xchange10q093012.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark one)

x	Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

		For the quarterly period ended September 30, 2012

o	Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

		For the transition period from ______________ to _____________

Commission File Number: 002-41703

The X-Change Corporation

(Exact Name of Registrant as Specified in Its Charter)

Nevada	90-0156146
(State of Incorporation)	(I. R. S. Employer ID Number)

12655 North Central Expressway, Suite 1000, Dallas, Texas 75243

(Address of Principal Executive Offices)

(972) 386-7350

(Registrant’s Telephone Number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o

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

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

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

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

YES x NO o

State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: December 5, 2012: 36,036,147

Transitional Small Business Disclosure Format (check one): YES o NO x

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The X-Change Corporation

Form 10-Q for the Quarter ended September 30, 2012

Table of Contents

	Page
Part I - Financial Information

Item 1 - Financial Statements	3

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3 - Quantitative and Qualitative Disclosures About Market Risk	23

Item 4 - Controls and Procedures	24

Part II - Other Information

Item 1 - Legal Proceedings	24

Item 1A - Risk Factors	24

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3 - Defaults Upon Senior Securities	25

Item 4 - Mine Safety Disclosures	25

Item 5 - Other Information	25

Item 6 - Exhibits	25

Signatures	25

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Part I - Financial Information

Item 1 - Financial Statements

The X-Change Corporation and Subsidiaries

Consolidated Balance Sheets

September 30, 2012 and December 31, 2011

	(Unaudited)			(Audited)
	September 30,			December 31,
	2012			2011
ASSETS
Current Assets
Cash on hand and in bank	$	1,345		$	-
Total current assets		1,345			-

TOTAL ASSETS	$	1,345		$	-


LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Convertible debenture payable, net of unamortized discount	$	284,225		$	285,225
Notes payable to shareholder		786,551			829,598
Accounts payable - trade		19,801			13,704
Accrued interest payable		116,050			106,632

Total Current Liabilities		1,206,627			1,235,159

Total Liabilities		1,206,627			1,235,159

Commitments and contingencies

Stockholders’ Deficit
Preferred stock - $0.001 par value.
75,000,000 shares authorized.
none issued and outstanding		-			-
Common stock - $0.001 par value.
750,000,000 shares authorized.
33,804,004 and 24,068,427 shares issued and outstanding		33,804			24,068
Additional paid-in capital		26,395,079			24,924,147
Accumulated deficit		(27,634,165	)		(26,183,374	)

Total Stockholders’ Deficit		(1,205,282	)		(1,235,159	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	1,345		$	-

The financial information presented herein has been prepared by management

without audit by independent certified public accountants.

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

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The X-Change Corporation and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

Nine and Three months ended September 30, 2012 and 2011

(Unaudited)

	Nine months			Nine months			Three months			Three months
	ended			ended			ended			ended
	September 30,			September 30,			September 30,			September 30,
	2012			2011			2012			2011

Revenues - net of returns and allowances	$	-		$	-		$	-		$	-
Cost of Sales		-			-			-			-

Gross Profit		-			-			-			-

Operating Expenses
General and administrative expenses		34,662			93,466			7,194			18,090
Total operating expenses		34,662			93,466			7,194			18,090

Loss from operations		(34,662	)		(93,466	)		(7,194	)		(18,090	)

Other income (expense)
Interest expense, including
amortization of financing
fees and note discounts		(1,416,129	)		(201,413	)		(71,899	)		(201,413	)
Loss on rescinded acquisition of
Old West Entertainment Corp.		-			(500,854	)		-			(500,854	)
Impairment of non-operating
assets acquired in note foreclosure		-			(41,260	)		-			-
Total other income (expense)		(1,416,129	)		(743,527	)		(71,899	)		(702,267	)

Loss from continuing operations
before provision for income taxes		(1,450,791	)		(836,993	)		(71,899	)		(720,357	)

Provision for income taxes		-			-			-			-

Net Loss		(1,450,791	)		(836,993	)		(71,899	)		(720,357	)

Other comprehensive income		-			-			-			-

Comprehensive Loss	$	(1,450,791	)	$	(836,993	)	$	(71,899	)	$	(720,357	)

Net loss per weighted-average share
of common stock outstanding, calculated
on Net Loss - basic and fully diluted	$	(0.05	)	$	(0.15	)	$	(0.00	)	$	(0.04	)

Weighted-average number of shares
of common stock outstanding		30,409,936			5,452,963			33,161,290			5,513,000

The financial information presented herein has been prepared by management

without audit by independent certified public accountants.

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

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The X-Change Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Nine months ended September 30, 2012 and 2011

(Unaudited)

	Nine months			Nine months
	ended			ended
	September 30,			September 30,
	2012			2011
Cash Flows from Operating Activities
Net loss for the period	$	(1,450,791	)	$	(836,993	)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization		-			-
Expenses paid with common stock		-			25,000
Loss on rescinded acquisition of Old West Entertainment Corp.		-			500,854
Impairment of non-operating assets acquired in note foreclosure		-			41,260
Effect of issuance of common stock at less than “fair value”		1,342,061			125,962
Increase (Decrease) in
Accounts payable and other		6,098			(4,570	)
Accrued interest payable		74,068			71,379

Net cash used in operating activities		(28,564	)		(77,108	)


Cash Flows from Investing Activities		-			-


Cash Flows from Financing Activities
Cash received from exercise of warrants		10,000			10,000
Cash contributed to support operations		2,610			-
Cash received on related party line of credit		17,299			67,108

Net cash provided by financing activities		29,909			77,108

Increase in Cash		1,345			-

Cash at beginning of period		-			-

Cash at end of period	$	1,345		$	-

Supplemental Disclosure of Interest and Income Taxes Paid
Interest paid for the period	$	-		$	-
Income taxes paid for the period	$	-		$	-

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Common Stock issued for license agreement	$	-		$	(530,000	)
Conversion of Debenture Payable into Common Stock	$	1,000		$	1,000
Repayment of Note Payable to Stockholder with Common Stock	$	60,346		$	75,000
Payment of Accrued Interest Payable to Stockholder with Common Stock	$	64,650		$	-

The financial information presented herein has been prepared by management

without audit by independent certified public accountants.

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

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The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2012 and December 31, 2011

NOTE A - Organization and Description of Business

The X-Change Corporation (Company) was incorporated under the laws of the State of Delaware on February 5, 1969 and changed its corporate domicile to the State of Nevada on October 4, 2000. We were originally organized to seek merger and/or acquisition candidates and engaged in various transactions since our inception. As of December 31, 2008, the Company has disposed of all operating assets and operating activities.

In March 2010, the Company formed the wholly-owned subsidiaries - Caballo Blanco Communications, Ltd. and Commerce Services, Inc. - as Colorado corporations to conduct operations related to the various proposed acquisitions. On December 27, 2010, the Company changed the corporate name of Commerce Services, Inc. to PolySilicon, Inc. to conduct the business activities related to a then proposed acquisition. There has been no economic activity conducted within either subsidiary since their formation.

