UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 

 
For the fiscal year ended December 31, 2017

Commission file number
333-218746
 
X RAIL ENTERTAINMENT, INC.
(Exact name of Registrant as Specified in its Charter)


Nevada
88-0203182
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification Number)

9480 South Eastern Ave, Suite 205
Las Vegas, NV  89123
(Address of principal executive offices)

702-583-6715
(Issuer's telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, $0.00001 PAR VALUE
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes [  ] No [ X ]
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes [X  ] No [  ]
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X  ] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [  ]

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 [  ]    Accelerated filer [  ]    Non-accelerated filer [  ] (Do not check if a smaller reporting company)    Smaller reporting company [X]

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

Aggregate market value of Common Stock held by non-affiliates based on the closing price of the registrant's Common Stock on the OTC Pink on June 30, 2017 was $10,131,173.

Number of outstanding shares of common stock as of April 2, 2018 was 1,195,244,905.

Documents Incorporated by Reference:  None.

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X RAIL ENTERTAINMENT, INC.
TABLE OF CONTENTS

PART I
 
PAGE
 
 
 
Item 1.
Business
4
 
 
 
Item 1A.
Risk Factors
8
 
 
 
Item 1B.
Unresolved Staff Comments
16
 
 
 
Item 2
Properties
16
 
 
 
Item 3.
Legal Proceedings
16
 
 
 
Item 4.
Mine Safety Disclosures
16
 
 
 
PART II
 
16
 
 
 
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
16
 
 
 
Item 6.
Selected Financial Data
17
 
 
 
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
18
 
 
 
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
20
 
 
 
Item 8.
Financial Statements and Supplementary Data
21
 
 
 
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
38
 
 
 
Item 9A.
Controls and Procedures
38
 
 
 
Item 9B.
Other Information
39
 
 
 
PART III
 
39
 
 
 
Item 10.
Directors, Executive Officers and Corporate Governance
39
 
 
 
Item 11.
Executive Compensation
43
 
 
 
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
44
 
 
 
Item 13.
Certain Relationships and Related Transactions and Director Independence.
43
 
 
 
Item 14.
Principal Accountant Fees and Services
43
 
 
 
PART IV
 
44
 
 
 
Item 15.
Exhibits and Financial Statement Schedules
46
 
 
 
SIGNATURES
48
 
 
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X RAIL ENTERTAINMENT, INC.

PART I

Item 1.  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.

Company Overview

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.

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.

X Train

The X Train will be an excursion passenger rail service between Los Angeles and Las Vegas. We expect service to begin in September 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 September 2018.
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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, 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 September 2018.

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.

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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.
The Company's common stock is currently quoted on the OTC Pink under the symbol "XREE".

The Company maintains offices at 9480 South Eastern Avenue, Suite 205, Las Vegas, Nevada 89123.

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.
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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:
         
April 2018 – June 2018: Rail realignment on station property to accommodate the X Train station – Cost - $2 million

April 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

September 2018 – First run at one per week.

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 September 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.
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Our Competitive Strengths

We have developed a business model that focuses on leisure travelers between Los Angeles and Las Vegas.  We believe the following strengths will allow us to maintain a competitive advantage in the market we serve:

Large Untapped Market of 12 Million Drivers.  There has been no regular passenger rail service between the Los Angeles and Las Vegas areas for over 20 years. The only major highway between Los Angeles and Las Vegas is Interstate 15 ("I-15"). Of the more than 12,000,000 annual visitors from the Southern California/Los Angeles market, 94% use automobile transportation to Las Vegas via this corridor every year. We only need to capture 28,000 of these drivers (approximately 0.025 % of the total marketplace) to meet our plan on an operating basis.  As the LA population grows, so will the traffic on this highway; the forecast for traffic on I-15 is expected to be 17 million passengers by 2030. Congestion on I-15 is increasing, with motor vehicle travelers experiencing substantial delays during peak travel times (e.g., generally over 6 hours of drive time on Friday and Sunday afternoons). With increasing gasoline costs, increasingly restrictive highway capacity, and reduced air travel from LA to Las Vegas, a rail transportation product - with both First Class and Coach – should be an attractive and viable alternative. Our trains will offer a service that will set us apart from other travel options by extending our customers' "Las Vegas" experience while en route.
"Las Vegas Style" Service. The focus of our approach is to create a unique, Vegas class, "must see" mode of travel that not only serves the functional purpose of transporting passengers to Las Vegas, but also integrates seamlessly into the traditional and iconic Las Vegas experience. To accomplish this goal, our award winning team of design professionals and staff has assembled an on-board product reflective of the "Las Vegas" theme, which is comprised of a comfortable, fun, upscale and provocative atmosphere with multiple on-board amenities. Each train ticket entitles a passenger to an assigned seat with a high-quality meal and an alcoholic beverage.
Oversize baggage, access to the on-board Wi-Fi network, and other premium options will also be available for additional ancillary fees. Commissions will be derived through our call centers, our website, and our on-board mobile application, where customers will be presented with the option to book ahead for various Vegas attractions and necessities such as hotels, shows, tours, restaurant reservations, and rental cars.
Experienced Management and Board of Directors.  We have a strong management team and board of directors comprised of both experienced industry professionals and successful entrepreneurs. Our CEO, Michael Barron has been a successful entrepreneur establishing and growing several companies over the past 30 years. Our board of directors is led by Dr. Harry Teng, Head of the School of Rail Engineering at UNLV in Las Vegas, Lou Schillinger, CEO of Short Line Insurance Company, with over 300 industry rail clients insured and Don Adams, a 50 year icon in the Las Vegas hotel/casino scene . Company management has operated passenger service on a railroad with our own Club X cars and staff.

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. 
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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 years ended December 31, 2017 and December 31, 2016, we incurred a net loss of $ 7,385,372 and 2,567,469. As of December 31, 2017, we had an aggregate accumulated deficit of $ 15,351,533 .
     
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, 2017 and 2016, 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, 2017 and 2016, 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 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 a Memorandum of Understanding 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.
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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.

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.
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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.

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.
12

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.

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.
13
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 December 31, 2017, our officers and directors beneficially owned approximately 42% 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.
14

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 December 31, 2017, there are 39,167,080 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.

Conversions of convertible promissory notes may also cause dilution to existing shareholders.

As a consequence of the discounted conversion price, any conversion of promissory notes will result in immediate dilution of the existing shareholders

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 .
15
  
Item 2.  Properties.

We lease approximately 3,066 square feet of general office space in premises located at 9480 S. Eastern Ave. Las Vegas, Nevada. Our lease for this space expires on February 28, 2019 and our monthly rent is $5,642.

Item 3.  Legal Proceedings.
 
We are not party to any material legal proceedings.

Item 4.  Mine Safety Disclosure

Not applicable.

PART II

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

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
 
 
16
Number of Stockholders

As of December 31, 2017, there were 583 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.

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.
       
Recent Sales of Unregistered Securities.

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchaser

None.

Item 6.  Selected Financial Data

Not applicable.

Forward-Looking Statements

Statements contained in this Form 10-K that are not historical facts are forward-looking statements.  In addition, words such as "believes," "anticipates," "expects," "intends" and similar expressions are intended to identify forward-looking statements.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements or events, or timing of events, to differ materially from any future results, performance or achievements or events, or timing of events, expressed or implied by such forward-looking statements.  We cannot assure that we will be able to anticipate or respond timely to the changes that could adversely affect our operating results in one or more fiscal quarters.  Results of operations in any past period should not be considered indicative of results to be expected in future periods.  Fluctuations in operating results may result in fluctuations in the price of our securities.
17

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere herein.

Critical Accounting Policies

The preparation of our financial statements and notes thereto requires management to make estimates and assumptions that affect the amounts and disclosures reported within those financial statements. On an ongoing basis, management evaluates its estimates, including those related to collection of receivables, impairment of goodwill, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in material differences from the estimated amounts in the financial statements. There have been no material changes to these policies during the fiscal year.
      
Results of Operations

The following are the results of our continuing operations for the year ended December 31, 2017 compared to the year ended December 31, 2016:
 
   
Years ended   
             
 
 
December 31,
   
December 31,
             
 
 
2017
   
2016
   
$ Change
   
% Change
 
                         
Revenues
 
$
52,354
   
$
-
   
$
52,354
     
100.0
%
Cost of sales
   
(61,638
)
   
-
     
(61,638
)
   
100.0
%
Gross profit (loss)
   
(9,284
)
   
-
     
(9,284
)
   
100.0
%
 
                               
Operating Expenses:
                               
Compensation and payroll taxes
 
$
3,578,749
   
$
1,912,125
   
$
1,666,624
     
87.2
%
Selling, general and administrative
   
374,970
     
243,784
     
131,186
     
53.8
%
Professional fees
   
899,983
     
265,335
     
634,648
     
239.2
%
  Total expenses
   
4,853,702
     
2,421,244
     
2,432,458
     
100.5
%
                                 
Loss from operations
   
(4,862,986
)
   
(2,421,244
)
   
(2,441,742
)
   
100.8
%
                                 
Other income (expense)
                               
Interest expense
   
(1,185,989
)
   
(146,225
)
   
(1,039,764
)
   
711.1
%
Derivative expense
   
(707,127
)
   
-
     
(707,127
)
   
-100.0
%
Loss on disposition of assets
   
(629,270
)
   
-
     
(629,270
)
   
-100.0
%
   Total other income (expense)
   
(2,522,386
)
   
(146,225
)
   
(2,376,161
)
   
1625.0
%
                                 
Net income (loss) from operations before provision for income taxes
   
(7,385,372
)
   
(2,567,469
)
   
(4,817,903
)
   
187.7
%
Provision for income taxes
   
-
     
-
     
-
     
0.0
%
Net income (loss)
 
$
(7,385,372
)
 
$
(2,567,469
)
 
$
(4,817,903
)
   
187.7
%

      
Revenue

During the year ended December 31, 2017 the Company generated some revenue from operating wine train in Santa Barbara, CA. During the year ended December 31, 2016, there was no operations yet.
18

Operating Expenses

Compensation and payroll taxes increased by $ 1,666,624 , or 87.2 %, during the year ended December 31, 2017 as compared to 2016.  The increase in compensation expense in the current year is due primarily to significant stock issuances to officers and directors as compensation. Selling, general and administrative expenses increased by $131,186, or 53.8%, during the year ended December 31, 2017 as compared to the same period in 2016 primarily due to higher office, marketing and advertising expenses.  We had an increase in our professional fee expenses during the year ended December 31, 2017 of $ 634,648 , or 239.2 %, due primarily to legal, consulting in the fair value of the derivative liabillity and accounting services.
       
Other (Expense) Income

Interest expense increased by $ 1,039,764 , or 711,1 % during the year ended December 31, 2017 as compared to the year ended December 31, 2016.  The increase is due primarily to increase in convertible debt in 2017.
      
The change in the fair value of the derivative  liabilities amounted to $707,127 for the year ended December 31, 2017 as a result of convertible debt.  The increase was primarily due to the increase in value of derivative liabilities outstanding during the year.

The loss on disposition of assets was $629,270 for the year ended December 31, 2017 as a result of the Company expensing the carrying value of 10 rail cars as they were exchanged for unpaid storage charges.
 
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 no 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 $ 7,385,372 and $2,567,469 for the years ended December 31, 2017 and 2016, respectively.  The Company also has an accumulated deficit of $ 15,351,533 and negative working capital of $2,507,897 as of December 31, 2017, as well as outstanding convertible notes payable of $369,900 before debt discount of $324,121.  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.
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.

Cash Flows

Net cash used in operating activities for the years ended December 31, 2017 and 2016 were $651,854 and $1,085,261, respectively.  Cash used in operating activities for the years ended December 31, 2017 and 2016 were primarily due to net losses of $ 7,385,372 and $2,567,469, respectively.  During the year ended December 31, 2017, the net loss included significant non-cash expenses of $ 280,150 in stock issued for services, $1,069,322 in derivative expense charged to interest, $ 3,050,000 for the stock compensation, $905,921 in changes in operating assets and liabilities and $37,433 in debt discount interest expenses and change in derivative liability of $707,127.  During the year ended December 31, 2016, the net loss included significant non-cash expenses of $1,257,091 for stock issued for compensation, $88,448 in debt discount expense on notes payable and $136,669 in accounts payable and accrued expenses.
 
19
There was no cash used in investing activities during the year ended December 31, 2017.  Net cash used in investing activities during the year ended December 31, 2016 was $83,160, which represented property and equipment acquisitions primarily related to the acquisition of rail cars and related costs.
 
Net cash provided by financing activities for the year ended December 31, 2017 was $506,668, which consisted of $498,940 from proceeds from sale of shares of common stock, $180,000 from exercise of warrant, $378,900 from proceeds from convertible notes payable and $83,672 from proceeds from related parties notes payable and $501,520 on repayment on convertible notes and $53,340 in repayments on related party notes. Net cash provided by financing activities for the year ended December 31, 2016 amounted to $1,045,533 which consisted of $739,109 in proceeds from the sale of common stock and $490,000 in proceeds from the issuance of convertible notes payable during the year. There was repayment of $183,576 towards related party notes payable.
        
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable

20

Item 8.  Financial Statements and Supplementary Data.
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
X Rail Enterprises, Inc.
6480 S. Eastern Avenue
Suite 205
Las Vegas, NV 89123

We have audited the accompanying balance sheet of X Rail Enterprises, Inc. as of December 31, 2016 and the related statements of operations, stockholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of X Rail Enterprises, Inc. as of December 31, 2016 and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has suffered recurring losses and has no operations which raise substantial doubt about its ability to continue as a going concern.  Management's plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Pritchett, Siler & Hardy, P.C.


Pritchett, Siler & Hardy, P.C
Farmington, Utah
March 31, 2017
21

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders
X Rail Entertainment, Inc.
9480 South Eastern Ave., Suite 205
Las Vegas, Nevada 89123
Opinion on the Financial Statements
We have audited the accompanying balance sheet of X Rail Entertainment, Inc., (the Company) as of December 31 2017, and the related statements of operations, stockholders' equity, and cash flows for the year then ended, and the related notes. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has suffered recurring losses and has no operations which raise substantial doubt about its ability to continue as a going concern.  Management's plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Pinnacle Accountancy Group of Utah

We have served as the Company's auditor since January 2018.
Pinnacle Accountancy Group of Utah
Farmington, Utah
April 2, 2018
22
 
X RAIL ENTERTAINMENT, INC.
BALANCE SHEETS
 
   
December 31,
   
December 31,
 
   
2017
   
2016
 
             
Assets
           
             
Current assets
           
Cash
 
$
56,983
   
$
202,169
 
Deposits
   
235
     
-
 
Total current assets
   
57,218
     
202,169
 
                 
Property and equipment, net of accumulated depreciation
   
125,000
     
833,160
 
                 
Total assets
 
$
182,218
   
$
1,035,329
 
                 
Liabilities and Stockholders' Equity (Deficit)
               
                 
Current liabilities
               
Accounts payable
 
$
44,117
   
$
78,890
 
Accrued expenses
   
305,961
     
76,234
 
Unearned revenue
   
3,042
     
-
 
Notes payable to related parties
   
379,153
     
348,825
 
Current portion of convertible notes payable, net of debt discount
   
45,779
     
210,946
 
Derivative liability
   
1,787,063
     
-
 
Total current liabilities
   
2,565,115
     
714,895
 
Long-term portion of convertible debt, net of current portion
   
-
     
-
 
Total liabilities
   
2,565,115
     
714,895
 
                 
Commitments and contingencies
               
                 
Stockholders' equity (deficit)
               
Preferred stock, $0.00001 par value, 2,011,000 shares authorized, 98,800 and 98,798 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively
   
1
     
1
 
Common stock, $0.00001 par value, 5,000,000,000 shares authorized, 590,244,905 and 208,353,303 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively
   
5,903
     
2,084
 
Additional paid-in capital
   
12,962,732
     
8,284,510
 
Accumulated (deficit)
   
(15,351,533
)
   
(7,966,161
)
Total stockholders' equity (deficit)
   
(2,382,897
)
   
320,434
 
Total liabilities and stockholders' equity (deficit)
 
$
182,218
   
$
1,035,329
 
See accompanying notes to financial statements
23
 
X RAIL ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
 
 
 
December 31,
   
December 31,
 
 
 
2017
   
2016
 
             
Revenues
 
$
52,354
   
$
-
 
Cost of sales
   
(61,638
)
   
-
 
Gross loss
   
(9,284
)
   
-
 
 
               
Operating Expenses:
               
Compensation and payroll taxes
   
3,578,749
   
$
1,912,125
 
Selling, general and administrative
   
374,970
     
243,784
 
Professional fees
   
899,983
     
265,335
 
  Total expenses
   
4,853,702
     
2,421,244
 
                 
Loss from operations
   
(4,862,986
)
   
(2,421,244
)
                 
Other income (expense)
               
Interest expense
   
(1,185,989
)
   
(146,225
)
Derivative gain (expense)
   
(707,127
)
   
-
 
Loss on disposition of assets
   
(629,270
)
   
-
 
   Total other income (expense)
   
(2,522,386
)
   
(146,225
)
                 
Net income (loss) from operations before provision for income taxes
   
(7,385,372
)
   
(2,567,469
)
Provision for income taxes
   
-
     
-
 
Net income (loss)
 
$
(7,385,372
)
 
$
(2,567,469
)
                 
Net income (loss) per share, basic and dilluted
   
(0.03
)
   
(0.02
)
                 
Weghted average number of common shares outstanding, basic and dilluted
   
292,282,791
     
170,650,346
 
 
See accompanying notes to financial statements
24
 
X RAIL ENTERTAINMENT, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
 
                           
Additional
             
   
Common Stock
         
Preferred Stock
   
Paid-in
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Total
 
Balance December 31, 2015
   
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 December 31, 2016
   
208,353,303
   
$
2,084
     
98,798
   
$
1
   
$
8,284,510
   
$
(7,966,161
)
 
$
320,434
 
                                                         
  Stock issued for services
   
16,460,000
     
165
     
-
     
-
     
279,985
     
-
     
280,150
 
  Stock issued for notes and interest conversion
   
80,183,500
     
802
     
-
     
-
     
672,150
     
-
     
672,952
 
  Stock issued for cash and warrants
   
17,178,800
     
172
     
-
     
-
     
498,768
     
-
     
498,940
 
  Stock issued for compensation
   
265,000,000
     
2,650
     
4
     
-
     
3,047,350
             
3,050,000
 
  Stock issued for warrant exercise
   
1,200,000
     
12
     
-
     
-
     
179,988
     
-
     
180,000
 
  Stock issued for shares exchange
   
1,885,302
     
19
     
-
     
-
     
(19
)
           
-
 
  Stock cancelled
   
(16,000
)
   
(0
)
   
(2
)
   
-
     
(0
)
   
-
     
-
 
  Net loss
   
-
     
-
     
-
     
-
     
-
     
(7,385,372
)
   
(7,385,372
)
Balance December 31, 2017
   
590,244,905
   
$
5,903
     
98,800
   
$
1
   
$
12,962,732
   
$
(15,351,533
)
 
$
(2,382,897
)

See accompanying notes to financial statements
25

X RAIL ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
 
   
Year ended
   
Year ended
 
   
December 31,
   
December 31,
 
   
2017
   
2016
 
             
Cash flows from operating activities
           
Net loss
 
$
(7,385,372
)
 
$
(2,567,469
)
Adjustments to reconcile net loss to net cash used in operating activities:
         
Amortization of debt discount interest expense on notes payable
   
37,433
     
88,448
 
Conversion of notes payable and accrued interest to capital
   
672,952
     
-
 
Common stock issued for services
   
280,150
     
-
 
Common stock issued for compensation
   
3,050,000
     
1,257,091
 
Derivative expense related to convertible note payable
   
1,787,063
     
-
 
Changes in operating assets and liabilities:
               
Accounts payable and accrued expenses
   
273,844
     
136,669
 
Unearned revenue
   
3,042
     
-
 
Loss on impairment of assets
   
629,270
     
-
 
Deposits
   
(235
)
   
-
 
Net cash used in operating activities
   
(651,853
)
   
(1,085,261
)
                 
Cash flows from investing activities
               
Purchases of property and equipment
   
-
     
(83,160
)
Net cash used in investing activities
   
-
     
(83,160
)
                 
Cash flows from financing activities
               
Repayments on convertible notes payable
   
(572,500
)
   
-
 
Proceeds from convertible notes payable
   
369,900
     
490,000
 
Repayments on related party notes payable
   
(53,344
)
   
(183,576
)
Proceeds from related party notes payable
   
83,672
     
-
 
Proceeds from stock and warrant purchases
   
498,940
     
739,109
 
Proceeds from exercise of warrant
   
180,000
     
-
 
Net cash provided by financing activities
   
506,668
     
1,045,533
 
                 
Net change in cash
   
(145,186
)
   
(122,888
)
Cash, beginning of the period
   
202,169
     
325,057
 
Cash, end of the period
 
$
56,983
   
$
202,169
 
                 
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
   
672,952
     
5,000
 
Debt discount on convertible notes
   
324,121
     
450,000
 

See accompanying notes to financial statements
26
 
X RAIL ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 and 2016
 

(1)  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.
   
(2)  Summary of Significant Accounting Policies:
 
Basis of Financial Statement Presentation:

The accompanying 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 periods presented. However, the results of operations for the 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 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 $ 7,385,372 for the year ended December 31, 2017.  The Company also has an accumulated deficit of $ 15,351,533 , and a negative working capital of $2,507,897 as of December 31, 2017, as well as outstanding convertible notes payable of $369,900, before debt discount of $324,121.  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.
27

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.
 
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.  Amounts could materially change in the future.

Cash and Cash Equivalents:

The Company considers all highly liquid holdings with maturities of three months or less at the time of purchase to be cash equivalents.

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 December 31, 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 December 31, 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 years ended December 31, 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.
Basic and Diluted Loss Per Share:

In accordance with FASB ASC 260, "Earnings Per Share," the basic loss per common share is computed by dividing the net loss available to common stockholders after preferred stock dividends, 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 diluted earnings per share computation for the years ended December 31, 2017 and 2016 as the amounts are anti-dilutive.  As of December 31, 2017 and 2016, the Company had no outstanding options.  As of December 31, 2017 and 2016, the Company also had convertible debt that is convertible into 39,167,080 and 11,450,000 shares, respectively, of common stock which was excluded from the computation.  As of December 31, 2017 and 2016, the Company had 14,978,000 and 9,000,000 outstanding warrants, respectively, which were also excluded from the computation because they were anti-dilutive.

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.
28
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 December 31, 2017, and December 31, 2016, the Company has not established a liability for uncertain tax positions.

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.

Derivative Liabilities:

The Company has certain embedded conversion options in notes payable with elements that qualify as derivatives. The Company values these embedded conversion options in notes payable using the Black Scholes model.  The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations (see Note 7).

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.

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.
   
(3)  Property and Equipment:

Property and equipment consisted of the following as of December 31, 2017 and 2016:
29
 
   
December 31,
   
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:
 
   
December 31,
   
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
   
154,998
     
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
   
7,400
     
-
 
                 
   
$
$ 379,153
   
$
348,825
 

(5)  Convertible Notes Payable:

A description of outstanding convertible notes payable is as follows:

East Shore Equities LLC
On June 2, 2017, the Company entered into a convertible note agreement with East Shore Equities LLC for total principal borrowings of $19,100.  The amounts are due on June 2, 2018, and bear interest at a rate of 4% 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 60% of the average of the lowest closing trading price during the 45 trading day period prior to the conversion election date.

Cardio Infrared Technologies, Inc.
On September 30, 2017, the Company entered into a convertible note agreement with Cardio Infrared Technologies, Inc. for total principal borrowings of $49,800.  The amounts are due on demand, 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 65% of the average of the lowest trading price during the 20 trading day period prior to the conversion election date.  The balance of the note was $40,800 as of December 31, 2017, as $9,000 was repaid during the year.
30

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 $79,990 (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, as of 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 the end of May, 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.
31
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.
       
The following summarizes the book value of the convertible notes payable outstanding as of December 31, 2017 and December 31, 2016:
32
 
   
December 31,
   
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
 
$
-
   
$
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
 
               
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
 
               
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
 
               
Promissory note, dated  June 2, 2017, bearing interest of 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
     
-
 
               
Promissory note, dated  September 30, 2017, bearing 10% interest, payable on demand, convertible to common stock  at the discount of 35% of the lowest traded price of the common stock during 20 trading days prior conversion
   
40,800
         
                 
Promissory note, dated  November 1, 2017, bearing interest of 12% annually, payable on August 10, 2018, convertible to common stock at a discount of 42% of the lowest two traded prices of the common stock during the 15 trading days  prior the conversion date.
   
45,000
     
-
 
                 
Promissory note, dated  November 27, 2017, with principal amount of $85,000 and aggregate puchase price of $79,900, bearing interest of 12% annually, payable within a year, convertible to common stock at the 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 during the 20 consecutive trading days including and immediately preceding  the conversion date
   
85,000
     
-
 
                 
Promissory note, dated  December 18, 2017, bearing interest of 12% annually, payable within a year convertible 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 note
   
40,000
     
-
 
                 
Promissory note, dated  December 20, 2017, bearing interest of 12% annually, payable on September 20, 2018, convertible to common stock at a discount of 50% of the lowest two traded prices of the common stock during the 25 trading days  prior the conversion date.
   
112,000
     
-
 
                 
Promissory note, dated  December 21, 2017, bearing interest of 12% annually, payable on September 30, 2018, convertible to common stock at a discount of 49% of the lowest two traded prices of the common stock during the 30 trading days prior the conversion date.
   
28,000
     
-
 
                 
Convertible notes before debt discount
   
369,900
     
572,500
 
                 
 Less debt discount
   
(324,121
)
   
(361,554
)
                 
 Total outstanding convertible notes payable
 
$
45,779
     
210,946
 

33
(6)  Commitments and Contingencies:
 
Operating Leases

The Company leases its facilities under a rental agreement that expires on February 28, 2019.  The rental agreement includes common area maintenance, property taxes and insurance.  

Future annual minimum payments under these operating leases are as follows:
 
Years ended
     
       
December 31, 2018
   
67,704
 
December 31, 2019
   
11,284
 
Total
 
$
78,988
 

Rental expense under operating leases for the years ended December 31, 2017 and 2016 was $52,954 and $56,795, respectively.

Litigation

We are not party to any material legal proceedings.
 
(7)  Derivative Instruments:

The Company has certain notes payable with elements that qualify as derivatives. The notes payable had a variable conversion feature that similarly prevented the calculation of the number of shares into which they were convertible.

The derivative liability, as it relates to the different instruments, is shown in the following table:
 

 
Year Ended
December 31,
2017
 
 
Conversion
Feature
 
 
of
 
 
Notes Payable
 
 
   
Beginning balance, January 1
 
$
-
 
Additional issuances
   
1,079,942
 
Exercised/converted
   
-
 
Reclassification to equity
   
-
 
Change in value of derivative liability
   
707,121
 
Ending balance, December 31
 
$
1,787,063
 


34

The derivative liability was valued using the Black-Scholes method with the following inputs:

 
 Year Ended
 
 Year Ended
 
 December 31, 2017
 
 December 31, 2016
 
 
 
 
Expected life in years
 0.4 - 0.96 years
 
 N/A
Stock price volatility
 283.6% - 343.6%
 
 N/A
Discount rate
0.12%
 
 N/A
Expected dividends
 None
 
 N/A
Forfeiture rate
0%
 
0%


(8)  Equity:

Common Stock

The Company is authorized to issue 5,000,000,000 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 and the increase from 3,000,000,000 to 5,000,000,000 shares was effective March 21, 2018.

