could disrupt normal business operations, which would result in increased costs and liabilities and decreases in revenues.

Our success will be dependent on our ability to operate a railroad system efficiently. Severe weather and natural disasters, such as tornados, flooding and earthquakes, could cause significant business interruptions and result in increased costs and liabilities and decreased revenues. In addition, damages to or loss of use of significant aspects of our infrastructure due to natural or man-made disruptions could have an adverse effect on our operating results, financial condition or liquidity for an extended period of time until repairs or replacements could be made. Additionally, during natural disasters, our workforce may be unavailable, which could result in further delays. Extreme swings in weather could also negatively affect the performance of locomotives and rolling stock.
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Operational dependencies may adversely affect our results of operations, financial condition or liquidity.

  Due to the integrated nature of the United States' freight transportation infrastructure, our future operations may be negatively affected by service disruptions of other entities such as ports and other railroads which we will interact with and the Class I railroads we will need to interact with Amtrak and Union Pacific, neither of which we yet have an agreement with. A significant prolonged service disruption of one or more of these entities could have an adverse effect on our results of operations, financial condition or liquidity.

  Acts of terrorism or war, as well as the threat of war, may cause significant disruptions in our business operations.

Terrorist attacks and any government response to those types of attacks and war or risk of war may adversely affect our results of operations, financial condition or liquidity. Our proposed use of the Class I railroad rail lines and facilities could be direct targets or indirect casualties of an act or acts of terror, which could cause significant business interruption and result in increased costs and liabilities and decreased revenues, which could have an adverse effect on operating results and financial condition. Such effects could be magnified if releases of hazardous materials are involved. Any act of terror, retaliatory strike, sustained military campaign or war or risk of war may have an adverse impact on our operating results and financial condition by causing unpredictable operating or financial conditions, including disruptions of our host railroads or connecting rail lines, loss of critical customers or partners, volatility or sustained increase of fuel prices, fuel shortages, general economic decline and instability or weakness of financial markets. In addition, insurance premiums charged for some or all of the coverage currently maintained by us could increase dramatically, the coverage available may not adequately compensate us for certain types of incidents and certain coverage may not be available to us in the future.

We expect to depend on the stability and availability of our information technology systems.

We expect to rely on information technology in all aspects of our business. A significant disruption or failure of our information technology systems could result in service interruptions, revenue collection disruptions, safety failures, security violations, regulatory compliance failures and the inability to protect corporate information assets against intruders or other operational difficulties. Although we anticipate taking steps to mitigate these risks, a significant disruption could adversely affect our results of operations, financial condition or liquidity. Additionally, if we are unable to acquire or implement new technology, we may suffer a competitive disadvantage, which could also have an adverse effect on our results of operations, financial condition or liquidity.

We may in the future become subject to various claims and lawsuits, and increases in the amount or severity of these claims and lawsuits could adversely affect our operating results, financial condition and liquidity.

As part of our proposed railroad operations, we may become exposed to various claims and litigation related to commercial disputes, personal injury, property damage, environmental liability and other matters. Personal injury claims by our employees and those of the host railroads are subject to the Federal Employees' Liability Act (FELA), rather than state workers' compensation laws. We believe that the FELA system, which includes unscheduled awards and a reliance on the jury system, can contribute to increased expenses. Other proceedings include claims by third parties for punitive as well as compensatory damages, and a few proceedings purport to be class actions. Developments in legislative and judicial standards, material changes to litigation trends, or a catastrophic rail accident or series of accidents involving any or all of property damage, personal injury, and environmental liability could have a material adverse effect on our operating results, financial condition and liquidity.

We expect that most of our future host railroad employees will be represented by unions, and failure to negotiate reasonable collective bargaining agreements may result in strikes, work stoppages or substantially higher ongoing labor costs.

We expect that a significant majority of the Class I railroads employees that we plan to employ will be union-represented. These union employees work under collective bargaining agreements with various labor organizations. Wages, health and welfare benefits, work rules and other issues have traditionally been addressed through industry-wide negotiations. If we or our Class I railroad partners are unable to negotiate acceptable new agreements, it could result in strikes by the affected workers, loss of business and increased operating costs as a result of higher wages or benefits paid to union members, any of which could have an adverse effect on our operating results, financial condition or liquidity.

The unavailability of qualified personnel in the future could adversely affect our operations.

Changes in demographics, training requirements and the unavailability of qualified personnel, particularly engineers and trainmen, could negatively impact our future ability to meet demand for rail service. Recruiting and retaining qualified personnel, particularly those with expertise in the railroad industry, will be vital to our future operations. Unpredictable increases in demand for rail services may exacerbate the risk of not having sufficient numbers of trained personnel, which could have a negative impact on operational efficiency and otherwise have a material adverse effect on our operating results, financial condition or liquidity.
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We will need to increase the size of our organization, and may experience difficulties in managing growth.

We are a small company with a minimal number of employees. With the start of our planned principal activities, we expect to experience a period of significant expansion in headcount, facilities, infrastructure and overhead and anticipate that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate managers. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively.

The loss of any of our executive officers, directors or key personnel would likely have an adverse effect on our business.

Our future success will depend to a significant extent on the continued services of our senior management and other key personnel, particularly Michael A. Barron.  The loss of the services of Mr. Barron or other key employees or directors would also likely have an adverse effect on our operations.

Risks Related to Our Industry

Changes in government policy could negatively impact demand for our future services, impair our ability to price our future services or increase our costs or liability exposure.

Changes in United States government policies could change the macroeconomic environment and affect demand for our future services. Developments and changes in laws and regulations as well as increased economic regulation of the rail industry through legislative action and revised rules and standards applied by the U.S. Surface Transportation Board in various areas, including rates, services and access to facilities could adversely impact our ability to determine prices for rail services and significantly affect the revenues, costs and profitability of tour business. Additionally, because of the significant costs to maintain our future rail network, an increase in expenditures related to the maintenance of the rails owned by the Class I railroads could hinder our ability to maintain, improve or expand the rail network, facilities and equipment in order to accept or handle any increased demand. Federal or state spending on infrastructure improvements or incentives that favor other modes of transportation could also adversely affect any future revenues.

Our success depends on our ability to continue to comply with the significant federal, state and local governmental regulations to which we are subject.

We are or will be subject to a significant amount of governmental laws and regulation with respect to our practices, taxes, railroad operations and a variety of health, safety, labor, environmental and other matters. Failure to comply with applicable laws and regulations could have a material adverse effect on us. Governments may change the legislative and/or regulatory framework within which we operate without providing us with any recourse for any adverse effects that the change may have on its business. For example, federal legislation enacted in 2008 mandates the implementation of positive train control technology by December 31, 2015, on certain mainline track where intercity and commuter passenger railroads operate and where toxic-by-inhalation hazardous materials are transported. This type of technology is new and deploying it across our host railroads' infrastructure may pose significant operating and implementation risks and could require significant capital expenditures.
                                     
We are subject to stringent environmental laws and regulations, which may impose significant costs on its business operations.

Our operations are or will be subject to extensive federal, state and local environmental laws and regulations concerning, among other things, emissions to the air; discharges to waters; the generation, handling, storage, transportation and disposal of waste and hazardous materials; and the cleanup of hazardous material or petroleum releases. Changes to or limits on carbon dioxide emissions could result in significant capital expenditures to comply with these regulations with respect to any diesel locomotives, equipment, vehicles and other machinery that we may operate.  Emission regulations could also adversely affect fuel efficiency and increase operating costs. Further, local concerns on emissions and other forms of pollution could inhibit our ability to build facilities in strategic locations to facilitate growth and efficient operations. In addition, many land holdings are and have been used for industrial or transportation-related purposes or leased to commercial or industrial companies whose activities may have resulted in discharges onto the property. We may in the future be subject to allegations or findings to the effect that we have violated, or are strictly liable under, these laws or regulations. Any future operating results, financial condition or liquidity could be adversely affected as a result of any of the foregoing, and we may be required to incur significant expenses to investigate and remediate environmental contamination.
6

Fuel supply availability and fuel prices may adversely affect our results of operations, financial condition or liquidity.

Fuel supply availability could be impacted as a result of limitations in refining capacity, disruptions to the supply chain, rising global demand and international political and economic factors. A significant reduction in fuel availability could increase fuel costs resulting in reduced margins. Each of these factors could have an adverse effect on our operating results, financial condition or liquidity. If the price of fuel increases substantially, we may be able to offset a significant portion of these higher fuel costs through a fuel surcharge program or increase in ticket prices, which may result in loss of customers.

Downturns in the economy could adversely affect demand for our future services.

Significant, extended negative changes in domestic and global economic conditions that impact future customers transported by us and may have an adverse effect on our operating results, financial condition or liquidity. Declines in economic growth and the United States travel industry all could result in reduced revenues.

Negative changes in general economic conditions could lead to disruptions in the credit markets, increase credit risks and could adversely affect our financial condition or liquidity.

Challenging economic conditions may not only affect future revenues due to reduced demand for many goods and services, but could result in payment delays and increased credit risk. Railroads are capital-intensive and we may need to finance a portion of the building and maintenance of infrastructure as well as locomotives and other rail equipment. Economic slowdowns and related credit market disruptions may adversely affect our cost structure, our timely access to capital to meet financing needs and costs of its financings.

Risks Related to Our Common Stock

A large percentage of our stock is owned by relatively few people, including officers and directors.

As of September 30, 2017, our officers and directors beneficially owned approximately 31% of our outstanding common stock.  If you purchase shares, you may be subject to certain risks due to the concentrated ownership of our common stock.  For example, these stockholders could, if they were to act together, affect the outcome of stockholder votes, which could, among other things, affect elections of directors, delay or prevent a change in control or other transaction that might be beneficial to you as a stockholder.

We have not paid dividends on common stock in the past and do not expect to pay dividends in the foreseeable future.  Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.  The payment of dividends on our common stock would depend on earnings, financial condition and other business and economic factors affecting it at such time as the Board of Directors may consider relevant.  If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if its stock price appreciates.

There is a limited market for our common stock which may make it more difficult to dispose of your stock.

Our common stock is currently quoted on the OTC Pink under the symbol "XREE".  There is a limited trading market for our common stock.  As a result, investors may find it difficult to dispose of, or to obtain accurate quotations of the price of, our common stock, which may adversely affect the market price of our common stock. A limited market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or assets by using common stock as consideration. There can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.

The price of our common stock is volatile, which may cause investment losses for our stockholders.

The market for our common stock is highly volatile. The trading price of our common stock on the OTC Pink is subject to wide fluctuations in response to, among other things, quarterly variations in operating and financial results, and general economic and market conditions. In addition, statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to our market or relating to us could result in an immediate and adverse effect on the market price of our common stock. The highly volatile nature of our stock price may cause investment losses for our shareholders. In the past, securities class action litigation has often been brought against companies following periods of volatility in the market price of their securities. If securities class action litigation is brought against us, such litigation could result in substantial costs while diverting management's attention and resources.
7

Additional stock offerings may dilute current stockholders.

Given our plans and our expectation that we may need additional capital and personnel, we may need to issue additional shares of capital stock or securities convertible or exercisable for shares of capital stock, including preferred stock, options or warrants. The issuance of additional capital stock may dilute the ownership of our current stockholders.

Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to this prospectus or Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), current public information and notice requirements. Any substantial sales of our common stock pursuant to this prospectus or Rule 144 may have a material adverse effect on the market price of our common stock. Such shares may include shares issuable pursuant to convertible debt or exercise of warrants. As of September 30, 2017, there are 10,525,356 shares of our common stock issuable upon conversion of outstanding convertible debt and 14,978,000 shares issuable upon exercise of outstanding warrants.