Between March 2010 and August 2011, the Company announced and abandoned several proposed acquisition transactions.

On August 18, 2011, The X-Change Corporation (Company) entered into an Asset Purchase Agreement (Agreement) with Old West Entertainment Corp. (Old West), a Nevada corporation, a privately-owned company which was not affiliated with the Company. As part of the Agreement, the Company acquired all right, title and interest in all of Old West's Operating Entertainment Business (Assets). The Assets included a website, client base, capital assets, hardware, software, intellectual property as well as all of Old West's artists, properties, patents, trademarks and distribution rights and agreements relating to Old West's music and entertainment business. The Company would also assume all rights and obligations under a Management Consulting Agreement between Old West and Arturo Molina Jr. (Molina), also known in the music business as "Frost." As consideration for this Agreement, the Company issued one million shares (1,000,000) of its common stock, in restricted form, to Old West.

As part of this Agreement, Molina was issued five million shares (5,000,000) of the Company's common stock for his management services for a period of one year and Molina was appointed President and CEO of the Company as well as acting CFO. The Company also issued five million shares (5,000,000) of its common stock in restricted form to the Bogat Family Trust (Bogat Trust) on behalf of Raymond Dabney (Dabney) as consideration for the management services Mr. Dabney will be providing to the Company in operating the music and entertainment portion of the business for a period of one year. Neither Molina, Dabney or the Bogat Trust are shareholders of Old West. Old West’s sole shareholder, officer and director is Mark Jordan. Mr. Jordan, Molina and the Bogat Trust were non-related and non-affiliates of the Company prior to this transaction.

On February 22, 2012, the Company entered into a Repurchase Agreement (Repurchase Agreement) with Old West, Molina and the Bogat Trust. As a part of the Repurchase Agreement, the Company transferred all of the aforementioned assets back to Old West in exchange for Old West returning the shares which the Company issued to it as part of the original Asset Purchase Agreement. A complete copy of the Repurchase Agreement was attached as an exhibit to a Current Report on Form 8-K on or about March 5, 2012 and the effect of the Repurchase Agreement was to make the initial agreement null and void Ab Initio.

On April 12 and May 14, 2012, respectively, the Company through a concurrently formed entity to-be-acquired as a wholly-owned subsidiary, Cress Oil and Natural Gas Company (Cress), entered into Purchase and Sale Agreements (PSA) with Granite Group Energy (a Delaware Limited Liability Company hereafter referred to as "Granite") and Wexco Resources, LLC (a Colorado Limited Liability Company hereafter referred to as "Wexco"). As part of the Granite Agreement, the Company is acquiring from Granite approximately 21,111 net acres of mineral interests in return for the payment of approximately $15,000,000. As part of the Wexco Agreement, the Company is acquiring from Wexco approximately 50,000 net acres of mineral interests in Teton County, Montana in return for the payment of approximately $7,500,000. As of the date of this filing, this Agreement has not been consummated through the payment of the required consideration.

On May 10, 2012, the Company, through Cress, entered into an Agreement (the"Agreement") with Diverse Energy Investments, LLC ("Diverse"). As part of the Agreement, the Company is acquiring from Diverse approximately 15,000 net acres of mineral interests in Roosevelt and Daniels Counties, Montana in return for the payment of approximately $8,812,500. As of the date of this filing, this Agreement has not been consummated through the payment of the required consideration.

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The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE A - Organization and Description of Business - Continued

Diverse Energy Investments, LLC. transferred the ownership of the leases to M.L.H. LLC and signed a new Purchase and Sale agreement with Big Sky Oil, Inc. a new subsidiary of The X-Change Corporation. The Purchase and Sale Agreement (PSA) has a closing date of December 20,2012 and the acreage was increased to 19,499.28 net acres. The price has been increased to $11,455,827.00. Diverse Energy transferred the leases to M.L.H. because of a dispute as to the ownership of Diverse. The dispute does not involve the leases or The X-Change Corporation.

The Investor who agreed to fund Cress declined to fund the purchase of the Diverse leases. The Granite Group leases expired on July 20, 2012 when the closing did not take place. The closing did not take place because the individual who incorporated Cress Oil and agreed to fund the purchase informed Granite that he had changed his mind and was going to not transfer ownership of Cress to the Company. The Wexco leases expired by the terms of the Purchase and Sale Agreement. The Company is still seeking funding on the Wexco leases even though the PSA has expired.

Currently, the Company has closed on the M.L.H. LLC leases by way of a farm out agreement. The Company has agreed to pay $500,000 for each 640 Acre lease site drilled. The Company has initiated conversations with interested working interest investors for a drilling program to start operations involving a portion of the M.L.H. leases.

On August 31, 2012, the Company entered into a Purchase Agreement with 4C Tech Holdings Inc., an Alberta, Canada corporation ("4C"), 1237878 Alberta Ltd., an Alberta, Canada corporation ("1237878") and 1238105 Alberta Ltd., an Alberta, Canada corporation ("1238105") (4C, 1237878 and 1238105 are collectively referred to as "Sellers") in which the Company purchased from Sellers all the issued and outstanding shares of Guardian Telecom Inc., an Alberta, Canada corporation ("Guardian"). This transaction closed on September 10, 2012. As consideration, the Company agreed to pay to the Sellers US $3,500,000, as specified in the Purchase Agreement, and issue 1,000,000 restricted, unregistered shares of the Company's common stock. At closing, the Company issued the shares of common stock and executed the promissory notes and pledge agreements required by the Purchase Agreement to secure payment of the cash component of the purchase price. At the date of closing, none of the parties to the Purchase Agreement were affiliates of the Company. As of November 28, 2012, the Sellers had not provided certain required financial information, appointed an X-Change designated member to the Company's Board of Directors, or delivered the Guardian stock certificates, all of which were required by the Purchase Agreement. On November 29, 2012, the Company and the Sellers agreed to resend the transaction retroactive to August 31, 2012, thereby nullifying any previous disclosures related to this transaction.

NOTE B - Preparation of Financial Statements

The Company follows the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and has adopted a year-end of December 31.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

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The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE B - Preparation of Financial Statements - Continued

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements filed with the U. S. Securities and Exchange Commission on its Annual Report on Form 10-K containing the Company’s financial statements for the year ended December 31, 2011. The information presented within these interim financial statements may not include all disclosures required by generally accepted accounting principles and the users of financial information provided for interim periods should refer to the annual financial information and footnotes when reviewing the interim financial results presented herein.

In the opinion of management, the accompanying interim financial statements, prepared in accordance with the U. S. Securities and Exchange Commission’s instructions for Form 10-Q, are unaudited and contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the respective interim periods presented. The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full fiscal year ending December 31, 2012.