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.
 
During the year ended December 31, 2017, the Company issued an aggregate of 80,183,500 shares of common stock for the conversion of $672,952 of convertible notes and associated interest. During the year ended December 31, 2016, the Company issued an aggregate of 200,000 shares of common stock for the conversion of $5,000 in convertible notes payable.  

During the year ended December 31, 2017, the Company issued 265,000,000 shares of common stock as employee and directors' compensation for a total of $ 3,050,000 . During the year ended December 31, 2016, the Company issued an aggregate of 16,791,611 shares of common stock as directors' and employee compensation.   
                
During the years ended December 31, 2017 and 2016, the Company issued 1,200,000 and 0 shares of common stock, respectively, for the exercise of warrants.  
35
During the year ended December 31, 2017, the Company issued aggregate 17,178,800 shares of common stock for total proceeds of $498,940. During the year ended December 31, 2016, the Company sold an aggregate total of 33,894,719 shares of common stock for total proceeds of $739,111.

During the year ended December 31, 2017 and 2016, the Company issued 16,460,000 and 1,204,000 shares of common stock for the services, respectively.

During the year ended December 31, 2017 and 2016, the Company issued 1,885,302 and 151,885,189 shares of common stock for share exchange with certain shareholders of Las Vegas Railway Express, Inc. (LVRE), respectively.

Warrants

During the year ended December 31, 2017, the Company issued 7,178,000 shares of common stock in warrants which were issued in connection with stock purchase agreements. During the year ended December 31, 2016, the Company issued 9,000,000 warrants in connection with the convertible notes issued during the period.  
 
The following summarizes the Company's warrant activity during the years ended December 31, 2017 and 2016:

   
Warrants
 
Outstanding - December 31, 2015
   
-
 
         
Granted
   
9,000,000
 
Exercised
   
-
 
Cancelled
   
-
 
Outstanding - December 31, 2016
   
9,000,000
 
         
Granted
   
7,178,000
 
Exercised
   
(1,200,000
)
Cancelled
   
-
 
Outstanding - December 31, 2017
   
14,978,000
 
 
 
Variables
 
Values
 
Exercise Price
 
$
0.15
 
Risk Free Rate
 
.92% to 1.07%
 
Discount rate
   
0.25
%
Volatility
   
580.29% - 669.15
%
 
 
36
 
 (9)  Share Based Compensation:
 
Employment Agreements

The Company has an employment agreement with Michael Barron, the CEO of the Company, which provides for an annual salary of $250,000.   His employment agreement provides that if we terminate him without cause, he is entitled to receive a lump sum payment equal to twice his annual salary plus the present value of a performance bonus computed on the basis that we achieve all of our performance targets.  Mr. Barron's employment agreement commenced as of December 15, 2017.

The Company has an employment agreement with Wanda Witoslawski which requires her to perform the duties of Chief Financial Officer and Treasurer of the Company for the duration of the employment agreement.  During the term of this Agreement, the Company agrees to pay Ms. Witoslawski a base salary at the rate of $225,000 per year.   Her employment agreement provides that if we terminate her without cause, she is entitled to receive a lump sum payment equal to twice her annual salary plus the present value of a performance bonus computed on the basis that we achieve all of our performance targets.  Mrs. Witoslawski's employment agreement commenced as of December 15, 2017.
     
The Company has an employment agreement with Joseph Cosio-Barron, the President of the Company, which provides for an annual salary of $200,000.  His employment agreement provides that if we terminate him without cause, he is entitled to receive a lump sum payment equal to twice his annual salary plus the present value of a performance bonus computed on the basis that we achieve all of our performance targets.  Mr. Cosio-Barron's employment agreement commenced as of December 15, 2017.
 
(10)  Income Taxes:

The Company accounts for income taxes under FASB ASC 740 " Income Taxes ."   Under the asset and liability method of FASB ASC 740, 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 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 December 31, 2017 and 2016, the Company has not established a liability for uncertain tax positions.

Any uncertain tax positions would be related to tax years that remain open and subject to examination by the relevant tax authorities.  The Company has no liabilities related to uncertain tax positions or unrecognized benefits as of the year end December 31, 2017 or 2016.  The Company has not accrued for interest or penalties associated with unrecognized tax liabilities.
 
As of December 31, 2017, the Company had  net operating loss carry forwards of approximately $6.4 million, which may be available to offset future taxable income for tax purposes.  This carry forward may be limited upon the ownership change under IRC Section 382.
 
The Components of the deferred tax asset at December 31, 2017 and 2016 are as follows:
   
2017
   
2016
 
Net operating loss carry forward
 
$
1,346,000
   
$
870,000
 
Derivative expense
   
375,000
     
-
 
Total
   
1,721,000
     
870,000
 
Valuation allowance
   
(1,721,000
)
   
(870,000
)
Total Deferred tax asset
 
$
0
   
$
0
 

A reconciliation of the effective Federal tax expense to the amount derived by applying the $ Federal statutory rates to pretax loss for 2017.

Pretax loss at Federal Statutory rate of 35%
 
$
2,585,000
 
Non-deductible differences (stock-based compensation)
   
(1,166,000
)
Change in valuation allowance
   
(851,000
)
Effect of change in federal tax rates due to newly enacted tax statues
   
(568,000
)
Net tax expense (benefit)
 
$
0
 

A reconciliation of the effective Federal tax expense to the amount derived by applying the Federal Statutory rate to pretax loss for 2016:

Pretax loss at Federal Statutory rate of 35%
 
$
899,000
 
Non-deductible differences (stock based compensation)
   
(439,000
)
Change in valuation allowance
   
(277,000
)
Effect of change in federal tax rates due to newly enacted statutes
   
(183,000
)
Net income tax expense (benefit)
 
$
0
 
 

(11)  Related-Party Transactions:
 
Michael A. Barron, the CEO of the Company, is a 100% owner and President of Allegheny Nevada Holdings Corporation, "Allegheny".  The Company was indebted to Allegheny by certain promissory notes with 10% monthly interest.   As of December 31, 2017, the balance of the note dated December 15, 2015 was $39,101 and the note dated September 30, 2017 was $53,700.

Dianne David, the Company's Director -Sales, is the spouse of the CEO, Michael A. Barron and as of December 15, 2015 holds a promissory note with 10% monthly interest and as of December 31, 2017 the principal balance is $74,044.

Wanda Witoslawski, the CFO of the Company, holds a promissory note dated December 15, 2015 of $49,910 and promissory note dated September 30, 2017 of $18,400. The balances as of December 31, 2017 are $49,910 and $7,400, respectively.

Las Vegas Railway Express, Inc. holds promissory note with no interest, payable on demand. Balance as of December 31, 2017 was $154,998.

(12)  Subsequent Events

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.
37
On January 11, 2018, the Company issued 5,000,000 shares of common stock for compensation.

On January 12, 2018, the Company filed an S-1 Registration to register 412,538,466 shares of common stock for future conversions.

On February 8, 2018, 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 November 20, 2018, and bear interest at a rate of 14% 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.

On March 21, 2018, the Company increased its authorized common stock from 3,000,000,000 to 5,000,000,000 shares.
 
On March 29, 2018, the Company issued 600,000,000 shares of common stock to employees and directors of the Board for compensation.

Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
 
None.
 
Item 9A.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our CEO and our CFO, evaluated the effectiveness of our disclosure controls and procedures as December 31, 2017.  Based on that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of December 31, 2017 such that material information required to be disclosed is made known to management and others, as appropriate, to allow timely decision regarding required disclosure and that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
 
Management's Annual Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
38
Our management, with the participation of the CEO and CFO, evaluated the effectiveness of the Company's internal control over financial reporting as of December 31, 2017. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this evaluation, our management, with the participation of the CEO and CFO, concluded that, as of December 31, 2017, our internal control over financial reporting was ineffective.
 
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to an exemption for smaller reporting companies under Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
 
Changes in Internal Control over Financial Reporting .

There were no changes in our internal control over financial reporting during the year ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Item 9B.  Other Information

None.
 
PART III

Item 10.  Directors, Executive Officers and Corporate Governance.

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
Hualiang Teng
58
Director
Louis M. Schillinger
68
Director
Donald Adams
75
Director
Wanda Witoslawski
53
Chief Financial Officer
Joseph Cosio-Barron
69
President

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. None of the above individuals has any family relationship with any other.

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

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.
39

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. 

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.
40

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.

Louis 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.

  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.

 Section 16(a) Beneficial Ownership Compliance

Our officers, directors and shareholders owning greater than ten percent (10%) of our shares are required to file beneficial ownership reports pursuant to Section 16(a) of the Securities and Exchange Act (the "Exchange Act"). To the Company's knowledge, all such reporting obligations were complied with during the year ended December 31, 2017.
41

Committees of the Board

The Company does not have an audit committee nor compensation committee because of the small size and early stage of the Company.

Nominating Committee

We do not have a separately designated nominating committee because the board makes all decisions regarding director nominations.

Involvement in Certain 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.  
Shearson Financial Network, a mortgage company,   filed for Chapter 11 bankruptcy protection in 2008. Michael A. Barron was CEO of the company at the time.

Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law permits a corporation to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a pending or completed action, suit or proceeding if the officer or director acted in good faith and in a manner the officer or director reasonably believed to be in the best interests of the corporation.

Our certificate of incorporation provides that, except in certain specified instances, our directors shall not be personally liable to us or our stockholders for monetary damages for breach of their fiduciary duty as directors, except for the following:

●
any breach of their duty of loyalty to our company or our stockholders;
 
●
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
 
●
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; and
 
●
any transaction from which the director derived an improper personal benefit.
 
In addition, our certificate of incorporation and bylaws obligate us to indemnify our directors and officers against expenses and other amounts reasonably incurred in connection with any proceeding arising from the fact that such person is or was an agent of ours. Our bylaws also authorize us to purchase and maintain insurance on behalf of any of our directors or officers against any liability asserted against that person in that capacity, whether or not we would have the power to indemnify that person under the provisions of the Nevada General Corporation Law. We expect to continue to enter into agreements to indemnify our directors and officers as determined by our Board of Directors. These agreements provide for indemnification of related expenses including attorneys' fees, judgments, fines, and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these bylaw provisions and indemnification agreements are necessary to attract any retain qualified persons as directors and officers.
42

The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees regarding, which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

Insofar as the provisions of our certificate of incorporation or bylaws provide for indemnification of directors or officers for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, we have been informed that in the opinion of the Commission this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Family Relationships

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

Item 11.  Executive Compensation.

SUMMARY COMPENSATION TABLE
Annual Compensation

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. 
43

  Director Compensation for Year Ended December 31, 2017

The following table sets forth director compensation for the year ended December 31, 2017 (excluding compensation to our executive officers set forth in the summary compensation table above).

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 $0.05 - $0.01 per share.
       
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

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) each person known by the Company to be the beneficial owner of more than five percent of its outstanding common stock.

   
Amount of Beneficial
   
Percent of
 
Directors and Officers (1)
 
Ownership (2)
   
Class (3)
 
             
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 South Eastern Ave, Suite 205, 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 outstanding as of December 31, 2017.
 
 
 

44
Item 13.  Certain Relationships and Related Transactions and Director Independence

Three of our directors, Hualiang Teng, Donald Adams and Louis M. Schillinger, are independent directors, using the NASDAQ definition of independence.
 
Certain officers and directors have a beneficial ownership and are officers and directors companies which are or have been parties to financial transactions. We may be subject to various conflicts of interest in our relationship with Mr. Barron, who is executive officer, CEO and Chairman, of the Company.

Michael A. Barron, the CEO of the Company, is a 100% owner and President of Allegheny Nevada Holdings Corporation, "Allegheny".  The Company was indebted to Allegheny by certain promissory notes with 10% monthly interest.   As of December 31, 2017, the balance of the note dated December 15, 2015 was $39,101 and the note dated September 30, 2017 was $53,700.

Dianne David, the Company's Director -Sales, is the spouse of the CEO, Michael A. Barron and as of December 15, 2015 holds a promissory note with 10% monthly interest and as of December 31, 2017 the principal balance is $74,044.

Wanda Witoslawski, the CFO of the Company, holds a promissory note dated December 15, 2015 of $49,910 and promissory note dated September 30, 2017 of $18,400. The balances as of December 31, 2017 are $49,910 and $7,400, respectively.

Las Vegas Railway Express, Inc. holds promissory note with no interest, payable on demand. Balance as of December 31, 2017 was $154,998.

Item 14.  Principal Accountant Fees and Services
 
In accordance with the SEC's definitions and rules, "audit fees" are fees for professional services for the audit and review of our annual financial statements, and includes fees for the audit and review of our annual financial statements included in a registration statement filed under the Securities Act as well as issuance of consents and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements except those not required by statute or regulation.  "Audit-related fees" are fees for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements, including attestation services that are not required by statute or regulation, due diligence and services related to acquisitions.  "Tax fees" are fees for tax compliance, tax advice and tax planning, and "all other fees" are fees for any services not included in the first three categories.

Audit Fees

The aggregate fees billed by the Company's auditor for the professional services rendered in connection with the audit of the Company's annual financial statements, and reviews of the financial statements included in the Company's Forms 10-Ks for fiscal 2017 and 2016 were approximately $45,925 and $9,250, respectively.

Audit Related Fees
 
There were no audit related fees for the fiscal year ended December 31, 2017 and 2016.
45
 
Tax Fees
 
None.
 
All Other Fees

None.
 
PART IV
 
Item 15.  Exhibits and Financial Statement Schedules.
 
 
(1)
Financial Statements: The following financial statements are included in Item 8 of this report:
 
 
 
●  Balance Sheets as of December 31, 2017 and 2016.
 
 
 
 
 
●  Statements of Operations for the fiscal years ended December 31, 2017 and 2016.
 
 
 
 
 
●  Statements of Cash Flows for the fiscal years ended December 31, 2017 and 2016.
 
 
 
 
 
●  Statement of Stockholders' (Deficit) for the fiscal years ended December 31, 2017 and 2016.
 
 
 
 
 
●  Notes to Financial Statements.
 
 
 
 
 
●  Report of Independent Registered Public Accounting Firm.
 
    (2)  Exhibits :
46

Exhibit No.
Description
 
 
3.1
Articles of Incorporation (incorporated by reference to Registration Statement on Form S-1 filed on June 14, 2017)
   
3.2
   
3.3
   
10.1
License Agreement between the Company and Las Vegas Railway Express, Inc.
   
10.2
   
10.3
   
10.4
Convertible note with East Shore Equities, LLC, dated June 2, 2017
   
10.5
Convertible note with Cardio Infrared Technologies, Inc., dated September 30, 2017
   
10.6
Convertible note with Power Up Lending Group LTD, dated November 1, 2017
   
10.7
Convertible note with EMA Financial, LLC, dated November 27, 2017
   
10.8
Convertible note with Adar Bays, LLC, dated December 18, 2017
   
10.9
Convertible note with Auctus Fund, LLC, dated December 20, 2017
   
10.10
Convertible note with Power Up Lending Group LTD, dated December 21, 2017
   
10.11
Employment agreement with Michael Barron dated December 15, 2017
   
10.12
Employment agreement with Wanda Witoslawski dated December 15, 2017
   
10.13
Employment agreement with Joseph Cosio-Barron dated December 15, 2017
   
21
Subsidiaries (incorporated by reference to Registration Statement on Form S-1 filed June 14, 2017)
   
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
101 INS
XBRL Instance Document*
   
101 SCH
XBRL Schema Document*
   
101 CAL
XBRL Calculation Linkbase Document*
   
101 DEF
XBRL Definition Linkbase Document*
   
101 LAB
XBRL Labels Linkbase Document*
   
101 PRE
XBRL Presentation Linkbase Document*
 

47
SIGNATURES
  
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 31, 2018.

X RAIL ENTERTAINMENT, INC.
 
 
By:
/ s/Michael A. Barron
 
Michael A. Barron, Chief Executive Officer
Principal Executive Officer
   
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:

Name
 
Title
 
Date
         
/ s/Michael A. Barron
Michael A. Barron
 
Chief Executive Officer, President and Chairman (principal executive officer)
 
April 2, 2018
 
 
 
 
 
 
 
 
 
 
 /s/Wanda Witoslawski
Wanda Witoslawski
 
Chief Financial Officer (principal financial and accounting officer)
 
April 2, 2018
 
 
 
 
 
 
 
 
 
 
/s/Hualiang Teng
 
Director
 
April 2, 2018
Hualiang Teng
 
 
 
 
 
 
 
 
 
 
 
 
 
 
/ s/Louis M. Schillinger
 
Director
 
April 2, 2018
Louis M. Schillinger
 
 
 
 
 
 
 
 
 
         
/s/ Donald Adams
 
Director
 
April 2, 2018
 Donald Adams
 
 
 
 
 
48
 





Exhibit 10.1


MASTER SERVICE AGREEMENT AND
LICENSE AGREEMENT


THIS AGREEMENT is made and entered into as of January 15, 2016, by and between Las Vegas Railway Express, Inc . , a Delaware corporation with its principal offices at 9480 South Eastern Ave., Suite 205, Las Vegas, NV 89123 (" LVRE " or "Licensor") and X Rail Enterprises .   Inc. a Wyoming corporation ("XRE E " or "Licensee"). Whereby, thereafter LVRE and/or Licensor and XREE and/or Licensee are at t imes referred to collectively as the "Parties" .

WHEREAS, beginning on or about January 16 , 2016 LVRE i nte nds to have XREE be licensed to exclus i vely operate various components of t he LVRE charter business ( " Service "); and

WHEREAS ,   LVRE has established various services and has engaged other companies or individuals to provide ancillary services in conjunction with providing said Service, includ i ng but not limited to ,   food and beverage service, ground transportation and lodgi ng services; and

WHEREAS, LVRE has negotiated or entered into certain contingent agreements to procure and lease all required railcars to support an initia l operation between Las Vegas, Nevada and Los Angeles. California. ("LVR E Equipment"); and

WHEREAS ,   L VRE has entered into discussions and/or agreements with National Railroad Passenger Corporation aka Amtrak ( " Host Railroad") in order to obtain access to their  rail lines for operation of the Service where required ; and

WHEREAS , LVRE represents that it has obtained all necessary insurance to support Service; and

WHEREAS, LVRE requests certain services to be provided by XREE to support LVRE ' s mobilization and operation of the Service ,   as further described in Section 3 below ("Mobilization Services " ) ,   and LVRE is prepared to license and compensate XREE for such services ; and

WHEREAS , XREE shall be the operating railroad for the Service and the trains shall be considered " XREE trains " ; and

WHEREAS. it   is the objective of both Parties to ensure the provision of safe efficient and a reliable Service in accordance with the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the mutual promises and undertakings and of the compensation set forth herein the Parties hereto agree as follows:

1.
Definitions

(a)
·' Lessee and Lessor " shall have the meaning set forth in the first paragraph of this Agreement.

(b)
" Mobilization Services " shall mean those services described in Section 3 of this Agreement.

Page 1 of 16
 
(c)
" Host Railroad" National Railroad Passenger Corporation (AMTRAK).

(d)
" LVRE " shall have the meaning set forth in the first paragraph of this Agreement.

(e)
" LVRE Equipment " shall mean the rolling stock used in the operation of Service, inc luding all different classes of passenger cars (which may in clude business, corporate cars), all of which is l i sted in Exhibit A hereto .

(f)
" FELA " shall mean the Federal Employers Liability Act. 45 U.S.C. §51 , et seq.

(g)
" FRA " shall mean the Federa l Railroad Administration.

(h)
" Mobilization Schedule " shall mean that schedule set forth in Exhibit B.

(i)
" Party " shall mean either XREE or LVRE .

(j)
" Parties " shall mean XREE and LVRE collectively.
 
(k)
" Qualified " shall mean that a person has satisfied all legally required training and certification requirements fo r a position and possesses the background ,   skills and experience necessary to fulfill the duties of a job to which that person is assigned in the Service .

(I)
" T&E Crew " shall mean one (1) locomotive engineer and one (1) conductor prov i ded by Amtrak for operation of Service trains i f the scheduled operating time from the departure at the initial stat i on of Los Angeles, Ca . to the arr i val at the final station of Las Vegas ,   NV (or v i ce versa).

2.
Grant of License

2.1
The Inte llectual Property R i ghts under the Agreement.

Under the terms and conditions hereinafter set forth ,   the LVRE hereby grants to XREE and XREE accepts from LVRE, an exclusive license, to use parts of or all of the I ntellectual Property R i ghts under the Agreement, in XREE's operations .   Without LVRE ' s consent , XREE sha ll not ,   by license ,   assignment or in any other manner ,   perm i t a third party to use the Intellectual Property Rights under the Agreement.

2.2
Scope

2.2.1
XREE shall only use the Intellectual Property Rights under the Agreement in i ts own normal business operations .   Without LVRE's consent ,   XREE shall not use the Intellectual Property Rights under the Agreement for any other purpose or when provid in g services to any third party .

2.2.2
The License in this   Agreement i s effective in the United States o f Amer i ca territory where LVRE has granted XREE a specific territory ("Licensed Territory") . XREE agrees that i t will not make, or authorize ,   any direct or ind ir ect use of the Intellectual Property Rights under the Agreement in any regions other than the Licensed Territory.

Page 2 of 16

2.3
XREE's confirmation

XREE confirms that it does not have any rights, titles or interests of the Intellectual Property Rights under the Agreement except the rights, titles and interests provided for under this Agreement.

2.4
Prohibitions

XREE undertakes that, at any time either during or after the Term it shall not:

2.4.1
commit any act which affects the rights of LVRE in relation to any of the In tellectual Property Rights Under the Agreement; or

2.4.2
apply for the registration of any of the Intellectua l Property Rights under the Agreement or any similar intellec tua l property right in any country or region in the world.

3.
XREE Services to be provided and responsibilities undertaken

XREE shall provide the following Services in support of LVRE 's mobilization and operation of Service:

(a)
Coordinate Train and Engine Crews.

XREE shall coordinate with Amtrak a T&E Crew for each scheduled train of the Service and will adhere to federal service laws .

(b)
Mobilization Services.

XREE shall provide the following mobilization services in accordance with the Mobilization Schedule set forth in Exh ibit B.

(c)
Managerial Control

In the performance of its obligations under this Agreement, XREE is not an employee of LVRE but rather a licensee .   All operating and other personnel of XREE involved in any aspect of providing the Services shall be employees of XREE, and shall be subject to the direction ,   supervision, and control of XREE.

(d)
Conduct of Employees

All XREE employees who are engaged in the provision of the Services for LVRE shall be Qualified, and shall perform their duties in a courteous, efficient and safe manner.

(e)
Control of Alcohol and Drug Use

XREE will be responsib le for compliance with FRA regulations relating to the control of drug and alcohol testing requ i red in 49 C.F.R. Part 219 with respect to its T&E Crews.
Page 3 of 16
 
4.
Obligations of LVRE

(a)
Equipment for Operation of Service

(i)
LVRE shall be solely r esponsible for the provision of the LVRE Equipment for the Service.

(ii)
Throughout the term of this Agreement, LVRE shall be solely responsible for:

a.
Complying with FRA and Amtrak Standard Maintenance Procedures i n order to assu r e that the passenger coaches to be used in Service wil l comply with private car mechanical standards, including compliance with the requirement that the passenger coaches have a current PC-1 annual inspection and PC-5 clearance i nspection .

b.
Obtaining any required FRA approvals of the LVRE Equipment to be used in Service ,   and for the performance of all FRA inspect i ons (except for the "set and release test " and the " running brake test" which will be performed by the T&E Crew) , test tra i ns, and completion of operat i ng, maintenance and safety plans, i nclud i ng but not l imited to ,   those requirements mandated by 49 CFR Parts 223 ,   229 ,   238 and 239.

c.
Inspecting and maintaining the LVRE Equipment incompliance w i th a ll applicable federal, state and local l aws ,   rules and regulations , i ncluding ,   but not limited to, the Americans w i th Disabilities Act.

d.
LVRE Equipment familiarity, inspect i on and maintenance train i ng in compliance with all applicable federal ,   state or l ocal laws ,   ru l es and regulations , inc l ud i ng emergency evacuat i on training , of all personnel assigned to the Serv i ce , inc l uding , as applicable , the Amtrak T&E Crews .

(iii)
In the event an applicable federal ,   state or loca l law or regu l ation i s enacted or promulgated after the effective date of th i s Agreement that requires modifications or upgrades to the LVRE Equipment , LVRE shall be solely respo n s i ble for complying w i th such requirements .

(iv)
XREE and LVRE shall each have the un i lateral r i ght to remove from service any unit of LVRE Equipment for safety-related defects .

(b)
Tra i n Pe r sonnel Other than T&E Crews

(i)
XREE shall be so l ely responsible for providing qua l ified train personnel other than the T&E Crews .

(ii)
XREE shall be solely responsible for baggage handling , passenger announcements , passenge r boa r ding and detraining , and deployment of ADA r amps and stairs as may be required at all stations served by Service.

Page 4 of 16

(c)
Train Movements Other Than Scheduled Movements

XREE shall be solely responsible for all train movements (e.g. ,   to and from train servicing facilities) other than the regularly scheduled Service described in Exhibit C.

(d)
Maintenance of Equipment

XREE shall be solely responsible for all maintenance serv i ces relating to the LVRE Equipment used in the Service.

(i)
XREE shall retain all records and reports concerning inspection , maintenance and cleaning of the LVRE Equipment for a period of three (3) years following term i nation of th i s Agreement (except for those records that may require longer retention periods for regulatory compliance, in which case LVRE shall retain such records in accordance with such regulatory requirements) and shall make those available upon request.

(ii)
XREE shall ensure that all personnel assigned to the maintenance function are Qualified.

(iii)
XREE shall assure that all LVRE Equipment operated on trains in Service i s maintained in a safe and reliable condition ,   that such LVRE Equipment complies at all times with Standard Maintenance Procedures and all app l icable FRA, Association of American Railroads, a n d accepted industry standards , and that any LVRE Equipment not compliant with these standards will not be used in Service .

(e)
Storage of Equipment

(i)
XREE shall be solely responsible for providing safe storage of the LVRE Equipment (including ADA ramps and stairs) when not in use in Service.

(ii)
LVRE shall be solely responsible for securing the LVRE Equipment (including ADA ramps and stairs) when not in use in Service.

(f)
Coordination with Host Railroad

XREE shall be responsible for obtaining access arrangements with the Host Rai l road if necessary for the performance of Serv i ce , other than for those arrangements to be provided by LVRE as specifically set forth above .

(g)
Provision of Food and Beverage Service

XREE shall be solely responsib l e for the provision of food and beverage (a l coholic and non-alcohol i c) on the Service .   XREE shall comply w i th all applicable federal , state or local laws ,   rules or regulations re l ating to the provision of food and beverage service on the Service. I t is understood that Amtrak T&E Crews shall have access to the food and non-alcoho li c beverage serv i ce prov i ded by XREE at the same prices such food and non-alcoholic beverage products are offered to Service passengers; provided, however, that complimentary coffee, tea and bottled water shall be provided to T&E Crews .

Page 5 of 16
 
(h)
Substitute Service

XREE shall be solely responsible for providing and operating any substitute services (e.g. ,   buses) in the event that the Service does not, for any reason, operate.

(i)
Stations and/or Infrastructure Improvements

LVRE shall be solely responsible for access to and management of station facilities . Further, prior to commencement of Service, LVRE shall provide XREE with a Certificate of Occupancy for any new stat i ons to be utilized for Service. To the extent required for performance of Service , LVRE , its contractors and subcontractors shall perform infrastructure and/or station im provements in accordance with all applicable federal ,   state and local laws, rules, regulations and requirements, includ ing, but not lim ited to, the Americans w ith Disabil i ties Act of 1990, unless applicable rules or requirements are waived by the appropriate entity .