Our common stock may be considered a "penny stock" and is subject to additional sale and trading regulations that may make it more difficult to buy or sell.

We anticipate that our common stock may be considered to be a "penny stock" and securities broker-dealers participating in sales of common stock will be subject to the "penny stock" regulations set forth in Rules 15g-2 through 15g-9 promulgated under the Exchange Act. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

As an issuer of "penny stock", the protection provided by the federal securities laws relating to forward looking statements does not apply to us.

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if our common stock is considered a penny stock, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.

Future issuances of common shares may be adversely affected by the SPA.

The market price of our common stock could decline as a result of issuances and sales by us, including pursuant to the Equity Purchase Agreement, or sales by our existing shareholders, of common stock, or the perception that these issuances and sales could occur. Sales by our shareholders might also make it more difficult for us to issue and sell common stock at a time and price that we deem appropriate. It is likely that the sale of shares by GPL   will depress the market price of our common stock.

Draw-downs under the SPA may cause dilution to existing shareholders.

GPL has committed to purchase up to $50,000,000 worth of shares of our common stock. From time to time during the term of the SPA, and at our sole discretion, we may present GPL with a put notice requiring GPL to purchase shares of our common stock. The purchase price to be paid by GPL will be 75% of the Market Price of our common stock.  We will be entitled to put to GPL on each put date such number of shares of common stock as equals 200% of the average of the  dollar volume on the principal trading exchange for our common stock for the 10 trading days preceding the put date; provided that the number of shares to be purchased by GPL shall not exceed the number of such shares that, when added to the number of shares of our common stock then beneficially owned by GPL, would exceed 4.99% of the number of shares of our common stock outstanding. As a result, our existing shareholders will experience immediate dilution upon the purchase of any of the shares by GPL. The issue and sale of the shares under the Equity Purchase Agreement may also have an adverse effect on the market price of the common shares. GPL may resell some, if not all, of the shares that we issue to it under the SPA and such sales could cause the market price of the common stock to decline significantly. To the extent of any such decline, any subsequent puts would require us to issue and sell a greater number of shares to GPL in exchange for each dollar of the put amount. Under these circumstances, the existing shareholders of our company will experience greater dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by GPL, and because our existing stockholders may disagree with a decision to sell shares to GPL at a time when our stock price is low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw down amounts under the SPA when our share price is decreasing, we will need to issue more shares to raise the same amount of funding. There is no guarantee that we will satisfy the conditions to the SPA. Although the Securities Purchase Agreement provides that we can require GPL to purchase, at our discretion, up to $50,000,000 worth of shares of our common stock in the aggregate, there can be no assurances that we will be able to satisfy the closing conditions applicable for each put. If we fail to satisfy the applicable closing conditions, we will not be able to sell the put shares to GPL. There is no guarantee that we will be able to fully utilize the SPA.  
8

Conversions of the EMA Note may also cause dilution to existing shareholders.

The EMA Note is convertible at equal the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the Closing Date, and (ii) 50% of either the lowest sale price for the Common Stock on the Principal Market during the twenty (20) consecutive Trading Days including and immediately preceding the Conversion Date, or the closing bid price, whichever is lower, as defined in the EMA Note.  As a consequence of the discounted conversion price, any conversion of the EMA note will result in immediate dilution of the Existing shareholders.

Conversions of the GPL Note may also cause dilution to existing shareholders.

The GPL Note is convertible at a 25% discount from market price, as defined in the GPL Note.  As a consequence of the discounted conversion price, any conversion of the GPL note will result in immediate dilution of the Existing shareholders

We have not yet assessed the effectiveness of our disclosure controls and procedures or our internal control over financing reporting. If we are unable to favorably assess the effectiveness of our disclosure controls or our internal control over financial reporting, our stock price could be adversely affected.

We have not yet assessed the effectiveness of our disclosure controls and procedures or our internal control over financial reporting. Following the effectiveness of the registration statement of which this prospectus forms a part, our management will be required to report on the effectiveness of our disclosure controls and procedures in each of our quarterly reports, and our internal control over financial reporting in each of our annual reports. Our management will need to provide a report on our internal control over financial reporting commencing with our first annual report after we have been required to file an annual report with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act for the prior fiscal year, which we anticipate will be our annual report for the year ended December 31, 2018. We may not be able to favorably assess the effectiveness of our disclosure controls and procedures or our internal control over financial reporting. If this occurs, investor confidence and our stock price could be adversely affected.

We are an "emerging growth company" and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.

We are an "emerging growth company," as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards, and we have elected to take advantage of this extended transition period. In other words, as an emerging growth company, we have elected to take advantage of the provision of the JOBS Act allowing us to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We are also currently able to take advantage of certain of these exemptions as a smaller reporting company. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.0 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; and (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
9

 
FORWARD-LOOKING STATEMENTS

The information contained in this prospectus, includes some statement that are not purely historical and that are "forward-looking statements." Such forward-looking statements include, but are not limited to, statements regarding our and their management's expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition and results of operations. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipates," "believes," "continue," "could," "estimates," "expects," "intends," "may," "might," "plans," "possible," "potential," "predicts," "projects," "seeks," "should," "will," "would" and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

Forward-looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as may be required by applicable law. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

USE OF PROCEEDS

We will not receive any proceeds from the sale of the common stock by the selling security holders pursuant to this prospectus. All proceeds from the sale of the shares will be for the account of the selling security holder.  We have agreed to bear the certain expenses relating to the registration of the shares for the selling security holders. We anticipate receiving proceeds from any "puts" tendered to GPL under the SPA.  Proceeds will be used for General Operating Expenses and Working Capital.

DETERMINATION OF OFFERING PRICE

The offering price for the shares sold to GPL under the put will equal 200% of the Market Price of our common stock on the date the purchase price is calculated. To the extent that the disparity between the offering price and market price of the common stock is material, such disparity was determined by us to be fair in consideration of GPL establishing a line of credit to facilitate our ongoing operations.

Securities Purchase Agreement

We entered into the Securities Purchase Agreement ("SPA") with GPL on January 5, 2018. Pursuant to the SPA, GPL committed to purchase up to $50,000,000 worth of our common stock, over a period of time terminating on the earlier of: (i) 24 months from the date of the agreement; (ii) the date on which GPL has purchase shares of our common stock pursuant to the SPA for an aggregate maximum purchase price of $50,000,000.  We may draw on this facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the SPA. The purchase price to be paid by GPL will be 75% of the Market Price of our common stock.  We will be entitled to put to GPL on each put date such number of shares of common stock as equals 200% of the average of the dollar volume on the principal trading exchange for our common stock for the 10 trading days preceding the put date; provided that the number of shares to be purchased by GPL shall not exceed the number of such shares that, when added to the number of shares of our common stock then beneficially owned by GPL, would exceed 4.99% of the number of shares of our common stock outstanding.  The SPA provides for payment to us of the price for the shares delivered to GPL within one business day of electronic delivery of the shares. There are put restrictions applied on days between the put notice date and the closing date with respect to that particular put. During such time, we are not entitled to deliver another put notice. There are circumstances under which we will not be entitled to put shares to GPL including the following:
10

 
·
will not be entitled to put shares to GPL unless there is an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), to cover the resale of the shares by GPL;
 
·
we will not be entitled to put shares to GPL unless our common stock continues to be quoted on  OTC Markets and has not been suspended from trading;
 
·
we will not be entitled to put shares to GPL if an injunction shall have been issued and remain in force against us, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the shares to GPL;
 
·
we will not be entitled to put shares to GPL if we have not complied with our obligations and are otherwise in breach of or in default under, the SPA, our Registration Rights Agreement with GPL (the "Registration Rights Agreement") or any other agreement executed in connection therewith with GPL; and,
 
·
we will not be entitled to put shares to GPL to the extent that such shares would cause GPL 's beneficial ownership to exceed 4.99% of our outstanding shares.
 
The SPA further provides that GPL is entitled to customary indemnification from us for any losses or liabilities it suffers as a result of any material misrepresentation, breach of warranty or non-fulfillment of or a failure to perform any material covenant or agreement contained in the SPA. The SPA also contains representations and warranties of each of the parties. The assertions embodied in those representations and warranties were made for purposes of the SPA and are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of the SPA. In addition, certain representations and warranties were made as of a specific date, may be subject to a contractual standard of materiality different from what a stockholder or investor might view as material, or may have been used for purposes of allocating risk between the respective parties rather than establishing matters as facts.

Dilutive Effects

Under the SPA, the purchase price of the shares to be sold to GPL will be at a price equal to 75% of the Market Price of our common stock. The table below illustrates an issuance of shares of common stock to GPL under the SPA for a hypothetical draw down amount of $20,000 at an assumed Market Price of $0.02:

Draw Down Amount
 
Price to be paid by GPL
  Number of Shares to be Issued  
 
$
20,000
   
$
0.015
     
1,333,333
 

By comparison, if the Market Price of our common stock was $0.01, the number of shares that we would be required to issue in order to have the same draw down amount of $20,000 would be greater, as shown by the following table:

Draw Down Amount
 
Price to be paid by GPL
 
Number of Shares to be Issued
 
           
 
$
20,000
   
$
0.007
     
2,857,143
 

Accordingly, there would be dilution of an additional 1,523,810 shares issued due to the lower stock price of $0.01 per share. In effect, if we are interested in receiving a fixed funding amount, a lower price per share of our common stock means a higher number of shares to be issued to GPL in order to receive that fixed funding amount, which equates to greater dilution of existing stockholders. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by GPL, and because our existing stockholders may disagree with a decision to sell shares to GPL at a time when our stock price is low, and may in response decide to sell additional numbers of shares, further decreasing our stock price.

The actual number of shares that will be issued to GPL under the SPA will depend upon the market price of our common stock at the time of our puts to GPL.
11

Likelihood of Accessing the Full Amount of the SPA

Notwithstanding that the SPA is in an amount of $50,000,000, the likelihood that we would access the full $50,000,000 is low. This is due to several factors including the fact that the SPA's share volume limitations will limit our use of the SPA and the market price may increase and thus fewer shares will need to be issued.

We determined to register for GPL in this registration statement a total of 80,000,000 shares, which represents less than 26% of our public outstanding shares (after subtracting the holdings of insiders and controlling shareholders) in order to allow the greatest possible flexibility under the SPA.  The amount of shares that might be utilized under the SPA cannot be determined at this time as it will fluctuate with the market price of our stock and our financial requirements.

SELLING STOCKHOLDERS

This prospectus relates to the sale from time to time by the selling shareholders identified herein of up to an aggregate of 416,538,466 shares of common stock consisting of:

a)
261,538,466 shares of our common stock underlying a 12% Convertible Note owing to EMA with an initial principal sum of $85,000.
   
b)
80,000,000 shares of our common stock underlying a Convertible Equity Line of Credit extended by GPL for up to $50,000,000.
   
c)
75,000,000 shares of our common stock underlying a 10% Convertible Note owing to GPL with a principal sum of $150,000.
 
The transactions by which the selling stockholders acquired their securities from us were exempt under the registration provisions of the Securities Act.
 