For segment reporting purposes, the Company operated in only one industry segment during the periods represented in the accompanying financial statements and makes all operating decisions and allocates resources based on the best benefit to the Company as a whole.

These financial statements reflect the books and records of the Company as of September 30, 2012 and December 31, 2011 and for each of the nine and three months ended September 30, 2012 and 2011, respectively.

NOTE C - Going Concern Uncertainty

As of September 30, 2012 and December 31, 2011, respectively, the Company has no operations, no cash on hand, and significant debt related to the financing of the operations of its former subsidiary, AirGATE. Because of these factors, the Company’s auditors have issued an audit opinion on the Company’s annual financial statements which includes a statement describing our going concern status. This means, in the auditor’s opinion, substantial doubt about our ability to continue as a going concern exists at the date of their opinion.

The Company’s business plan continues to seek an acquisition or merger with a private operating company which offers an opportunity for growth and possible appreciation of our stockholders’ investment in the then issued and outstanding common stock. However, there is no assurance that the Company will be able to successfully consummate an acquisition or merger with a private operating company or, if successful, that any acquisition or merger will result in the appreciation of our stockholders’ investment in the then outstanding common stock.

The Company’s current controlling stockholder has maintained the corporate status of the Company and has provided all working capital support on the Company's behalf since the December 2008 foreclosure action. Because of the Company's lack of operating assets, its continuance is fully dependent upon the majority stockholder's continuing support. It is the intent of this controlling stockholder to continue the funding the nominal necessary expenses to sustain the corporate entity. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist. There is no legal obligation for either management or significant stockholders to provide additional future funding. Further, the Company is at the mercy of future economic trends and business operations for this controlling stockholder to have the resources available to support the Company. Should this pledge fail to provide financing, the Company has not identified any alternative sources of working capital to support the Company.

The Company's ultimate continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis. The Company faces considerable risk in it’s business plan and a potential shortfall of funding due any potential inability to raise capital in the equity securities market. If adequate operating capital and/or cash flows are not received during the next twelve months, the Company could become dormant until such time as necessary funds could become available.

The Company anticipates future sales or issuances of equity securities to fulfill its business plan. However, there is no assurance that the Company will be able to obtain additional funding through the sales of additional equity securities or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company.

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The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE C - Going Concern Uncertainty - Continued

The Company’s Articles of Incorporation authorize the issuance of up to 75,000,000 shares of preferred stock and 750,000,000 shares of common stock. The Company’s ability to issue preferred stock may limit the Company’s ability to obtain debt or equity financing as well as impede potential takeover of the Company, which may be in the best interest of stockholders. The Company’s ability to issue these authorized but unissued securities may also negatively impact our ability to raise additional capital through the sale of our debt or equity securities.

While the Company is of the opinion that good faith estimates of the Company’s ability to secure additional capital in the future to reach its goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.

Regardless of whether the Company’s cash assets prove to be inadequate to meet the Company’s operational needs, the Company might seek to compensate providers of services by issuances of stock in lieu of cash.

NOTE D - Summary of Significant Accounting Policies

1.	Cash and cash equivalents

For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.

Cash overdraft positions may occur from time to time due to the timing of making bank deposits and releasing checks, in accordance with the Company's cash management policies.

2.	Convertible Debt Instruments

The Company records debt net of debt discount for beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion Feature and Debt Topics of the FASB Accounting Standards Codification. The amounts allocated to warrants and beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest expense over the life of the debt.

3.	Accounting for Stock Options

The Company has adopted the provisions of the Compensation Topic of the FASB Accounting Standards Codification which requires the measurement and recognition of compensation expense for all share-based payment awards made to its employees and directors based on estimated fair values at the time of grant. In addition, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 “Share-Based Payment” (SAB 107) in March 2005, which provides supplemental accounting guidance.

The valuation techniques used in applying these provisions are sensitive to certain assumptions and parameters used including the volatility and liquidity of the Company’s stock. The Black Scholes option valuation model used in this process was developed for use in estimating the fair value of trading options that have no vesting restrictions and are fully transferable. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.

The Company has recorded in the past, and may record in the future, substantial non-cash compensation expense which is not expected to have a significant effect on our financial condition or cash flows but are expected to have a significant, adverse effect on our reported results of operations.

The Company follows the provisions of the Compensation topic of the FASB Accounting Standards Codification for equity instruments granted to non-employees.

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The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE D - Summary of Significant Accounting Policies - Continued

4.	Income taxes

The Company files income tax returns in the United States of America and various states, as appropriate and applicable. The Company is no longer subject to U.S. federal, state and local, as applicable, income tax examinations by regulatory taxing authorities for any period prior to December 31, 2006. The Company does not anticipate any examinations of returns filed for periods ending after December 31, 2006.

The Company uses the asset and liability method of accounting for income taxes. At September 30, 2012 and December 31, 2011, respectively, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of temporary differences. Temporary differences generally represent differences in the recognition of assets and liabilities for tax and financial reporting purposes, primarily accumulated depreciation and amortization, allowance for doubtful accounts and vacation accruals.

The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification. The Codification Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a respective taxing authority. As a result of the implementation of Codification’s Income Tax Topic, the Company did not incur any liability for unrecognized tax benefits.

5.	Income (Loss) per share

Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.

Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.

As of September 30, 2012 and 2011, respectively, the Company’s outstanding stock options, warrants, and convertible debentures are considered to be anti-dilutive due to the Company’s net operating loss.

6.	New and Pending Accounting Pronouncements

The Company is of the opinion that any and all pending accounting pronouncements, either in the adoption phase or not yet required to be adopted, will not have a significant impact on the Company's financial position or results of operations.

NOTE E - Fair Value of Financial Instruments

The carrying amount of cash, accounts receivable, accounts payable and notes payable, as applicable, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.

Interest rate risk is the risk that the Company’s earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.

Financial risk is the risk that the Company’s earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to financial risk, if any.

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The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE F - Concentrations of Credit Risk

When applicable, the Company maintains cash in domestic financial institutions subject to insurance coverage issued by the Federal Deposit Insurance Corporation (FDIC). Under FDIC rules, the Company is entitled to aggregate coverage as defined by Federal regulation per account type per separate legal entity per financial institution. During the nine months ended September 30, 2012 and the year ended December 31, 2011, respectively, the Company has not had any had deposits in a financial institution with credit risk exposures in excess of statutory FDIC coverage. The Company has incurred no losses as a result of any unsecured credit risk exposures.

NOTE G - Debt Financing Arrangements

Melissa Note

On August 15, 2006, the Company executed a long-term Promissory Note (Melissa Note) with Melissa CR 364 Ltd., a Texas limited partnership (Melissa Ltd.) providing a $1,000,000 line of credit. Melissa Ltd. is managed by a former officer and shareholder of the Company.