5.
Schedule of Service Operations

(a)
The i nitial schedules for the operation of the Service are attached hereto as Exhibit
D. In the event of any change in the schedule of trains to be operated by Amtrak T&E Crews pursuant to this Agreement,  LVRE shall advise XREE no later than thirty
(30) days prior to the schedule change in order to permit XREE to comply with applicable collective bargaining agreements in changing work schedules of its T&E Crews.

6.
Risk of Liability

(a)
LVRE agrees to defend, indemnify and hold harmless XREE , including their respective officers, agents ,   employees, and subsidiaries and other third parties to the extent XREE is obligated to indemnify or hold harmless such third parties , irrespective of negligence or fault of LVRE . or such third parties, for all damage or liability for personal inj ury or death to any person, or damage to any property (including property of LVRE and los s of use or revenue) which would not have been incurred but for the existence of Service; provided, however, that LVRE shall have no responsib ility to indemnify XREE for XREE's liability under the Employers ' Liability Act (FELA) for injury or death to LVRE employees engaged directly in the operation of Service. The risk of injury or death and of FELA claims by such XREE employees is assumed by LVRE and LVRE agrees to defend, indemnify and hold harm less XREE against any FELA claims with respect to injury or death of such employees to the extent such claims are not covered by LVRE's railroad l iability ins urance coverage . Compensation for such risk is inc luded in the amounts and rates agreed upon by the Parties in this Agreement.

(b)
Where claims are made against XREE and LVRE arising out of the same incident , the Parties shall cooperate fully and shall make all of the inves t i gative and claims information available to each other. Any claim for i ndemnification by XREE or LVRE shall not be made a part of any litigation brought by a third party arising out of any claim against XREE and/or LVRE. If a dispute arises concerning the scope of XREE ' s or LVRE's indemnity obligations pursuant to this Section 6 , such dispute shall be resolved separately pursuant to Section 11 of this Agreement.

Page 6 of 16
 
(c)
LVRE agrees to defend, indemnify and hold harmless XREE i ncluding t he ir respective officers, agents, employees, and subs i diaries and other th ird parties to the extent XREE is obligated to indemnify or ho l d harmless such third parties , irrespective of negligence or fault of L VRE , any third parties, from and against any action , suit or other proceed i ng based upon a claim that the Service infringes any patent, copyright ,   royalty, trademark or service mark or other third party proprietary r ight , or involves the wrongful use of any trade secret or confidential information .

(d)
Neither Party shall be liable to the other Party, whether by way of indemnity or restitution or in contract or in tort (including negligence). for any indirect or consequential loss or damages or loss of revenue, loss of profit, loss of use, loss of production, or loss of contract.

(e)
The indemni ty provisions set forth above shall survive termina t ion of this Agreement for any reason .

7.
Insurance and Payment

(a)
Liability Ins urance

LVRE shall procure and maintain for the duration of this Agreement rai lroad liability insurance, with combined single limits for bodily i njury and property damage of not less than $4 , 000,000 per occurrence, with respective named insureds on a primary basis .

(b)
Property Insurance

Throughout the term of this Agreement ,   LVRE shall procure and maintain for the duration of this Ag r eement , property insurance covering the LVRE Equipment against all risks of physical damage usually covered in a railroad property insurance policy. Such insurance shall carry limits sufficient to cover the scheduled value of all LVRE property used in the Service. XREE shall be n amed as an additiona l insured as respects its i nterest in LVRE's property in XREE ' s care, custody ,   and control and LVRE shall waive and cause i ts property insurers to waive all r i ghts of
subrogation against XREE.

(c)
LVRE shall procure and maintain for the duration of this Agreement workers ' compensation insura nce in compliance with applicable statutory requirement and Employer ' s Liability Coverage in the amount of $2 , 000 , 000 per occurrence. Such insurance shall contain a waiver of subrogation in favor of XREE . LVRE shall provide satisfactory proof that it has taken out for the period covered by this Agreement full compensation insurance for all persons employed directly by LVRE to carry out the work contemplated under this Agreement   all in accordance with applicable law s, rul es and regulations. Further, LV R E shall require all subcontractors to obtain and ma inta in ,   for the duration of this Agreement, workers ' compensation of the same type and lim its as specified herein.


Page 7 of 16

8.
Compensation

L VRE shall license XREE.

(a)
Payment to LVRE . In cons ideration for th e rights and licenses granted by L VRE to XREE under this Agreement   XREE shall pay to LVRE a non - refundable ,   creditab l e fee in the su m of $1,000 due and payable no later than 7 bus iness days after the execution of said Agreement.

XREE shall pay Royalties .

(b)
Royalties to LVRE . XREE shall pay LVRE royalties based on each train run from Las Vegas to Lo s Angeles roundtrip .   Said r oya l ties shall be a sum equal to   5% of the operating income from the train operations which shall be calculated pre corporate overhead.

9.
Disruption of Service

In the event of disruption of the Service due to a Force Majeure event as defi n ed in Section 12 . LVRE's obligation to compensate XREE for charges during the per i od of time that the cessation of the Service occu r s shall be modified as p ro vided in this Section .

LVRE shall be obligated to pay any di r ect costs plus all applicable ove rh ead s and m an agemen t fee that a re attributable to the Serv i ce which is incurred during the period of disruption .

10.
Te rm and Termin a tion

(a)
T he term of this Agreement shall be from January 15, 2016 through January 14 , 2046 .

(b)
In case of a material breach by either Party of its obligation s pur suant t o th is Agreement, and unless the Party in breach remedies such non-compliance wi thi n ten ( 10) days of receipt of a written notice from th e non-breaching Party, th e other Party may immediat e ly terminate this Agreement. No delay or omission by a Party in the exercise of any right to terminate this Agreement or to submit an issue fo r resolution as prov id ed in Section 11will impa i r any such po wer or rem edy, nor will it  alter or affect the r ights of e ither Party.


(c)
Upon termination of this Agreement , all rights and obligations of th e Parties hereunde r will terminat e e xcept as otherw ise st ate d herein and except for right s and obligat i ons ,   whether de t ermined ,   contingent or otherwise ,   which arose prior to or as a result of such termination.

Page 8 of 16
 
11.
Dispute Resolution

(a)
In the event of a dispute by the Parties over any issue arising under or related to this Agreement. either Party may proceed with binding arbitration in the following manner:

(i)
The Party wishing to initiate arbitration shall notify the other in writing of its desire to submit the matter to arbitration. Such notice shall contain a statement of the issues and shall designate one arbitrator.

(ii)
Within fifteen (15) days of such notice, the other Party shall respond in writing by designating a second arbitrator.

(iii)
Within fifteen (15) days of designation of the second arbitrator, the two arbitrators designated as aforesaid shall appoint a third arbitrator to serve as chairman. If the two arbitrators so designated fail to appoint a third arbitrator within the time provided herein, or if a Party fails to appoint an arbitrator within the time provided for herein, either Party may request the Chief Judge of the United States District Court for the district in which the said Party's principal office is located to appoint an additional    a rb itrator.

(iv)
The arbitrators shall promptly hear and decide the issues submitted to them in accordance with the rules for commercial arbitration of the American Arbitration Association, giving to both Parties reasonable notice of the time and place of hearing.

(v)
The arbitrators, or a majority of them, shall promptly render their decision and award in writing to the Parties.

(vi)
Any arbitration award rendered hereunder shall be final and binding upon the Parties. Judgment upon any such arbitration award may be entered in any United States District Court having jurisdiction over the Parties .

(vii)
Each Party shall bear its own costs and expenses of arbitration including the cost of any expenses of the arbitrator designated by or for it. The fees of the chairman and any other remaining expenses of the arbitrators shall be borne equally by the Parties.

(viii)
The Parties agree that every reasonable effort shall be made to obtain the prompt resolution of disputes which are submitted to arbitration pursuant to this Agreement. The Parties further specifically agree that neither Party shall be entitled to delay the arbitration process significantly by insisting on the application of extensive procedural steps or ot her actions which cannot clearly be expected to improve the ability of the arbitrators to render a prompt, reasonable and fair decision   and agree further that reasonable discovery requests shall not be barred by the foregoing.

(b)
In the event of a dispute arising under or related to an invoice or request seeking payment  of  any  kind under  this  Agreement  the  Party disputing that  amount shal l timely pay any undisputed amount of the invoice or requested fee, charge or cost.

Page 9 of 16
 
(i)
In t he event of such a dispute only   the disputed portion of the invoice and/or request for payment shall be subject to the dispute resolution process under this Agreement.

(ii)
The Party disputing an amount set forth in an invoice shall not be required to pay the d isputed amount pending resolution of the process described in this Section; however, the undisputed amount shall be paid in accordance with the ordinary payment terms of this Agreement. Payment of or receipt of the undisputed amount may not be construed to be any admission by either Party regarding any matter arising from the disputed amount. Further, payment of or receipt of the undisputed amount does not preclude recovery of any or the entire amount paid if it is subsequently determined that a dispute exists as to the paid portion.

(c)
Pending resolution of a dispute as set forth under this Section 11, the Parties shall proceed diligently with the performance of this Agreement in accordance with its terms.

12.   Force Majeure

XREE will be excused from performance of any of its obligations hereunder, where such non-performance is occasioned by any event beyond its control which shall include, without limi tation ,   any order, rule, or regulation of any federal, state, or local government body , agent or instrumentality ,   work stoppage, accident, natural disaster or severe weather .

13.
Compliance with Laws

LVRE represents and warrants that:

(a)
It is qualified to do business in the States of Delaware and Nevada and that it will take such action as ,   from time to time hereafter, may be necessary to remain so qualified;

(b)
It shall comply with all federal, state and l ocal laws regulations and ordinances applicable to its activities and obligations under this Agreement and for operation of the Service; and

(c)
It shall obtain ,   at its expense ,   all lice nses ,   permits, insurance ,   and governmental approvals, if any, necessary to the performance of its obligations under this Agreement and for operation of the Service.


14.
Notices

Any request, demand, authorization ,   direction, notice, consent, waiver or other document provided or permitted by this Agreement to be made upon, given or furnished to ,   or filed with one Party by the other Party will be in writing and will be delivered by hand or be  deposited in the mails of the United States, postage prepaid addressed as follows:
Page 10 of 16

If to XREE:
X Rail Enterprises, Inc. 3651 Lindell Road, 0482 Las Vegas, NV 89103 Attention: Wayne Bailey


If to LVRE:                          Las Vegas Railway Express ,   Inc.
9480 South Eastern Avenue Las Vegas, Nevada 89123 Attention: Michael A. Barron

Either Party may change the address by notifying the other Party of such change.

15.
Confidential Information

This Agreement , and the documents and information disclosed by or on behalf of either Party to the other Party in connection with this Agreement shall constitute "Confidential Information" as defined in, and subject to the terms and conditions of ,   the Non-Disclosure Agreement.

16.
Assignment

Th i s Agreement may not be assigned by XREE or LVRE without the express written consent of the other Party.

17.   Severability

If any term, covenant, condition ,   or provision (or part thereof) of this Agreement or the application thereof to any person or circumstance shall, at any time or to any extent, be invalid or unenforceable, the remainder of th is Agreement or the application of such term or provision (o r remainder thereof) to term, covenant, condition, and provision of this Agreement will be valid and enforced to the fu llest extent permitted by law unless the term , covenant, condition, or provision or part thereof declared invalid or unenforceable is so fundamental to the Agreement that the remainder of the Agreement ,   standing alone does not represent a meeting of the minds of the Parties .

18.
Governing Law

This Agreement and the r ights and obligations of the Parties hereto shall be governed by and construed in accordance with the laws of the Nevada.


19.
Amendments

This Agreement may be amended only upon the mutual written agreement of the Parties hereto.

Page 11 of 16
 
20.   Entire Agreement

No oral statement or prior written matter will have any force or effect. The Parties hereby acknowledge that they are not relying on any representations or agreements other tha n those contained in this Agreement.

IN  WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized representatives .


X Rail Enterprises, I nc.



By: / s/Wayne Bailey
Name: Wayne Bailey
Title: President





LAS VEGAS RAILWAY EXPRESS, INC.


By: /s/ Michael Barron
Name: Michael A. Barron
Title:  CEO and President


Page 12 of 16


 
Exhibit 10.4

'NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOT E IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS  AMENDED  (THE "ACT")  OR  ANY  STATE  SECURITIES    LAWS    AND NEIT HER T H IS NOTE NOR ANY INT EREST T HERE IN NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF  EXCEPT  PURSUANT TO AN EFFECTIVE REGIS T RAT IO N STATEMENT UNDER SUCH ACT AND SUCH LAWS OR AN EXEMPTIO N FROM REGIST RATION UNDER SUCH ACT AND SUCH LAWS.


CONVERTIBLE PROMISSORY NOTE


Principal Amount: $ 19, l 00.00

Issue Date: June 2, 2017
Maturity Date: June 2, 2018


For good and valuable consideration, X Rail Entertainment, Inc., a NV corporation ("Maker") , hereby makes and delivers this Promissory Note (this "Note") in favor of East Shore Equities LLC, or its assigns ("Holder") , and hereby agrees as follows:

A RT IC LE I.
PRINCIPAL AND INTEREST

Section l. I For value received, Maker promises to pay to Holder at such place as Holder or its assigns may designate in writing, in currently available funds of the United States, the principal sum of $ 19, l00.00 Maker's obligation under this Note shall accrue interest at the rate of four percent (4.0%) per annum from the date hereof until paid in full. Interest shall be computed on the basis of a 365-day year or 366-day year, as applicable, and actual days lapsed. Accrual of interest shall commence on the first business day to occur after the Issue Date and continue until payment in full of the principal sum has been made or duly provided for.

Section 1.2
 
a.
All payments shall be app lied first to interest, then to principal and shall be credited to the Maker's account on the date that such payment is physically received by the Holder.

b.
All principal and accrued interest then outstanding shall be due and payable by the Maker to the Holder on or before June 2 2018 (the "Maturity Date").

c.
Absent the occurrence of an event of default (unless such event of default is waived in writing by the payee) the Company may prepay this note in full without any prepayment penalty.

d.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Maker and will not impose personal liability upon the holder thereof.


Section 1.3 This Note is issued in exchange solely for value received, $19, 100.00, paid by Holder to Maker by wire.

ARTICLE II.
CONVERSION RIGHTS; CONVERSION PRICE

Section 2.1 Conversion. The Holder or its assigns shall have the right, from time to time, commencing on the Issuance Date of this Note, to convert any part of the outstanding interest or Principal Amount of this Note into fully paid and non-assessable shares of Common Stock of the Maker (the "Conversion Stock") at the Conversion Price determined as provided herein. Promptly after delivery to Maker of a Notice of Conversion of Convertible Note in the form attached hereto as Exhibit I, properly completed and duly executed by the Holder or its assigns (a "Conversion Notice"), the Maker shall issue and deliver to or upon the order of the Holder that number of shares of Common Stock for the that portion of this Note to be converted as shall be determined in accordance herewith.

No fraction of a share or scrip representing a fraction of a share will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. The date on which Notice of Conversion is given (the "Conversion Date") shall be deemed to be the date on which the Holder faxes or emails the Notice of Conversion duly executed to the Maker. Certificates representing Common Stock upon conversion will be delivered to the Holder within two (2) trading days from the date the Notice of Conversion is delivered to the Maker.  Delivery of shares upon conversion shall be made to the address specified by the Holder or its assigns in the Notice of Conversion.

Section 2.2. Conversion Price. Upon any conversion of this Note, the conversion price shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 60% multiplied by the Market Price (as defined herein) (representing a discount rate of 40%). "Market Price" means the lowest of the daily Trading Price (as defined below) for the Common Stock during the forty five (45) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the lowest trading price on the OTC Bulletin Board, or other applicable trading market (the "OTCBB") as reported by a reliable reporting service ("Reporting Service") mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the volume weighted  average price of such security on the principal securities exchange or trading market where such security is  listed or traded. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Maker and the holders of a majority in interest of the Note being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. "Trading Day" shall mean any day on which the Common Stock is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on





































George Buonocore Member
 
 
Exhibit 10.5
 
CONVERTIBLE
DEMAND
 PROMISSORY NOTE

Dated as of September 30, 2017


Principal Amount: $49,800
 
FOR VALUE RECEIVED, the undersigned X Rail Entertainment, Inc., a Nevada corporation ("Maker"), promises to pay to the order of Cardio Infrared Technologies, Inc. ("Lender"), the principal sum of Forty Nine Thousand Eight Hundred Dollars ($49,800), (the "Principal Amount") together with ten percent annual interest on the unpaid Principal Amount. Said note shall be due on demand (the "Maturity Date").

1.
INTEREST RATE.

The Principal Amount under this Note shall bear interest at a rate of ten percent (10%) per year upon the Maturity Date.

In the event that any interest rate provided for in this Agreement shall be determined to be unlawful, such interest rate shall be computed at the highest rate permitted by applicable law. Interest not paid when due shall be added to the unpaid Principal Amount and shall thereafter bear interest at the same rate as the Principal Amount. All payments (including prepayments) hereunder are to be applied first to the payment of accrued interest and the balance remaining applied to the payment of the Principal Amount and the Maturity Payment.

2.
PAYMENTS.

Maker shall make payments of the Principal Amount, the Maturity Payment and accrued interest thereon to Lender as follows: except as otherwise set forth in this Note, the unpaid Principal Amount under the Note plus all accrued and unpaid interest thereon plus the Maturity Payment shall be payable upon the Maturity Date. If the Maker has not repaid the Principal Amount together with any and all accrued interest thereon and the Maturity Payment on the Maturity Date, the Lender may,
in his sole discretion , at any time after the Maturity Date, (i) make a written demand for payment of any unpaid Principal Amount, Maturity Payment and accrued interest thereon.

3.
VOLUNTARY PREPAYMENT.

Maker may, from time to time, in its sole discretion, upon five (5) business days' prior written notice to Investor, make one or more periodic payments to the Lender. Such payments shall be credited against any Principal Amount, Maturity Payment and accrued interest thereon owed by Maker to Lender pursuant to the Note on the date that such payment is received by the Lender and credited to Lender's account. Such payments shall be applied first to accrued and unpaid interest, then to the Principal Amount and then to the Maturity Payment amount then outstanding. Notwithstanding anything herein to the contrary, in the case of any payment by Maker to the Lender prior to the Maturity Date, Lender shall be entitled to the full amount of the interest that would have been due on the Note and to the full amount of the Maturity Payment that would have been paid had Maker paid the Principal Amount and interest thereon and the Maturity Payment on the Maturity Date.
1

4.
CONVERSION OPTION.

The outstanding principal amount and accrued interest of this Note shall be converted upon receipt by the Company of notice from the Lenders of its election to convert this Note into fully paid, non-assessable shares of common stock of the Company, at the price of 35% of the lowest traded price for 20 trading days prior to conversion at the option of the Lender.

5.
WAIVERS.

Except as set forth elsewhere herein, Maker, for itself and its legal representatives, successors, and assigns, expressly waives presentment, protest, demand, notice of dishonor, notice of nonpayment , notice of maturity, notice of protest, notice of intent to accelerate, notice of acceleration , presentment for the purpose of accelerating maturity, and diligence in collection.

6.
DEFAULT.

The occurrence and continuance of one or more of the following events shall constitute an event of default ("Event of Default") of this Note:

6.1
The nonpayment of the Principal Amount or the Maturity Payment under the Note or any accrued interest thereon by Maker within five business days of when the same shall have become due and payable.

6.2
The entry of a decree or order by a court having appropriate jurisdiction adjudging Maker bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Maker under the federal Bankruptcy Act or any other applicable federal or state law, or appointing a receiver, liquidator, assignee or trustee of Maker, or any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days.

6.3
The institution by Maker of proceedings to be adjudicated bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the federal Bankruptcy  Act or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee or trustee of the Company, or of any substantial part of its property, shall become subject to the jurisdiction of a federal bankruptcy court or similar state court, or if Maker shall make an assignment for the benefit of its creditors, or if there is a receivership, execution or other material judicial seizure, or if there is an admission in writing by Maker of its inability to pay its debts generally as they become due, or the taking of corporate action by Maker in furtherance of any such action.

6.4
Default in the obligation of Maker for borrowed money, other than this Note , which shall continue for a period of sixty (60) days, or any event that results in acceleration of the maturity of any material indebtedness of Maker under any note, indenture , contract, or agreement.

2
6.5
Maker's failure to comply with any material term, obligation, covenant, or condition contained in this Note, within 10 days after the expiration of all cure periods and receipt of written notice from the Lender demanding such compliance.

6.6
Any warranty, covenant, or representation made to the Lender by Maker under this Agreement, proves to have been false in any material respect when made or furnished.

7.
ACCELERATION.

At the option of the Lender, and without presentment, demand, protest or notice, all of which are hereby expressly waived, the Principal Amount, the Maturity Payment and any accrued and unpaid interest thereon shall become immediately due and payable upon an Event of Default as set forth in Section 6 above. Any reasonable attorneys' fees and other expenses incurred by the Lender in connection with Maker's bankruptcy or any of the other Event of Default described in Section 6 shall be additional indebtedness of Maker secured by this Agreement.

8.
SECURITY INTERESTS.

It is further understood that this Note is not secured by a personal guarantee.

9.
ATTORNEYS' FEES.

In the event it should become necessary to employ counsel to collect any amounts owed by Maker under this Note, Maker agrees to pay the reasonable attorneys' fees and costs of the Lender, incurred in connection with the Lender's collection efforts, irrespective of whether suit is brought.

10.
SECTION HEADINGS.

Headings and numbers have been set forth for convenience only. Unless the contrary is compelled by the context, everything contained in each paragraph applies equally to this entire Note.

11.   AMENDMENTS IN WRITING.

Subject to applicable law, this Note may be amended, modified, or supplemented only by a written agreement signed by the Lender and the Maker.

12.
CHOICE OF LAW

This Note and all transactions hereunder and/or evidenced hereby shall be governed by and construed under the laws of the State of Nevada without regard to the conflicts of law principles thereof.

13.
ARBITRATION.

If at any time during the term of this Note any dispute, difference, or disagreement shall arise upon or in respect of the Note, and the meaning and construction hereof, every such dispute, difference, and disagreement shall be referred to a single arbiter agreed upon by the parties hereto, or if no single arbiter can be agreed upon, an arbiter or arbiters shall be selected in accordance with the rules of the American Arbitration Association and such dispute, difference, or disagreement shall be settled by binding arbitration in accordance with the then prevailing commercial rules of the American Arbitration Association, and judgment upon the award rendered by the arbiter may be entered in any court having jurisdiction thereof. The parties hereto each jointly and severally waive any and all rights to appeal the judgment or award of such arbiter(s).
3

14.
TRANSFERABILITY.

The right to principal and interest under this Note may be transferred only through a book entry system maintained by Maker. Any other means of transfer, including, without limitation, transfers by endorsement, shall be null and void. Ownership of the obligation must be reflected in a book entry. A book entry is a record of ownership that identifies the owner of an interest in this Promissory Note.


IN WITNESS WHEREOF,    the Maker has caused its duly authorized representative to execute this Note as of th e date first written above.

 


X RAIL ENTERTAINMENT, INC.



       /s/ Michael Barron
By:  Michael A. Barron - CEO
 
 
4

 

Exhibit 10.6

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: $45,000.00
Issue Date: November 1, 2017 Purchase Price: $45,000.00
   

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED , X Rail Entertainment, Inc. , a Nevada corporation (hereinafter called the "Borrower"), hereby promises to pay to the order of POWER UP LENDING GROUP LTD. , a Virginia corporation, or registered assigns (the "Holder") the sum of $45,000.00 together with any interest as set forth herein, on August 10, 2018 (the "Maturity Date"), and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%)(the "Interest Rate") per annum from the date hereof (the "Issue Date") until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid ("Default Interest"). Interest shall be computed on the basis of a 365 day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All payments due hereunder (to the extent not converted into common stock, $0.00001 par value per share (the "Common Stock") in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the "Purchase Agreement").

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1
 Conversion Right . The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III), each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided , however , that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership   limitations on conversion as set forth in the section may NOT be waived by the Holder . The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the "Notice of Conversion"), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the "Conversion Date"); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term "Conversion Amount" means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder's option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder's option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder's option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.

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1.2
Conversion Price . The conversion price (the "Conversion Price") shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments by the Borrower relating to the Borrower's securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 58% multiplied by the Market Price (as defined herein) (representing a discount rate of 42%). "Market Price" means the average of the lowest two (2) Trading Prices (as defined below) for the Common Stock during the fifteen (15) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the "OTC") as reported by a reliable reporting service ("Reporting Service") designated by the Holder (i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the "pink sheets". If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as reasonably determined by the Borrower. "Trading Day" shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.
 

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1.3
Authorized Shares . The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved seven times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation set forth in Section 1.1 is not in effect)(based on the respective Conversion Price of the Note (as defined in Section 1.2) in effect from time to time, initially 25,586,206 )(the "Reserved Amount"). The Reserved Amount shall be increased (or decreased with the written consent of the Holder) from time to time in accordance with the Borrower's obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4
Method of Conversion .

(a)
Mechanics of Conversion . As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).

(b)
Surrender of Note Upon Conversion . Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.

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(c)
Delivery of Common Stock Upon Conversion . Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within two (2) business days after such receipt (the "Deadline") (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower's obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.
 
(d)
Delivery of Common Stock by Electronic Transfer . In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder's Prime Broker with DTC through its Deposit and Withdrawal at Custodian ("DWAC") system.

(e)
Failure to Deliver Common Stock Prior to Deadline . Without in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder  $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the "Fail to Deliver Fee"); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(e) are justified.

1.5
 Concerning the Shares . The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) ("Rule 144"); or (iii) such shares are transferred to an "affiliate" (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).


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Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder's counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act; or otherwise may be sold pursuant to an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6
Effect of Certain Events .

(a)
Effect of Merger, Consolidation, Etc . At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). "Person" shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b)
Adjustment Due to Merger, Consolidation, Etc . If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10)  days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

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(c)
Adjustment Due to Distribution . If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower's shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution"), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

1.7
Prepayment . Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the "Prepayment Periods"), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. Any notice of prepayment hereunder (an "Optional Prepayment Notice") shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the "Optional Prepayment Date"), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which direction shall to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage ("Prepayment Percentage") as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the "Optional Prepayment Amount"). If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.7.

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Prepayment Period
 
Prepayment Percentage
 
1. The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date.
   
120
%
         
2. The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date.
   
125
%
 
3. The period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date.
   
130
%
         
4. The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date.
   
135
%
         
5. The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date.
   
140
%
         
6. The period beginning on the date that is one hundred fifty-one (151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date.
   
145
%
 
After the expiration of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.

ARTICLE II. CERTAIN COVENANTS

2.1  Sale of Assets . So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

ARTICLE III. EVENTS OF DEFAULT

If any of the following events of default (each, an "Event of Default") shall occur:

3.1
Failure to Pay Principal and Interest . The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.

3.2
Conversion and the Shares . The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower's transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.


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3.3
Breach of Covenants . The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.

3.4
Breach of Representations and Warranties . Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5
Receiver or Trustee . The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6
Bankruptcy . Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.7
Delisting of Common Stock . The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

3.8
Failure to Comply with the Exchange Act . The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.9
Liquidation . Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.10
Cessation of Operations . Any cessation of  operations  by  Borrower  or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower's ability to continue as a "going concern" shall not be an admission that the Borrower cannot pay its debts as they become due.