The shares of common stock referred to above are being registered to permit public sales of the shares of Common Stock, and the selling stockholders may offer the shares for resale from time to time pursuant to this prospectus. The selling stockholders may also sell, transfer or otherwise dispose of all or a portion of their shares in transactions exempt from the registration requirements of the Securities Act or pursuant to another effective registration statement covering those shares. We may from time to time include additional selling stockholders in supplements or amendments to this prospectus.
 
The table below sets forth certain information regarding the selling stockholders and the shares of our common stock offered in this prospectus. The selling stockholders has had no material relationship with us within the past three years other than as described in the footnotes to the table below or as a result of its acquisition of our shares or other securities.
 
Beneficial ownership is determined in accordance with the rules of the SEC. The selling stockholder's percentage of ownership of our outstanding shares in the table below is based upon 590,244,905 shares of common stock outstanding as of December 31, 2017.
 
Selling Stockholder
 
Number
of Shares
Beneficially
Owned Before
Offering
   
Number of
Shares
Offered
   
Number of Shares
Beneficially
Owned After
Offering
   
Percentage of
Shares
Beneficially
Owned
After Offering
 
GPL Ventures, LLC
   
80,000,000
     
80,000,000
     
-0-
     
-0-
 
EMA (1)
   
261,538,466
     
261,538,466
     
-0-
     
-0-
 
GLP Ventures, LLC (1)
   
75,000,000
     
75,000,000
     
-0-
     
-0-
 
 
  
(1)
Represents the amount of shares that will be held by the selling stockholder after completion of this offering based on the assumptions that (a) all shares registered for sale by the registration statement of which this prospectus is part will be sold and (b) no other shares of our common stock are acquired or sold by the selling stockholder prior to completion of this offering. However, the selling stockholder may sell all, some or none of the shares offered pursuant to this prospectus and may sell other shares of our common stock that they may own pursuant to another registration statement under the Securities Act or sell some or all of their shares pursuant to an exemption from the registration provisions of the Securities Act, including under Rule 144. To our knowledge there are currently no agreements, arrangements or understanding with respect to the sale of any of the shares that may be held by the selling stockholder after completion of this offering or otherwise.
 
We have assumed all shares of common stock reflected on the table will be sold from time to time in the offering covered by this prospectus. Because the selling stockholders may offer all or any portions of the shares of common stock listed in the table below, no estimate can be given as to the amount of those shares of common stock covered by this prospectus that will be held by the selling stock stockholders upon the termination of the offering.
12

DESCRIPTION OF BUSINESS

X Rail Entertainment, Inc. is a Nevada corporation, originally formed as a Utah corporation under the name State Cycle, Inc. on August 7, 1974. We moved the corporation to the state of Nevada and changed our name to X Rail Enterprises, Inc. on November 5, 2015, at which time our primary business changed from mining to rail transportation, passenger excursions, rail car construction and rail related operations and services. Effective November 4, 2017, we changed our name to X Rail Entertainment, Inc.

X Rail Entertainment, Inc. is in the specialty passenger train business and has three operating divisions, The X Train, which will be an excursion railroad between metropolitan areas and resort/casino destinations, X Wine Railroads, which is a rail excursion from metropolitan areas to wine regions, and Club X Train, a riders membership club for X Train customers.

X Train

The X Train is an excursion passenger rail service between Los Angeles and Las Vegas. We expect service to begin in June 2018. XREE plans to have its casino guests ride the exclusive train service and to manage the host activity of its guests throughout their stay in the resort/casino. We anticipate that, in addition to the Los Angeles to Las Vegas line, future X Train runs will be added in the coming years.

We anticipate running the X Train as an Amtrak train that will be listed on the Amtrak national timetable. X Train will provide a complete bundled package of services including ticket, rooms and transfers to & from the station and weekend events such as access to nightclubs, golf outings and restaurants. It will be scheduled as a Friday through Sunday service with passengers in Los Angeles boarding the train at Union Station and arriving at a new station to be built in Las Vegas and owned and operated by the X Train. Only the X Train will be able to use our station in Las Vegas. A typical X Train will consist of 10 passenger cars including food service and will carry on average, 500 passengers per trip. This number can be increased by adding more cars to the route.

Our LA to Vegas business plan emanates from a regional transportation feasibility study published in 2007, which suggested that a well-run rail service between Los Angeles and Las Vegas could garner up to 30% of the approximately 12 million passengers who regularly drive between these two metropolitan areas. See: www.rtcsouthernnevada.com. We believe that with our current business plan, we would be able to break-even, on an operating basis, with approximately 2,000 riders per year.

X Wine Railroad

The Company's X Wine Railroad service from LA Union Station to Santa Barbara California ran on a scheduled basis, once a month on Saturdays, with individual riders (retail) as well as charters for corporate outings and special events (corporate). The X Wine Railroad provides a unique wine tasting experience to riders who take the train aboard special period classic railcars and an excursion to the Los Olivos wine area of Southern California. Over 250 private wineries reside in the area and the X Wine Railroad provides private access to these vineyards on an exclusive basis. Ticket prices are $369 per person, all inclusive. Since February 2017 this train has run once and the Company expects to continue to run this train intermittently, depending on demand. X Wine provides an all-inclusive day trip including a gourmet breakfast, wine tasting in the wineries, wine and cheese lunch at the wineries, and a gourmet dinner on the train's return trip.

Club X Train

Club X Train will be a one stop shop for all Las Vegas rooms, activities, tours, show tickets and packages. Las Vegas shows, hotel rooms, tours, nightclubs and attractions are all available as a member of ClubXTrain.com. This will be the only site riders need to plan their Vegas vacation getaway. Club X Train has the best Las Vegas deals and specials, too.

We anticipate that when a customer purchases a train ticket on either the X Train (once it commences operations) or any of the X Wine Railroad excursions, such tickets will include enrollment in our Club X membership club. Members will receive points from each excursion they ride and will be provided discounts on products and services we provide. The more they ride, the more points they will receive. Club X train will the customer's ticket within Vegas for access to nightclubs, hosted bottle service, pool parties, gentlemen's clubs and the Club X Train Crawl: a high end to visiting three nightclubs in one night. Customers will outline their desired plan for the evening and Club X Train will take care of arranging all the details.  We expect to commence offering Club X Train service when the X Train commences running, currently anticipated to be June 2018.

13

Plan of Operations

The X Train

On February 11, 2016, the Company entered into share exchange agreements with some shareholders of Las Vegas Railway Express, Inc. ("Las Vegas Rail"). Las Vegas Rail had developed a brand identity in its development of a passenger train service from Los Angeles to Las Vegas, called the X Train. X Rail Entertainment, Inc. was formed to enter into an agreement with selected shareholders of Las Vegas Rail to exchange the stock of the Company for certain shares of Las Vegas Rail. In addition, the Company executed a license agreement with XTRN to pay a royalty of 5% of the gross revenues generated by the Company's operation of the X Train brand services including the operating name of Las Vegas Railway Express. Accordingly the Company owns the right to use Las Vegas Railway Express and the X Train brand and logo, which it acquired under the license agreement.

Under the licensing agreement X Rail Entertainment Inc. operates an excursion passenger rail service also known as the X Train that will run between Los Angeles and Las Vegas. Service is expected to begin in 2018. The Company plans to have its casino guests ride this exclusive train service and manage a host of activities for its guests throughout their stay in the resorts and casinos in Las Vegas.

Accordingly, the Company plans to operate an excursion passenger rail service between Los Angeles and Las Vegas. The service will operate as an Amtrak train on the Union Pacific Railroad, BNSF railroad and Metrolink railroad under Amtrak's access entitlement. The X Train will be stored in Amtrak's 8 th Street yard in Los Angeles and the consist will be assembled there by Amtrak switching engines. Each consist will be made up of unique privately owned custom railcars which the Company will lease based on demand for that particular weekly service. Each train will consist of 10 railcars with a total capacity of approximately 444 passengers.

Arrival into Las Vegas is planned to be at the train station we will construct in downtown Las Vegas at the Plaza Hotel. The train station, has not yet been constructed. The station is being built by R & O Construction of Ogden Utah and is expected to have a temporary platform completed by May, 2018 and a final structure completed by June 2018.

At arrival, passengers will disembark the rail cars and immediately board a limo or tour bus to take them to the property where they are staying. All accommodations and activities planned for the weekend stay will be booked via the X Train booking center in Las Vegas. Weekend VIP and club hop services will be coordinated through Red Carpet VIP or Niteclubs.com for niteclub and outings. Passengers will be picked up at their hotels on Sunday at noon for a 2 pm departure back to Los Angeles Union Station where the weekend experience is concluded.

To commence commercial service on the Las Angeles to Las Vegas route, we will need to negotiate and secure the necessary rights, equipment and facilities. These items include: securing a regularly scheduled train agreement from Amtrak to operate our excursion service on a weekly basis beginning with one round trip train per week and increasing to six round trips per week over the next several years as demand dictates, securing operating rights to run our trains over tracks owned by private railroads, obtaining the capability to operate train equipment safely and in conformity with applicable government regulations, and purchasing or leasing appropriate locomotive and passenger cars designed to move passengers over the route in comfort and securing leases on terminal facilities and passenger depots in Los Angeles and in Las Vegas. We expect the X Train to begin running in 2018.

The Company also owns a licensed IATIA travel agency, X Train Vacations which books rail excursions for other passenger railroads in the United States of America. X Train Vacations is considered as a part of the Las Vegas Railway Express division.  The Company plans to earn commissions from services that it will provide in 2017 in conjunction with the X Train rail service.

The specific steps, estimated costs and expected timeline for operation of our X Train service are as follows:
                                                     
February 2018 – June 2018: Rail realignment on station property to accommodate the X Train station – Cost - $2 million

February 2018 – June 2018- Training of Amtrak crews for certification of the new route between Dagget, Ca. & Las Vegas - $550,000

May 2018 – June 2018 – Beta test runs on route $250,000

February 2018 – June 2018– Procurement of passenger rail cars for service – lease deposit $500,000

June 2018 – First run at one per week.
14

  The X Wine Railroad

The Company's X Wine Railroad service from LA Union Station to Santa Barbara California ran regularly on a monthly basis from February 2017 to December 2017, and the Company plans to continue to run the train service in 2018 depending on demand, as discussed above.
Club X Train

Club X Train will be a one stop shop for all Las Vegas rooms, activities, tours, show tickets and packages. Las Vegas shows, hotel rooms, tours, nightclubs and attractions are all available as a member of ClubXTrain.com. This will be the only site riders need to plan their Vegas vacation getaway. Club X Train has the best Las Vegas deals and specials, too.

We expect to commence offering Club X Train service when the X Train commences running, currently anticipated to be June 2018. As such commencement of the Club X Train will require the same steps and costs as commencement of the X Train, as set forth above.

Competition

We believe our primary competitor is Iowa Pacific Corp. of Chicago, Illinois. Iowa Pacific is a private company which operates freight short line businesses as well as six passenger excursions.

Employees

As of September 30, 2017, we have 5 employees, all of whom are full-time.

DESCRIPTION OF PROPERTY

We lease approximately 3,079 square feet of general office space in premises located at 9480 S. Eastern Ave. Las Vegas, Nevada. Our lease for this space expires in November 2018 and our monthly rent is $5,818.

LEGAL PROCEEDINGS

We are not party to any material legal proceedings.