The Melissa Note had an initial term of 24 months with interest accruing at 10% per annum. Accrued interest under the note was payable quarterly beginning November 1, 2006, and the principal and any remaining accrued interest was due at maturity on August 14, 2008. The Company pledged 100% of the issued and outstanding common stock of AirGATE as collateral for the note. At the discretion of Melissa Ltd, the Melissa Note may be converted into restricted common stock of the Company at any time at an agreed upon conversion rate of $0.825 per share. In addition, the Melissa Note may be prepaid at any time without penalty. Since December 15, 2008, upon notice of default, the Melissa Note has accrued interest at the default rate of 18.0%.

The Company valued and recorded an embedded beneficial conversion feature in connection with the Melissa Note of $756,950, and amortized this amount over the initial two year life of the note resulting in non-cash charges to earnings as a component of interest expense through December 31, 2008.

At maturity, the Company failed to make the required payment of the entire outstanding principal and accrued interest due under the Melissa Note. On August 22, 2008, the Company, AirGATE and the Melissa Ltd. entered into an Amendment to Promissory Note (the Amendment) amending the Melissa Note. The Amendment extended the maturity date of the Note to December 15, 2008 and, in a supplemental Board action, changed the conversion rate to par value ($0.001 per share). In connection with the Amendment, AirGATE paid Melissa Ltd. (i) $100,000 to be applied against the outstanding principal of the Melissa Note, (ii) all interest on the Note accrued through August 15, 2008, and (iii) $4,500, representing Melissa Ltd’s attorneys’ fees and costs in connection with the Amendment.

After the application of the $100,000 principal payment against the outstanding principal under the Note, the outstanding principal owed under the Note was $697,794. Interest payments were due on the 15th of each month beginning September 15, 2008. If either the Company and/or AirGATE completes a corporate financing transaction before December 15, 2008, whereby either the Company and/or AirGATE receives in excess of $300,000 through the issuance of debt or equity or a combination thereof, the Company and/or AirGATE agreed to remit to Melissa Ltd. in payment of the obligations under the Melissa Note, the entire net proceeds of such transaction, or such smaller amount of net proceeds as is necessary to pay the entire outstanding principal amount of the Melissa Note, plus all accrued interest.

In December 2008, Melissa Ltd. began foreclosure proceedings against its collateral, which included 100% of the Company’s holdings in AirGATE, and the right to convert the Melissa Note into restricted, unregistered shares of the Company’s common stock. The foreclosure proceeding was consummated on January 16, 2009 and the Company’s holdings in AirGATE were forfeited. Additionally, Melissa Ltd. converted approximately $51,000 of principal on the Melissa Note to 51,000,000 shares of the Company’s common stock, concurrent with the maturity date of December 15, 2008.

In May 2011, Melissa, Ltd. converted approximately $75,000 in principal and $40,000 of accrued interest into 575,000 shares of restricted, unregistered common stock.

- 11 -

The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE G - Debt Financing Arrangements - Continued

Melissa Note - continued

On March 20, 2012, the Company issued 8,747,864 shares of restricted, unregistered shares to Melissa, Ltd. in repayment of approximately $17,496 in notes payable principal. As the valuation of the conversion as stated in the respective note agreements was below the “fair value” of the securities issued, the Company experienced a non-cash charge to operations of approximately $1,494,684 which will be classified as “interest expense” in the Company’s financial statements.

On August 23, 2012, the Company issued 450,000 shares of unrestricted shares to Melissa, Ltd. in repayment of approximately $90,000 in note payable principal and accrued interest. As the valuation of the conversion as stated in the respective note agreements was above or equal to the “fair value” of the securities issued and the Company did not experience any non-cash charge to operations as a result of this transaction.

On September 28, 2012, the Company issued 350,000 shares of unrestricted to Melissa, Ltd. in repayment of approximately $17,500 in note payable principal and accrued interest. As the valuation of the conversion as stated in the respective note agreements was below the “fair value” of the securities issued, the Company experienced a non-cash charge to operations of approximately $45,500 which will be classified as “interest expense” in the Company’s financial statements.

As of September 30, 2012 and December 31, 2011, respectively, the outstanding balance on the Melissa Note is approximately $575,743 and $615,025, inclusive of capitalized accrued interest. Interest continues to accrue at 10% per annum.

South Beach Live, Ltd. Note

During Calendar 2009, the Company executed a $100,000 Line of Credit Note Payable with South Beach Live, Ltd. (South Beach), a significant Company stockholder, to provide funds necessary to support the corporate entity and comply with the periodic reporting requirements of the Securities Exchange Act of 1934, as amended. This note bears interest at 10.0% and matured in Calendar 2011. Subsequent to maturity, the note is due upon demand and no demand for repayment has been made for repayment. Through September 30, 2012 and December 31, 2011, respectively, an aggregate of approximately $242,367 and $236,359 has been advanced against this note.

On October 5, 2012, the Company paid $100,000 cash against the accrued interest and principal on this note.

LCII Debentures

During the quarter ending September 30, 2007, the Company entered into a Securities Purchase Agreement with La Jolla Cove Investors, Inc. (“LCII”) providing for two convertible debentures totaling $400,000 with two corresponding sets of non-detachable warrants totaling 4,000,000 shares with an exercise price of $1.00. The convertible debentures accrue interest at 6-1/4% until converted or the expiration of their three year term. The respective debentures matured in August 2010; however, in the absence of a formal extension agreement, both parties have agreed to stay the maturity and allow future conversions and warrant exercises to occur.

The debentures and warrants have mandatory conversion features. These conversion features becomes effective in the first full calendar month after the common stock underlying the debenture is either i) registered under the Securities Act of 1933 (the “Act”), which is at the Company’s option, or ii) available by LCII to be resold pursuant to Rule 144 of the Act. If the conversion feature becomes effective, LCII is obliged to convert an average of 10% of the face value of the debenture each calendar month into a variable number of shares of the Company’s common stock. The number of shares is determined by a formula where the dollar amount of the debenture being converted is multiplied by eleven, from which the product of the conversion price and ten times the dollar amount of the debenture being converted is then subtracted, all of which is then divided by the conversion price. The conversion price is equal to the lesser of (i) $1.00, or (ii) 80% of the average of the 3 lowest volume weighted average prices during the twenty trading days prior to the conversion election. The Company can prevent conversion if the trading price falls below $0.30 per share on the date LCII elects to convert. Under certain provisions, if LCII does not convert an average of at least 5% of the face value of the debenture, the Company may prepay portions of the debenture. As contractually linked, if LCII converts a portion of the debenture, LCII must also exercise a proportionate amount of the warrants.