3.11
Financial Statement Restatement .  The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

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3.12
 Replacement of Transfer Agent . In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.13
Cross-Default . Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. "Other Agreements" means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term "Other Agreements" shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal  to  the  Default  Amount  (as  defined  herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT AMOUNT (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon
the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note or upon acceleration), 3.3, 3.4, 3.7, 3.8, 3.10, 3.11, 3.12, 3.13, and/or 3.14 exercisable through the delivery of written notice to the Borrower by such Holders (the "Default Notice"), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the "Mandatory Prepayment Date") plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4(e) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the "Default Amount") and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

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ARTICLE IV. MISCELLANEOUS

4.1
Failure or Indulgence Not Waiver . No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2
Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Borrower, to:

X Rail Entertainment, Inc. 9480 S. Eastern Ave.
Las Vegas, NV 89123
Attn: Michael Barron, Chief Executive Officer Fax:
Email: mbarron@vegasxtrain.com
 
 If to the Holder:
 
POWER UP LENDING GROUP LTD.
111 Great Neck Road, Suite 214 Great Neck, NY 11021
Attn: Curt Kramer, Chief Executive Officer e-mail: info@poweruplending.com
 
With a copy by fax only to (which copy shall not constitute notice):
 
 Naidich Wurman LLP
111 Great Neck Road, Suite 216 Great Neck, NY 11021
Attn: Allison Naidich
facsimile: 516-466-3555
e-mail: allison@nwlaw.com
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4.3
Amendments . This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4
Most Favored Nation . During the period where any monies are owed to the Holder pursuant to this Note, if the Borrower engages in any future financing transactions with a third party investor, the Borrower will provide the Holder with written notice (the "MFN Notice") thereof promptly but in no event less than 10 days prior to closing any financing transactions. Included with the MFN Notice shall be a copy of all documentation relating to such financing transaction and shall include, upon written request of the Holder, any additional information related to such subsequent investment as may be reasonably requested by the Holder. In the event the Holder determines that the terms of the subsequent investment are preferable to the terms of the securities of the Borrower issued to the Holder pursuant to the terms of the Purchase Agreement, the Holder will notify the Borrower in writing. Promptly after receipt of such written notice from the Holder, the Borrower agrees to amend and restate the Securities (which may include the conversion terms of this Note), to be identical to the instruments evidencing the subsequent investment. Notwithstanding the foregoing, this Section 4.4 shall not apply in respect of (i) an Exempt Issuance, or (ii) an underwritten public offering of Common Stock. "Exempt Issuance " means the issuance of: (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Borrower pursuant to any stock or option plan duly adopted for such purpose by a majority of the members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of this Note and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Borrower, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Borrower and in which the Borrower receives benefits in addition to the investment of funds, but shall not include a transaction in which the Borrower is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

4.5
Assignability . This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an "accredited investor" (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona   fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.

4.6
Cost of Collection . If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys' fees.

4.7
Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the Eastern District of New York.
 
The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
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4.8
Purchase Agreement . By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.9
Remedies . The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on November 1, 2017

X Rail Entertainment, Inc.

            /s/ Michael Barron
             By: Michael Barron
Chief Executive Officer

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EXHIBIT A -- NOTICE OF CONVERSION


The undersigned hereby elects to convert $__________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note ("Common Stock") as set forth below, of X Rail Entertainment, Inc., a Nevada corporation (the "Borrower") according to the conditions of the convertible note of the Borrower dated as of November 1, 2017 (the "Note"), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[ ]
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system ("DWAC Transfer").

Name of DTC Prime Broker: Account Number:

[  ]     The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder's calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

POWER UP LENDING GROUP LTD.
111 Great Neck Road, Suite 214 Great Neck, NY 11021 Attention: Certificate Delivery
e-mail: info@poweruplendinggroup.com

Date of conversion:
Applicable Conversion Price:   $  
Number of shares of common stock to be issued
pursuant to conversion of the Notes:  
Amount of Principal Balance due remaining
under the Note after this conversion:  

POWER UP LENDING GROUP LTD.

By: Name: Curt Kramer
Title: Chief Executive Officer
Date:  

13
Exhibit 10.7

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBL E HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AM.ENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIREDUNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal A mount : $85 , 000.00
I s sue D a te: November 2 7, 201 7



12% CONVERTIBLE NOTE

FOR  VALUE  R E C E IVED , X  RAIL  ENT E R T AINME N T ,  INC. ,  a   N ev ad a  co r po r at i o n (" B o rr ow e r''   o r " Co mp a n y"),  h e r e b y p ro mi se s  to  p ay  t o  th e  or d er of  EMA FINA N CIAL , LLC, a D e l awa r e lim i t e d l ia bilit y co mp a n y , o r its r eg i stere d ass i gns ( the " H o ld e r " ) , o n N ove mb er 27, 20 17 , (s ub ject to ex t ens i o n as se t fort h bel ow, th e " M at uri ty  D ate ' '),  the s um  o f $85 , 000 . 0 0  as se t  fort h h ere i n , t oget h e r w ith in te re st o n t h e un pa id p r i nc ip a l b a lanc e h e r eof a t th e r a te of twe l ve ( 1 2%) p er a nn u m  ( th e " In te r est  R ate " )  from  t h e  d a t e  of  i ss u a n c e  h e r eof  until  t hi s  N ote  p lus  a n y  a n d  a ll amo unt s du e here und er ar e pa i d in fu ll , a n d a n y a ddi t i o n a l am o un ts se t fo rth  h e r e in ,  includ i n g w i t h o u t limit a ti o n an y A dditi ona l Princip a l (as d e fin e d h e r e in) . In teres t s h a ll b e co mpu te d o n th e b as i s of a 36 5- day y ea r a n d t h e act ua l n u mb e r of da ys el a ps e d. An y am o un t o f  princi pa l or  int e r est o n th is N ote w hich i s n ot pa id  w h e n du e  s hall  b ea r  in te r est  at  th e  ra t e  of  t we nt y -four (24% )  p e r a nn um from t h e du e d ate th e r e of un ti l t h e sa m e is paid (" D e fault Int e r est") . A ll p ay m e nt s du e he re u nd e r s h a ll b e m a d e in l aw ful m o ne y o f th e U nit e d Sta t es of A m e ri ca .  A ll pa y m e nt s s h a ll b e m a d e a t s u c h addr e s s as th e H o ld e r s h a ll here a f te r g i ve t o t h e B o r rower b y wr i tte n n ot i ce mad e in accor d a n ce w ith t h e p rov i s i o n s o f thi s N o t e.  Wh e n eve r a n y  a m ou nt  e xpr es s e d  t o  b e  du e  b y  t h e ter m s of thi s No t e i s du e o n a n y d ay w hi c h i s not a b u s in ess da y ,  th e sa m e  s h a ll in stea d be du e o n th e n ext s u ccee di ng d ay w hich is a  bu s in ess d ay a nd , i n t h e  case of a n y  int e r es t p ay m e n t dat e w hi ch i s n o t th e d a t e o n w hi c h t hi s N o t e i s  p a id  in full , th e ex t e n s i o n of  th e  du e dat e  t h e r eof  sha ll n o t b e t ake n int o a c c o un t fo r p urp oses of de t e rminin g  th e am o unt of  int e r est  d u e o n s u c h d a t e. As u se d i n th is N o t e , the term " bu s in ess da y" s h a ll m ea n a n y da y o th e r t han a Sa turd ay , S und ay o r a d ay o n w hi c h co mm e r c ial b a n ks in t h e c it y o f New Y o rk , N ew Y o r k ar e a uth or i ze d or r e qui re d b y l aw o r exec ut ive o rd e r t o rem a in c l ose d . Eac h ca pi ta li ze d term u sed h e r e in ,  a n d  n o t  o th e r w i se  d efi n e d , s h a ll h ave th e m ea nin g asc ribed t h e r e t o in tha t certa in Sec uri t i es  Pur c h ase  A g r ee m en t e nter e d  int o b y a n d b etwee n th e Co mp any a nd H o lder dat e d o n or a b ou t t h e d a t e h e r eof ,  pur s uan t  t o  w hi c h t hi s N o t e was o ri gina ll y i ssu ed (t h e " Pur c h ase Ag r ee ment " ). Th e H o ld e r m ay , b y w r it t e n n o t i c e t o t h e B orrowe r a t l eas t five (5) d ays b e fore the Ma turit y D ate (as m ay ha ve b ee n pr ev i o u s l y ex t e n de d ) , ex t e nd t h e M a turit y Date to up t o o n e  ( I )  yea r  fo ll ow in g  th e  d at e  of  th e  or i g in a l  M at urit y  D ate h ere un de r .
1

This Note is free from all taxes , lie ns , c l aims and encumbrances with respect to  th e  issue thereof and sha ll not be subject to preemptive rights or ot her sim ilar rights of shareholders of the Borrower and will not impose personal liabilit y upon t h e holder thereof.

 In the event that after 181 days from the  Issue  Date:  (i)  the  shares  underlying  this  Note cannot be sold without restriction pursuant  to  Rule  14 4 of the Securities  Act of  1933,  as  amended (the "Securities Act" ), or (ii) if the Note cannot be converted into shares without a restrictive legend under some other exemption under the Securities Act (the " Restriction Default Date"), then in either such case the outstanding principal amount of this Note shall  be  automatically,  and  without  any action required  by Holder ,  be  increased  as of  the  Restriction  Default Date to an amount equal 200% of the outstanding principal amount as of the Restriction Default Date.
Th e follow in g terms shall app l y to t his Note:

ARTICLE I. CONVERSION RIGHTS

1.1. Conversion Right. The Holder shall have the right, in its sole and absolute discretion, at any time from time to time, to convert all or any part of the outstanding amount due under this Note into fully paid and non -assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price" ) determined as provided herein (a " Conversion "); provided , however , that  in  n o event shall the H o ld er be entitled to convert any portion of this Note in excess of  t ha t  portion  of thi s Note upon conver s i o n of w hi ch the sum of ( I) the number of s har es of Com m on Stock beneficially owned by the H older and its affiliates (other than s h a r es of Common Stock whic h may b e deemed beneficially owned through the ownersh ip  of  the  unconvert e d  portion  of  th e  Notes  or  the un exe rcised or unc o nverted portion of any other security of t h e Borrower s ubject to a limitation on conversio n or  exercise analogous  to the  limitations contained  herein) and  (2)  the  numb e r of  s ha res of C o mm o n Stock issuable upon the co n version of the portion of this Note wit h respect to which the determinat ion of this proviso is being made ,  would  result  in  beneficial  ownersh ip  by the Holder and its affi liate s of more than 4.9% of t h e outstanding shares of Common Stock. For  purposes  of  the proviso to  the  immediate l y  preceding  sentence,  beneficial  ownership  s h a ll  be  det e rmined  in accorda n ce with Sec tion 13(d) of the Securities Exc han ge Act of 1934, as amended (the "Exchange Act'"), a nd Regulation 13D-G  thereunder,  except  as  otherw ise  provided  in  clause  (I)  o f  suc h proviso, provid e d, further , however ,   that the limitati o n s on conversion may be wa iv ed  by the H o ld er upon , at the e l ect i o n of the Hold er, not l ess than 61 d ays ' prior notice to the Borrower , and  the provisions of the convers i on limit ation sha ll continue to apply  until  suc h  61 st  day  (or  such  la te r date, as determined by the Holder , as may be specified in s u ch  n ot i ce  of  waiver).  The  number of s h ares of Common Stock to  be  issued  upon  each  Conversion  of  t hi s  Note  (' 'C onver s i o n  S ha res") sha ll be determined by dividin g the Convers i on Amount (as defined below) by  the  applicable Conversio n Price then in effect on the  date  specified  in  the  n otice  of  co n version,  in  the  form attached hereto as Exhibit  A (the "No tice  of  Conversion "),  de li vered to  the  Borrower  by  the  Holder i n accordance with Sectio n 1 .4 below; provided that the Notice  of  Co n vers i on i s  submitted  by fac s imile o r e-mail (or by ot h e r means resulting in , o r reasonably expected to result in , notice) to the Borrower before 11:59 p.m., New York , New York time on suc h conversion  date (the "Co nversion Date '' ). The term "Co nversion Amount "  means ,  with  respect  to  any  Conversion  of  this  Note ,  the sum of (I)  the  principal  amount  of  this  Note  to  be  converted  in  such  Conversion,  (2)accrued and unpaid interest , if any , on such principal amount being converted at the interest rate s provided in this Note to the Conversion Date, plus   (3) at t he H o ld er's option, Default Inter est, if any , on the amou nt s referred to in the immediately preceding clauses (I) and/or (2) , plus   (4) any Additional Principal for such Conversion, plus   (5) at the Holder's option , any  amounts  owed  to  the  Holder pursuant to Sections 1.2(c) and I .4(g) h ereof.
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1.2. Conversion Price.

a)
Calculation of Conversio n Price . The conversion  price hereunder (the " Convers i on Price") sha ll equal t h e l ower of: (i) the closing sa l e price of t he Co mm on Stock on the Principal Market on the Trading Day immediately preceding the Closing  Date ,  and  (ii)  50%  of e i ther the l owest sale price for the Common Stock on the Principal Market during the twenty (20) consecut i ve Trading Days including and imm ediately preceding the Co nversion Date, or the closing b id price , wh i chever is lower, provided if the Registration Statement (as defined in the registration rights agreement entere d into by an d between the Company a nd Holder dated on or about the date hereof (" Registrat ion Rights Agreement''), i s not filed within thirty (30) days of  C l os ing ,  or  if w ithin ninety (90) days of C l osi n g , t h e Registration Statement registering the shares of Co mm on Stock of this Note is not effect iv e in accordance with Section 4( o) of the Purchase Agreement  then the conversion price  hereunder  ("Default  Co nver sio n  Price")  s hall  while  this  Note  remains outsta ndin g equal the l owe r of: (i) the closing sa l e price of Common Stock on the Principal Market on the Trading Day including and immediately preceding the Conversion Date,  and  (ii)  40% of either the l owest sa le price for the Common S t ock on the Principal Market during the twenty (20) consecutive Trading Da ys including and imm edia tel y preceding the Conversion Date or t h e closing bid price, w hich ever is lower, provided, however , if the Compa n y' s s h are pri ce at any time loses the bid (ex: 0.0001 on the ask w i th zero market makers on the bid on l eve l 2), then t h e Conversion Pri ce may , in the Holder ' s so l e and absolute discretion, be reduced to a fixed conversio n price of 0.00001 (if l ower than the conversion price otherwise) , and provided, that if on the date of delivery of the Convers i on S har es to the Holder, or any date thereafter wh il e Conve rsion Shares are held by the Holder , the closing bid price per s har e of Com m o n Stock on the Princip al Market on  t h e  Trading Day on wh ich t he Common S hare s are traded is les s than the sale price per s h are of Common Stock on the Principal Market on the Trading Day used to calcu late the Conversion Price h ereunder , then such Co n vers i on Price shall be automatically reduced suc h that the Conversion Pric e shall be recalculated usin g t h e new low closing bid  price ("Adjusted  Conversion  Price") and s hall replace th e Conversion Price above, a nd Holder sha ll be issu ed a number of additional s ha res such that the aggregate number of sha re s Holder receives is based upon the Adjusted Co n versio n Price, and provided ,  further, that  the  Conversion  Price  s hall  be  subject  to  Sect ion 1.2(b) below.For t h e purpose of clarity, any s h ares required to be i ssued as a resu lt of an Adjusted Conve r sio n Price sha ll be deemed to be "Convers ion Shares" under this Note. I f an Event of D efau lt under Section 3.9 of the Note has occurred, Hold er, in i ts sole discr etion, may elect to use a Conversion Price w hich shall equal the l owe r of: (i) the closing sa le price of the Common Stock on the Principal Market o n the Trading Day immediately preceding the Closing Date; (ii) 50% of eit h er t h e lowest sale price or the closing bid price, whic h ever i s lower for the Common Stock on the Principal Market during any Tradin g Day in which the Event of D efau l t ha s not been cured. I f such Common Stock is not traded o n the OTCBB , OTCQB , OTC Pink , NAS DAQ or NYSE, then s uch sa le  price s h a ll  be the sa le price of s u c h sec urit y on the principal sec uriti es exchange or trading market where s uch sec uri ty is listed or traded o r , if no sa le price of such security is available in any of the forego in g manners, the average of t h e closing bid prices of any m a rk et makers for s uch secur it y that are li sted in the "pink sheets" by the Nationa l Quotation Bureau ,  Inc.  I f s uch sa le  price cannot  be calculated  for  such sec urit y on such date in the manner provided above, such price sha ll be the fair market value as mutua ll y deter m ined by the Borrower a n d t h e H o l der.  I f the  Borrower ' s  Common  stock  i s  chi ll ed for deposit at OT C, becomes chi ll ed at any point wh il e t h is Note  remains  outstanding  o r de p osit  o r other additio n a l fees are payab l e due  to  a  Y i e l d  Sig n ,  Stop Sign  or  other  tra d ing  restrict i ons ,  or  if the clos i ng sale price at any  time  falls  be l ow  $0.0 1 2  (as  appropriate l y  an d  equitably  adj u sted  fo r stock sp l its , stock divide n ds , stock cont ri butions  and sim il ar events) ,  t h en  such 50% figure specified i n c l ause 1 . 2(a)( i i) above sha ll be r e d uced to 35% provided however , in t h e event that th e Default Convers i on Price is app l icab l e then s u ch 40% figure spec i fied i n cla u se 1 .2(a)(  i i) above  shall  b e r educed to 25%. I n the event t h at  the  s h a r es  of  t h e  Borrower ' s  Common  Stock  are  n ot  del i verable via D WAC following the co n version of a n y amo u nt h ere u nder , an additiona l 5% disco un t w ill be attrib u ted to the Conversion Price. Additio n a ll y , the Borrower acknowledges t h at it will take all reasonable steps necessary  or  appropriate ,  i n c l uding  prov i d i ng  a  board  o f  directors  r e solution aut h oriz in g t h e iss u a n ce of co m mon stock to H older. So l ong as the re q uested sa l e may b e made p ur s uant t o R u le 1 44, t h e Company agree s to: ( 1 ) accept a n opinion of cou n se l  to  the  H o l de r confirming the rig h ts of t h e H older to se ll shares of Co mm on Stock issuable or iss u e d to H o l der o n conversion of this Note pursuant  to R ul e  144 as  pro mul gated  by t h e  SEC (" Ru l e  1 44 " ) , a n d / or (2) i n the eve n t that Ho l der , acting in its so l e discretion, requests that Compa n y ' s cou n se l provide  an opi n io n of co u nsel (which opin i o n of co un se l shall be  provided  to  the  Holder  w i th i n  24  hours of Ho l der ' s req u est) confirming th e r i ghts of the Ho l der to se ll s h ares of Common Stock  issuab l e  or is s u ed to H o l der on convers i on of t h is Note pursuant to R ul e 1 44 , as suc h Ru l e 1 44 may be in effect from time to time , whic h o p ini o n will be iss u ed at  the Com p a n y' s ex p ense a n d  the convers i o n dollar a m ount will b e reduced by $750 . 00 to cove r t h e cos t of such  lega l opinio n . " Trading  D ay ' · s h a ll  m ean any day o n whic h the Commo n Stock is tra d able for any p e riod on t h e O T C P ink , or on the principal securit i es excha n ge or other securities market on wh i ch t h e Commo n Stock is t h en being traded . Additio n ally , if the Co m pany ceases  to  be a  report in g compa n y  pursuant  t o  the  1934 Act or if the Note ca n not be converted into free trading s h ares after  1 8 1  days  from  t h e  issuance  d ate ,  an addit i onal  15%  discount  w ill  be  attributed   to  the  Co n ve r sio n   Price  for  any  a n d  a ll  Co n ve r sions s ubmitted t hereafter.

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b)
If at any time the Conversion Price as deter min ed here un der for any Conversion would be less t h an the par va l ue of the Co m mo n Stock , t h e n t h e Conver s io n Pr i ce h ereunder sha ll eq u al such par value for suc h Conversion an d the Conversio n Amo un t for such Conversion shall be increased to i nclude A d ditio n al P rincipa l , w h e r e " Add i tiona l P r in cipal'' means suc h additional amount to be added to the Conversion A m o u nt to t he extent necessary to cause the number of Conve r sion Shares issuab l e upon such Conversion to eq u a l t h e same numbe r o f Convers i o n Shares as wou l d have been issued had  the Conversio n  Price  not  bee n  s u bject to the m in im u m price set forth in this Sect i o n I .2(b).

c)
Without  i n  a n y  way  l i m iti n g  t h e   H o l der ' s  r ight   to   pursue  other r emedies , i n cl u di n g actua l damages a n d / or equ i tab l e re l ief , t h e part i es agree t h at if de l ivery of the Common Stock i ssuable upon conve r sion of th i s Note is  n ot  de l ivered  by  the  Dea dl i n e  (as  defined bel o w) the Borrowe r s h a ll pay to t h e H olde r $ 1 , 000.00  per day  i n cas h , for eac h day  beyo n d  the D eadli n e t h at t h e Borrower fai l s to de l ive r such Co m mo n Stock. S u ch cash amount shall be paid  to Holde r by the fifth d ay of the m onth fo ll owing  t h e mo n th  i n w h ich  it h as accrued  or , at the option of  the H older , s h all be added to the pri n cipal amo u nt of th i s Note , i n wh i c h eve n t interest sha ll accrue thereon in accorda n ce w i th th e te r ms of t hi s Note and such addit i onal principa l amount sha ll be co n vertible i nto Com m on Stock in  accorda n ce  w i th  the  terms  of  t h is  Note.  T h e B orrower agrees that t h e right to convert this Note is a va lu ab l e r i ght to the Ho l der. T h e damages  r esu l t i ng  from a fa i lu r e , attempt to frustrate , or interference w i t h suc h conversion right are d i fficu l t if not impossib l e to quantify. Accordingly , the parties acknowledge that the liquidated damages provision conta in ed in this Section are justified.

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1.3.
Authorized   Shares . The Borrower covenants that the Borrower w ill at all times whi le this Note i s outs tanding reserve from its autho ri zed and unissued Common Stock  a suffic i ent number of shares, free from preemptive ri ghts, to provide for the issuance of Co mm o n Stock up on t h e full conversion or adjustment of this Note. Th e Borrower is r e quir ed a t a ll times to have authoriz e d a nd reserved seven (7) t imes t h e number of shares that is act u a lly issuable upon full conversion or adjustment of th i s Note (based o n the Conversion Pric e of the Notes in effect from time to time)(the " Reserved Amount"). Initi a lly , the Company will in struct the Tran sfer Agent to reserve fifty four million one hundr ed thousand (54, I 00,000) shares of common stock in the name of the Holder for issuance up on conversion hereof. Th e Borrower represents that upon issuance, such shares wi ll be duly and va lidl y is s ued, fully paid and non-assessable. In addi t ion , if the Borrower sha ll i ssue any sec uritie s or make any change to its capita l st ructur e which would change the number of shares of Common Stock in to which this Note s hall be co nverti b l e at the t h en c urr ent Conversion Price , t h e Borrower s h a ll at the same time make proper provision so that thereafter there s hall be a sufficient number of shares of Common Stock authorized and reserved , free from preemptive rights, for conversion of this Note in full. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for th e Common Stock issuable up o n co nv ersion of this Note, and (ii) agrees that it s issuance of thi s Note sha ll const itute full authority to its officers and agents who are charged with the duty of executing stock ce1tificates to execute and i ssue the nece ssary certificates for shares of Common Stock in accordance with  the  terms and cond ition s of t hi s Note.

If , at any time the Borrower does not m ain t ain the Reserved A mount it w ill be considered an Event of Default und er Section 3.2 of the Note.

1.4.
Method of Conversion.

a)
Mecha nic s of Conversion. S ubjec t to Section I . I , this Note may be c o nverted by the Holder in  whole or  in  part at  any  time and  from  time to time after the Is sue  Da te , by s ubmi tting to the Borrower a Notice of Conversion (by facsimile ,  e-mail  or other  reasonable means of communication dispatched on the Conversion Date prior to  11 :59  p.m.,  New  York ,  New York time).

b)
Book   Entry   upon   Conversion.   Notwithstanding  anything  to  the contrary se t forth here in , upon conversion of th is Note in  accordance  with  the  terms  hereof,  the Holder s hall not be required to physically surrende r  this  Note  to  the  Borrower  un les s  the  entire unp aid principal amo unt of this Note is so converted. The Holder and the Borrower s hall maintain records showing  the  principal  amount  so  converted  and  the  dates  of  s u c h conversions  or  shall  u se suc h other method , reasonably satisfactory to th e H o lder and the Borrower , so as not to require physical surrender of t hi s Note upon each suc h  conversion.  In the event of any  dispute  or discrepancy , suc h records of the Borrower s hall , prima facie , be controlling and determinative in t he absence of manifest error. Notwithstanding the foregoing, if any  portion  of  t hi s  Note  is converted  as aforesaid , the Holder may not transfer this Not e unle ss the  Holder  first  physically  surrenders  this Note to the Borrower , where upo n the  Borrower  will  forthwith  i ssue  and deliver  upon the orde r of the Holder a new Note of like t enor, registered as the Holder (upo n payment by the Holder of any applicab le transfer taxes) may request, r eprese ntin g in the aggregate t h e remaining unpaid principal amount of t h is No t e. T h e Ho l der and a n y assig n ee , by acceptance of  t hi s  Note ,  ack n owledge  and ag r ee t h at , by reaso n of t h e prov i sions of t h is paragrap h , fo ll owing co n ve r sio n of a  p ortio n of t h i s N ote , the u n paid and u n conve rt ed p r i nc i pa l  amo un t of  t h i s  Note  r eprese n ted  by  th i s Note  may  be l ess tha n the amo u n t stated on t h e face h ereof.