.
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Market Information

Our common stock is quoted on the OTC Pink under the symbol "XREE".   The following table sets forth the high and low prices per share of our common stock for each period indicated.  These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
                                                          
 
Common Shares
 
Year Ended December 31, 2017:
High
 
Low
 
Quarter Ended March 31, 2017
 
$
5.85
   
$
3.00
 
Quarter Ended June 30, 2017
 
$
3.91
   
$
0.12
 
Quarter Ended September 30, 2017
 
$
0.25
   
$
0.04
 
Quarter Ended December 31, 2017
 
$
0.05
   
$
0.01
 
                 
Year Ended December 31, 2016:
High
 
Low
 
Quarter Ended March 31, 2016
 
$
6.30
   
$
1.75
 
Quarter Ended June 30, 2016
 
$
6.30
   
$
1.20
 
Quarter Ended September 30, 2016
 
$
2.10
   
$
2.10
 
Quarter Ended December 31, 2016
 
$
5.00
   
$
1.00
 
 
15

Number of Stockholders

As of September 30, 2017, there were 580 stockholders of record of our common stock.  

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future. In addition, any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant.

Equity Compensation Plan Information

We do not have any equity compensation plan.

Transfer Agent

Our transfer agent is Action Stock Transfer Corp. located in Salt Lake City, UT.

PENNY STOCK RULES

The U.S. Securities and Exchange Commission has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).

A purchaser is purchasing penny stock, which limits the ability to sell the stock. The shares offered by this prospectus constitute penny stock under the Securities and Exchange Act. The shares will remain penny stocks for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock.

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document, which:

Contains a description of the nature and level of risk in the market for penny stock in both Public offerings and secondary trading;
   
Contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the Securities Act of 1934, as amended;
   
Contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" price for the penny stock and the significance of the spread between the bid and ask price;
   
Contains a toll-free number for inquiries on disciplinary actions;
   
Defines significant terms in the disclosure document or in the conduct of trading penny stocks; and
   
Contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange Commission shall require by rule or regulation.
 
 
16

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer:  
   
The bid and offer quotations for the penny stock;
   
The compensation of the broker-dealer and its salesperson in the transaction;
   
The number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
   
Monthly account statements showing the market value of each penny stock held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling their securities.
17

 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of financial condition and results of operations in conjunction with the financial statements and related notes appearing elsewhere in this prospectus.

Overview

X Rail Entertainment, Inc. is in the specialty passenger train business and has three operating divisions, The X Train, currently in the planning stages, will be an excursion railroad between metropolitan areas and resort/casino destinations, X Wine Railroads, a rail excursion from metropolitan areas to wine regions, and Club X Train, currently in the planning stages, a riders membership club for X Train customers.

Results of Operations for the Three Months Ended September 30, 2017 as Compared to the Three Months Ended September 30, 2016

The following is a comparison of the results of operations for the three months ended September 30, 2017 and 2016.
                                                                               
   
Three months ended
             
 
 
September 30,
   
September 30,
             
 
 
2017
   
2016
   
$ Change
   
% Change
 
                         
Revenues
 
$
-
   
$
-
   
$
-
     
100.0
%
Cost of sales
   
-
     
-
     
-
     
100.0
%
Gross profit (loss)
   
-
     
-
     
-
     
100.0
%
 
                               
Operating Expenses:
                               
Compensation and payroll taxes
 
$
137,569
   
$
210,842
   
$
(73,273
)
   
-34.8
%
Selling, general and administrative
   
72,429
     
56,213
     
16,216
     
28.8
%
Professional fees
   
101,313
     
48,094
     
53,219
     
110.7
%
  Total expenses
   
311,311
     
315,149
     
(3,838
)
   
-1.2
%
                                 
Loss from operations
   
(311,311
)
   
(315,149
)
   
3,838
     
-1.2
%
                                 
Other income (expense)
                               
Interest expense
   
(133,630
)
   
(70,121
)
   
(63,509
)
   
90.6
%
Derivative expense
   
1,764
     
-
     
1,764
     
-100.0
%
Loss on disposition of assets
   
(629,270
)
   
-
     
(629,270
)
   
-100.0
%
   Total other income (expense)
   
(761,136
)
   
(70,121
)
   
(691,015
)
   
985.5
%
                                 
Net income (loss) from operations before provision for income taxes
   
(1,072,447
)
   
(385,270
)
   
(687,177
)
   
178.4
%
Provision for income taxes
   
-
     
-
     
-
     
0.0
%
Net income (loss)
 
$
(1,072,447
)
 
$
(385,270
)
 
$
(687,177
)
   
178.4
%

Operating Expenses

Compensation expense decreased by $73,273, or 34.8%, during the quarter ended September 30, 2017 as compared to the quarter ended September 30, 2016.  The decrease in compensation expense was primarily due to fewer employees.  Selling, general and administrative expenses increased by $16,216, or 28.8%, during the quarter ended September 30, 2017 as compared to the same period in 2016 primarily due to increase in travel and office expenses. Professional fees increased by $53,219, or 110.7%, during 2017 as compared to 2016 due primarily to increases in consulting services and accounting expenses.  

Other (Expense) Income

Interest expense increased by $63,509, or 90.6%, during the quarter ended September 30, 2017 as compared to the same period in 2016 due to issuances of certain promissory notes.  During the three months ended September 30, 2017, the Company expensed the carrying value of 10 rail cars of $629,270 as they were repossessed by the rail yard storage facility for unpaid storage charges.
18

Results of Operations for the Nine Months Ended September 30, 2017 as Compared to the Nine Months Ended September 30, 2016

The following is a comparison of the results of operations for the nine months ended September 30, 2017 and 2016.
                                                                        
   
Nine months ended
             
 
 
September 30,
   
September 30,
             
 
 
2017
   
2016
   
$ Change
   
% Change
 
                         
Revenues
 
$
32,259
   
$
-
   
$
32,259
     
100.0
%
Cost of sales
   
(46,051
)
   
-
     
(46,051
)
   
100.0
%
Gross profit (loss)
   
(13,792
)
   
-
     
(13,792
)
   
100.0
%
 
                               
Operating Expenses:
                               
Compensation and payroll taxes
 
$
391,274
   
$
1,702,480
   
$
(1,311,206
)
   
-77.0
%
Selling, general and administrative
   
272,977
     
162,238
     
110,739
     
68.3
%
Professional fees
   
565,438
     
188,681
     
376,757
     
199.7
%
  Total expenses
   
1,229,689
     
2,053,399
     
(823,710
)
   
-40.1
%
                                 
Loss from operations
   
(1,243,481
)
   
(2,053,399
)
   
809,918
     
-39.4
%
                                 
Other income (expense)
                               
Interest expense
   
(727,727
)
   
(89,019
)
   
(638,708
)
   
717.5
%
Derivative expense
   
(7,789
)
   
-
     
(7,789
)
   
-100.0
%
Loss on disposition of assets
   
(629,270
)
   
-
     
(629,270
)
   
-100.0
%
   Total other income (expense)
   
(1,364,786
)
   
(89,019
)
   
(1,275,767
)
   
1433.1
%
                                 
Net income (loss) from operations before provision for income taxes
   
(2,608,267
)
   
(2,142,418
)
   
(465,849
)
   
21.7
%
Provision for income taxes
   
-
     
-
     
-
     
0.0
%
Net income (loss)
 
$
(2,608,267
)
 
$
(2,142,418
)
 
$
(465,849
)
   
21.7
%

 
Revenue

Revenue increased by $32,259, or 100% during the nine months ended September 30,2017 as the Company started its operation running a wine train between Los Angeles and Santa Barbara, CA.  Revenue was generated from selling train tickets, food and beverage and wine tours.  The gross profit was negative because of introductory price of wine trip.

Cost of Sales

Cost of sales increased by $46,051, or 100% during the nine months ended September 30, 2017, which represents costs of operating the wine train.

Operating Expenses

Compensation expense decreased by $1,311,206, or 77.0%, during the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2016.  The decrease in compensation expense during the nine months ended September 30, 2017 is primarily due to the issuance of stock compensation to employees and Board members resulting in additional expenses in 2016.  Selling, general and administrative expenses increased by $110,739, or 68.3%, during the nine months ended September 30, 2017 as compared to the same period in 2016 primarily due to increase in travel and office expenses. Professional fees increased by $376,757, or 199.7%, during 2017 as compared to 2016 due primarily to increases in professional services.  
19

Other (Expense) Income

Interest expense increased by $638,708, or 717.5%, during the nine months ended September 30, 2017 as compared to the same period in 2016 due to issuances of promissory notes and accruing interest. During the nine months ended September 30, 2017, the Company expensed the carrying value of 10 rail cars of $629,270 as they were repossessed by the rail yard storage facility for unpaid storage charges.


Results of Operations for the Years Ended December 31, 2016 and 2015
    
   
Years Ended   
             
 
 
December 31,
   
December 31,
             
 
 
2016
   
2015
   
$ Change
   
% Change
 
 
                       
Operating Expenses:
                       
Compensation and payroll taxes
 
$
1,912,125
   
$
302,383
   
$
1,609,742
     
532.35
%
Selling, general and administrative
   
243,784
     
3,383
     
240,401
     
7106.15
%
Professional fees
   
265,335
     
500
     
264,835
     
52967.00
%
  Total expenses
   
2,421,244
     
306,266
     
2,114,978
     
690.57
%
                                 
Loss from operations
   
(2,421,244
)
   
(306,266
)
   
(2,114,978
)
   
690.57
%
                                 
Other income (expense)
                               
Interest expense
   
(146,225
)
   
(8,750
)
   
(137,475
)
   
1571.14
%
   Total other income (expense)
   
(146,225
)
   
(8,750
)
   
(137,475
)
   
1571.14
%
                                 
Net income (loss) from operations before provision for income taxes
   
(2,567,469
)
   
(315,016
)
   
(2,252,453
)
   
715.03
%
Provision for income taxes
   
-
     
-
     
-
     
0.00
%
Net income (loss)
 
$
(2,567,469
)
 
$
(315,016
)
 
$
(2,252,453
)
   
715.03
%
           
Operating Expenses

During the year ended 2016, the compensation expenses were increased by 532% comparing to 2015 as a result of issuing stock for compensation and services. The G&A and consulting professional expenses increased by 7,106% and 52,967%, respectively, as the company started new operation as of January 2016.

Interest expense increased by 1,571% as a result of issuing convertible notes.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support asset growth, satisfy disbursement needs, maintain reserve requirements and otherwise operate on an ongoing basis. The Company has limited operating revenues and is currently dependent on debt financing and sale of equity to fund operations. 
                   
As shown in the accompanying financial statements, the Company has net losses of $2,608,267 for the nine months ended September 30, 2017 and $2,567,469 for the year ended December 31, 2016.  The Company also has an accumulated deficit of $10,547,428 and negative working capital of $1,094,242 as of September 30, 2017, as well as outstanding convertible notes payable of $509,600 before debt discount of $205,224.  Management believes that it will need additional equity or debt financing to be able to implement its business plan.  Given the limited revenue, capital deficiency and negative working capital, there is substantial doubt about the Company's ability to continue as a going concern.
20


We believe that the successful growth and operation of our business is dependent upon our ability to do the following:

obtain adequate sources of debt or equity financing to pay unfunded operating expenses and fund long-term business operations; and

manage or control working capital requirements by controlling operating expenses.

Management is attempting to raise additional equity and debt to sustain operations until it can market its services and achieves profitability.  The successful outcome of future activities cannot be determined at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results.