- 12 -

The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE G - Debt Financing Arrangements - Continued

LCII Debentures - continued

In the event that the entire $400,000 of the convertible debentures is converted in conjunction with the required exercise of warrants, the Company will receive a total of $4.4 million from LCII. The aggregate number of shares issuable to LCII in this event is dependent on the trading price of the Company’s common stock over the term of the conversion process.

The Company allocated the proceeds from the debentures between the warrants and the debt based on the estimated relative fair value of the warrants and the debt. The value of the warrants was calculated at $273,634 using the Black-Scholes model and the following assumptions: discount rate of 4.1%, volatility of 156% and expected term of three years. The Company also calculated a beneficial conversion feature totaling $126,366. The Company is amortizing both the warrant value and value attributed to the beneficial conversion feature (total $400,000) over the term of the debentures. This non-cash charge to income is included in interest expense.

On June 13, 2012, the Company entered into a Settlement Agreement and Addendum to Securities Repurchase Agreement with LJII . On December 8, 2011, LJII sued the Company in regards to a claimed breach of a convertible debenture dated August 29 and October 9, 2007. The Company filed its answer and cross complaint in the lawsuit. In June 2012, both parties determined that it would be in their best interest to settle the suit and cross complaint. As part of the settlement LJII agreed to extend the Maturity Date of the Debentures to December 31, 2013 and to exercise approximately 2,800,000 Common Stock Warrants at One Dollar ($1.00) per Share as the Debentures are converted. This Settlement Agreement and Addendum effectively cancelled the initial warrant(s) (approximately 145,613 warrants exercisable at $20.00 as effected by the Company’s 2010 reverse stock split) and issued 2,912,260 new warrants reflecting the restructured warrant(s), pricing and expiration date. The Company recognized no effect in the accompanying financial statements as a result of this transaction; however, the Company will experience a “cheap stock” charge equivalent to the difference between the “fair value” of the shares issued and the contractual blended conversion/exercise price on the date of each future conversion transaction.

On July 23, 2012 and October 5, 2012, LJII tendered notices to the Company to convert an aggregate $13,500 in debenture principle and exercise an aggregate 135,000 in warrants. These transactions generated approximately $135,000 in warrant proceeds to the Company.

At September 30, 2012 and December 30, 2011, respectively, the outstanding principal amount of convertible debentures totaled approximately $274,225 and $285,225.

NOTE H - Income Taxes

The components of income tax (benefit) expense for each of the nine months ended September 30, 2012 and 2011, respectively, are as follows:

	Nine months		Nine months
	ended		ended
	September 30,		September 30,
	2012		2011

Federal:
Current	$	-	$	-
Deferred		-		-
		-		-
State:
Current		-		-
Deferred		-		-
		-		-

Total	$	-	$	-

- 13 -

The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE H - Income Taxes - Continued

As of September 30, 2012, the Company has a cumulative net operating loss carryforward of approximately $4,130,000 to offset future taxable income. Subject to current regulations, components of this cumulative carryforward will begin to expire at the end of each fiscal year starting in 2023. The amount and availability of the net operating loss carryforwards may be subject to limitations set forth by the Internal Revenue Code. Factors such as the number of shares ultimately issued within a three year look-back period; whether there is a deemed more than 50 percent change in control; the applicable long-term tax exempt bond rate; continuity of historical business; and subsequent income of the Company all enter into the annual computation of allowable annual utilization of the carryforwards.

The Company's income tax expense (benefit) for the nine months ended September 30, 2012 and 2011, respectively, differed from the statutory federal rate of 34 percent as follows:

	Nine months			Nine months
	ended			ended
	September 30,			September 30,
	2012			2011

Statutory rate applied to loss before income taxes	$	(493,000	)	$	(285,000	)
Increase (decrease) in income taxes resulting from:
State income taxes		-			-
Nondeductible charge for stock issued at less than “fair value”		456,300			39,000
Nondeductible charge for non-operating asset impairment		-			14,000
Other, including use of net operating loss
carryforward and reserve for deferred tax asset		37,000			232,000

Income tax expense	$	-		$	-

Temporary differences due to statutory requirements in the recognition of assets and liabilities for tax and financial reporting purposes, generally including such items as organizational costs, accumulated depreciation and amortization, allowance for doubtful accounts, organizational and start-up costs and vacation accruals. These differences give rise to the financial statement carrying amounts and tax bases of assets and liabilities causing either deferred tax assets or liabilities, as necessary, as of September 30, 2012 and December 31, 2011, respectively:

	September 30,			December 31,
	2012			2011
Deferred tax assets
Net operating loss carryforwards	$	1,400,000		$	1,354,000
Stock based compensation		-			-
Debt discount amortization		657,000			657,000
Other		-			-
		2,057,000			2,011,000
Less valuation allowance		(2,057,000	)		(2,011,000	)

Net Deferred Tax Asset	$	-		$	-

During the nine months ended September 30, 2012 and the year ended December 31, 2011, respectively, the valuation allowance for the deferred tax asset increased (decreased) by approximately $46,000 and $(6,000), respectively.

NOTE I - Preferred Stock

The Company is authorized to issue up to a total of 75,000,000 shares of $0.001 par value Preferred Stock. The Company’s Board of Directors has designated 250,000 shares as “Series A Convertible Preferred Stock”.

- 14 -

The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE I - Preferred Stock - Continued

The Company is under no obligation to pay dividends or to redeem the Series A Convertible Preferred Stock. This series of stock is convertible into 10 shares of Common Stock at the option of the shareholder or upon automatic conversion. In the event of any liquidation, dissolution or winding-up of the Company, the holders of outstanding shares of Series A Preferred shall be entitled to be paid out of the assets of the Corporation available for distribution to shareholders, before any payment shall be made to or set aside for holders of the Common Stock, at an amount of $1 per share.

As of September 30, 2012 and December 31, 2011, respectively, there were no shares of preferred stock issued and outstanding.

Amendment to the Articles of Incorporation

On January 31, 2011, the Board of Directors of the Company and its majority shareholder approved an amendment to its Articles of Incorporation increasing the authorized capital of the Company from 37,500,000 shares of common stock, par value $.001 and 3,750,000 shares of preferred stock, par value $.001, to 750,000,000 shares of common stock and 75,000,000 share of preferred stock. The Amended Articles were filed with the Nevada Secretary of State on March 22, 2011, the effective date of the amendment.

Reverse Stock split

Effective August 9, 2010, Company’s Board of Directors declared a 1-for-20 reverse split of the issued and outstanding shares of common stock. The reverse stock split was implemented by adjusting the stockholders’ book entry accounts to reflect the number of shares held by each stockholder following the split. No fractional shares were issued in connection with the reverse stock split and any fractional shares resulting from the reverse split were rounded up to the nearest whole share. The reverse stock split reduced the number of the Company’s issued and outstanding shares of common stock on this date from 136,089,746 to approximately 5,513,000.