 
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c)
Pav m ent of Taxes . Th e Borrower s h a ll not be req uir ed to pay any tax w h ich may be payab l e i n res p ect of any tra n sfe r i n volved i n the iss u e and del i very of  sha r es  of Commo n Stock or ot h e r securit i es or  prope r ty on co n vers i on  of  this  Note  i n  a  n ame  other  tha n  that of the Ho l der (or in street n a m e), a n d the Borrower s h a ll not be requ i red to i ssue or de l iver any such shar e s or other sec u rit i es or property un l ess and u nt i l the p erson or persons (ot h er  than the H o l der or t h e c u s t odian in w h ose street na m e s u c h s h ares are t o be h e l d for the H older ' s accou n t)  re q uesting t he i ssua n ce t h ereof sha ll have pa i d to t h e Borrower t h e a m o u nt of any s u ch tax or s h a ll have e s tab l ished to the satisfaction of t h e Borrower that such t ax has b ee n pa i d.

d)
D el i very of Co mm on Stock up o n Conversio n . Upon receip t by t h e Borrower from the Ho l der of a facsim il e trans m ission or e-ma i l (or o th er reasona bl e mea n s of communication) of a Not i ce of Co n version meeti n g t he re qui rements fo r conversion  as  provided  i n t h is Section 1 .4 o r u po n an eve n t trigger i ng the calcu l at i on of an Adjusted Conversio n Pr ice , the Borrowe r sha ll issue and de l iver  or  ca u se  to  be  issued  and  de li vered  to  o r  u pon  the  order  o f  the H o l der certificates for t h e Com m o n Stock i ss u able up on such co n ve r sio n w i t hi n  three  (3)  business days after s u c h receipt or such an  event  (the " Dead li ne " )  (a n d ,  sole l y  in  the case of conve r s ion  of  t h e e n t ir e u npaid pri n ci p a l amo u nt  hereof ,  s u r r e n der of  t hi s  Note)  in accordance  w i th  t h e  terms h e r eof a n d the P u rc h ase Agreement.

e)
Obl i gat i on of Borrower to D e l iver  Com m on  Stock .  Upon  receipt  by the Borrower of a d ul y and properly exec u ted Notice of Co n versio n or u pon an event trigger i ng  t h e calcu l at i on o f an Ad j usted Conversion Pr i ce ,  t h e  Ho ld er s h a ll be deemed  to  be t h e  holder of  record of the Co m mon Stock i ssuable u pon suc h co n vers i on or as a resu l t of an Ad ju sted Conversion P rice , t h e o u tstan d ing princ i pa l amo un t a n d t h e amount of accrued  a n d u npaid  in terest  o n th i s  Note s h a ll be  r educed  to  reflec t  such  co n ve r s i on  or   ad j us tm ent,   a n d,   u n l ess   t h e   Borrower  defau lt s   o n  it s ob l igat i ons u nde r t h is Article I , a ll rig h ts wit h r espect to t h e port i on of t hi s N ote be i ng so converted sha ll forthwit h term in a t e except t h e r i ght to receive t h e Co m mo n Stock or other securities, cash or other assets , as herein prov i ded , on such convers i o n . If t he H o ld er s h a ll  h ave  given  a  Not i ce  of Conversio n  as  prov i ded  h ere i n  or  u po n  a n  eve n t triggeri n g  t h e   ca l c ul ation   of   an   Adjusted Co n version Price , t h e B orrower' s ob li gatio n to i ssue and  del i ver the cert ifi ca t es  fo r Common Stock s h a ll be absolute a n d uncon d itiona l , i rres p ective of th e abse n ce of any actio n  by  t h e  Holder  t o enforc e the same , a n y waiver or consent with respect to a n y prov i s i on thereof , t h e r ecovery of any judgment aga i nst any person or any action to e n force the sa m e ,  any  failu r e  o r  de l ay  in  t h e enforcement  of  any  ot h er  ob l igat i on  of  t h e  Bo r rower  to   t h e   h o l de r  of   r ecord ,   or   any  setoff , c o unter cl a im , reco u pment, l im i tation or te r mina t io n , or  a n y breac h or  a ll eged  breach b y the H o l der of  any  ob li gatio n  to  t h e  Borrower ,  a n d  i rrespective  of  a n y  other  c i rc u msta n ce   w h ic h  m i ght othe r w i se l imit s u c h ob l igat i o n of the Bor r ower to t h e Ho l de r in co n nectio n  with  suc h conversion. The Conversio n Date specified in t h e Not i ce of Conversion s h a ll  be t h e  Convers i on  D ate so  l o ng  as the Not i ce of Conversion is received  by  the  Borrower  before  11: 59  p.m. ,  New  York ,  New  Yo r k time , on such date.

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f)
D e l ivery   of Common   Stock     b y   E l ec t ro ni c  Tra n sfe r .  In  l i eu  of de l iver i ng physica l certificates represe n ti n g the Common Stock iss u ab l e u pon co n vers i on , p r ovided the Borrower is participating i n the Depository T ru st Company ( " OTC " ) Fast Automated Secu r i ti es Transfer ( " FAST " ) progra m , upon request of the Ho l der a n d its comp li a n ce wi t h t h e provisions contai n ed i n Sectio n I. l and in this Sect i on 1 .4 , th e Borrower s h all u se i ts best efforts to ca u se  it s tra n sfe r agent to elec t ron i ca ll y transmit the Common Stock iss u able upo n conversio n or upon an event triggering t h e ca l cu l ation of a n Adjusted Conversio n Pr i ce to t h e H o l der by credit i ng  the ac co u n t of Ho l der ' s  P r im e  Broker  w i t h  OTC  throug h  its  Depo s it  Withdrawa l Agent  Commission (" DWAC'") syst e m.
 
g)
Fa il ure to De li ver Com m on Stock P ri or to D ead li ne. Witho u t in a n y way l imiting the H o l der ' s right to purs u e other remed i es , includ i ng ac t ual damages a n d / or eq u itab l e re l ief , t h e part i es agree that if d e li v e ry of the Commo n Stock issuable upon conve r sion o r adjustment of t h is Note i s n ot de l ivered b y the D eadline , t h e Borrowe r sha ll pay to the H older $ 1 , 000.00 per day i n cash , for eac h day beyond the D ea dl ine that t h e Borrower fai l s t o de l iver such Commo n Stock to the H o l der. S u c h cash amount sha l l be paid to  H o l der  by  the fifth  day  of  the month fo ll ow i ng the month i n wh i ch it has acc ru ed or , at t h e option o f t h e Ho l der,  s h a ll  be adde d to  t h e p r incipa l amount of th i s Note, in  which  event  interest  sha l l accr u e  t h ereon  in acco r da n ce  wit h the terms of t h i s Note and such addit i ona l p r inc i pa l amou n t s h a ll be convertib l e  in to Common Stock i n accorda n ce w i th the terms of t h is Note . T he Borrower agrees that the rig h t to convert and / or receive shares in the event of a n adjus t ment is a valuable rig h t to the H o l der. T h e d amages resu lt ing from a fa i lu r e, attempt to frustrate, o r interfere n ce wit h such co n versio n or adjustment r ight a r e d i fficu lt i f not imposs i b l e to q u a l ify . According l y the parties acknowledge that t h e liquidated da m ages provis i on co n tained in this Sect i on I .4(g) are justified .

h)
The Borrower acknow l edges t h at i t wi ll take a ll reaso n able steps necessary or appropriate, in clud in g accepting an opinion of co un se l to H o ld er co n fi r mi n g the rights of Holder to se l l shares of Common Stock issued to Holder on co n vers i o n or ad j ust m ent of t h e N ote pursuant to Ru l e 144 as promulgated by t h e SEC ("Rul e 1 44 " ), as such R ul e m ay be i n effect fro m time to ti m e. So l ong as t h e re q uested sale may b e made p u rsuant to Ru l e 1 44  the Borrower agrees to acc e pt a n opin i on of cou n se l to the H o ld er w hi ch opi n io n wi ll be issue d at the Borrower ' s expense.

i)
Charges an d Expenses.   I ssuance of Common Stock to Holder or any of i ts assignees , upon the convers i on of t h is Note sha ll  be  made  wit h out  c h arge  to  the  H o l der for an y i ssuance fee , transfe r tax , l ega l o p i nion and re l ated charges , p ostage/mai li ng charg e or any ot h er expense w i th respect to the i ssua n ce of suc h Com m on Stock. Compa n y sha ll pay a ll Tra n sfer Agent fee s i n curred from the issua n ce  of  the  Common Stock  to  Ho l der , as  we ll as  any and  a ll other  fe e s and c h arge s required  by  the  Transfer  Age n t  as  a  condit i on  to  effectuate  such  i ssuance. That notw i thstanding , the Ho l d e r m ay in t h e interest of sec u ring  is s uance  and/or  del i very of Common Stock before t h e D ead l i n e , at any t i me from time to time , in its sole d i scretio n e l ect  to  pay any such fees o r charges upfront, and Company ag r ees that any  such  fees or  charges  as  noted  in  this Sectio n that are paid by the Ho l der (whet h er from the Company's de l ays , outr i g h t re fu sa l to pay , H older ' s interest in sec u ri n g i ssuance  and / or  de l ivery  of  Commo n  Stock  before  the  Dead li ne , or otherwise), will be at Compa n y ' s expense , and the conve r sio n a mo u nt wi ll automatica ll y be red u ced by t h at dollar amo u nt to cover the cost of the fees or c h arges as noted in t hi s Sect i o n .

1.5 .     Restricted  Securities. The  shares of Common  Stock  issuable  upon conversion or adjustment of this Note may not be sold or transferred unless (i)  such shares are sold pursuant  to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel  in comparable  transactions)  to  the effect that  the  shares  to  be sold or transferred may be sold  or  transferred  pursuant  to  an  exemption  from  such  registration  or  (i i i) such shares are sold or transferred pursuant to Rule  144  under  the  Act  (or a successor rule)  (" Rule 144'') or (iv) such shares are  transferred  to an " affiliate"  (as  defined  in  Rule  144)  of  the Borrower who agrees to sell or  otherwise transfer the shares  only in accordance with this  Sect  ion 1.5 and  who is  an  Accredited  Investor  (as  defined  in  the  Purchase  Agreement).  Any  legend  set  forth  on  any stock certificate evidencing  any  Conversion  Shares  shall  be  removed  and  the  Borrower  shall  issue to the Holder a new certificate therefore free of any transfer legend if (i) the  Borrower or  its  transfer agent  shall have  received  an  opinion  of  counsel  form,  substance  and  scope  customary  for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be reasonably acceptable to the Company, or ( ii) in the  case  of  the  Common  Stock  issued  or  issuable  upon conversion  of  this  Note,  such  security  is  registered  for  sale   by   the   Holder   under  an  effective registration statement filed under  the  Act  or  otherwise  may  be  sold  pursuant  to  Rule  I 44  without any restriction as to the number of securities as of  a  particular date that can then be  immediately sold.
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1.6.
Effect of Certa i n Events .

a)
Effect of Merger. Co n so li datio n , Etc .  A t  the opt i on o f  the  Ho l der ,  t h e sa l e , co n veya n ce o r disposit i on of  a ll  or  su b sta n t i ally  a ll  of  t h e  assets  of  t he Borrower ,  t h e effectua t ion by t he Bo r rowe r of  a  transact i on  o r series of  r e l ated  t ransact i ons  in  wh i ch  more  than 50% of the vot i ng p ower of th e Borrower i s d i s p ose d  of ,  or  the  co n so l i d at i on ,  m e r ger  or  other bus in ess com bin a t io n of t h e  Bo r rower  wit h or  in to  a n y ot h er  P e r so n (as  defined  b elow)  or  Pe r so n s w h e n  the  Bo r rowe r  i s  n ot  t h e  survivor  sha ll  e i t h er:  (i)  be  deemed  to  be  a n  Even t  of  D efau l t  (as defi n ed in Artic l e Ill ) p u rsua n t to w h ic h the B o r rower s h a ll be  req uir ed to  p ay  to t h e H o ld er upon t h e consu m mat i on of and as a co n d i tion to suc h transact i on an  a m ou n t e q ua l to t h e  D efa ul t A m o u nt (as defined i n Art i c l e III ) or  (ii)  be treate d  purs u a n t t o  Sect i o n  l. 6(b)  h ereof.  " P e r son ' '  shall  mea n any i nd i vidua l , co r porat i on , limi ted  l iab i lity com p any,  partners h ip , assoc i ation , trust or  ot h er e n t i ty or o r ga n izatio n.

b)
A dju st m ent D u e t o Me r ger. Conso l i d atio n. E t c.   I f , at  any  t i m e w h e n th i s Note is i ss u ed and outsta n d i ng a n d prior to convers i o n o f a ll of the Notes, t h ere s h a l l be any merger, conso l ida t ion , excha n ge of shares, r ecap it a l izatio n , r eorga ni zation , o r o th e r si mil a r event, as a r esu l t of w h ic h shares of Co m mon Stock of t h e Borrower s h a ll be c h a n ged into the same o r a different nu m ber of s h ares of anot h e r class or cl asses of s t oc k or  sec uri t i es  of  th e  Borrower  or another ent it y , or in case of a n y sa l e o r co n veya n ce o f a ll o r s u bsta n tia ll y a ll of t h e assets of t h e Bo rr ower ot h er t ha n in connectio n wit h a p lan of complete l iq u i d at i o n of t h e Borrower , th en t h e H older of t h is Note s h a ll thereafte r h ave t h e ri g h t to rece i ve u pon convers i on of t h is Note, upon t h e basis and up on t h e terms and co n d i tio n s specified here i n and in lie u of the s h ares of Co m mo n Stock i mm ediate l y t h eretofore issuab l e up o n co n version , s u c h stock , sec urit ies or assets w h ich the Hol der wou l d h ave been  e n t i t l ed  to  receive  in  suc h  tra n sactio n  h ad  th i s  Note  bee n  converted  in  full im m ed i ate l y p r ior t o s u c h tra n saction ( w i t h o u t r egar d to any l im i ta t io n s  on co n version set  forth he rei n ) , a n d i n a n y suc h case appropr i ate prov i sio n s sha ll be made w i t h respect to t h e rights and interests of t h e H o l der of t h is Note  to  t h e  end  t h at  t h e  prov i sions  he r eof  ( in cl u d in g,  w i tho u t l im itat i o n , provis i ons for ad j us t ment of t h e Co n versio n P rice a n d of t h e nu mber of shares i ss u ab l e upon co n vers i on of the Note) sha ll t h e r eafter be appl i cab l e , as n ea rl y as m ay be practicab l e in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section l.6(b) unless (a) it first gives, to the extent practicable, thi1ty (30) days prior written notice (but in any event at least fifteen ( 15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger , consolidation, exchange of shares , recapitalization, reorganization or other similar event or sale of assets (during which time , for clarification, the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity assumes by written instrument the obligations of this Section l.6(b). The above provisions shall similarly apply to successive consolidations, mergers , sales, transfers or share exchanges.

 
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c)
Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase , by way of return of capital or otherwise (including any dividend or distribution to the Borrower's shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e. , a spin-off)) (a "Distribution'"), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution. Such assets shall be held in escrow by the Company pending any such conversion

d)
Purchase   Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the "Purchase Rights'') pro rata to the record holders of any class of Common Stock , then the Holder of  this Note will be entitled  to acquire, upon  the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant , issuance or sale of such Purchase Rights or , if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

e)
Stock Dividends and Stock Splits . If the Company, at any time while this Note is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common  Stock or any securities convertible  into or exercisable for Common Stock; (B) subdivides outstanding shares of  Common  Stock  into a larger number of shares; (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (0) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price (and each sale or bid price used in determining the Conversion Price) shall be multiplied by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall  become  effective immediately after the effective date in the case of a subdivision, combination or re-classification.

9
f)
Notice of Adjustments. Upon the occurrence of each adjustment or readjustm e nt of the Conversion Price as a result of the eve nts described in this Section 1.6 , th e Borrower , at its expense , shall promptly compute such adjus tm ent or readjustm ent and prepare and furnish to the Holder a certifi cate setti ng forth such adjustment or readjustment and showing  in detail t h e facts upon which suc h adjustment or readjustment i s based. The Borrower shall , upon the writte n request at any time of the Holder , furnish to such Hold er a like certificate setting forth (i) such adjustment or readjustment , (i i) the Conversion Price at the time in effect and (iii) the numb e r of shares of Com mon Stock and the amount, if any , of ot her securities or pr operty which at the time woul d be received upon conversion of the Note.

1.7 .   Revocation . If any Conversion Shares  are  not  received  by  the  Deadlin e.  the Holder may  revoke  the  applicable  Conversion  pursuant  to  whic h  such  Conversion  Shares  were i ssuab l e. This Note shall remain convertible  after the  Maturity  Dat e  hereof  un ti l this Note  i s  repaid or converted in fu ll.

l .8.  Prepayment.   Notwit h sta ndin g anything to th e contrary contained in this Note , subject to th e terms of this Section , at  any  t im e during  t h e  period  beginning  on  the  I ss ue  Da te and e nd ing o n the date which is s i x (6) months  following  the  Issue  Date  ("Prepayment  Termination Date"") , Borrower s hall have the right , exercisable on  not  le ss  than  five  (5)  Trading  Day s  prior wr itten notice to the Holder of this  Note,  to  prepay  the outs tanding  balance on  this Note  (pr incipal and accrued interest) , in full , in accordance  with  this Section.  Any  notice of  prepayment  hereunder ( an ·'Optiona l Prepayment Notice") shall be delivered to the Hold er of the Note at its registered addresses and s hall state: (I) that the Borrower is exercising its right  to  prepay  the Note ,  a nd (2)  the date of prepayment which shall be n ot more than ten  ( I 0)  Tradin g  Days  from  the  date  of  the Optional Prep ay ment Noti ce. On the date fixed  for  p rep ayme nt  (the " Optional  Pr epay m e nt  Date '"), the B orrower shall make payment of  the  Optional  Pr epayment  Amount  (as  defined  be low)  to  or up on th e order of the Hold er as specified by the Holder in writing to the Borrower at l east  one (I) business day prior to the  Optional  Prepayment  Date.  If  the  Borrower  exercises  it s  right  to  prepay the Note , the Borrow er s hall make payment to t h e Holder of an amount in cash  (the  " Optional Prepa yme n t Amount") equal to the Prepayment Factor (as defin ed below) , multiplied b y the s um of: (w) the then outstanding principal amount of thi s No t e   plus (x) accrued and unpaid intere st on the unpaid principal amount of this Note to the Optional Prepaym ent Date plus   (y) Default Interest , if any , on the amou nts referred to in c lau ses (w) and (x) plus ( z) any amounts owed to the Holder pursuant to Sections 1.3 and I .4(g) hereof. If the Borrower d el i ve r s an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Hold er of the Note within two (2) business days following the Optional Prepa yme nt Date , the Borrower shall forever forfeit it s right to prepay the N ote pursuant to this Section. After the  Prepayment  Termination  Date , the B o rrow er sha ll have no right to prepay this Note. For purpo ses h e r eof,  the " Prepayment Factor" s hall equa l one hundr ed and fifty percent (150%) , provided that such Prepayment factor  sha ll  equal  one hundred and thirty five percent (135%) if the Optional Prepayment  Date occurs on or  before  th e date which i s ninety (90) days fo llowin g the Issue Date here of.


ARTIC LE II. CERTAIN COVENANTS

2.1.
Distributi ons on Capital Stock . So lon g as the Borrower sha ll  have  any ob li gation und er thi s Note, the Borrower shall not without t h e Holder's written consent (a) pay , declare or set apa1t fo r such payment, any divi d e n d or ot h er distr i b u t i o n (w h e th er in cash , property or other secur i ties) o n shares of ca p ital stock ot h er than div i de n ds on sha r es of Co m mo n Stock solely in t h e fo r m of a dd it i ona l s h a res of Co mm on Stock or (b) d i rect l y or i ndi r ec tl y or throug h a n y s u bsidiary make a n y ot h er payme n t or  d i strib u tion  in  respect  of  i ts  capita l stock  except  for distr i butions p u rsuant to any share h o ld er s' r i g h ts p l a n wh i c h is approved by a majority of the Borrower ' s dis i nterested directo r s.
 
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2.2.
R estric t ion o n Stock R epurc h ases. So l o n g as th e Borrower sha ll h ave any obl i gation u nder th i s Note, the Borrower sha ll no t witho u t the H o l de r 's writte n consent redeem , repurchase or otherwise  acquire (whet h er  for cas h or  in exchange  for  property or  ot h er secur i ties or othe r w i se) in a n y one transact i o n or series of re l ated tra n sactio n s a n y s h ares o f cap i tal stock of the Borrower or any warra n ts, r i g h ts or opt i ons to p u rchase or ac q uire any s u c h shares .

2.3.
B o r rowings; Lie n s. Notwi th s t a n d i ng sect i on 4 (1 ) of t h e  P ur c h ase Agreement , so l ong as t h e Borrower s h a ll h ave any ob li gation u n de r th i s Note , t h e Borrower sha ll n ot (i) create , incur , assume guara n tee , endo r se , co n tingent l y agree to p u rchase  or ot h erwise  become  l iable  u pon t h e o b l i gation of a n y person, fir m , partners hi p, jo i nt ve n ture  or  cor p orat i o n ,  except  by  the endo r sement of negot i able inst ru ments for deposit or co ll ect i on , or suffer to ex i s t any li ab ili ty fo r borrowed m o n ey , except (a) borrowings in existe n ce o r comm i tte d o n the date  he r eof  and  of w h ich t h e Bor r ower has i nfor m e d Hol der in writing pr i or t o the date hereof , or (b) in d ebted n ess  to trade cred i tors or fi n a n cial in stitut i ons i n curred in the o rd i n ary cou r se of business , or (ii) ente r in to, create or incur any l i ens , claims or encumbrances of any k in d , o n or with r espect to any of its  property  or assets now owned or hereafter acq u ired or any interest therei n or any  i nco m e  or  p r ofits  t h ere from , secu r ing any i ndebte d ness occurring after the date h ereof.

2.4.
Sale of Assets. So lo n g as t h e Borrower sha ll h ave any ob li ga t io n u nder th i s Note , the Borrower sha ll n ot , witho u t  t h e  H o l der ' s  writte n consent, se ll ,  lease or otherw i se  dispose of any sign i fica n t p ort i o n of i ts asse t s o u tside  the or d ina r y  co u rse of  busi n ess.  A n y co n se n t t o the d i sposition of any assets may be co n ditioned o n a s p ec i fied u se of t h e proceeds of disposit i on.

2.5.
A d vances and L oans. So lo n g as  the  Bor r ower  sha ll  h ave  a n y  ob l igat i o n under t h is Note, the Borrowe r shall not , w i t h o u t th e Ho ld er ' s  written  consent,  l end  mo n ey ,  give cred i t o r make advances to  any  person ,  fi r m ,  j o in t venture  o r  corporat i on , i ncl u d i ng ,  w i thout l i m itatio n , officer s, d i rectors , emp l oyees , subs idi aries a n d affi li ates of t h e B o r rowe r , except loa n s , credits or advances in  ex i stence  or  co mm itted  on  t h e  date  h ereof  a n d  w hi ch  the  Borrower  has i nformed Ho l der in writing pr i or to the date h ereof.

2.6.
Charter. So l ong as the Borrower sha ll h ave a n y o bli gat i o n s under t hi s Note , t h e Borrower s h a ll n ot ame n d i ts charter docume nt s , i nc lu ding w it hout li mi tat i on i ts cert i ficate of in corporation and by l aws, in any manner that materia ll y and adversely affects a n y r i g h ts of the Holder.

2.7.
Transfer Agent . T h e Bor r ower sha ll not c h ange i ts tra n sfer agen t without t h e p rior w r itte n co n sent of t h e H o ld er. Any resig n atio n by t h e tra n sfe r agent wit h o u t a rep l aceme n t transfer agent conse n ted to by t h e H older p r io r to such rep l aceme n t tak in g effect sha ll con s tit u te an Event o f Defa u lt h ereu n der.

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ARTICLE III. EVENTS OF DEFAULT

Any one or more of the following events which shall occur and/or be continuing shall constitute an event of default (each, an " Event of Default"):
3.1.
Failure to Pay Principal or Interest.  The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.
 
3.2.
Conversion and the Shares . The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so at any time following the execution hereof or) upon exercise by the Holder of the conversion  rights of the Holder in accordance with the terms of this Note , fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs , and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note , or fails to remove (or directs its transfer agent  not  to remove or impairs, delays , and/or hinders its transfer agent from removing) any  restrictive  legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement , statement or threat not to honor its obligations shall not be rescinded in writing) for five (5) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note , if a conversion of this Note is delayed , hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower's transfer agent in order to process a conversion , such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.
3.3.
Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of three (3) days after written notice thereof to the Borrower from the Holder.

3.4.
Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement , statement or certificate given in writing pursuant hereto or in connection herewith (including , without limitation, the Purchase Agreement) , shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.5.
Receiver or Trustee . The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
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3.6.
Judgments.   Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its prope11y or other assets  for more than $50,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty  (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7.
Bankruptcy. Bankruptcy, insolvency , reorganization or liquidation proceedings or other proceedings, voluntary or involuntary , for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of  the Borrower.
3.8.
Delisting of Common Stock . The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB , or OTCQB, OTC Pink or an equivalent replacement exchange , NASDAQ , the NYSE or AMEX.
3.9.
Failure to Complv with the Exchange Act . The Borrower shall fail to comply in any material respect with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
3.10.
Liquidation.   Any dissolution , liquidation , or winding up of Borrower or any substantial portion of its business.
3.11.
Cessation   of   Operations.   Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become  due, provided , however , that any disclosure of the Borrower ' s ability to continue as a "going concern" shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12.
Maintenance   of Assets.   The failure by Borrower , during  the  term  of  this Note , to maintain any material intellectual property rights, personal , real property or other assets which are necessary to conduct its business (whether now or in the future).
3.13.
Financial   Statement   Restatement. The restatement of any  financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would , by comparison to the unrestated financial statement , have constituted a material adverse effect o n the rights of the Holder with respect to this Note or the Purchase Agreement.
3.14.
Reverse Splits . The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.
3.15.
Replacement of Transfer Agent . In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement , a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.16.
Cross-Default . Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements , after the passage of  all applicable notice and cure or grace periods , shall, at the option of the Holder , be considered a default under this Note and the Other Agreements, in which event the Holder shall  be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or h ereu nder. "Other Agreements" means , collectively, all agreements and instruments between , among or b y: (1) the Borrower , and, or for the benefit of,  (2)  the  Holder  and  any  affiliate  of  the  Holder,  including , without limitat ion,  promissory  notes;  provided,  however ,  the  term  ''Other  Agreements''  s ha ll  not inc lud e the r e lat ed or companion document s to this Note. Each of the l oan transactions will be cross-defa ult ed wit h each other loan transaction and with all other existing and  future  debt  of Borrower to the Hold er.
 
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Upon the occurrence a nd during the co ntinuation of any Event of Default spec ified in Section 3 .1 (so lel y with respect to failure to pay the principal here of o r interest thereon when due at the Matur it y Dat e), the Note s h a ll become immediately due a nd payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereund er, an amount equal to the Default Sum (as defined h erein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF  DEFAULT  SPECIFIED  IN  SECT IO N  3.2 ,  THE  NOTE  S HALL BECOME I MME DIAT ELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER , I N FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMO UN T EQUAL TO:  (Y) THE  DEFAULT SUM (AS DEFINED  HEREIN);  MULTIPLIED  BY (Z) TWO (2). Upon the occurrence a nd during the conti nuation of any Event of Default specified in Sections 3. 1 (solely w ith respect to failure to pay the principal  hereof  or  int erest  thereon  when  due on  th i s Note upon a Trading Market  Prepayment  Event  pursuant  to  Sectio n  1.7 or  upon  acceleration), 3.3, 3.4 , 3.6 , 3.8, 3.9, 3. 11 , 3.12, 3.13, 3. 14 , 3. 17 , 3.18 and/or 3. 15 exercisable through the delivery of written notice to the Borrower b y s u c h Holders (the " Defau l t Not ic e'') , and  upon  t h e  occurre nce  of an Event of Default spec ifi ed in the remaining sections of Articles III ( ot her than failure to pay the principal hereof o r int erest thereon at the Maturity  Date specified  in  Section  3 , I  hereof) ,  the  Note sha ll become imm ed iate ly due and payable and the Borrower s hall pay to the  Holder,  in  full satisfactio n of  it s obligations  hereunder ,  an amount equa l  to  the greater of ( i )  150% times the   sum   of (w) the then outstand in g principal amount of t hi s Note, a ccrued and unp aid interest on the unp aid principal amount of this Note  to  the  date  of  payment  (the  "Mandatory  Pr epayment Date ' ')   plus (y)  Default  Int erest, if any , on  t h e amounts r efe rred to in clauses (w) and/or (x)  (z)   any amou nt s owed to the Holder pursuant to Sections 1.3 and I .4(g) h ereof (the then outstanding principal amount of this Note to the date of payment plus   the amou nt s referred to in clauses (x) , (y) and (z) sha ll collectively be known as the " Defa ult Sum'') or (ii) the " par it y va lu e " of the D efault Sum to be prepaid , where parity value m eans (a) the highest number of shares of Common Stoc k issuable upon conversion of or otherwise pursuant to such  Default S u m in accordance  with Article I,  treating  the  Trading   Day  immediately   preceding  the   Mand atory  Prepayment   Date  as the co n vers ion Date ' ' for purposes of determining the lo west ap plicable Conversion Price, unle ss the Default Event arises as a result of a breach  in  respect  of a  specific  Conversion  Date  in  wh i c h case s u c h Conversion Date sha ll be the Conversion Date), multiplied by (b)  the highest C losin g  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  (the " Defau lt  Amount " )  and all other a m ounts payable h ereunder  shall  immediately  become  due  and  payable,  a ll  without demand, presentment o r notice, all of which h ereby are  expressly  waived,  together  w ith  all  costs , includin g , w ithout limitation , legal fees and expenses, of co ll ection , a nd the H older sha ll  be e n titled to exercise a ll other rights and remedies available at la w or in equity.
If the Borrower fails to pay the Default Amount  within five (5)  business days of  writte n  notice that such amount is due and payable , then the Holder sha ll ha ve the right at any t im e , so long  as  the Borrower remains in d efa ul t (a nd so long  and  to  the  extent  that  there  are  sufficient  authorized s h ares) , to require the Borrower , upon written notic e , to immediately issue, in li e u of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect. The Holder may still convert any amounts due hereunder , including without limitation the Default Sum , until such time as this Note has been repaid in full.
3.17.
Inside Information.   The Borrower or its officers, directors, and/or affiliates attempt to transmit , convey, dis close , or any actual transmittal, conveyance , or disclosure by the Borrower or its officers, directors, and/or affiliates of , material non-public information  concerning the Borrower , to the Holder or its successors and assigns, which is not immediately cured by Borrower's filing of a Form 8 - K pursuant to Regulation FD on that same date .
3.18.
Bid Price . The Borrower shall lose the "bid " price for its  Common  Stock ($0.000 I on the "Ask" with zero market makers on the " Bid ' ' per Level 2) and / or a market (including the OTC Pink , OTCQB or an equivalent replacement exchange).