Critical Accounting Policies

The preparation of the financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

The financial statements have been prepared assuming that the Company will continue as a going concern. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.   The Company considers all highly liquid holdings with maturities of three months or less at the time of purchase to be cash equivalents. The Company does not have any receivables. The Company maintains its cash in back deposit accounts which, at times may exceed federally insured limits.  The Company evaluates long –lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. The Company's financial instruments include cash, notes payable and derivative liabilities.  Derivative liabilities are recorded at fair value.  The principal balance of notes payable are at fair value because current interest rates and terms offered to the Company for similar debt are the same.  The Company has no derivative liabilities.

Off Balance Sheet Arrangements

The Company has no off balance sheet arrangements.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.



DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information regarding our executive officers and directors:

Name
Age
Office
     
Michael A. Barron
67
Chairman of the Board of Directors, Chief Executive Officer
Wanda Witoslawski
53
Chief Financial Officer and Treasurer
Joseph Cosio-Barron
69
President
Hualiang Teng
58
Director
Lou Schillinger
68
Director
Don Adams
75
Director

Directors hold office for a period of one year from their election at the annual meeting of stockholders and until their successors is duly elected and qualified. Officers are elected by, and serve at the discretion of, the Board of Directors.

Set forth below is a brief description of the background and business experience of each of our executive officers and directors.
21

Michael A. Barron – Chairman and Chief Executive Officer

Michael Barron has been our Chairman and Chief Executive Officer since December 2015 and previously served as President and Chief Executive Officer of Las Vegas Railway Express, Inc. from 2010 to 2015. Mr. Barron has been a developer of new business Entertainment for nearly 30 years. Mr. Barron began his career in 1971 where he was the Senior Planner for the City of Monterey and was the HUD liaison for the City's downtown redevelopment project. He master planned the city's redevelopment of famous Cannery Row, Fisherman's Wharf, and was Secretary of the Architectural Review Committee. Mr. Barron was the founder of Citidata, the first electronic provider of computerized real estate multiple listing service (MLS) information in the nation from 1975 to 1979. Citidata became the nation's largest provider of electronic real estate information and was sold to Moore Industries in 1979. In June 1979, TRW hired Mr. Barron to develop its real estate information services division (TRW/REIS) that acquired 11 companies in the field and eventually became the world's largest repository of real estate property information - Experian. In November 1988, he founded and served as President, until 1992, of Finet Holdings Corporation (NASDAQ:FNCM), a publicly traded mortgage broker and banking business specializing in e-mortgage financing on site in real estate offices and remote loan origination via the Internet (www.finet.com). The company was publicly traded and maintained a market capitalization of $500 million. From March 1995-1998, Mr. Barron pioneered the first nationwide commercially deployed video conference mortgage financing platform for Intel Corporation which as a licensed mortgage banker and broker in 20 states funded over $1 billion in closed loans. He later went on to serve as CEO for publicly traded Shearson Home Loans, a $1.3 billion mortgage bank licensed in 33 states with 237 offices and 1,450 employees.  He founded Liberty Capital, a publicly traded real estate asset management company with a portfolio of mortgages and real estate valued at over $100 million based in Las Vegas, Nevada. Mr. Barron holds a B.S. degree from California Polytechnic University and he was accepted into the MBA program at UCLA, where he has yet to complete his degree. Mr. Barron has received numerous awards throughout his career including the American Institute of Planners National Award for historic building preservation, National Association Of Realtors award for Best New Product of the Year for video conferencing of mortgages in real estate offices,  He is a regular speaker at UNLV in the rail engineering program.

Wanda Witoslawski - Chief Financial Officer

Ms. Witoslawski has served  in progressively responsible financial positions for public companies over the past twelve years. She served as Controller for Ocean West Enterprises until its acquisition by Shearson Home Loans in 2005 where she managed the accounting function for a staff of 1,350 employees and $200mm credit facility. Upon Shearson's exit from mortgage banking in 2007, she joined the principals Mr. Barron and Mr. Cosio-Barron as Controller at Liberty Capital Asset Management, an investor in acquiring defaulted mortgage pools, managing public accounting documents for SEC filings and the financial supervision over the liquidation of over 4,000 mortgage loans the company had acquired.
                                                
Joseph Cosio-Barron - President

Mr. Cosio-Barron has served as President of the Company and as President of Club X, X Rail's entertainment membership program, since 2016-.  Previously, Mr. Cosio-Barron was President of Shearson Home Loans, a $1.3 billion national mortgage bank with 237 offices in 33 states and 1,450 employees from 2004 to 2007. He co-founded Liberty Capital, a $100 million asset management company based in Las Vegas.  He has also served as the Managing Partner and President of CBS Consultants, Inc. a financial firm offering highly specialized services in development and lending for hotels, resorts, casinos and entertainment Companies. He was Executive Vice President of Finet Holdings Corporation, President of Terra West Construction, and Senior Vice-President of Multi-Financial Corporation. 

Dr. Hualiang Teng – Director

Dr. Teng has served as a director of the Company since 2015. Dr. Teng, an Associate Professor in Transportation Engineering at the University of Nevada, Las Vegas (UNLV), has approximately 30 years of research and education experience in transportation engineering and management. He graduated from China's Beijing Jiaotong University with his B.S. and M.S. degrees in railroad engineering and management. He has a second M.S. degree from West Virginia University on railroad operations, and a Ph.D. in civil engineering from Purdue University. He has taught at Beijing Jiaotong University, Polytechnic University of New York, The University of Virginia (UVa), and UNLV. He was the Associate Director for the Center of Transportation Studies at UVa. Dr. Teng leads the railroad and high-speed rail program at UNLV. Since 2007, he has been operating the Transit UTC at UNLV for which he has been involved in research with federal and local agencies and organized distinguished seminars. He has initiated the railroad, high-speed rail, and transit program at UNLV for which he has developed a curriculum and certificate program on railroad. He is the advisor for the AREMA student chapter at UNLV. In addition, he has been active in railroad professional activities. Dr. Teng also is interested in Intelligent Transportation Systems, infrastructure maintenance, air quality analysis, freight transportation, safety, and demand forecasting. So far, he has published approximately 40 peer-reviewed technical papers.  Dr. Teng's knowledge and experience in transportation engineering and management qualify him to serve on the Company's board of directors.
22

Don Adams – Director

Don Adams has served as a director of the Company since 2015. Mr. Adams currently serves as Managing Director of Gaming Sales for the Company. Mr. Adams has spent the last 35 years as Founder and Chief Executive Officer of Allstate Ticketing in Las Vegas.  Allstate ticketing is the oldest and largest broker of sightseeing tours in Nevada, with over 20 (and growing) locations including the Flamingo, Harrah's, Hoover Dam, Las Vegas Convention and Visitors Authority and McCarran International airport.  Mr. Adams and Allstate were pioneers in using the web-based platforms for the industry and in 2005 sold Allstate to Travelocity, Inc. Prior to founding Allstate, Mr. Adams served in executive roles for many Las Vegas gaming companies. Mr. Adams's executive experience qualifies him to serve on the Company's board of directors.

Lou Schillinger – Director

Mr. Schillinger has been a Director of X Rail Entertainment, Inc. since 2015 and since 1993, has been the Founder, President & CEO of United Shortline Insurance Services Inc. (USI). United Shortline has been serving the rail industry with innovative and railroad responsive insurance products for the past 26 years. Mr. Schillinger has devoted his entire thirty+ professional career to the insurance industry. In 1985, shortly after the deregulation of the U.S. railroad industry, Mr. Schillinger's agency began to produce unique Railroad Industry Liability and Property coverage's to the growing Shortline and Regional Railroad Industry throughout North America. He was responsible for developing the policy language, current rating structure, underwriting guide, claims manual, and has reviewed and underwritten both alone and with various consulting underwriters, virtually every shortline and regional railroad in America during the last 25 years. United Shortline Insurance Services, Inc. is the largest Managing General Agency providing insurance to over 30% of the Railroad Industry and is credited with establishing and maintaining the only fully admitted Railroad Liability Program in the country since 1994. In 2001, USI and Marsh, Inc. combined to develop a certified safety program to the ASLRRA and became the first "endorsed" liability insurance product in the ASLRRA's history. Mr. Schillinger has been awarded the exclusive marketing contract for Class I railroads Railroad Protective Program from Hudson Insurance Company in 2007. Mr. Schillinger has conducted Railroad Liability seminars for agents, legislators, industry groups, and client railroads throughout the country. In addition Mr. Schillinger has had the privilege of presenting a Small Business Curriculum for a portion of the University of Pennsylvania's 1999, 2000, 2002, and 2005 MBA Programs. An avid lighthouse historian, Mr Schillinger acquired and begun restoring an offshore lighthouse "Port Austin Reef Light", located 2.5 miles north of Port Austin in Lake Huron in 1985 and continues this pursuit to this date. Mr. Schillinger is a graduate of Michigan State University where he earned a BA in Financial Administration and has taken numerous hours of continuing education. Mr. Schillinger's rail industry experience qualifies him to serve on the Company's board of directors.
                                             
Family Relationships

There are no family relationships between any of our directors or executive officers and any other directors or executive officers.

Legal Proceedings

Except as set forth below, to our knowledge, during the last ten years, none of our directors and executive officers have:
 
  ·
Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.

  ·
Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.

  ·
Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.

  ·
Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

  ·
Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. 
23

Board Committees

We have not established any board committees and does not have an audit committee financial expert due to the small size and early stage of the Company.

Board Leadership Structure and Role in Risk Oversight

Mr. Barron serves as chairman and chief Executive officer. Due to the small size and early stage of the Company, we believe it is currently most effective to have the chairman and chief executive officer positions combined.

Our board of directors is primarily responsible for overseeing our risk management processes. The board of directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding the Company's assessment of risks. The board of directors focuses on the most significant risks facing the Company and the Company's general risk management strategy, and also ensures that risks undertaken by the Company are consistent with the board's appetite for risk. While the board of directors oversees the Company's risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing the Company and that our board leadership structure supports this approach.
 
Code of Ethics

The Company has adopted a Code of Ethics that applies to the Company's principal executive officer, principal financial officer and principal accounting officer.

EXECUTIVE COMPENSATION

Annual Compensation

The following table sets forth information concerning the total compensation paid or accrued by us during the two fiscal years ended December 31, 2017 to:

  ·
All individuals who served as our chief executive officers or acted in a similar capacity at any time during the fiscal year ended December 31, 2017; and
   
  ·
All individuals who served as executive officers of ours at any time during the fiscal year ended December 31, 2017 and received annual compensation during the fiscal year ended December 31, 2017 in excess of $100,000.

Name and
               
Share
       
All Other
       
Principal Position
Year
 
Salary
   
Bonus
   
Awards
       
Compensation
   
Total
 
                                     
Michael A. Barron
2017
 
$
27,500
   
$
-
   
$
55,000
 
(2
)
 
$
-
   
$
82,500
 
CEO and Chairman
2016
 
$
110,427
   
$
-
   
$
175,000
 
(1
)
 
$
-
   
$
285,427
 
                                               
Wanda Witoslawski
2017
 
$
55,917
   
$
-
   
$
50,000
 
(2
)
 
$
-
   
$
105,917
 
CFO and Treasurer
2016
 
$
94,292
   
$
-
   
$
0
 
(1
)
 
$
-
   
$
94,292
 
                                               
Joseph Cosio-Barron
2017
 
$
59,208
   
$
-
   
$
50,000
 
(2
)
 
$
-
   
$
109,208
 
President
2016
 
$
143,039
   
$
-
   
$
286,413
 
(1
)
 
$
-
   
$
429,452
 

(1) Represents aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The shares were valued at $0.07 per share.