On January 31, 2011, the Company’s Board of Directors and its majority shareholder approved an amendment to its Articles of Incorporation increasing the authorized capital of the Company from 37,500,000 shares of $0.001 par value common stock and 3,750,000 shares of $0.001 par value preferred stock to 750,000,000 shares of $0.001 par value common stock and 75,000,000 shares of $0.001 par value preferred stock. The Amended Articles were filed with the Nevada Secretary of State on March 22, 2011, the effective date of the amendment.

The effects of these actions are reflected in the accompanying financial statements as of the first day of the first period presented.

Stock issuances

On October 7, 2010, the Company issued 1,000,000 shares of restricted, unregistered post-reverse split shares, valued at approximately $530,000 which was equal to the closing quotation of the Company’s securities on the transaction date, to 21-Century Silicon, Inc. (a Texas corporation) to license the use of 21-Century’s technology and to secure an exclusive right to negotiate to acquire certain intellectual property from 21-Century. On January 28, 2011, concurrent with the abandonment of the 21-Century transaction, the Company rescinded the October 2010 transaction where 1,000,000 shares of restricted, unregistered common stock was issued to license the use of 21-Century’s technology and to secure an exclusive right to negotiate to acquire certain intellectual property from 21-Century. Further, concurrent with this action, the Company executed its lien on the assets pledged by 21-Century in satisfaction of a note receivable and accrued interest totaling approximately $41,200. Upon foreclosure on said assets, the Company’s management elected to take a 100% impairment against the foreclosed value resulting in a charge to operations in the first quarter of 2011 of approximately $41,200. Any gain, if any, upon the ultimate disposition of said assets will be recognized at the point of future sale.

On January 3, 2011, LJII issued a Debenture Conversion Notice to the Company for the conversion of $1,000 of the outstanding debenture balance into 21,375 shares of the Company’s common stock. Additionally, LJII exercised 10,000 outstanding warrants to obtain 10,000 shares of the Company’s common stock for $10,000 cash. This conversion was completed on January 5, 2011 with the delivery of the shares to LJII. As the aggregate conversion and exercise price was below the “fair value” of the securities issued, the Company experienced a non-cash charge to operations of approximately $10,962 which was classified as “interest expense” in the accompanying financial statements.

- 15 -

The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE J - Common Stock Transactions - Continued

Stock issuances - continued

In May 2011, the Company issued an aggregate 575,000 restricted, unregistered post-reverse split shares to Melissa CR 364 LTD. to retire a combination of approximately $75,000 on the aforementioned notes and approximately $40,000 in accumulated accrued interest. As the valuation of the conversion as stated in the separate note agreements was below the “fair value” of the securities issued, the Company experienced a non-cash charge to operations of approximately $115,000 which was classified as “interest expense” in the accompanying financial statements.

In July 2011, in connection with the execution of a Letter of Intent ("LOI") with George J. Akmon and Jerry Monday & Associates, LLC (collectively referred to as "Operators") to operate “The Texas Star Casino” outside the nine mile territorial waters of Texas, in international waters, as a casino ship, the Company issued 100,000 shares of restricted, unregistered common stock as an inducement to execute the LOI. This transaction was valued at approximately $25,000 which approximated “fair value” of the Company’s securities on the date of issuance.

In August 2011, the Company issued an aggregate 12,252,136 shares of restricted, unregistered common stock to Old West, Molina and the Bogat Trust, as previously discussed. Concurrent with the rescission of this transaction, the Company recovered 11,000,000 shares of the 12,252,136 shares originally issued. Approximately 1,252,136 shares remained in the possession of Old West, Molina and/or the Bogat Trust. These net 1,252,136 shares remaining outstanding were initially valued at an agreed-upon value of approximately $25,042. As the agreed-upon transaction valuation was below the “fair value” of the shares issued, the Company experienced an additional non-cash charge to operations of approximately $475,812. The aggregate approximately $500,854 was charged to operations as “Loss on rescinded acquisition of Old West Entertainment Corp.” in the accompanying financial statements to reflect the net economic event related to these transactions.

In October and November 2011, the Company issued an aggregate 6,800,000 shares of free-trading common stock in settlement of approximately $13,600 of debt on the books of Old West Entertainment Corp. while Old West was an operating component of the Company and prior to the March 2012 rescission of the entire transaction. As the debt reduction was less than the “fair value” of the shares issued, the Company recognized an additional non-cash charge to operations of approximately $1,091,000 was recognized as “Loss on rescinded acquisition of Old West Entertainment Corp.” during the 4th quarter.

On July 23, 2012, LJII issued a Debenture Conversion Notice to the Company for the conversion of $1,000 of the outstanding debenture balance into 177,713 shares of the Company’s common stock. Additionally, LJII exercised 10,000 outstanding warrants to obtain 10,000 shares of the Company’s common stock for $10,000 cash. As the aggregate conversion and exercise price was below the “fair value” of the securities issued, the Company experienced a non-cash charge to operations of approximately $1,877 which was classified as “interest expense” in the accompanying financial statements.

- 16 -

The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE J - Common Stock Transactions - Continued

Stock issuances - continued

NOTE K - Common Stock Warrants

In conjunction with, and as a component of, certain debt issuances, the Company has issued an aggregate 607,016 warrants to purchase an equivalent number of shares of common stock at prices between $0.70 and $20.00 per share, as adjusted by the Company’s 2010 reverse stock split and the June 2012 litigation settlement with LJII.

	Number of			Weighted
	Warrant			Average
	Shares			Price

Balance at January 1, 2011		607,016		$	5.72

Issued		-
Exercised		(10,000	)	$	1.00
Expired		-			-

Balance at December 31, 2011		597,016		$	5.72

Issued		2,912,260		$	1.00
Cancelled		(145,613	)	$	20.00
Exercised		(10,000	)	$	1.00
Expired		(400,978	)	$	0.93

Balance at September 30, 2012		2,952,685		$	1.02

As of September 30, 2012, the warrants break down as follows:

# warrants		exercise price

2,902,260	$	1.00
37,125	$	1.40
13,300	$	4.00

2,952,685	$	1.02

- 17 -

The X-Change Corporation and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2012 and December 31, 2011

NOTE K - Common Stock Warrants - Continued

	# warrants				expiring in

	13,300				2012
	2,902,260				2013
	37,125				2018

	2,952,685

NOTE L - Contingencies

The Company has acquired certain oil and gas leases with M.L.H. LLC through a Purchase and Sale agreement with Big Sky Oil, Inc. a wholly-owned subsidiary of the Company. The Company has closed on the M.L.H. LLC leases by way of a farm out agreement and has agreed to pay $500,000 for each 640 Acre lease site drilled. The Company has initiated conversations with interested working interest investors for a drilling program to start operations involving a portion of the M.L.H. leases and has not completed any funding for this endeavor.