ARTICLE IV. MISCELLANEOUS
4.1.
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power , right or privilege hereunder shall operate as a  waiver thereof , nor shall any single or partial exercise of any such power , right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of , any rights or remedies otherwise available.
4.2.
Notices. All notices, demands , requests , consents , approvals , and other communications required or permitted hereunder shall be in writing and , unless otherwise specified here in , shall be (i) personally served , (ii) deposited in the mail , registered or certified , return receipt requested, postage prepaid , (iii) delivered by reputable air courier service with charges prepaid , or (iv) transmitted by hand delivery, telegram, email or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall  be deemed  effective  (a) upon hand delivery or delivery by facsimile or email , with accurate confirmation generated by the transmitting facsimile machine or computer , at the address , email or number designated in the Purchase Agreement (if delivered on a business day during normal business  hours  where  such notice is to be received), or the first business day following such delivery (if delivered other than on  a business day during normal business hours where such notice is to be received) or (b) on  the second business day following the date of mailing by express courier service , fully prepaid, addressed to such address , or upon actual receipt of such mailing, whichever shall first occur.

4.3.
Amendments. This Note and any provision hereof may only be amended  by an instrument in writing signed by the Borrower and the Holder. The term' 'Note " and all reference thereto , as used throughout this instrument , shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4.
Assignability . This Note shall be binding upon the Borrower and its successors and assigns , and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an "accredited investor " (as defined in Rule 50l(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

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4.5.
Cost of Collection . If default is made in the payment of this Note , the Borrower s hall pay the Holder hereof costs of co lle ct ion , including reasonable attorneys' fees.

4.6.
Governing Law . Thi s Note shall be governed by and construed in accordance with the law s of the State of Nevada without regard to conflicts of law s principles that would result in the application of the substa ntive laws of another jurisdiction. Any action brought by either party against t h e other concerning the transactions contemp lat ed by th i s Agreement must be brought on ly in the civ il or s tate courts of New York or in th e federa l courts l oca ted in the State and county of New York. Both parties and the individua l signing this Agreement on behalf of t he Borrow e r agree to submit to the jurisdiction of such courts. The prevailin g party sha ll be enti tl ed to r ecove r from the ot her party its reasonable attorney's fees and costs.  In the event that any provision of thi s Note is invalid or unenforceable under any applicable statute or rule of l aw, then s u c h provision shall be deemed inoperative to t h e exte nt t hat it may conflict therewith and s hall be deemed modifi ed to conform wit h s u ch statute or rul e of la w. Any s uch provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Not e. Nothing contained h erei n sha ll be deemed or operate to  preclude  the  Holder from brin ging suit o r taking o ther legal action against the Borrower in any o ther juri sd iction to collect on the Borrower's ob li gatio ns to Holder , to realize on any collateral or any other security for s uch obligations, or to enforce a judgment or other deci sio n in favor of the Hold e r. This Note shall be deemed an unconditional obligation of Borrower for the payment of money and, without limitation to any other remedies of Holder , may be enforced against Borrower by summary proceeding pursuant to New York Civil Procedure Law and Rules Section 3213 or any similar rule or statute in the jurisdiction where enforcement is sought. For purposes of such rule or statute , any other document or agreement to which Holder and Borrower are parties or which Borrower delivered to Holder , which ma y be convenient or necessary to determine Holder's rights hereunder or Borrower's obligations to Holder are deemed a part of this Note, whether or not such other document or agreement was delivered together herewith or was executed apart from this Note.

4.7.
Certain Amounts. Whenever pursuant to this Note the Borro wer i s required to pay an amount in excess of the outstanding principal amount (or the portion thereof r eq uir e d to be paid at that time) plus accr u ed and unpaid int erest plu s Default Interest on such interest,  the Borro wer and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents st ipulat ed damages and no t a penalty and is intended to compensate the Holder in part for loss of t h e opportunity to convert this Note and to earn a return from th e sa l e of s h ares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such s har es pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionat e to th e possible lo ss to the Holder from the r ece ipt of a cash payment without the opportunity to convert this Note into s hare s of Commo n Stock.
4.8.
Disclosure. Upon receipt or delivery by the Company of any  notice  in accordance with the terms of this Note, unle ss the Company has in good faith determined  that  the matters relating to such notice do n ot constitute material , non-public information relating to  the Company or any of its Subsidiaries , the Company sha ll with in o n e (I) Trading  Day after any suc h r ece ip t or delivery, publicly disclose such material, non-public information on a  Current  R eport  on Form 8-K or otherwise. In the event that t h e Company believes that a notice contains mate ria l ,  non- public information r e latin g to the Company or any of it s Subsidiaries, the Company so s hall indicate to such Holder contemporaneously with delivery of suc h notice, and in the absence of any suc h indication , the Holder shall be allowed to presume that all matters relating to such notice do not const it ut e mat eria l , non-public information relatin g to the Company or its Subsidiaries.

 
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4.9.
Notice of Corporate Even ts.   Exce pt as otherwise pr ovided b e low,   the  Holder of this Note sha ll h ave no rights as a Holder of Common Stock unless and only to t he extent that it converts thi s Note into Common  Stock.  The  Borrower  shall  provide  the  Holder  with  prior notification of any meetin g of the B orrower' s shareholders (and copies of proxy mat er ial s a nd other information sent to s hareholders). In the eve nt of any taking by the Borrower of a r ecord of its share h o lder s fo r the purpose of determining shareholders who are entitled to receive paym ent of any dividend or ot h er  distribution ,  any  right  to  subscribe  for,  purchase  or  otherwise  acquire  (including by way of m e r ger, consolidation , r ec la ssifica tion or recapitalization) any s h are of any class  or a ny other securit ies or property , or to receive any other right,  or  for  the  purpose  of  determining shareholders w h o are entitled to  vote  in connection  with any  proposed  sa l e,  lease  or  conveyance  of all or s ub stantially a ll of the assets of the  Borrower  or  any  proposed  liquidation ,  dissolution  or w indin g up of the Borrower , t h e Borrower sha ll mail a  noti ce  to  the  Holder ,  at  least  twenty (20) days prior to the record date specified therein (or thirt y (30) days prior to the consummation of the transaction or event, whichever is earlier) , of  t he date on  which  any  such  record  is to  be  taken  for the purpose of such dividend, distribution , right or other eve nt, and a brief statement  regarding  the amount and character of such dividend , di str ibution , right or ot h e r event to the extent known at  such time. The Borrower sha ll make a public announcement of any  event  requiring  notification  to  the Holder hereunder substant ially s imultaneou s ly with the notificati o n  to  the  Holder  in  accordance with the ter ms of this Section 4.9.

4.10.
Remedies. The Borrower acknowledges that a breach b y it of its ob li gat ion s h ere und er will cause irreparable harm to the Holder , by vitiating the intent and purpose of the transaction co nt e mplate d hereby. Accor dingly , the Borrower  acknowledges  that  the  remedy  at  law for a breach of its obligations  under this Note will  be inadequate  and  agrees ,  in the event of  a  breach or thr eatened breach by the Borrower of  the  provisions  of  this  Note,  that  the  Holder  shall  be entitled, in addition to all other ava ilable remedies at law  or  in  equity ,  and  in  addition  to  the penalties assessable herein , t o an injunction  or  injunctions  restraining ,  preventing  or  cu rin g  any breach of this Note a nd to enforce  specifically  the  terms  and  provisions  thereof,  w ithout  the necessity of showing economic los s and without any bond or other sec urit y being required.

4.11.
Usury.   T hi s No te s h all be su bj ect to th e anti-usury limitati ons contained in the Purcha se Agreement.




(Remainder of Page intentionally left blank)
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I N W I TNESS W H E R E OF , B o r rowe r h as caused t hi s No t e to be sig n e d in i t s n a m e by i t s duly a u t h or i z ed officer as of th e I ssue D ate first set fort h ab ove.



/s/ Michael Barron

N a m e: Michael Barron, CEO



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EXHIBIT A NOTICE OF CONVERSION
 
The undersigned hereby elects to convert principal under the 12% Co n vert i ble Note of X RAIL ENTERTAINMENT, I NC . , a Nevada corporation (the Company"), into shares of  common  stock  (the '"Commo n Stock") , of t h e Company according to t h e condi ti ons hereof, as of t h e date written be l ow.  If shares of Common Stock are t o be issued in the name of a person other  tha n  t h e  u ndersigned,  the undersigned will pay all transfer taxes payab l e with respect t h ereto and  is  delivering  herewith  such certificates a n d opin i ons as reasonab l y r equeste d by the Compa n y in accorda n ce th e r ew i th . No fee w i ll be charged to the holder for any conversion , except for such transfer taxes, if a n y.
 
By t h e delivery of  th i s  Notice  of  Conversion  the  undersigned  represents  a n d  warrants  to  the Company that  its ownership  of  t h e  Commo n Stock  does  not exceed  the amou n ts specified  under Section  I. I of this Note, as determined in accordance w ith Section 1 3( d) of the Exchange Act.
 
The undersigned agrees to comp l y with the prospect u s de l i very requirements under the applicable securities l aws in connectio n w i t h any t r ansfer of t h e aforesaid shares of Co m mon Stock pursuant to any prospectus.
Conversion ca l culations:
 
I ssue Date of Note :

   D a t e to Effect Conversion:
 


Co n version Price:

P ri nci p al  Amount of Note to be Converted:  
Less applicab l e fees under t he Note:

Amount of Note to be Converted:


I nterest Accrued o n Acco u nt
of Conversio n at I ssue:
 


Add i tiona l Principa l on Account of Conversio n
P urs u a n t to Section I .2(b) of t h e N ote:  
Number of shares of Common Stock to be issued :  
R emai n ing Bala n ce of Note* :  
Signatu r e :
 
  N ame:  

Address for Delivery of Common Stock Certificates:    



Or






*Sum provided docs not include accrued interest
DWAC In st ructions:
B roker No :  
 
A ccount N o:  
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Exhibit 10.8


THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT")


  US $40,000.00


   X RAIL ENTERTAINMENT, INC.
12% CONVERTIBLE REDEEMABLE NOTE
DUE DECEMBER 18, 2018


FOR VALUE RECEIVED, X Rail Entertainment, Inc. (the "Company") promises to pay to the order of ADAR BAYS, LLC and its authorized successors and permitted assigns (" Holder "), the aggregate principal face amount of Forty Thousand Dollars (U.S. $40,000.00) on December 18, 2018 (" Maturity Date ") and to pay interest on the principal amount outstanding hereunder at the rate of 12% per annum commencing on December 18, 2017. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 3411 Indian Creek Drive, Suite 403, Miami Beach, FL 33140, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time.  The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company.  The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer.  Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.

This Note is subject to the following additional provisions:

1.   This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith.
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2.   The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

3.   This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (" Act ") and applicable state securities laws.  Any attempted transfer to a non-qualifying party shall be treated by the Company as void.  Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary.  Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (" Notice of Conversion ") in the form annexed hereto as Exhibit A . The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.

4.   (a)   The Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the " Common Stock ") at a price (" Conversion Price ") for each share of Common Stock equal to 50% of the lowest trading price   of the Common Stock as reported on the National Quotations Bureau OTC Market Exchange which the Company's shares are traded or any exchange upon which the Common Stock may be traded in the future (" Exchange "), for the lower of (i) the twenty trading days immediately preceding the date of this Agreement or (ii) the twenty prior   trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion.  No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share . To the extent the Conversion Price of the Company's Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law.  The Company agrees to honor all conversions submitted pending this increase.   In the event the Company experiences a DTC "Chill" on its shares, the Conversion Price shall be decreased to 50% instead of 60% while that "Chill" is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 9.9% of the outstanding shares of the Common Stock of the Company.
(b)                                 Interest on any unpaid principal balance of this Note shall be paid at the rate of 12% per annum.  Interest shall be paid by the Company in Common Stock ("Interest Shares").  Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above.  The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
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(c)   The Notes may be prepaid with the following penalties:
 
PREPAY DATE
PREPAY AMOUNT
≤ 90 days
125% of principal plus accrued interest
91-180 days
150% of principal plus accrued interest
 
This Note may not be prepaid after the 180 th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void.

(d)   Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

(e)   In case of any Sale Event (not to include a sale of all or substantially all of the Company's assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.

5.     No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

6.     The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

7.     The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.
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8.     If one or more of the following described "Events of Default" shall occur:

(a)   The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or

(b)   Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or

(c)   The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or

(d)   The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for  bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or

(e)   A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or

(f)    Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or

(g)   One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

(h)   The Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or

(i)    The Company shall have its Common Stock delisted from an exchange (including the OTC Market exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
 
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(j)     If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;

(k)   The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion; or

(l)     The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.

(m)   The Company shall not be "current" in its filings with the Securities and Exchange Commission; or

(n)   The Company shall lose the "bid" price for its stock in a market (including the OTC marketplace or other exchange).

Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law.  Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.  In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4 th day after the conversion notice was delivered to the Company.  This penalty shall increase to $500 per day beginning on the 10 th day.  The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%.  In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%. Further, if a breach of Section 8(m) occurs or is continuing after the 6 month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.005 per share.

If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys' fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

Make-Whole for Failure to Deliver Loss.  At the Holder's election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:
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Failure to Deliver Loss = [(Highest VWAP price for the 30 trading days on or after the day of exercise) x (Number of conversion shares)]

The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder's written notice to the Company.

9.     In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

10.   Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.

11.   The Company represents that it is not a "shell" issuer and has never been a "shell" issuer or that if it previously has been a "shell" issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a "shell issuer.  Further. The Company will instruct its counsel to either (i) write a 144 opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder's counsel.
 
12.                               The Company shall issue irrevocable transfer agent instructions reserving 42,105,000 shares of its Common Stock for conversions under this Note (the "Share Reserve"). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all costs associated with issuing and delivering the shares. If such amounts are to be paid by the Holder, it may deduct such amounts from the Conversion Price. The company should at all times reserve a minimum of four times the amount of shares required if the note would be fully converted.  The Holder may reasonably request increases from time to time to reserve such amounts. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions.

13.   The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc.  This notice shall be given to the Holder as soon as possible under law.

14.   If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal or interest on this Note.
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15.   This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto.  The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York or in the Federal courts sitting in the county or city of New York.  This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.


Dated:   12/18/17


 
X RAIL ENTERTAINMENT, INC.
   
 
By: /s/ Michael Barron
   
 
Title: CEO
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EXHIBIT A


NOTICE OF CONVERSION

 (To be Executed by the Registered Holder in order to Convert the Note)

The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of    X Rail Entertainment, Inc.  ("Shares") according to the conditions set forth in such Note, as of the date written below.

If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.

Date of Conversion:  
Applicable Conversion Price:  
Signature:  
[Print Name of Holder and Title of Signer]
Address:  


SSN or EIN:
Shares are to be registered in the following name:  

Name:  
Address:  
Tel:  
Fax:    
SSN or EIN:  

Shares are to be sent or delivered to the following account:

Account Name:  
Address:  


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Exhibit 10.9

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


Principal Amount: US$112,000.00
Issue Date: December 20, 2017
Purchase Price: US$112,000.00
 

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED , X RAIL ENTERTAINMENT, INC. , a Nevada corporation (hereinafter called the "Borrower"), hereby promises to pay to the order of AUCTUS FUND, LLC , a Delaware limited liability company, or registered assigns (the "Holder") the sum of US$112,000.00 together with any interest as set forth herein, on September 20, 2018 (the "Maturity Date"), and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%) (the "Interest Rate") per annum from the date hereof (the "Issue Date") until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.  This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein with the written consent of the Holder which may be withheld for any reason or for no reason. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of the lesser of (i) twenty four percent (24%) per annum or (ii) the maximum amount allowed by law from the due date thereof until the same is paid (the "Default Interest").  Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed .  All payments due hereunder (to the extent not converted into common stock, $0.00001 par value per share (the "Common Stock") in accordance with the terms hereof) shall be made in lawful money of the United States of America.  All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.  As used in this Note, the term "business day" shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.  Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the "Purchase Agreement").
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This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I.  CONVERSION RIGHTS

1.1   Conversion Right .  The Holder shall have the right from time to time, and at any time following the Issue Date and ending on the later of (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the Conversion Price (as defined below) determined as provided herein (a "Conversion"); provided , however , that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock.  For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided , further , however , that the limitations on conversion may be waived by the Holder (up to a maximum of 9.99%) upon, at the election of the Holder, not less than 61 days' prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver).  The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the "Notice of Conversion"), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the "Conversion Date").  The term "Conversion Amount" means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder's option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, provided however, that the Borrower shall have the right to pay any or all interest in cash plus (3) at the Holder's option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder's option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.
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1.2   Conversion Price .

Calculation of Conversion Price .  Subject to the adjustments described herein, t he conversion price (the "Conversion Price") shall equal the lesser of (i) the lowest Trading Price (as defined below) during the previous twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the date of this Note and (ii) the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower's securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).  The "Variable Conversion Price" shall mean 50% multiplied by the Market Price (as defined herein) (representing a discount rate of 50%). "Market Price" means the lowest Trading Price for the Common Stock during the twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.  "Trading Price" means, for any security as of any date, the lesser of: (i) the lowest trade price on the OTC Pink, OTCQB or applicable trading market as reported by a reliable reporting service ("Reporting Service") designated by the Holder or, if the OTC Pink is not the principal trading market for such security, the trading price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no trading price of such security is available in any of the foregoing manners, the average of the trading prices of any market makers for such security that are listed in the "pink sheets" by the National Quotation Bureau, Inc., or (ii) the closing bid price on the OTC Pink, OTCQB or applicable trading market as reported by a Reporting Service designated by the Holder or, if the OTC Pink is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the "pink sheets" by the National Quotation Bureau, Inc.  To the extent the Conversion Price of the Borrower's Common Stock closes below the par value per share, the Borrower will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Borrower agrees to honor all conversions submitted pending this adjustment.  Furthermore, the Conversion Price may be adjusted downward if, within three (3) business days of the transmittal of the Notice of Conversion to the Borrower, the Common Stock has a closing bid which is 5% or lower than that set forth in the Notice of Conversion. If the shares of the Borrower's Common Stock have not been delivered within three (3) business days to the Borrower, the Notice of Conversion may be rescinded.  At any time after the Closing Date, if in the case that the Borrower's Common Stock is not deliverable by DWAC (including if the Borrower's transfer agent has a policy prohibiting or limiting delivery of shares of the Borrower's Common Stock specified in a Notice of Conversion), an additional 10% discount will apply for all future conversions under all Notes.  If in the case that the Borrower's Common Stock is "chilled" for deposit into the DTC system and only eligible for clearing deposit, an additional 15% discount shall apply for all future conversions under all Notes while the "chill" is in effect.  If in the case of both of the above, an additional cumulative 25% discount shall apply.  Additionally, if the Company ceases to be a reporting company pursuant to the 1934 Act or if the Note cannot be converted into free trading shares after one hundred eighty-one (181) days from the Issue Date, an additional 30% discount will be attributed to the Conversion Price.  If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes.  "Trading Day" shall mean any day on which the Common Stock is tradable for any period on the OTC Pink, OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being traded .  The Borrower shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance.  Holder shall be entitled to deduct $500.00 from the conversion amount in each Notice of Conversion to cover Holder's deposit fees associated with each Notice of Conversion.  If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where "Additional Principal" means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price.
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While this Note is outstanding, each time any 3 rd party has the right to convert monies owed to that 3 rd party (or receive shares pursuant to a settlement or otherwise), including but not limited to under Section 3(a)(9) and Section 3(a)(10), at a discount to market greater than the Conversion Price in effect at that time (prior to all other applicable adjustments in the Note), then the H1older, in Holder's sole discretion, may utilize such greater discount percentage (prior to all applicable adjustments in this Note) until this Note is no longer outstanding.  While this Note is outstanding, each time any 3 rd party has a look back period greater than the look back period in effect under the Note at that time, including but not limited to under Section 3(a)(9) and Section 3(a)(10), then the Holder, in Holder's sole discretion, may utilize such greater number of look back days until this Note is no longer outstanding.  The Borrower shall give written notice to the Holder within one (1) business day of becoming aware of any event that could permit the Holder to make any adjustment described in the two immediately preceding sentences.
(a)   Conversion Price During Major Announcements .  Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower's Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the  "Announcement Date"), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a).  For purposes hereof,  "Adjusted Conversion Price Termination Date" shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.
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(b)   Pro Rata Conversion; Disputes . In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Borrower shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 4.13.

1.3   Authorized Shares .  The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement.  The Borrower is required at all times to have authorized and reserved 10 times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time) (the "Reserved Amount").  The Reserved Amount shall be increased from time to time in accordance with the Borrower's obligations pursuant to Section 3(d) of the Purchase Agreement.  The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.  In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes.  The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.  Notwithstanding the foregoing, in no event shall the Reserved Amount be lower than the initial Reserved Amount, regardless of any prior conversions.

If, at any time the Borrower does not maintain or replenish the Reserved Amount within three (3) business days of the request of the Holder, the principal amount of the Note shall increase by Five Thousand and No/100 United States Dollars ($5,000) (under Holder's and Borrower's expectation that any principal amount increase will tack back to the Issue Date) per occurrence .

1.4   Method of Conversion .

(a)   Mechanics of Conversion .  Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 5:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
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(b)   Surrender of Note Upon Conversion .  Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted.  The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.  In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error.  Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note.  The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

(c)   Payment of Taxes .  The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder's account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(d)   Delivery of Common Stock Upon Conversion .  Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the "Deadline") (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement .

(e)   Obligation of Borrower to Deliver Common Stock .  Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion.  If the Holder shall have given a Notice of Conversion as provided herein, the Borrower's obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.  The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 5:00 p.m., New York, New York time, on such date.
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(f)   Delivery of Common Stock by Electronic Transfer .  In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its commercially reasonable best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder's Prime Broker with DTC through its Deposit Withdrawal At Custodian ("DWAC") system.

(g)   DTC Eligibility & Market Loss . If the Borrower fails to maintain its status as "DTC Eligible" for any reason, or, if the Conversion Price is less than $0.01 at any time while this Note is outstanding, the principal amount of the Note shall increase by Fifteen Thousand and No/100 United States Dollars ($15,000) (under Holder's and Borrower's expectation that any principal amount increase will tack back to the Issue Date).  In addition, the Variable Conversion Price shall be redefined to mean forty percent (40%) multiplied by the Market Price, subject to adjustment as provided in this Note.

(h)   Failure to Deliver Common Stock Prior to Delivery Deadline .  Without in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock until the Borrower issues and delivers a certificate to the Holder or credit the Holder's balance account with OTC for the number of shares of Common Stock to which the Holder is entitled upon such Holder's conversion of any Conversion Amount (under Holder's and Borrower's expectation that any damages will tack back to the Issue Date). .  Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note.  The Borrower agrees that the right to convert is a valuable right to the Holder.  The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify.  Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(h) are justified .
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(i)   Rescindment of a Notice of Conversion .  If (i) the Borrower fails to respond to Holder within one (1) business day from the Conversion Date confirming the details of Notice of Conversion, (ii) the Borrower fails to provide any of the shares of the Borrower's Common Stock requested in the Notice of Conversion within three (3) business days from the date of receipt of the Note of Conversion, (iii) the Holder is unable to procure a legal opinion required to have the shares of the Borrower's Common Stock issued unrestricted and/or deposited to sell for any reason related to the Borrower's standing, (iv) the Holder is unable to deposit the shares of the Borrower's Common Stock requested in the Notice of Conversion for any reason related to the Borrower's standing, (v) at any time after a missed Deadline, at the Holder's sole discretion, or (vi) if OTC Markets changes the Borrower's designation to 'Limited Information' (Yield), 'No Information' (Stop Sign), 'Caveat Emptor' (Skull & Crossbones), 'OTC', 'Other OTC' or 'Grey Market' (Exclamation Mark Sign) or other trading restriction on the day of or any day after the Conversion Date, the Holder maintains the option and sole discretion to rescind the Notice of Conversion ("Rescindment") with a "Notice of Rescindment."

1.5   Concerning the Shares .  The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless  (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of  counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) ("Rule 144") or (iv) such shares are transferred to an "affiliate" (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).  Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES."
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The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be reasonably accepted by the Borrower so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Borrower does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note .

1.6   Effect of Certain Events .

(a)   Effect of Merger, Consolidation, Etc .  At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof.  "Person" shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b)   Adjustment Due to Merger, Consolidation, Etc .  If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof.  The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b).  The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
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(c)   Adjustment Due to Distribution .  If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower's shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution"), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d)   Adjustment Due to Dilutive Issuance .  If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, except for shares of Common Stock issued directly to vendors or suppliers of the Borrower in satisfaction of amounts owed to such vendors or suppliers (provided, however, that such vendors or suppliers shall not have an arrangement to transfer, sell or assign such shares of Common Stock prior to the issuance of such shares), any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a "Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock ("Convertible Securities") (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as "Options") and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share.  For purposes of the preceding sentence, the "price per share for which Common Stock is issuable upon the exercise of such Options" is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable).  No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.
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Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share.  For the purposes of the preceding sentence, the "price per share for which Common Stock is issuable upon such conversion or exchange" is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities.  No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

(e)   Purchase Rights .  If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the "Purchase Rights") pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(f)   Notice of Adjustments .  Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.
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1.7   [Intentionally Omitted].

1.8   Status as Shareholder .  Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder's allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder's rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms  of this Note.  Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.  In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower's failure to convert this Note.

1.9   Prepayment .  Notwithstanding anything to the contrary contained in this Note, the Borrower may prepay the amounts outstanding hereunder pursuant to the following terms and conditions:

(a)   At any time during the period beginning on the Issue Date and ending on the date which is ninety (90) days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 135%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note plus (y) Default Interest, if any.
(b)   At any time during the period beginning the day which is ninety one (91) days following the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 150%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note plus (y) Default Interest, if any.
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(c)   After the expiration of one hundred eighty (180) days following the date of the Note, the Borrower shall have no right of prepayment.
1.10   Any notice of prepayment hereunder (an "Optional Prepayment Notice") shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the date fixed for prepayment (the "Optional Prepayment Date"), the Borrower shall make payment of the applicable prepayment amount to 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 Borrower delivers an Optional Prepayment Notice and fails to pay the applicable prepayment amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

ARTICLE II.  CERTAIN COVENANTS

2.1   Distributions on Capital Stock .  So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder's written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders' rights plan which is approved by a majority of the Borrower's disinterested directors.