(2) Represents aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The shares were valued at $0.001 per share.

24

Employment Agreements

As of August 1, 2017, the Company executed 5 year employment agreements for officers of the Company.

Outstanding Equity Awards at 2016 Fiscal Year-End

There were no outstanding equity awards at December 31, 2017.

Compensation of Directors

The following table sets forth compensation received by our directors (excluding compensation paid to our executive officers included in the summary compensation table above) in the fiscal year ended December 31, 2017.

 
Name
 
Fees earned
or paid in
cash ($)
   
Stock
awards ($)
       
Option
Awards ($)
   
All
other
compensation ($)
   
Total ($)
 
Hualiang Teng
   
-
     
5,000
 
(1
)
   
-
     
-
     
5,000
 
Don Adams
   
-
     
5,000
 
(1
)
   
-
     
-
     
5,000
 
Lou Schillinger
   
-
     
5,000
 
(1
)
   
-
     
-
     
5,000
 

1) Represents aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Shares were valued at $0.001 per share.

Risk Management

The Company does not believe risks arising from its compensation policies and practices for its employees are reasonably likely to have a material adverse effect on the Company.

DESCRIPTION OF SECURITIES

The Company is authorized to issue 3,000,000,000 shares of common stock and 1,000,000 shares of preferred A, 10,000 shares of preferred A-2, 1,000,000 shares of preferred B and 1,000 shares of preferred C class.  The increase in authorized shares of common stock from 500,000,000 to 1,000,000,000 was approved by the shareholders and Board of Directors on September 27, 2017. The increase from 1,000,000,000 to 3,000,000,000 shares was effective December 12, 2017.

On November 20, 2016, the Company effected a reverse stock split, on a 1000 to 1 basis, which has been retroactively applied to the financial statements to the earliest period presented.

Holders of the Company's common stock are entitled to one vote for each share on all matters submitted to a stockholder vote.  Holders of common stock do not have cumulative voting rights. Therefore, holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors. Holders of the Company's common stock representing a majority of the voting power of the Company's capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders. A vote by the holders of a majority of the Company's outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to the Company's certificate of incorporation.

Holders of the Company's common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock. The Company's common stock has no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to the Company's common stock.
25

Convertible Notes and Warrants
 
Power Up Lending Group LTD
 
On November 1, 2017, the Company entered into a convertible note agreement with Power Up Lending Group LTD for total principal borrowings of $45,000.  The amounts are due nine months after the issuance of the note on August 10, 2018, and bear interest at a rate of 12% per annum.  At the option of the debt holder, beginning 180 days after the issuance of the note, the debt holder may convert the outstanding balance of the Note into shares of the Company's common stock at a conversion rate equal to 58% of the average of the lowest two closing trading prices during the 15 trading day period prior to the conversion election date.

EMA Financial, LLC
 
On November 27, 2017, we entered into a securities purchase agreement (the "November 2017 Purchase Agreement"), dated as of November 27, 2017 (the "Closing Date"), with EMA Financial, LLC (the "Investor") pursuant to which the Investor purchased an aggregate principal amount of $85,000 of Convertible Notes for an aggregate purchase price of $85,000 (the "November 2017 Notes"). The November 2017 Notes 12% original issue discount. Net proceeds from the sale of the November 2017 Notes were $76,500, which have been used for general corporate purposes.
 
The November 2017 Notes bear interest at a rate of 12.0% per annum, payable in arrears on the maturity date of November 27, 2018 (the "Maturity Date"). The November 2017 Notes are convertible into shares of Common Stock, after the earlier of June 1, 2018 or the effectiveness of a registration statement to register the resale of the shares of Common Stock issuable upon conversion of the November 2017 Notes (the "Registration Statement"), at a conversion price equal to the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the Closing Date, and (ii) 50% of either the lowest sale price for the Common Stock on the Principal Market during the twenty (20) consecutive Trading Days including and immediately preceding the Conversion Date, or the closing bid price, whichever is lower ("Conversion Date").
 
Until June, 2018 (the "Prepayment Termination Date"), the Company has the right, exercisable on not less than five (5) trading days' prior written notice to the holder of the November 2017 Notes, to prepay the outstanding balance on the November 2017 Notes (principal and accrued interest), in full. On the date fixed for prepayment (the "Optional Prepayment Date"), the Company must make payment of the Optional Prepayment Amount or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Company exercises its right to prepay the November 2017 Note, the Company must pay Holder an amount in cash (the "Optional Prepayment Amount") equal to the Prepayment Factor (as defined below), multiplied by the sum of: (w) the then-outstanding principal amount of the November 2017 Note plus (x) accrued and unpaid interest on the unpaid principal amount of the November 2017 Note to the Optional Prepayment Date plus (y) default interest. For purposes hereof, the "Prepayment Factor" shall equal one hundred and fifty percent (150%), provided that such Prepayment factor shall equal one hundred and thirty five percent (135%) if the Optional Prepayment Date occurs on or before the date which is ninety (90) days following the Issue Date hereof.
 
In connection with the November 2017 Purchase Agreement, we entered into a registration rights agreement with the Investor (the "Registration Rights Agreement") pursuant to which we agreed to file the Registration Statement with the SEC on or before January 15, 2018, and to use our reasonable best efforts for to cause such Registration Statement to become effective prior to February 25, 2018. Upon certain failures of the Company to file or maintain effectiveness of the Registration Statement, including the failure to file the Registration Statement on or before January 15, 2018, then on such event date and each one-month anniversary of such event date, the Company shall pay to the Investor an amount as part of liquidated damages in cash equal to 1.5% of the aggregate purchase price paid by the Investor pursuant to the November 2017 Purchase Agreement for any unregistered registrable securities then held by the Investor, up to a maximum of 24% of the purchase price of the November 2017 Notes.
 
The November 2017 Notes contain certain negative covenants preventing the Company from undertaking certain actions without the consent of the Investor. The November 2017 Notes also contain certain events of default, including but not limited to the Company's failure to pay principal and interest, material defaults under the other transaction documents, material restatements of our financial statements, material defaults in other payment obligations, failure of the Company to comply with its reporting requirements with the SEC, bankruptcy or appointment of a receiver, the Company's failure to deliver certificates representing the shares of Common Stock after a conversion, the entry of judgments in excess of $50,000 against the Company, failure to maintain a listing for our Common Stock on NASDAQ, OTCQX, NYSE, AMEX or an equivalent exchange, cessation of operations,. Any amount of principal or interest on the November 2017 Notes which is not paid when due shall bear interest at the default rate of 24% per annum.
26

In the case of certain defaults, including the failure to pay principal and interest when due at the maturity date, we are required to pay a "Default Sum" equal to the outstanding principal amount of the November 2017 Notes, plus accrued and unpaid interest on the principal amount of the November 2017 Notes, plus default interest (if any), plus any other amounts owed to the Investor. In the case of a default due to failure to deliver conversion shares, we may be required to pay twice the Default Sum. In the case of certain other defaults, including without limitation the failure to pay principal and interest when due after acceleration of the November 2017 Notes, we may be required to pay the greater of 150% of the Default Sum or the "parity value" of the Default Sum to be prepaid. For these purposes, the parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum, treating the trading day immediately preceding the mandatory prepayment date as the "conversion date" for purposes of determining the lowest applicable conversion price (unless the default arises as a result of a breach in respect of a specific conversion date, in which case such conversion date shall be the "conversion date"), multiplied by (b) the highest closing price for the Common Stock during the period beginning on the date of first occurrence of the event of default and ending one day prior to the mandatory prepayment date.
 
Adar Bays, LLC
 
On December 18, 2017, the Company entered into a security purchase agreement with ADAR Bays, LLC providing for total borrowings of $120,000, with the first note being of $40,000 and the second and third notes being in the total amount of $80,000.  Interest on the note equals 12% of the total principal balance. The Company received payment of $38,000 on December 19, 2017, which represents the total amount outstanding as of September 30, 2017.  The convertible note matures 12 months after the issuance, at which point the outstanding principal and interest is due. The outstanding amounts are convertible into shares of common stock at a conversion rate equal to 50% of the lowest of: (i) the lowest trading price during the twenty trading days prior to the conversion, or (ii) the lowest trading price during the twenty trading days preceding the date of this Agreement.

Auctus Fund, LLC
 
On December 20, 2017, the Company entered into a convertible note agreement with Auctus Fund, LLC for total principal borrowings of $112,000.  The amounts are due nine months after the issuance of the note on September 20, 2018, and bear interest at a rate of 12% per annum.  At the option of the debt holder, beginning 180 days after the issuance of the note, the debt holder may convert the outstanding balance of the Note into shares of the Company's common stock at a conversion rate equal to 50% of the lowest closing trading price during the 25 trading day period prior to the conversion election date.
 
Power Up Lending Group LTD
 
On December 21, 2017, the Company entered into a convertible note agreement with Power Up Lending Group LTD for total principal borrowings of $28,000.  The amounts are due nine months after the issuance of the note on September 30, 2018, and bear interest at a rate of 12% per annum.  At the option of the debt holder, beginning 180 days after the issuance of the note, the debt holder may convert the outstanding balance of the Note into shares of the Company's common stock at a conversion rate equal to 51% of the lowest closing trading price during the 30 trading day period prior to the conversion election date.

GPL Ventures
 
We entered into the SPA with GPL on January 5, 2018. Pursuant to the SPA, GPL committed to purchase up to $50,000,000 worth of our common stock, over a period of time terminating on the earlier of: (i) 24 months from the date of the agreement; (ii) the date on which GPL has purchase shares of our common stock pursuant to the SPA for an aggregate maximum purchase price of $50,000,000.  We may draw on this facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the SPA. The purchase price to be paid by GPL will be 75% of the Market Price of our common stock.  We will be entitled to put to GPL on each put date such number of shares of common stock as equals 200% of the average of the dollar volume on the principal trading exchange for our common stock for the 10 trading days preceding the put date; provided that the number of shares to be purchased by GPL shall not exceed the number of such shares that, when added to the number of shares of our common stock then beneficially owned by GPL, would exceed 4.99% of the number of shares of our common stock outstanding.  The SPA provides for payment to us of the price for the shares delivered to GPL within one business day of electronic delivery of the shares. There are put restrictions applied on days between the put notice date and the closing date with respect to that particular put.

RELATIONSHIP BETWEEN THE ISSUER AND THE SELLING SECURITY HOLDER

The selling security holders have not at any time during the past three years acted as one of our employees, officers or directors or had a material relationship with us.

GPL Ventures
 
On January 5, 2018, the Company entered into a convertible note agreement with GPL Ventures for total principal balance of $150,000.  The amounts are due six months after the issuance of the note on July 5, 2018, and bear interest at a rate of 10% per annum.  At the option of the debt holder, beginning 180 days after the issuance of the note, the debt holder may convert the outstanding balance of the Note into shares of the Company's common stock at a conversion rate equal to 75% of the average of the five lowest closing trading prices during the 10 trading day period prior to the conversion election date
27

PLAN OF DISTRIBUTION

This prospectus includes 416,538,466 shares of common stock offered by the selling stockholders.