NOTE M - Subsequent Events

On October 5, 2012, LJII issued a Debenture Conversion Notice to the Company for the conversion of $12,500 of the outstanding debenture balance into 2,107,143 shares of the Company’s common stock. Additionally, LJII exercised 125,000 outstanding warrants to obtain 125,000 shares of the Company’s common stock for $125,000 cash. As the aggregate conversion and exercise price was below the “fair value” of the securities issued, the Company experienced a non-cash charge to operations of approximately $245,536 which will be classified as “interest expense” in the accompanying financial statements.

On November 29, 2012, the Company and 4C Tech Holdings Inc., an Alberta, Canada corporation ("4C"), 1237878 Alberta Ltd., an Alberta, Canada corporation ("1237878") and 1238105 Alberta Ltd., an Alberta, Canada corporation ("1238105") (4C, 1237878 and 1238105 are collectively referred to as "Sellers") agreed to resend a Purchase Agreement with in which the Company purchased from Sellers all the issued and outstanding shares of Guardian Telecom Inc., an Alberta, Canada corporation ("Guardian") retroactive to August 31, 2012, thereby nullifying any previous disclosures related to this transaction. The transaction was nullified as the Sellers had not provided certain required financial information, appointed a Company designated member to the Company's Board of Directors, or delivered the Guardian stock certificates, all of which were required by the Purchase Agreement.

Management has evaluated all activity of the Company through December 5, 2012 (the issue date of the restated financial statements) and concluded that no subsequent events, other than as disclosed above, have occurred that would require recognition in the financial statements or disclosure in the notes to financial statements.

(Remainder of this page left blank intentionally)

- 18 -

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

(1)	Caution Regarding Forward-Looking Information

Certain statements contained in this quarterly filing, including, without limitation, statements containing the words "believes", "anticipates", "expects", “aims” and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this and previous filings.

Given these uncertainties, readers of this Form 10-Q and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

(2)

General

(3)	Plan of Business

On August 18, 2011, the Company entered into an Asset Purchase Agreement with Old West Entertainment Corp. (Old West), a corporation formed February 3, 2011 in accordance with the Laws of the State of Nevada. Prior to this transaction, Old West was not affiliated with or related to the Company or its management. As part of the Agreement, the Company acquired all rights, title and interest in all of Old West's Operating Entertainment Business (Assets). The Assets included a website, client base, capital assets, hardware, software, intellectual property as well as all of Old West's artists, properties, patents, trademarks and distribution rights and agreements relating to Old West's music and entertainment business. The Company also assumed all rights and obligations under a Management Consulting Agreement between Old West and Arturo Molina, Jr. (Molina), also known in the music business as "Frost." In exchange, the Company issued 1,000,000 shares of restricted, unregistered shares of the Company’s common stock to Old West.

As part of the Agreement, Molina/Frost was issued 5,000,000 shares of restricted, unregistered shares of the Company’s common stock and was appointed President and CEO of the Company. The Company also issued 5,000,000 shares of restricted, unregistered shares of common stock to the Bogat Family Trust as consideration for the management services that beneficiaries of the Trust was to provide to the Company in operating the music and entertainment portion of the business.

On February 22, 2012, the Company entered into a Repurchase Agreement (Repurchase Agreement) with Old West, Molina and the Bogat Trust. As a part of the Repurchase Agreement, the Company is transferred all of the aforementioned assets back to Old West in exchange for Old West returning the shares which the Company issued to it as part of the original Asset Purchase Agreement. A complete copy of the Repurchase Agreement was attached as an exhibit to a Current Report on Form 8-K on or about March 5, 2012 and the effect of the Repurchase Agreement was to make the initial agreement null and void Ab Initio.

- 19 -

On April 12 and May 14, 2012, respectively, the Company through a concurrently formed entity to-be-acquired as a wholly-owned subsidiary, Cress Oil and Natural Gas Company (Cress), entered into Purchase and Sale Agreements with Granite Group Energy (a Delaware Limited Liability Company hereafter referred to as "Granite") and Wexco Resources, LLC (a Colorado Limited Liability Company hereafter referred to as "Wexco"). As part of the Granite Agreement, the Company is acquiring from Granite approximately 21,111 net acres of mineral interests in return for the payment of approximately $15,000,000. As part of the Wexco Agreement, the Company is acquiring from Wexco approximately 50,000 net acres of mineral interests in Teton County, Montana in return for the payment of approximately $7,500,000. As of the date of this filing, this Agreement has not been consummated through the payment of the required consideration.

Diverse Energy Investments, LLC. transferred the ownership of the leases to M.L.H. LLC and signed a new Purchase and Sale agreement with Big Sky Oil, Inc. a new subsidiary of The X-Change Corporation. That purchase and Sale Agreement has a closing date of December 20,2012 and the acreage was increased to 19,499.28 net acres. The price has been increased to $11,455,827.00. Diverse Energy transferred the leases to M.L.H. because of a dispute as to the ownership of Diverse. The dispute does not involve the leases or The X-Change Corporation.

(4)	Results of Operations

The Company had no revenue for either of the nine or three month periods ended September 30, 2012 and 2011, respectively.

General and administrative expenses for the nine months ended September 30, 2012 and 2011 were approximately $35,000 and $93,000, respectively. During the first quarter of 2012, the Company was virtually dormant due to the inaction of former management. During the first quarter of 2011, the Company experienced somewhat higher expenditure levels due to various due diligence activities related to the various proposed acquisitions, as discussed in previous filings. Current management continues to focus on exploring possible candidates for a business combination transaction, including the completion of the oil & gas lease acquisitions in eastern-Montana and western-North Dakota. Accordingly, future expenditure levels will fluctuate depending on the Company’s acquisition endeavors and the stated objective of remaining current with the Company’s periodic reporting requirements of the Securities Exchange Act of 1934, as amended.

On January 28, 2011, concurrent with the abandonment of the 21-Century Silicon transaction, the Company rescinded the December 2011 transaction where 1,000,000 shares of restricted, unregistered common stock was issued to the shareholders of 21-Century Silicon to license the use of 21-Century Silicon’s technology and to secure an exclusive right to negotiate to acquire certain intellectual property from 21-Century Silicon. Additionally, concurrent with this action, the Company executed its lien on the assets of 21-Century Silicon in satisfaction of a note receivable and accrued interest totaling approximately $41,200. Upon foreclosure on said assets, the Company’s management elected to take a 100% impairment against the foreclosed value resulting in a charge to operations in the first quarter of 2011 of approximately $41,200. Any gain, if any, upon the ultimate disposition of said assets will be recognized at the point of future sale.