2.2   Restriction on Stock Repurchases .  So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder's written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

2.3   Borrowings .  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors financial institutions or other lenders incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note .

2.4   Sale of Assets .  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business.  Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
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2.5   Advances and Loans .  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.

2.6   Section 3(a)(9) or 3(a)(10) Transaction . So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a "3(a)(9) Transaction") or Section 3(a)(l0) of the Securities Act (a "3(a)(l0) Transaction"). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than Fifteen Thousand Dollars $ 15,000 , will be assessed and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

2.7   Preservation of Existence, etc. The Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.

2.8   Non-circumvention . The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.

2.9                               Repayment from Proceeds . While any portion of this Note is outstanding, if the Company receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an equity line of credit of the Borrower or the sale of assets, the Borrower shall, within one (1) business day of Borrower's receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Borrower to immediately apply all or any portion of such proceeds to repay all or any portion of the outstanding amounts owed under this Note.  Failure of the Borrower to comply with this provision shall constitute an Event of Default.  In the event that such proceeds are received by the Holder prior to the Maturity Date, the required prepayment shall be subject to the terms of Section 1.9 herein.
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ARTICLE III.  EVENTS OF DEFAULT

If any of the following events of default (each, an "Event of Default") shall occur:

3.1   Failure to Pay Principal or Interest .  The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise .

3.2   Conversion and the Shares .  The Borrower (i) fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, (ii) fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iii) directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iv) fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion, (v) fails to remain current in its obligations to its transfer agent, (vi) causes a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent, (vii) fails to repay Holder, within forty eight (48) hours of a demand from the Holder, any amount of funds advanced by Holder to Borrower's transfer agent in order to process a conversion, and/or (viii) fails to maintain the Reserved Amount.

3.3   Failure to Deliver Transaction Expense Amount .  The Borrower fails to deliver the Transaction Expense Amount (as defined in the Purchase Agreement) to the Holder within three (3) business days of the date such amount is due .

3.4   Breach of Covenants .  The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

3.5   Breach of Representations and Warranties .  Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
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3.6   Receiver or Trustee .  The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors or commence proceedings for its dissolution, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed for the Borrower or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment.

3.7   Judgments .  Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.8   Bankruptcy .  Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower, or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy relief, all under international, federal or state laws as applicable.

3.9   Delisting of Common Stock .  The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC Pink, OTCQB, Nasdaq National Market, Nasdaq Small Cap Market, New York Stock Exchange, NYSE MKT, or an equivalent replacement exchange

3.10   Failure to Comply with the Exchange Act .  The Borrower shall fail to comply with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in its filings); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.11   Liquidation .  Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.12   Cessation of Operations .  Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower's ability to continue as a "going concern" shall not be an admission that the Borrower cannot pay its debts as they become due.

3.13   Maintenance of Assets .  The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future), or any disposition or conveyance of any material asset of the Company.
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3.14   Financial Statement Restatement .  The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.15   Reverse Splits .    The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

3.16   Replacement of Transfer Agent . In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.17   Cessation of Trading .  Any cessation of trading of the Common Stock on at least one of the OTC Pink, OTCQB, Nasdaq National Market, Nasdaq Small Cap Market, New York Stock Exchange, NYSE MKT, or an equivalent replacement exchange, and such cessation of trading shall continue for a period of five consecutive (5) Trading Days.

3.18   Cross-Default .  Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements (as defined herein), after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder . "Other Agreements" means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder (and any affiliate of the Holder) or any other third party, including, without limitation, promissory notes; provided, however, the term "Other Agreements" shall not include the agreements and instruments defined as the Documents.  Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

3.19   Bid Price .  The Borrower shall lose the "bid" price for its Common Stock ($0.0001 on the "Ask" with zero market makers on the "Bid" per Level 2) and/or a market (including the OTC Pink, OTCQB or an equivalent replacement exchange ).

3.20   OTC Markets Designation .  OTC Markets changes the Borrower's designation to 'No Information' (Stop Sign), 'Caveat Emptor' (Skull and Crossbones), or 'OTC', 'Other OTC' or 'Grey Market' (Exclamation Mark Sign).
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3.21   Inside Information .  Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower's filing of a Form 8-K pursuant to Regulation FD on that same date.

3.22   Unavailability of Rule 144 .  If, at any time on or after the date which is six (6) months after the Issue Date, the Holder is unable to (i) obtain a standard "144 legal opinion letter" from an attorney reasonably acceptable to the Holder, the Holder's brokerage firm, and the Company's transfer agent in order to facilitate the Holder's conversion of any portion of the Note into free trading shares of the Borrower's Common Stock pursuant to Rule 144, and (ii) thereupon deposit such shares into the Holder's brokerage account.

Upon the occurrence of any Event of Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16. 3.17, 3.18, 3.19, 3.20, 3.21, and/or 3.22 exercisable through the delivery of written notice to the Borrower by such Holders (the "Default Notice"), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to (i) 150% (EXCEPT WITH RESPECT TO SECTION 3.2 AND/OR 3.22, IN WHICH CASE 150% SHALL BE REPLACED WITH 200%) times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the "Mandatory Prepayment Date") plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the "Default Sum") or (ii) at the option of the Holder, the "parity value" of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, 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 Event 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 Trading 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 (the "Default Amount") and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.  Further, if a breach of Sections 3.9, 3.10 and/or 3.19 occurs or is continuing after the six (6) month anniversary of this Note, then the principal amount of the Note shall increase by Fifteen Thousand and No/100 United States Dollars ($15,000) (under Holder's and Borrower's expectation that any principal amount increase will tack back to the Issue Date) and the Holder shall be entitled to use the lowest Trading Price during the delinquency period as a base price for the conversion with the Variable Conversion Price shall be redefined to mean forty percent (40%) multiplied by the Market Price (at the option of the Holder), subject to adjustment as provided in this Note . For example, if the lowest Trading Price during the delinquency period is $0.01 per share and the conversion discount is 50%, then the Holder may elect to convert future conversions at $0.005 per share.  If this Note is not paid at Maturity Date, then the outstanding principal due under this Note shall increase by Fifteen Thousand and No/100 United States Dollars ($15,000).

The Holder shall have the right at any time, to require the Borrower to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect, subject to the terms of this Note.  This requirement by the Borrower shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action.
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If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Borrower for its attorneys' fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

ARTICLE IV.  MISCELLANEOUS

4.1   Failure or Indulgence Not Waiver .  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges.  All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2   Notices .  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

If to the Borrower, to:

X Rail Entertainment, Inc.
9480 S. Eastern Ave., Suite 205
Las Vegas, NV 89123
A ttn: Michael Barron
E-mail:  mbarron@vegasxtrain.com

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If to the Holder:

Auctus Fund, LLC
177 Huntington Avenue, 17th Floor
Boston, MA 02115
Attn: Lou Posner
Facsimile: (617) 532-6420

With a copy to (which copy shall not constitute notice):

Chad Friend, Esq., LL.M.
Legal & Compliance, LLC
330 Clematis Street, Suite 217
West Palm Beach, FL 33401
e-mail: CFriend@LegalandCompliance.com

4.3   Amendments .  This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder.  The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4   Assignability .  This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns.  Each transferee of this Note must be an "accredited investor" (as defined in Rule 501(a) of the 1933 Act).  Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.  The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

4.5   Cost of Collection .  If default is made in the payment of this Note, the Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys' fees.

4.6   Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of Massachusetts or in the federal courts located in the Commonwealth of Massachusetts.  The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens .  THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY .  The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
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4.7   Certain Amounts .  Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note.  The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8   Purchase Agreement .  By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.9   Notice of Corporate Events .  Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower's shareholders (and copies of proxy materials and other information sent to shareholders).  In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time.  The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9 including, but not limited to, name changes, recapitalizations, etc. as soon as possible under law.
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4.10   Usury . If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Borrower from paying all or a portion of the principal or interest on this Note.

4.11   Remedies .  The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby.  Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.  No provision of this Note shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

4.12   Severability .  In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

4.13   Dispute Resolution . In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum, Closing or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within two (2) Business Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within two (2) Business Days, submit via facsimile (a) the disputed determination of the Conversion Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations. Such investment bank's or accountant's determination or calculation shall be binding upon all parties absent demonstrable error.
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4.14   Terms of Future Financings.  So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holder's option, shall become a part of the transaction documents with the Holder.  The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.
4.15   Piggyback Registration Rights.  The Borrower shall include on the next registration statement the Borrower files with SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note.  Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than Fifteen Thousand and No/100 United States Dollars ($15,000), being immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.


[signature page follows]
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer as of the date first above written.


X RAIL ENTERTAINMENT, INC.
   
 
  /s/ Michael Barron
 
Name: Michael Barron
 
Title: Chief Executive Officer


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EXHIBIT A
NOTICE OF CONVERSION

The undersigned hereby elects to convert $_________________principal amount of the Note (defined below) together with $________________ of accrued and unpaid interest thereto, totaling $_____________ into that number of shares of Common Stock to be issued pursuant to the conversion of the Note ("Common Stock") as set forth below, of X Rail Entertainment, Inc., a Nevada corporation (the "Borrower"), according to the conditions of the convertible note of the Borrower dated as of December 20, 2017 (the "Note"), as of the date written below.  No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[ ]
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system ("DWAC Transfer").

Name of DTC Prime Broker:
Account Number:

[  ]
The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder's calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

Name: [NAME]
Address: [ADDRESS]

Date of Conversion:
 _____________
Applicable Conversion Price:
$____________
Number of Shares of Common Stock to be IssuedPursuant to Conversion of the Notes:
______________
Amount of Principal Balance Due remaining Under the Note after this conversion:
 ______________
Accrued and unpaid interest remaining:
______________

[HOLDER]


By:_____________________________
Name: [NAME]
Title: [TITLE]
Date:  [DATE]
 

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Exhibit 10.10

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


Principal Amount: $28,000.00
Issue Date: December 21, 2017 Purchase Price: $28,000.00


CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED , X Rail Entertainment, Inc. , a Nevada corporation (hereinafter called the "Borrower"), hereby promises to pay to the order of POWER UP LENDING GROUP LTD. , a Virginia corporation, or registered assigns (the "Holder") the sum of $28,000.00 together with any interest as set forth herein, on September 30, 2018 (the "Maturity Date"), and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%)(the "Interest Rate") per annum from the date hereof (the "Issue Date") until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid ("Default Interest"). Interest shall be computed on the basis of a 365 day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All payments due hereunder (to the extent not converted into common stock, $0.00001 par value per share (the "Common Stock") in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the "Purchase Agreement").

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1
 Conversion Right . The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III), each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided , however , that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership   limitations on conversion as set forth in the section may NOT be waived by the Holder . The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the "Notice of Conversion"), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the "Conversion Date"); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term "Conversion Amount" means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder's option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder's option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder's option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.


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1.2
Conversion Price . The conversion price (the "Conversion Price") shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments by the Borrower relating to the Borrower's securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 51% multiplied by the Market Price (as defined herein) (representing a discount rate of 49%). "Market Price" means the average of the lowest one (1) Trading Prices (as defined below) for the Common Stock during the thirty (30) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the "OTC") as reported by a reliable reporting service ("Reporting Service") designated by the Holder (i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the "pink sheets". If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as reasonably determined by the Borrower. "Trading Day" shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

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1.3
Authorized Shares . The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved ten times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation set forth in Section 1.1 is not in effect)(based on the respective Conversion Price of the Note (as defined in Section 1.2) in effect from time to time, initially 79,568,059 )(the "Reserved Amount"). The Reserved Amount shall be increased (or decreased with the written consent of the Holder) from time to time in accordance with the Borrower's obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4
Method of Conversion .

(a)
Mechanics of Conversion . As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).

(b)
Surrender of Note Upon Conversion . Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.

(c)
Delivery of Common Stock Upon Conversion . Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within two (2) business days after such receipt (the "Deadline") (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower's obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.

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(d)
Delivery of Common Stock by Electronic Transfer . In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder's Prime Broker with DTC through its Deposit and Withdrawal at Custodian ("DWAC") system.

(e)
Failure to Deliver Common Stock Prior to Deadline . Without in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the "Fail to Deliver Fee"); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(e) are justified.

1.5
 Concerning the Shares . The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) ("Rule 144"); or (iii) such shares are transferred to an "affiliate" (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).

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Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder's counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act; or otherwise may be sold pursuant to an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6
Effect of Certain Events .

(a)
Effect of Merger, Consolidation, Etc . At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). "Person" shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b)
Adjustment Due to Merger, Consolidation, Etc . If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

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(c)
Adjustment Due to Distribution . If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower's shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution"), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

1.7
Prepayment . Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the "Prepayment Periods"), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. Any notice of prepayment hereunder (an "Optional Prepayment Notice") shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the "Optional Prepayment Date"), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which direction shall to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage ("Prepayment Percentage") as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the "Optional Prepayment Amount"). If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.7.

Prepayment Period
 
Prepayment Percentage
 
1. The period beginning on the Issue Date and ending one hundred eighty (180) days following the Issue Date.
   
175
%
 
After the expiration of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.

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ARTICLE II. CERTAIN COVENANTS

2.1  Sale of Assets . So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

ARTICLE III. EVENTS OF DEFAULT

If any of the following events of default (each, an "Event of Default") shall occur:

3.1
Failure to Pay Principal and Interest . The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.

3.2
Conversion and the Shares . The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower's transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.

3.3
Breach of Covenants . The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.

3.4
Breach of Representations and Warranties . Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

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3.5
Receiver or Trustee . The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6
Bankruptcy . Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.7
Delisting of Common Stock . The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

3.8
Failure to Comply with the Exchange Act . The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.9
Liquidation . Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.10
Cessation of Operations . Any cessation of  operations  by  Borrower  or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower's ability to continue as a "going concern" shall not be an admission that the Borrower cannot pay its debts as they become due.

3.11
Financial Statement Restatement . The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.12
 Replacement of Transfer Agent . In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.13
Cross-Default . Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. "Other Agreements" means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term "Other Agreements" shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

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Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal  to  the  Default  Amount  (as  defined  herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT AMOUNT (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon
the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note or upon acceleration), 3.3, 3.4, 3.7, 3.8, 3.10, 3.11, 3.12, 3.13, and/or 3.14 exercisable through the delivery of written notice to the Borrower by such Holders (the "Default Notice"), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the "Mandatory Prepayment Date") plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4(e) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the "Default Amount") and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

4.1
Failure or Indulgence Not Waiver . No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2
Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address  as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:


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If to the Borrower, to:

X Rail Entertainment, Inc. 9480 S. Eastern Ave.
Las Vegas, NV 89123
Attn: Michael Barron, Chief Executive Officer Fax:
Email: mbarron@vegasxtrain.com
 
If to the Holder:
 
POWER UP LENDING GROUP LTD.
111 Great Neck Road, Suite 214 Great Neck, NY 11021
Attn: Curt Kramer, Chief Executive Officer
e-mail: info@poweruplending.com
 
With a copy by fax only to (which copy shall not constitute notice):
 
Naidich Wurman LLP
111 Great Neck Road, Suite 216 Great Neck, NY 11021
Attn: Allison Naidich facsimile: 516-466-3555
e-mail: allison@nwlaw.com

4.3
Amendments . This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4
Most Favored Nation . During the period where any monies are owed to the Holder pursuant to this Note, if the Borrower engages in any future financing transactions with a third party investor, the Borrower will provide the Holder with written notice (the "MFN Notice") thereof promptly but in no event less than 10 days prior to closing any financing transactions. Included with the MFN Notice shall be a copy of all documentation relating to such financing transaction and shall include, upon written request of the Holder, any additional information related to such subsequent investment as may be reasonably requested by the Holder. In the event the Holder determines that the terms of the subsequent investment are preferable to the terms of the securities of the Borrower issued to the Holder pursuant to the terms of the Purchase Agreement, the Holder will notify the Borrower in writing. Promptly after receipt of such written notice from the Holder, the Borrower agrees to amend and restate the Securities (which may include the conversion terms of this Note), to be identical to the instruments evidencing the subsequent investment. Notwithstanding the foregoing, this Section 4.4 shall not apply in respect of (i) an Exempt Issuance, or (ii) an underwritten public offering of Common Stock. "Exempt Issuance " means the issuance of: (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Borrower pursuant to any stock or option plan duly adopted for such purpose by a majority of the members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of this Note and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Borrower, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Borrower and in which the Borrower receives benefits in addition to the investment of funds, but shall not include a transaction in which the Borrower is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

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4.5
Assignability . This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an "accredited investor" (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona   fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.

4.6
Cost of Collection . If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys' fees.

4.7
Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the Eastern District of New York. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

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4.8
Purchase Agreement . By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.9
Remedies . The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
 
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on December 21, 2017

X Rail Entertainment, Inc.

          /s/ Michael Barron
  By: Michael Barron
Chief Executive Officer

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EXHIBIT A -- NOTICE OF CONVERSION


The undersigned hereby elects to convert $ ________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note ("Common Stock") as set forth below, of X Rail Entertainment, Inc., a Nevada corporation (the "Borrower") according to the conditions of the convertible note of the Borrower dated as of December 21, 2017 (the "Note"), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[ ]
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system ("DWAC Transfer").

Name of DTC Prime Broker: Account Number:

[  ]     The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder's calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

POWER UP LENDING GROUP LTD.
111 Great Neck Road, Suite 214 Great Neck, NY 11021
Attention: Certificate Delivery
e-mail: info@poweruplendinggroup.com

Date of conversion:
Applicable Conversion Price:   $  
 Number of shares of common stock to be issued
pursuant to conversion of the Notes:  
   Amount of Principal Balance due remaining
under the Note after this conversion:  

POWER UP LENDING GROUP LTD.

By: Name: Curt Kramer
Title: Chief Executive Officer
Date:  

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Exhibit 10.11
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of December 15, 2017 by and between X Rail Entertainment, Inc., a   Nevada Corporation (the "Company") and Michael A. Barron (the "Executive").

WITNESSETH:

WHEREAS, the Company and the Executive desire to enter into this Agreement to assure the Company of the continuing and exclusive service of the Executive and to set forth the terms and conditions of   the   Executive's employment with the Company.

WHEREAS, the Executive and the Company have agreed that   to fill this critical executive position. The Company and Executive must agree upon the terms and conditions set forth herein. The Company's Board further believes that it must provide the Executive with certain enhanced severance benefits upon the Executive's termination of employment and to provide to the Executive, through enhanced financial security, incentive to continue providing services to the Company notwithstanding the possibility of a   change of control.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties agree as follows:

1.
Term:  The Company agrees to employ the Executive and the Executive hereby accepts such employment, in accordance with the terms of this Agreement, commencing as December 15, 2017 and ending on the fifth anniversary of the date hereof unless this Agreement is earlier terminated as provided herein. Notwithstanding any other provision of this Agreement, the Company shall have an obligation to make any payments to the Executive for Base Salary and Bonuses, as defined below and as required by this Agreement.

2.
Services:   So long as this Agreement shall continue in effect, the Executive shall perform duties as assigned by the Board of Directors of the Company (the "Board"). The Executive shall use Executive's best efforts and abilities to promote the Company's interests and shall perform the services contemplated by this Agreement in accordance with policies established by and under the direction of the Board.   The Executive agrees to serve in such other executive capacities for one or more direct or indirect Affiliates of the Company as the Board may from time to time request, subject to appropriate authorization by the Affiliate or Affiliates involved and any limitations under applicable law. The Executive agrees to faithfully and diligently promote the   business, affairs and interests of the Company and its Affiliates. Executive may engage in other outside interests or companies so long as the outside interests are not directly competitive with the X Rail Entertainment, Inc. Executive will be required to work from the corporate main office at 9480 S. Eastern Ave., Las Vegas, Nevada 89123 as his principal place of business for the company for not less than four days per week unless company travel or authorized vacation time is in effect.

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3.
Duties and Responsibilities: In addition to his duties as an employee as discussed herein, the Executive shall serve as Chief Executive Officer of the   Company for the duration of this Agreement. Executive's duties as an Executive shall be overall responsibility and authority, subject to authorities and limitations as established by the Board of Directors, to implement and continue to develop the business strategies of the Company. In the performance of Executive's duties, the Executive shall report directly to the Board of Directors.

The Executive agrees to observe and comply with the rules and regulations of the Company as adopted by the Board respecting the performance of the Executive's duties and agrees to carry out and perform orders, directions and policies of the Company and its Board as they may be, from time to time, stated either orally or in writing. The Company agrees that   the duties which may be assigned to the Executive shall be usual and customary duties of the position(s) to which the Executive may from time to time be appointed or elected and shall not be inconsistent with the provisions of the charter documents of the Company or applicable law. The Executive shall have such corporate power and authority as shall reasonably be required to enable the Executive to perform the duties required in any office that may be held, subject to the limitations on such powers imposed by the Board.

4.   Compensation:

Base Compensation :

During the term of this Agreement, the Company agrees to pay the Executive a base salary at the rate of Two Hundred Fifty Thousand Dollars (250,000.00) per year payable in equal installments no less frequently than twice monthly from the date hereof to December 14, 2022, subject to increases at the discretion of the Board or the Compensation Committee of the Board, payable in accordance with the Company practices in effect from time to time.

Bonuses:

Executive shall be eligible for General Bonuses (as defined below) and Performance Bonuses (as defined below) as follows (collectively, "Bonuses"):

General Bonuses: Executive shall be eligible for bonuses in accordance with any bonus or other incentive compensation plans adopted and approved by the Board ("General Bonuses").
Stock Option Plan Grant .  The Executive is entitled to receive additional shares under the Stock Option plan as "Option Shares". If the Company issues Preferred Shares, the Preferred Shares shall be calculated as if converted into Common shares and the calculated shares thereof shall be considered as newly issues Common Shares. The strike price shall be set at $0.0001 per share and the Executive may exercise a cashless transaction if the common stock is trading over and above the strike price which shall remain in force.
Executive Bonus , The Company agrees to a cash award as follows:
(a)   Effective on the date which an Agreement with Union Pacific Railroad Company is executed (the "Grant Date"), the Company hereby grants to the Executive, as compensation for the Executive's service as an Executive of the Company, the right to be paid a sum equal to Three Million Dollars (3,000,000.00), subject to the terms, conditions and provisions of this Agreement. Payment shall be due upon execution of said Agreement.
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(b)   The Executive shall be entitled to receive an additional grant on the date which an Agreement with National Passenger Railroad Corporation is executed (the "Grant Date"), the Company hereby grants to the Executive, as compensation for the Executive's service as an Executive of the Company, the right to be paid a sum equal to Two Million Dollars (2,000,000.00), subject to the terms, conditions and provisions of this Agreement. Payment shall be due upon execution of said Agreement.

Additional Benefits:   The Company agrees to provide the following "Additional Benefits" to Executive:

Payment of a medical plan coverage for the Executive at the expense of the Company, with such payment of coverage (or comparable coverage) to continue following termination of employment (other than for "Cause" or without "Good Reason" as each term is defined in this Agreement) until the Executive is eligible for Medicare or Cobra coverage or if employed elsewhere and other insurance coverage is offered.

All rights and benefits for which the Executive is otherwise eligible under any pension plan, profit-sharing plan, dental, disability, or insurance plan or policy or other plan or benefit that the Company or its Affiliates may provide for the Executive or (provided the Executive is eligible to participate therein) for employees of the Company generally, as from time to time in effect, during the term of this Agreement.

In the event the Company does not offer a medical and dental plan the Company agrees to pay for the Executive's personal health plan.
Perquisites : The Executive shall be entitled to five weeks paid vacation and other perquisites in accordance with the plans, policies, programs and practices which are at least as favorable as those in effect with respect to other peer employees of the Company.

Auto Allowance : Executive shall not be entitled to an auto allowance.

5 .         Termination :

This Agreement and all obligations hereunder (except the obligations contained in Additional Benefits Sections 4, and Sections 7, 8, 9 and 10, (Confidential Information, Non-Competition, Non-Solicitation of Customers and Noninterference with the Executives) which shall survive any termination hereunder) shall terminate upon the earliest to occur of any of the following:
Expiration of Term: The expiration of the term provided for in Section 1 or the voluntary termination by Executive or retirement from the Company in accordance with the normal retirement policies of the Company.
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Death or Disability of Executive : For the purposes of this Agreement, disability shall mean the absence of the Executive performing Executive's duties with the Company for a period of three (3) months period, as a result of incapacity due to mental or physical illness. If the Executive shall become disabled, the Executive's employment may be terminated by written notice from the Company to the Executive.
For Cause or Without Good Reason : The Company may terminate the Executive's employment and all of the Executive's rights to receive Base Salary and Bonuses hereunder for Cause or upon the resignation of Executive without Good Reason. Termination for "Cause" shall mean termination of the Executive by the Company for any of the following reasons: (a) the Executive's willful criminal misconduct or habitual neglect in the performance of his duties under this Agreement, (b) commission of any felony by the Executive, (c) the Executive's commission of any   felony involving fraud, dishonesty or moral turpitude, (d) the Executive's material breach of any material provision of this Agreement that remains uncured ten (10) days following receipt by the Executive from Company of written notice thereof, unless such breach is of a kind not susceptible to cure within such ten (10) day period, (e) material violation of any Company policies by Executive, (f) the Executive's material    dishonesty, moral, turpitude, fraud  or misrepresentation, if not disclosed, with respect to his material duties or the Executive's misrepresentation in inducement to enter into this Agreement, or (g) any willful or intentional action or inaction by the Executive resulting in any injury to the reputation of or the financial detriment of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been (i) delivered to him a notice of termination which shall include a statement to the effect that the Executive was guilty of conduct justifying termination for Cause, AND (ii) an opportunity given to him on not less than seventy two (72) hours' notice to be heard before at least a majority of the Board of Directors. "Good Reason" shall be defined as (i) demotion of Executive from the position of Chief Executive Officer without the consent of the Executive; (ii) any attempt   to decrease the Executive's Base Salary; (iii) any breach of this Agreement by the Company; or (iv) any requirement that the Executive relocate to an office more than 30 miles from Las Vegas, Nevada. In the event the Executive is discharged for any other reason whatsoever the Company shall be obligated to pay the Executive a severance sum in cash. The severance amount shall be calculated by taking the sum of all shares held by the Executive plus any shares held in trust or by an entity where the Executive is the beneficial owner of said shares and combining all share amounts. This shall also include any shares, options, or warrants which are contractually obligated by the company and the total of these instruments shall be added to the share count as if earned. The severance amount to be paid shall be based on the total share count multiplied by the market share price of the trailing 14 day trading average times twenty percent (20%). Said severance sum shall be paid to the Executive prior to any termination becoming effective. Failure by the company to pay the full amount of the severance to the Executive within 5 days of the notice of termination, unless Executive agrees in writing to alternative terms, will negate any discharge of the Executive.
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Without Cause or With Good Reason : Notwithstanding any other provision of this Section 5, the Board shall have the right to terminate the Executive's employment with the Company without Cause, and the Executive shall have the right to resign with good reason, at any time. If the Company terminates the Executive without Cause or the Executive terminates for good reason, then the Company shall, within two (2) weeks of such termination, make an immediate lump sum payment in the amount of  one time the applicable Base Salary for a period equal to two (2) years following the date of termination (the "Severance Period"), net of applicable taxes, plus  any Bonuses as set by the Board of Directors and duly approved (based on the assumption that the Company would achieve all performance targets for a 100% bonus), and the Company shall provide the Additional Benefits provided for under Section 4 for the remainder of the term, including the accelerated full vesting of Stock Options. The present value of the aggregate unpaid Base Salary and Bonuses shall be determined under the then applicable federal rates under the Internal Revenue Code. Further, if Executive is terminated without Cause or resigns with Good Reason, all stock options held by Executive shall become fully vested.