Our common stock is quoted on the OTC Pink under the symbol "XREE". The selling stockholders will offer their respective shares at the market price less discount per share until our common stock is quoted on the OTCQB, and thereafter, at prevailing market prices or privately negotiated prices. Each selling stockholder and any of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of its shares of common stock on the OTC Pink, OTCQB, or any other stock exchange, market or trading facility on which our shares are traded or in private transactions. A selling stockholder may use any one or more of the following methods when selling shares:

·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
   
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
   
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
   
·
an exchange distribution in accordance with the rules of the applicable exchange;
   
·
privately negotiated transactions;
   
·
settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
   
·
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
   
·
Through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
   
·
a combination of any such methods of sale; or
   
·
any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

In addition, the selling stockholders may transfer the shares of common stock by other means not described in this prospectus. If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

The selling stockholders may pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
28

To the extent required by the Securities Act and the rules and regulations thereunder, the selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.

There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

We will pay all expenses of the registration of the shares of common stock.

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates. 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of the Company's common stock as of December 31, 2017 by (a) each of the Company's directors and executive officers, (b) all of the Company's directors and executive officers as a group, and (c) any holder of more than five (5%) percent.
                                                          
Michael Barron
   
97,416,021
     
16.5
%
Wanda Witoslawski
   
71,367,832
     
12.1
%
Joseph Cosio-Barron
   
63,037,548
     
10.7
%
Hualiang Teng
   
5,107,407
     
0.9
%
Don Adams
   
5,174,068
     
0.9
%
Louis Schillinger
   
5,660,665
     
1.0
%
 
               
All directors and officers as a group
   
247,763,541
     
42.0
%
                 
5% of greater beneficial owners:
               
Gilbert H. Lamphere
   
129,135,847
     
21.9
%
Wayne Bailey
   
69,669,829
     
11.8
%
 
 
(1)
The address of each of the beneficial owners is 9480 S. Eastern Ave., Las Vegas, Nevada 89123.
     
 
(2)
In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person that are currently exercisable, or become exercisable within 60 days are deemed outstanding. However, such shares are not deemed outstanding for purposes of computing the percentage ownership of any other person.
     
 
(3)
Based on 590,244,905 shares of common stock outstanding as of December 31, 2017. 

29

 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Three of our directors, Dr. Hualiang Teng, Don Adams, and Lou Schillinger, are independent directors, using the NASDAQ definition of independence.

The following is a description of transactions and relationships between us, our executive officers and our directors and each of their affiliates.

Michael A. Barron, the CEO and President of the Company, is a 100% owner and President of Allegheny Nevada Holdings Corporation, "Allegheny".  The Company has issued a promissory note to Allegheny with 10% annual interest, due on demand.   As of December 31, 2016 and September 30, 2017, the balance of the note was $52,240 and $39,101, respectively.

As of December 31, 2016 and September 30, 2017, Las Vegas Railway Express, Inc. holds a promissory note of the Company of $162,232 and $155,798, respectively, with no interest, payable on demand.

Wanda Witoslawski, the Chief Financial Officer of the Company, holds a promissory note of $55,994 with 10% annual interest. The balance of the note was $55,994 as of December 31, 2016 and $49,910 as of September 30, 2017.
Dianne David, Vice President Sales of the Company, holds a promissory note with 10% annual interest. The balance of the note was $78,359 as of December 31, 2016 and $74,044 as of September 30, 2017.
During the nine months ended September 30, 2017, the Company entered into short-term borrowings with the Allegheny Nevada Holdings Corporation (Michael A. Barron, the CEO and President of the Company, is a 100% owner and President of Allegheny Nevada Holdings Corporation), Cardio Infrared Technologies, Inc. (Wayne Bailey, the former CFO of the Company, is a 100% owner and President of Cardio Infrared Technologies, Inc.) and Wanda Witoslawski ( the Chief Financial Officer of the Company) amounting to a total of $121,900.  The outstanding amounts accrue interest at a rate of 10% per month and are payable on demand.
During the nine months ended September 30, 2017, the Company accrued travel and office expenses of $11,716 advanced and paid by Allegheny Nevada Holdings Corporation. The amount due is to be paid in the short term and does not accrue interest.
Effective March 14, 2017, Michael Barron returned 2 shares of the Company's Series A-2 Preferred Stock to the Company for 4 shares of preferred stock series C.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Neither our Articles of Incorporation nor Bylaws prevent us from indemnifying our officers, directors and agents to the extent permitted under the Nevada Revised Statute ("NRS"). NRS Section 78.7502 provides that a corporation shall indemnify any director, officer, employee or agent of a corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with any the defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.

NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
30

NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed hereby in the Securities Act and we will be governed by the final adjudication of such issue. 

LEGAL MATTERS

The validity of the issuance of the common stock hereby will be passed upon for us by Frederick C. Bauman, Bauman & Associates Law Firm, Las Vegas, Nevada.
 
EXPERTS

The audited financial statements included in this prospectus for the fiscal years ended December 31, 2016 and 2015 have been audited by Pritchett, Siler & Hardy, P.C. The reports of Pritchett, Siler & Hardy, P.C. are included in this prospectus in reliance upon the authority of this firm as experts in accounting and auditing.


ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 under the Securities Act of 1933, as amended, relating to the shares of common stock being offered by this prospectus, and reference is made to such registration statement. This prospectus and it does not contain all information in the registration statement, as certain portions have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission.

In addition, since our common stock is registered under the Securities Exchange Act of 1934, we are required to file annual, quarterly, and current reports, or other information with the SEC as provided by the Securities Exchange Act of 1934, as amended. You may read and copy any reports, statements or other information we file at the SEC's public reference facility maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Our SEC filings are also available to the public through the SEC's Internet website at http://www.sec.gov.
31

X RAIL ENTERTAINMENT, INC.

Financial Statements
 
September 30, 2017
 
33

PART I   FINANCIAL INFORMATION
 X RAIL ENTERTAINMENT, INC.
 BALANCE SHEET (Unaudited)
   
September 30,
   
December 31,
 
   
2017
   
2016
 
             
Asset
 
Current assets
           
Cash
 
$
4,700
   
$
202,169
 
Prepaid Expenses
   
11,725
     
-
 
Deposits
   
235
     
-
 
Total current assets
   
16,660
     
202,169
 
                 
Property and equipment, net of accumulated depreciation
   
125,000
     
833,160
 
                 
Total assets
 
$
141,660
   
$
1,035,329
 
                 
Liabilities and Stockholders' Equity (Deficit)
 
                 
Current liabilities
               
Accounts payable
 
$
44,800
   
$
78,890
 
Accrued expenses
   
292,977
     
76,234
 
Unearned revenue
   
1,107
     
-
 
Notes payable to related parties
   
440,753
     
348,825
 
Current portion of convertible notes payable, net of debt discount
   
304,376
     
210,946
 
Derivative liability
   
26,889
     
-
 
Total current liabilities
   
1,110,902
     
714,895
 
Long-term portion of convertible debt, net of current portion
   
-
     
-
 
Total liabilities
   
1,110,902
     
714,895
 
                 
Commitments and contingencies
               
                 
Stockholders' equity (deficit)
               
Preferred stock, $0.00001 par value, 2,011,000 shares authorized, 98,880 and 98,798 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
   
1
     
1
 
Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 246,226,161 and 208,353,303 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
   
2,463
     
2,084
 
Additional paid-in capital
   
9,602,722
     
8,284,510
 
Accumulated (deficit)
   
(10,574,428
)
   
(7,966,161
)
Total stockholders' equity
   
(969,242
)
   
320,434
 
Total liabilities and stockholders' equity
 
$
141,660
   
$
1,035,329
 
 
See accompanying notes to financial statements
34

X RAIL ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
   
Three months
ended
   
Three months
ended
   
Nine months
ended
   
Nine months
ended
 
 
 
September 30,
   
September 30,
   
September 30,
   
September 30,
 
 
 
2017
   
2016
   
2017
   
2016
 
                         
Revenues
 
$
-
   
$
-
   
$
32,259
   
$
-
 
Cost of sales
   
-
     
-
     
(46,051
)
   
-
 
Gross loss
   
-
     
-
     
(13,792
)
   
-
 
 
                               
Operating Expenses:
                               
Compensation and payroll taxes
 
$
137,569
   
$
210,842
     
391,274
   
$
1,702,480
 
Selling, general and administrative
   
72,429
     
56,213
     
272,977
     
162,238
 
Professional fees
   
101,313
     
48,094
     
565,438
     
188,681
 
  Total expenses
   
311,311
     
315,149
     
1,229,689
     
2,053,399
 
                                 
Loss from operations
   
(311,311
     
(315,149
)
   
(1,243,481
)
   
(2,053,399
)
                                 
Other income (expense)
                               
Interest expense
   
(133,630
     
(70,121
)
   
(727,727
)
   
(89,019
)
Derivative gain (expense)
   
1,764
     
-
     
(7,789
)
   
-
 
Loss on disposition of assets
   
(629,270
     
-
     
(629,270
)
   
-
 
   Total other income (expense)
   
(761,136
     
(70,121
)
   
(1,364,786
)
   
(89,019
)
                                 
Net income (loss) from operations before provision for income taxes
   
(1,072,447
     
(385,270
)
   
(2,608,267
)
   
(2,142,418
)
Provision for income taxes
   
-
     
-
     
-
     
-
 
Net income (loss)
 
$
(1,072,447
   
$
(385,270
)
 
$
(2,608,267
)
 
$
(2,142,418
)
 
                               
Net income (loss) per share, basic and dilluted
   
(0.0048
     
(0.002
)
   
(0.774
)
   
(0.013
)
                                 
Weghted average number of common shares outstanding, basic and dilluted
   
223,173,591
     
194,251,646
     
3,369,863
     
169,407,177
 
See accompanying notes to financial statements
35

X RAIL ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
 (Unaudited)
   
Nine months ended
   
Nine months ended
 
   
September 30,
   
September 30,
 
   
2017
   
2016
 
             
Cash flows from operating activities
           
Net loss
 
$
(2,608,267
)
 
$
(2,142,418
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Conversion of notes payable and accrued interest to capital
   
88,395
     
-
 
Common stock issued for services
   
130,000
     
1,263,702
 
Derivative expense related to convertible note payable
   
26,889
     
-
 
Warrant expense
   
499,196
     
-
 
Amortization of debt discount on convertible notes payable
   
-
     
45,639
 
Changes in operating assets and liabilities:
               
Accounts payable and accrued expenses
   
182,653
     
58,680
 
Unearned revenue
   
1,107
     
-
 
Prepaid expenses and deposits
   
(11,960
)
   
-
 
Net cash used in operating activities
   
(1,691,987
)
   
(774,397
)
                 
Cash flows from investing activities
               
Purchases of property and equipment
   
-
     
(19,240
)
Write off property and equipment
   
708,160
     
-
 
Net cash used in investing activities
   
708,160
     
(19,240
)
                 
Cash flows from financing activities
               
Repayments on convertible notes payable
   
(82,000
)
   
-
 
Proceeds from convertible notes payable
   
19,100
     
490,000
 
Repayments on related party notes payable
   
(53,344
)
   
(164,716
)
Proceeds from related party notes payable
   
145,272
     
-
 
Proceeds from stock purchases
   
421,000
     
237,500
 
Proceeds from exercise of warrant
   
180,000
     
-
 
Net cash provided by financing activities
   
630,028
     
562,784
 
                 
Net change in cash
   
(353,799
)
   
(230,853
)
Cash, beginning of the period
   
202,169
     
325,057
 
Cash, end of the period
 
$
(151,630
)
 
$
94,204
 
                 
Supplemental disclosure of cash flow information:
               
Income taxes paid
 
$
-
   
$
-
 
                 
Supplemental disclosure of non-cash investing and financing transactions:
               