- 20 -

On May 25, 2011, the Company announced that it had closed on the purchase of a Casino Ship located in Freeport, Texas. The acquisition was purchased by LDC Collection Systems, Inc., a newly-formed and wholly-owned subsidiary incorporated under the Laws of the State of Texas. The purchase price was 2,000,000 shares of restricted, unregistered common stock of the Company with an agreed-upon valuation of approximately $1,750,000. The Casino ship, known as “The Texas Star Casino”, is a 155-foot ocean going vessel equipped with 250 slot machines and various table games. The ship also has facilities for entertainment, beverage service and dining. The ship was purchased from CJP Entertainment LLC, a Missouri corporation. The ship was built in 1977 and updated in 1986. The ship previously operated out of ports located in Georgia and Florida.

On June 6, 2011, the Company has also entered into a Letter of Intent ("LOI") with George J. Akmon and Jerry Monday & Associates, LLC (collectively referred to as "Operators") to operate “The Texas Star Casino” outside the nine mile territorial waters of Texas, in international waters, as a casino ship. As it was the intent to operate the ship outside the 9-mile State of Texas territorial limit means that the Company, nor its operators, will be required to acquire or hold a gaming license from the State of Texas.

On July 25, 2011, the Company, its wholly-owned subsidiary, LDC Collection Systems, Inc. and CJP Entertainment LLC, mutually agreed to execute a Repurchase Agreement whereby the May 25, 2011 transaction to purchase a Casino Ship located in Freeport, Texas. The original transaction was valued at approximately $1,750,000 (which approximated 21.9% of a November 8, 2006 independent third-party appraisal by Cruise Research and Management of the casino ship) (see Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on or about June 2, 2011) and consideration of 2,000,000 shares of the Company’s restricted, unregistered common stock was issued to the seller. Concurrent with the execution of the July 25, 2011 Repurchase Agreement, the 2,000,000 shares of the Company’s common stock held by the CJP Entertainment LLC was returned to the Company and cancelled. As the Company retained no rights to own or operate the cruise ship, no further action was taken by Management, George J. Akmon and/or Jerry Monday & Associates, LLC with regard to the June 6, 2011 LOI to operate said casino ship and said negotiations and obligations ceased on the part of all parties. Pursuant to the appropriate accounting literature, this transaction was reflected in the restated financial statements net of all the aforementioned events as of June 30, 2011, as reported on Form 10-Q/A.

On April 12 and May 14, 2012, respectively, the Company through a concurrently formed entity to-be-acquired as a wholly-owned subsidiary, Cress Oil and Natural Gas Company (Cress), entered into Purchase and Sale Agreements with Granite Group Energy (a Delaware Limited Liability Company hereafter referred to as "Granite") and Wexco Resources, LLC (a Colorado Limited Liability Company hereafter referred to as "Wexco"). As part of the Granite Agreement, the Company is acquiring from Granite approximately 21,111 net acres of mineral interests in return for the payment of approximately $15,000,000. As part of the Wexco Agreement, the Company is acquiring from Wexco approximately 50,000 net acres of mineral interests in Teton County, Montana in return for the payment of approximately $7,500,000. As of the date of this filing, this Agreement has not been consummated through the payment of the required consideration.

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Diverse Energy Investments, LLC. transferred the ownership of the leases to M.L.H. LLC and signed a new Purchase and Sale agreement with Big Sky Oil, Inc. a new subsidiary of The X-Change Corporation. That purchase and Sale Agreement has a closing date of December 20,2012 and the acreage was increased to 19,499.28 net acres. The price has been increased to $11,455,827.00. Diverse Energy transferred the leases to M.L.H. because of a dispute as to the ownership of Diverse. The dispute does not involve the leases or The X-Change Corporation.

The Company recognized interest accruals, amortization of debt financing fees and accretion of debt discounts of approximately $1,416,000 and $201,000 during the nine months ended September 30, 2012 and 2011, respectively. Included in the September 30, 2012 expenses is a non-cash charge of approximately $1,416,000 related to the issuance of restricted, unregistered common stock at less than ‘fair value’ for the payment of approximately $117,500 in principal and/or accrued interest to either Melissa CR 364, Ltd. or LCII through the issuance of common stock. The maturity date of the Company’s convertible debenture with La Jolla Cove Investors, Inc. has been extended until December 31, 2013. This debenture is discussed more fully in our Annual Report on Form 10-K. Due to the nature and conditions of this debt, it has been classified as “current” on the Company’s balance sheet regardless of the stated maturity date(s).

Earnings per share for the respective nine month periods ended September 30, 2012 and 2011, respectively, were $(0.05) and $(0.15) based on the weighted-average shares issued and outstanding at the end of each respective period.

The Company does not expect to generate any meaningful revenue or incur operating expenses for purposes other than fulfilling the obligations of a reporting company under the Securities Exchange Act of 1934 unless and until such time that the Company completes a business combination transaction.

(5)	Liquidity and Capital Resources

At September 30, 2012 and December 31, 2011, respectively, the Company had a working capital deficit of approximately $(1,205,000) and $(1,235,000).

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The Company's ultimate continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis. The Company faces considerable risk in its business plan and a potential shortfall of funding due any potential inability to raise capital in the equity securities market. If adequate operating capital and/or cash flows are not received during the next twelve months, the Company could become dormant until such time as necessary funds could become available.

(6)	Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (GAAP). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note D of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

(7)	Effect of Climate Change Legislation

The Company currently has no known or identified exposure to any current or proposed climate change legislation which could negatively impact the Company’s operations or require capital expenditures to become compliant. Additionally, any currently proposed or to-be-proposed-in-the-future legislation concerning climate change activities, business operations related thereto or a publicly perceived risk associated with climate change could, potentially, negatively impact the Company’s efforts to identify an appropriate target company which may wish to enter into a business combination transaction with the Company.

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Item 3 - Quantitative and Qualitative Disclosures About Market Risk

The Company may be subject to certain market risks, including changes in interest rates and currency exchange rates. At the present time, the Company does not undertake any specific actions to limit those exposures.

Item 4 - Controls and Procedures

(a)	Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive and Financial Officer (Certifying Officer), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 promulgated under the Exchange Act as of the end of the period covered by this Quarterly Report. Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our Certifying Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our Certifying Officer concluded that as of such date, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the time periods specified by the SEC due to a inherent weakness in our internal controls over financial reporting due to our status as a shell corporation and having a sole officer and director. However, our Certifying Officer believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the respective periods presented.

(b)	Changes in Internal Controls

There were no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

Item 1 - Legal Proceedings

None

Item 1A - Risk Factors

Not applicable

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

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Item 3 - Defaults on Senior Securities

None.

Item 4 - Mine Safety Disclosures

None.

Item 5 - Other Information

None.

Item 6 - Exhibits

31.1

Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002

32.1

Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002

SIGNATURES

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

	The X-Change Corporation

Dated: December 5, 2012	By: /s/ R. Wayne Duke
	R. Wayne Duke
	Chairman, Chief Executive Officer,
	Acting Chief Financial Officer and Director

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