Conversion of related party debt to capital
 
$
-
   
$
-
 
Conversion of notes payable and accrued interest to capital
   
88,395
     
5,000
 
Debt discount on convertible notes
   
205,224
     
490,000
 
See accompanying notes to financial statements
36


X RAIL ENTERTAINMENT, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
 (Unaudited)
 
                         
Additional
             
 
 
Common Stock
   
Preferred Stock
   
Paid-in
   
Accumulated
       
 
 
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Total
 
Balance January 1, 2016
   
4,557,784
   
$
46
     
98,798
   
$
1
   
$
5,835,346
   
$
(5,398,691
)
 
$
436,702
 
                                                         
  Stock issued for employees compensation
   
16,791,611
     
168
     
-
     
-
     
1,185,243
     
-
     
1,185,411
 
  Stock issued for notes conversion
   
200,000
     
2
     
-
     
-
     
4,998
     
-
     
5,000
 
  Stock issued per Share Exchange Agreement
   
151,885,189
     
1,519
     
-
     
-
     
(1,519
)
   
-
     
0
 
  Stock issued for cash
   
33,894,719
     
339
     
-
     
-
     
738,772
     
-
     
739,111
 
  Stock issued for services
   
1,024,000
     
10
     
-
     
-
     
71,670
     
-
     
71,680
 
  Value of warrants allocated to notes
   
-
     
-
     
-
     
-
     
450,000
     
-
     
450,000
 
  Net loss
   
-
     
-
     
-
     
-
     
-
     
(2,567,470
)
   
(2,567,470
)
Balance January 1, 2017
   
208,353,303
   
$
2,084
     
98,798
   
$
1
   
$
8,284,510
   
$
(7,966,161
)
 
$
320,434
 
                                                         
  Stock issued for services
   
1,460,000
     
15
     
4
     
-
     
129,985
     
-
     
130,000
 
  Stock issued for notes conversion
   
21,600,000
     
216
     
-
     
-
     
81,784
     
-
     
82,000
 
  Stock issued for interest conversion
   
127,889
     
1
     
-
     
-
     
6,394
     
-
     
6,395
 
  Stock issued for cash
   
11,620,000
     
116
     
-
     
-
     
420,884
     
-
     
421,000
 
  Stock issued for warrant exercise
   
1,200,000
     
12
     
-
     
-
     
179,988
     
-
     
180,000
 
  Stock issued for shares exchange
   
1,880,969
     
19
                     
(19
)
           
-
 
  Stock cancelled
   
(16,000
)
   
(0
)
   
(2
)
   
-
     
-
     
-
     
-
 
  Warrants expense
   
-
     
-
     
-
     
-
     
499,196
     
-
     
499,196
 
  Net loss
   
-
     
-
     
-
     
-
     
-
     
(2,608,267
)
   
(2,608,267
)
Balance September 30, 2017
   
246,226,161
   
$
2,463
     
98,800
   
$
1
   
$
9,602,722
   
$
(10,574,428
)
 
$
(969,242
)
 
See accompanying notes to financial statements
37

X RAIL ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
 (Unaudited)

(1)           Organization and basis of presentation
Basis of Financial Statement Presentation:
The accompanying unaudited interim financial statements of X Rail Entertainment, Inc. (the "Company") have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America ("GAAP") for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. However, the results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or any other future period. These interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2016.
Going Concern:
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has net losses of $2,608,267 for the nine months ended September 30, 2017.  The Company also has an accumulated deficit of $10,547,428, and a negative working capital of $1,094,242 as of September 30, 2017, as well as outstanding convertible notes payable of $509,600, before debt discount of $205,224.  Management believes that it will need additional equity or debt financing to be able to implement its business plan.  Given the lack of revenue, capital deficiency and negative working capital, there is substantial doubt about the Company's ability to continue as a going concern.
Management is attempting to raise additional equity and debt to sustain operations until it can market its services and achieves profitability.  The successful outcome of future activities cannot be determined at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results.
The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
       
(2)           Summary of Significant Accounting Policies
Risks and Uncertainties:
The Company operates in an industry that is subject to intense competition and potential government regulations.  Significant changes in regulations and the inability of the Company to establish contracts with rail services providers could have a materially adverse impact on the Company's operations.
38

  Use of Estimates:
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods.
Property and Equipment:
Property and equipment are recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives of approximately five years once the individual assets are placed in service.  The Company expenses all purchases of equipment with individual costs of under $500, and these amounts are not material to the financial statements. As of September 30, 2017, we recorded the rail cars on the balance sheet at $125,000 with no accumulated depreciation. The rail cars are currently not depreciated as they are not in service and not ready to run. The rail cars require substantial investment to retrofit. The Company expensed the carrying value of 10 rail cars as they were exchanged for unpaid storage charges. The amount written off was $629,270 as of September 30, 2017.
Long-Lived Assets:
In accordance with FASB ASC 360-10, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.  The Company's management believes there has been no impairment of its long-lived assets during the nine months ended September 30, 2017, or 2016.  There can be no assurance, however, that market conditions will not change or demand for the Company's business model will continue.  Either of these could result in future impairment of long-lived assets.
Income Taxes:
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The deferred tax assets of the Company relate primarily to operating loss carryforwards for federal income tax purposes. A full valuation allowance for deferred tax assets has been provided because the Company believes it is not more likely than not that the deferred tax asset will be realized. Realization of deferred tax assets is dependent on the Company generating sufficient taxable income in future periods.
 The Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of September 30, 2017, and December 31, 2016, the Company has not established a liability for uncertain tax positions.
Basic and Diluted Loss per Share:
In accordance with Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") 260, "Earnings per Share," the basic income (loss) per common share is computed by dividing the net income (loss) available to common stockholders by the weighted average common shares outstanding during the period.  Diluted earnings per share reflect per share amounts that would have resulted if diluted potential common stock had been converted to common stock.  Common stock equivalents have not been included in the earnings per share computation for the three and nine months ended September 30, 2017, and 2016 as the amounts are anti-dilutive.  As of September 30, 2017, the Company had 14,978,000 outstanding warrants and convertible debt of $509,600, before debt discount of $205,224, which were all excluded from the computation as they were anti-dilutive. As of December 31, 2016, the Company had 9,000,000 outstanding warrants and convertible debt of $572,500, before debt discount of $361,554, which were all excluded from the computation as they were anti-dilutive.
39

Share Based Payment:
The Company issues stock, options, and warrants as share-based compensation to employees and non-employees.
The Company accounts for its share-based compensation to employees in accordance FASB ASC 718.  Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. 
The Company accounts for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 "Equity - Based Payments to Non-Employees." Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: ( a ) the goods or services received; or ( b ) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.
The Company values stock compensation based on the market price on the measurement date. As described above, for employees this is the date of grant, and for non-employees, this is the date of performance completion.
The Company values warrants using the Black-Scholes option pricing model.  Assumptions used in the Black-Scholes model to value options and warrants issued during the nine months ended September 30, 2017 were as follows.
Variables
 
Values
 
Exercise Price
 
$
0.15
 
Risk Free Rate
 
.92% to 1.07%
 
Discount rate
   
0.25
%
Volatility
   
666.26% - 634.49
%
  New Accounting Pronouncements:
 There are no new significant accounting standards applicable to the Company that have been issued but not yet adopted by the Company as of September 30, 2017, and through the date of this filing.
40

(3)            Property and Equipment
Property and equipment consisted of the following.
   
September 30,
   
December 31,
 
   
2017
   
2016
 
             
             
Rail cars (not in service)
 
$
125,000
   
$
833,160
 
Less: accumulated depreciation
   
-
     
-
 
                 
   
$
125,000
   
$
833,160
 
(4)           Related Party Notes Payable
A summary of outstanding notes payable is as follows:
   
September 30,
   
December 31,
 
   
2017
   
2016
 
           
Promissory note,  dated  December 15, 2015, bearing interest at 10% annually, payable on demand
 
$
49,910
   
$
55,994
 
               
Promissory note,  dated  December 15, 2015, bearing interest at 10% annually, payable on demand
   
39,101
     
52,240
 
                 
Promissory note,  dated  December 15, 2015, bearing interest at 10% annually, payable on demand
   
74,044
     
78,359
 
                 
Promissory note,  dated  September 30, 2015, bearing no interest, payable on demand
   
155,798
     
162,232
 
               
Promissory note,  dated  September 30, 2017, bearing 10% interest ,payable on demand
   
53,700
     
-
 
                 
Promissory note,  dated  September 30, 2017, bearing 10% interest, payable on demand
   
49,800
     
-
 
               
Promissory note,  dated  September 30, 2017, bearing 10% interest, payable on demand
   
18,400
     
-
 
                 
   
$
$ 440,753
   
$
348,825
 

41

(5)           Convertible Notes Payable
The following summarizes the book value of the convertible notes payable outstanding as of September 30, 2017 and December 31, 2016:
   
September 30,
   
December 31,
 
   
2017
   
2016
 
           
Promissory note,  dated  April 30, 2008, bearing interest at 10% annually, payable on demand, convertible to shares of common stock at $.05 per share **
 
$
80,500
   
$
82,500
 
               
Promissory note,  dated  May 12, 2016, bearing interest at 10% annually, payable within a year, convertible to shares of common stock at $.05 per share
   
-
     
60,000
 
               
Promissory note,  dated  May 19, 2016, bearing interest at 10% annually, payable within a year, convertible to shares of common stock at $.05 per share
   
-
     
20,000
 
               
Promissory note,  dated  May 20, 2016, bearing interest  at 10% annually, payable within a year, convertible to shares of common stock at $.05 per share*
   
20,000
     
20,000
 
                 
Promissory note,  dated  May 31, 2016, bearing interest at 10% annually, payable within a year, convertible to shares of common stock at $.05 per share*
   
40,000
     
40,000
 
               
Promissory note,  dated  June 3, 2016, bearing interest at 10% annually, payable within a year, convertible to shares of common stock at $.05 per share*
   
350,000
     
350,000
 
               
Promissory note,  dated  June 2, 2017, bearing interest at 4% annually, payable within a year, convertible to common stock at a discount of 40% of the lowest traded price of the common stock during 45 trading daysprior the conversion date.
   
19,100
     
-
 
                 
 Convertible notes before debt discount
   
509,600
     
572,500
 
                 
 Less debt discount
   
(205,224
)
   
(361,554
)
                 
 Total outstanding convertible notes payable
 
$
304,376
   
$
210,946
 
*These promissory notes were converted on November 8, 2017. The company issued total 66,967,499 shares of restricted common stock for conversion of promissory notes of $410,000 and corresponding interest of $59,675.
** The promissory note conversion was executed on November 13, 2017. 8,050,000 shares of common stock to be issued for conversion of promissory note and 3,438,112 shares of common stock to be issued for accrued interest.
Fair Value of Financial Instruments:
The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, notes payable and derivative liabilities.  Derivative liabilities are recorded at fair value.  The principal balance of notes payable approximates fair value because current interest rates and terms offered to the Company for similar debt are substantially the same.
42

FASB ASC 820 defines fair value, establishes a framework for measuring fair value, in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
(6)           Derivative Instruments
The Company has a convertible note payable with elements that qualify as derivatives as the convertible note payable has variable conversion features (see note 5).
Stock Price
 
$
0.045
 
         
Exercise Price
 
$
0.027
 
         
Life in Years
   
0.7
 
         
Annualized Volatility
   
310.72
%
         
Annual Rate of Quarterly Dividends
   
0.00