6.
Buy Out Provision:   If the Employer terminates the Executive's employment because the business is sold, the Employer will pay to the Executive (1) the Executive's accrued salary and vacation, including the then unused accrued vacation, up to and  including the date of termination and (2) the equivalent of two (2) years of the Executive's Base Salary, less applicable deductions and withholdings, pursuant   to the Employer's standard pay periods and practices; provided, however, that such payments shall be deemed severance pay and not wages. Such payment shall be made to the Executive as soon as administratively practicable after the termination of the Executive's employment, but no later than two weeks from the date the Executive's employment is so terminated. The Executive shall execute a release of all current or future claims, known or unknown, arising on or before the date of the release, against the Employer and its subsidiaries and the directors, officers, employees and affiliates of any of them, in a form approved by the Employer and (3) the Executive shall be entitled to all stock grants on section 4 which shall be issued upon termination.

7.
Golden Parachute Limitation: The payments and benefits payable to the Executive under this Agreement and all other contracts, arrangements, or programs with the Company shall not, in the aggregate exceed the maximum amount that may be paid to the Executive without triggering golden parachute penalties under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), as determined in good faith by the Company's independent auditors.  The Executive agrees that, to the extent payments or benefits under this Agreement would not be deductible under Code Section 162(m) if made or provided when otherwise due under this Agreement, such payments and benefits shall be made or provided later, immediately after Section 162(m) ceases to preclude their deduction, with interest thereon at the rate provided in Code Section 1274(b) (2) (B). If even after such deferral the payments and benefits otherwise payable to the Executive must be reduced to avoid triggering such penalties, the payments and benefits will be reduced in the priority order designated by the Executive, or, if the Executive fails promptly to designate an order, in the priority order designated by the Company. If an amount in excess of the   limit set forth in this Section 7 is paid to the Executive, the Executive shall repay the excess amount to the Company upon demand. The Executive and the Company agree to cooperate with each other in connection with any administrative or judicial proceedings concerning the existence or amount of golden parachute penalties on payments or benefits received by the Executive.

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8.
Business Expenses: During the term of this Agreement, the Company shall reimburse the Executive promptly for business expenditures made and substantiated in accordance with policies, practices and procedures established from time to time by the Company generally with respect to other employees and incurred in the pursuit and furtherance of the Company's business and good will.
9.
Confidential Information :   The Executive acknowledges that the nature of the Executive's engagement by the Company is such that the Executive shall have access to information of a confidential and/or trade secret nature which has great value to the Company and which constitutes a   substantial basis and foundation upon which the business of the Company is based.   Such information includes financial, marketing data, techniques, processes, formulas, developmental or experimental work, work in process, methods, trade secrets (including, without limitation, customer lists and lists of customer sources), or any other   secret or confidential information relating to the products, services, customers, sales or business affairs of the Company or its Affiliates (the "Confidential  Information"). The Executive shall keep all such Confidential Information in confidence during the term of this Agreement and at any time thereafter and shall not disclose any of such Confidential Information to any other person, except to the extend such disclosure is (i) required by applicable law, (ii) lawfully obtainable from other sources, or (iii) authorized in writing by the Company. Upon termination of the Executive's employment with the Company, the Executive shall deliver to the Company all documents, records, notebooks, work papers, and all similar material containing any of the foregoing information, whether prepared by the Executive, the Company or anyone else.
10.
Non-Competition : In order to protect the Confidential Information, the Executive agrees that during the term of the Executive's employment, and for a period of one years thereafter if the Executive employment is terminated by the Company with Cause or by the Executive without Good Reason, Executive shall not, directly or indirectly, whether as an owner, partner, shareholder, agent, employee, creditor or otherwise, promote, participate or engage in any activity or other business competitive with the Company's business or the business of any present Affiliate of the Company in   the state of Nevada if such activity or other business involves any use by the Executive of any of the Confidential Information. The Company shall notify the Executive of any perceived violation of this Section 10, and the Executive shall have 30 days to cure such violation.

11.
Non-Solicitation of Customers : The Executive agrees that for a period of two (2) year after   the   termination of employment with the Company, the Executive will not, on behalf of himself or any other individual, association or entity, whether or not affiliated with the Executive call on any of the customers of the Company or any Affiliate of the Company for the purpose of soliciting or inducing any of such customers to acquire (or providing to any of such customers) any product or service provided by the Company or any Affiliate of the Company, nor will the Executive in any way, directly or indirectly, as agent or otherwise, in any other manner solicit, influence   or encourage such customers to take away or to divert or direct their business to the Executive or any other person or entity by or with which the Executive is employed, associated, affiliated or otherwise related if such business is competitive with the Company.

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12.
Noninterference with Executives :  In order to protect the Confidential Information, the Executive agrees that during the term hereof and for a period of two (2) years thereafter, the Executive will not, directly or indirectly, induce or entice any employee of the Company or  its  Affiliates to  leave such employment or cause  anyone  else to  leave  such employment.

13.
Indemnity : To the fullest extend permitted by applicable law and the bylaws of the Company, as from time to time in effect, the Company shall indemnify the Executive and hold the Executive harmless for any acts or decisions made in good faith while performing services for the Company, and the Company shall use commercially reasonable efforts to obtain coverage for the Executive (provided the same may be obtained at reasonable cost) under any liability insurance policy or policies now in force or hereafter obtained during the term of this Agreement that cover other officers of the Company having comparable or lesser status and responsibility.   The Company will pay and, subject to any legal limitations, advance all reasonable expenses, including reasonable attorneys' fees and costs of   court approved settlements, actually and necessarily incurred by the Executive in connection with the defense of any action, suit or proceeding and in connection with any appeal thereon, which has been brought against the Executive by reason of the Executive's service as an officer, employee or agent of the Company, except if shown that the Executive has breached his duties and obligations to the Company.

14.
Severability: If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, to achieve the intent of the parties to the extent possible.   In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.

15.
Succession:    This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, "successor" and "assignee" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the stock of the Company or to which the Company assigns this Agreement by operation of law or otherwise.    The obligations and duties of the Executive hereunder are personal and otherwise not assignable. The Executive's obligations and representations under this Agreement will survive the termination of the Executive's employment, regardless of the manner of such termination.

16.
Notices:   Any notice or other communication provided for in this Agreement shall be in writing and sent if to the Company to its office at:

X Rail Entertainment, Inc.
9480 South Eastern Ave, Suite 205
Las Vegas, Nevada 89123
(702) 583-6698

or at such other address as the Company may from time to time in writing designate, and if to the Executive at such address as Executive may from time to time in writing designate. Each such notice or other communication shall be effective (i) if given by telecommunication, when transmitted to the applicable number so specified in (or pursuant to) this Section 16 and a verification of receipt is received, (ii) if given by mail, three days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when actually delivered at such address.
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17.
Entire Agreement : This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes agreements, undertakings, commitments and practices relating to the Executive's employment by the Company.

18.
Amendments :   No amendment or modification of the terms of this Agreement shall be valid unless made in writing and duly executed by both parties. All previous Agreement's shall be null and void.

19.
Waiver :   No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof or of any other right, nor shall any single or partial exercise preclude any further or other exercise of such right or any other right.

20.
Governing Law :   This Agreement, and the legal relations between the parties, shall be governed by and construed in accordance with the laws of the State of Nevada without regard to conflicts of law doctrines, and any court action arising out of this Agreement shall be brought in any court of competent jurisdiction within the State of Nevada.

21.
Arbitration:   The parties may, if they so desire and elect, submit any claim for payment under this   Agreement or any dispute regarding the interpretation of this Agreement to arbitration upon such terms and provisions to which they agree.

22.
Withholding:   All compensation payable hereunder, including salary and other benefits, and amounts payable under Section 4 above, shall be subject to applicable taxes, withholding and other required, normal or elected employee deductions.

23.
Counterparts :  This Agreement and any amendment hereto may be executed in one or more counterparts. All of such counterparts shall constitute one and the same agreement and shall become effective when a copy signed by each party has been delivered to the other party.

24.
Headings :  Section and other headings contained in this Agreement arc for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

25.
Representation by Counsel; Interpretation : The Company and the Executive each acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the matters contemplated by this Agreement. Accordingly, any rule of law, including but not limited to Section 1654 of the California civil Code, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provision of this Agreement shall be interpreted in a reasonable manner to affect the intent of the parties.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.



THE COMPANY

X Rail Entertainment, Inc.

By: /s/Joseph Cosio-Barron

Its: President



THE EXECUTIVE

Michael A. Barron
Chief Executive Officer

/s/ Michael Barron
 
 
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Exhibit 10.12
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of December 15, 2017 by and between X Rail Entertainment, Inc., a   Nevada Corporation (the "Company") and Wanda Witoslawski (the "Executive").

WITNESSETH:

WHEREAS, the Company and the Executive desire to enter into this Agreement to assure the Company of the continuing and exclusive service of the Executive and to set forth the terms and conditions of   the   Executive's employment with the Company.

WHEREAS, the Executive and the Company have agreed that   to fill this critical executive position. The Company and Executive must agree upon the terms and conditions set forth herein. The Company's Board further believes that it must provide the Executive with certain enhanced severance benefits upon the Executive's termination of employment and to provide to the Executive, through enhanced financial security, incentive to continue providing services to the Company notwithstanding the possibility of a   change of control.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties agree as follows:

1.
Term: The Company agrees to employ the Executive and the Executive hereby accepts such employment, in accordance with the terms of this Agreement, commencing as December 15, 2017 and ending on the fifth anniversary of the date hereof unless this Agreement is earlier terminated as provided herein. Notwithstanding any other provision of this Agreement, the Company shall have an obligation to make any payments to the Executive for Base Salary and Bonuses, as defined below and as required by this Agreement.

2.
Services:   So long as this Agreement shall continue in effect, the Executive shall perform duties as assigned by the Chief Executive Officer of the Company (the "CEO").The Executive shall use Executive's best efforts and abilities to promote the Company's interests and shall perform the services contemplated by this Agreement in accordance with policies established by and under the direction of the Board.   The Executive agrees to serve in such other executive capacities for one or more direct or indirect Affiliates of the Company as the CEO may from time to time request, subject to appropriate authorization by the Affiliate or Affiliates involved and any limitations under applicable law. The Executive agrees to faithfully and diligently promote the   business, affairs and interests of the Company and its Affiliates. Executive may engage in other outside interests or companies so long as the outside interests are not directly competitive with the X Rail Entertainment, Inc. Executive will be required to work from the corporate main office at 9480 S. Eastern Ave., Las Vegas, Nevada 89123 as his principal place of business for the company for not less than four days per week unless company travel or authorized vacation time is in effect.

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3.
Duties and Responsibilities: In addition to his duties as an employee as discussed herein, the Executive shall serve as Chief Financial Officer of the   Company for the duration of this Agreement. Executive's duties as an Executive shall be overall responsibility and authority, subject to authorities and limitations as established by the Chief Executive Officer, to implement and continue to develop the business strategies of the Company. In the performance of Executive's duties, the Executive shall report directly to the Chief Executive Officer.

The Executive agrees to observe and comply with the rules and regulations of the Company as adopted by the Board respecting the performance of the Executive's duties and agrees to carry out and perform orders, directions and policies of the Company and its Board as they may be, from time to time, stated either orally or in writing. The Company agrees that   the duties which may be assigned to the Executive shall be usual and customary duties of the position(s) to which the Executive may from time to time be appointed or elected and shall not be inconsistent with the provisions of the charter documents of the Company or applicable law. The Executive shall have such corporate power and authority as shall reasonably be required to enable the Executive to perform the duties required in any office that may be held, subject to the limitations on such powers imposed by the Board.

4.   Compensation:

Base Compensation :

During the term of this Agreement, the Company agrees to pay the Executive a base salary at the rate of Two Hundred and Twenty Five Thousand Dollars (225,000.00) per year payable in equal installments no less frequently than twice monthly from the date hereof to December 14, 2022, subject to increases at the discretion of the Board or the Compensation Committee of the Board, payable in accordance with the Company practices in effect from time to time.

Bonuses:

Executive shall be eligible for General Bonuses (as defined below) and Performance Bonuses (as defined below) as follows (collectively, "Bonuses"):

General Bonuses: Executive shall be eligible for bonuses in accordance with any bonus or other incentive compensation plans adopted and approved by the Board ("General Bonuses").
Stock Option Plan Grant .  The Executive is entitled to receive additional shares under the Stock Option plan as "Option Shares". If the Company issues Preferred Shares, the Preferred Shares shall be calculated as if converted into Common shares and the calculated shares thereof shall be considered as newly issues Common Shares. The strike price shall be set at $0.0001 per share and the Executive may exercise a cashless transaction if the common stock is trading over and above the strike price which shall remain in force.
Executive Bonus : The Company agrees to a cash award as follows:
(a)   Effective on the date which an Agreement with Union Pacific Railroad Company is executed (the "Grant Date"), the Company hereby grants to the Executive, as compensation for the Executive's service as an Executive of the Company, the right to be paid a sum equal to Three Million Dollars (3,000,000.00), subject to the terms, conditions and provisions of this Agreement. Payment shall be due upon execution of said Agreement.
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(b)   The Executive shall be entitled to receive an additional grant on the date which an Agreement with National Passenger Railroad Corporation is executed (the "Grant Date"), the Company hereby grants to the Executive, as compensation for the Executive's service as an Executive of the Company, the right to be paid a sum equal to Two Million Dollars (2,000,000.00), subject to the terms, conditions and provisions of this Agreement. Payment shall be due upon execution of said Agreement.

Additional Benefits:   The Company agrees to provide the following "Additional Benefits" to Executive:

Payment of a medical plan coverage for the Executive at the expense of the Company, with such payment of coverage (or comparable coverage) to continue following termination of employment (other than for "Cause" or without "Good Reason" as each term is defined in this Agreement) until the Executive is eligible for Medicare or Cobra coverage or if employed elsewhere and other insurance coverage is offered.

All rights and benefits for which the Executive is otherwise eligible under any pension plan, profit-sharing plan, dental, disability, or insurance plan or policy or other plan or benefit that the Company or its Affiliates may provide for the Executive or (provided the Executive is eligible to participate therein) for employees of the Company generally, as from time to time in effect, during the term of this Agreement.

In the event the Company does not offer a medical and dental plan the Company agrees to pay for the Executive's personal health plan.
Perquisites : The Executive shall be entitled to five weeks paid vacation and other perquisites in accordance with the plans, policies, programs and practices which are at least as favorable as those in effect with respect to other peer employees of the Company.

Auto Allowance : Executive shall not be entitled to an auto allowance.

5 .         Termination :

This Agreement and all obligations hereunder (except the obligations contained in Additional Benefits Sections 4, and Sections 7, 8, 9 and 10, (Confidential Information, Non-Competition, Non-Solicitation of Customers and Noninterference with the Executives) which shall survive any termination hereunder) shall terminate upon the earliest to occur of any of the following:
Expiration of Term: The expiration of the term provided for in Section 1 or the voluntary termination by Executive or retirement from the Company in accordance with the normal retirement policies of the Company.
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Death or Disability of Executive : For the purposes of this Agreement, disability shall mean the absence of the Executive performing Executive's duties with the Company for a period of three (3) months period, as a result of incapacity due to mental or physical illness. If the Executive shall become disabled, the Executive's employment may be terminated by written notice from the Company to the Executive.
For Cause or Without Good Reason : The Company may terminate the Executive's employment and all of the Executive's rights to receive Base Salary and Bonuses hereunder for Cause or upon the resignation of Executive without Good Reason. Termination for "Cause" shall mean termination of the Executive by the Company for any of the following reasons: (a) the Executive's willful criminal misconduct or habitual neglect in the performance of his duties under this Agreement, (b) commission of any felony by the Executive, (c) the Executive's commission of any   felony involving fraud, dishonesty or moral turpitude, (d) the Executive's material breach of any material provision of this Agreement that remains uncured ten (10) days following receipt by the Executive from Company of written notice thereof, unless such breach is of a kind not susceptible to cure within such ten (10) day period, (e) material violation of any Company policies by Executive, (f) the Executive's material    dishonesty, moral, turpitude, fraud  or misrepresentation, if not disclosed, with respect to his material duties or the Executive's misrepresentation in inducement to enter into this Agreement, or (g) any willful or intentional action or inaction by the Executive resulting in any injury to the reputation of or the financial detriment of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been (i) delivered to him a notice of termination which shall include a statement to the effect that the Executive was guilty of conduct justifying termination for Cause, AND (ii) an opportunity given to him on not less than seventy two (72) hours' notice to be heard before at least a majority of the Board of Directors. "Good Reason" shall be defined as (i) demotion of Executive from the position of Chief Executive Officer without the consent of the Executive; (ii) any attempt   to decrease the Executive's Base Salary; (iii) any breach of this Agreement by the Company; or (iv) any requirement that the Executive relocate to an office more than 30 miles from Las Vegas, Nevada. In the event the Executive is discharged for any other reason whatsoever the Company shall be obligated to pay the Executive a severance sum in cash. The severance amount shall be calculated by taking the sum of all shares held by the Executive plus any shares held in trust or by an entity where the Executive is the beneficial owner of said shares and combining all share amounts. This shall also include any shares, options, or warrants which are contractually obligated by the company and the total of these instruments shall be added to the share count as if earned. The severance amount to be paid shall be based on the total share count multiplied by the market share price of the trailing 14 day trading average times twenty percent (20%). Said severance sum shall be paid to the Executive prior to any termination becoming effective. Failure by the company to pay the full amount of the severance to the Executive within 5 days of the notice of termination, unless Executive agrees in writing to alternative terms, will negate any discharge of the Executive.
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Without Cause or With Good Reason : Notwithstanding any other provision of this Section 5, the Board shall have the right to terminate the Executive's employment with the Company without Cause, and the Executive shall have the right to resign with good reason, at any time. If the Company terminates the Executive without Cause or the Executive terminates for good reason, then the Company shall, within two (2) weeks of such termination, make an immediate lump sum payment in the amount of  one time the applicable Base Salary for a period equal to two (2) years following the date of termination (the "Severance Period"), net of applicable taxes, plus  any Bonuses as set by the Board of Directors and duly approved (based on the assumption that the Company would achieve all performance targets for a 100% bonus), and the Company shall provide the Additional Benefits provided for under Section 4 for the remainder of the term, including the accelerated full vesting of Stock Options. The present value of the aggregate unpaid Base Salary and Bonuses shall be determined under the then applicable federal rates under the Internal Revenue Code. Further, if Executive is terminated without Cause or resigns with Good Reason, all stock options held by Executive shall become fully vested.

6.
Buy Out Provision:   If the Employer terminates the Executive's employment because the business is sold, the Employer will pay to the Executive (1) the Executive's accrued salary and vacation, including the then unused accrued vacation, up to and  including the date of termination and (2) the equivalent of two (2) years of the Executive's Base Salary, less applicable deductions and withholdings, pursuant   to the Employer's standard pay periods and practices; provided, however, that such payments shall be deemed severance pay and not wages. Such payment shall be made to the Executive as soon as administratively practicable after the termination of the Executive's employment, but no later than two weeks from the date the Executive's employment is so terminated. The Executive shall execute a release of all current or future claims, known or unknown, arising on or before the date of the release, against the Employer and its subsidiaries and the directors, officers, employees and affiliates of any of them, in a form approved by the Employer and (3) the Executive shall be entitled to all stock grants on section 4 which shall be issued upon termination.

7.
Golden Parachute Limitation: The payments and benefits payable to the Executive under this Agreement and all other contracts, arrangements, or programs with the Company shall not, in the aggregate exceed the maximum amount that may be paid to the Executive without triggering golden parachute penalties under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), as determined in good faith by the Company's independent auditors.  The Executive agrees that, to the extent payments or benefits under this Agreement would not be deductible under Code Section 162(m) if made or provided when otherwise due under this Agreement, such payments and benefits shall be made or provided later, immediately after Section 162(m) ceases to preclude their deduction, with interest thereon at the rate provided in Code Section 1274(b) (2) (B). If even after such deferral the payments and benefits otherwise payable to the Executive must be reduced to avoid triggering such penalties, the payments and benefits will be reduced in the priority order designated by the Executive, or, if the Executive fails promptly to designate an order, in the priority order designated by the Company. If an amount in excess of the   limit set forth in this Section 7 is paid to the Executive, the Executive shall repay the excess amount to the Company upon demand. The Executive and the Company agree to cooperate with each other in connection with any administrative or judicial proceedings concerning the existence or amount of golden parachute penalties on payments or benefits received by the Executive.

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8.
Business Expenses: During the term of this Agreement, the Company shall reimburse the Executive promptly for business expenditures made and substantiated in accordance with policies, practices and procedures established from time to time by the Company generally with respect to other employees and incurred in the pursuit and furtherance of the Company's business and good will.
9.
Confidential Information :   The Executive acknowledges that the nature of the Executive's engagement by the Company is such that the Executive shall have access to information of a confidential and/or trade secret nature which has great value to the Company and which constitutes a   substantial basis and foundation upon which the business of the Company is based.   Such information includes financial, marketing data, techniques, processes, formulas, developmental or experimental work, work in process, methods, trade secrets (including, without limitation, customer lists and lists of customer sources), or any other   secret or confidential information relating to the products, services, customers, sales or business affairs of the Company or its Affiliates (the "Confidential  Information"). The Executive shall keep all such Confidential Information in confidence during the term of this Agreement and at any time thereafter and shall not disclose any of such Confidential Information to any other person, except to the extend such disclosure is (i) required by applicable law, (ii) lawfully obtainable from other sources, or (iii) authorized in writing by the Company. Upon termination of the Executive's employment with the Company, the Executive shall deliver to the Company all documents, records, notebooks, work papers, and all similar material containing any of the foregoing information, whether prepared by the Executive, the Company or anyone else.
10.
Non-Competition : In order to protect the Confidential Information, the Executive agrees that during the term of the Executive's employment, and for a period of one years thereafter if the Executive employment is terminated by the Company with Cause or by the Executive without Good Reason, Executive shall not, directly or indirectly, whether as an owner, partner, shareholder, agent, employee, creditor or otherwise, promote, participate or engage in any activity or other business competitive with the Company's business or the business of any present Affiliate of the Company in   the state of Nevada if such activity or other business involves any use by the Executive of any of the Confidential Information. The Company shall notify the Executive of any perceived violation of this Section 10, and the Executive shall have 30 days to cure such violation.

11.
Non-Solicitation of Customers : The Executive agrees that for a period of two (2) year after   the   termination of employment with the Company, the Executive will not, on behalf of himself or any other individual, association or entity, whether or not affiliated with the Executive call on any of the customers of the Company or any Affiliate of the Company for the purpose of soliciting or inducing any of such customers to acquire (or providing to any of such customers) any product or service provided by the Company or any Affiliate of the Company, nor will the Executive in any way, directly or indirectly, as agent or otherwise, in any other manner solicit, influence   or encourage such customers to take away or to divert or direct their business to the Executive or any other person or entity by or with which the Executive is employed, associated, affiliated or otherwise related if such business is competitive with the Company.

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12.
Noninterference with Executives :  In order to protect the Confidential Information, the Executive agrees that during the term hereof and for a period of two (2) years thereafter, the Executive will not, directly or indirectly, induce or entice any employee of the Company or  its  Affiliates to  leave such employment or cause  anyone  else to  leave  such employment.

13.
Indemnity : To the fullest extend permitted by applicable law and the bylaws of the Company, as from time to time in effect, the Company shall indemnify the Executive and hold the Executive harmless for any acts or decisions made in good faith while performing services for the Company, and the Company shall use commercially reasonable efforts to obtain coverage for the Executive (provided the same may be obtained at reasonable cost) under any liability insurance policy or policies now in force or hereafter obtained during the term of this Agreement that cover other officers of the Company having comparable or lesser status and responsibility.   The Company will pay and, subject to any legal limitations, advance all reasonable expenses, including reasonable attorneys' fees and costs of   court approved settlements, actually and necessarily incurred by the Executive in connection with the defense of any action, suit or proceeding and in connection with any appeal thereon, which has been brought against the Executive by reason of the Executive's service as an officer, employee or agent of the Company, except if shown that the Executive has breached his duties and obligations to the Company.

14.
Severability: If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, to achieve the intent of the parties to the extent possible.   In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.

15.
Succession:    This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, "successor" and "assignee" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the stock of the Company or to which the Company assigns this Agreement by operation of law or otherwise.    The obligations and duties of the Executive hereunder are personal and otherwise not assignable. The Executive's obligations and representations under this Agreement will survive the termination of the Executive's employment, regardless of the manner of such termination.

16.
Notices:   Any notice or other communication provided for in this Agreement shall be in writing and sent if to the Company to its office at:

X Rail Entertainment, Inc.
9480 South Eastern Ave, Suite 205
Las Vegas, Nevada 89123
(702) 583-6698

or at such other address as the Company may from time to time in writing designate, and if to the Executive at such address as Executive may from time to time in writing designate. Each such notice or other communication shall be effective (i) if given by telecommunication, when transmitted to the applicable number so specified in (or pursuant to) this Section 16 and a verification of receipt is received, (ii) if given by mail, three days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when actually delivered at such address.
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17.
Entire Agreement : This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes agreements, undertakings, commitments and practices relating to the Executive's employment by the Company.

18.
Amendments :   No amendment or modification of the terms of this Agreement shall be valid unless made in writing and duly executed by both parties. All previous Agreement's shall be null and void.

19.
Waiver :   No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof or of any other right, nor shall any single or partial exercise preclude any further or other exercise of such right or any other right.

20.
Governing Law :   This Agreement, and the legal relations between the parties, shall be governed by and construed in accordance with the laws of the State of Nevada without regard to conflicts of law doctrines, and any court action arising out of this Agreement shall be brought in any court of competent jurisdiction within the State of Nevada.

21.
Arbitration:   The parties may, if they so desire and elect, submit any claim for payment under this   Agreement or any dispute regarding the interpretation of this Agreement to arbitration upon such terms and provisions to which they agree.

22.
Withholding:   All compensation payable hereunder, including salary and other benefits, and amounts payable under Section 4 above, shall be subject to applicable taxes, withholding and other required, normal or elected employee deductions.

23.
Counterparts :  This Agreement and any amendment hereto may be executed in one or more counterparts. All of such counterparts shall constitute one and the same agreement and shall become effective when a copy signed by each party has been delivered to the other party.

24.
Headings :  Section and other headings contained in this Agreement arc for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

25.
Representation by Counsel; Interpretation : The Company and the Executive each acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the matters contemplated by this Agreement. Accordingly, any rule of law, including but not limited to Section 1654 of the California civil Code, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provision of this Agreement shall be interpreted in a reasonable manner to affect the intent of the parties.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.



THE COMPANY

X Rail Entertainment, Inc.

By: /s/ Michael Barron

Its: CEO



THE EXECUTIVE

Wanda Witoslawski
Chief Financial Officer

/s/Wanda Witoslawski
 
 
 

 

 
 
 
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Exhibit 10.13
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of December 15, 2017 by and between X Rail Entertainment, Inc., a   Nevada Corporation (the "Company") and Joseph A. Cosio-Barron (the "Executive").

WITNESSETH:

WHEREAS, the Company and the Executive desire to enter into this Agreement to assure the Company of the continuing and exclusive service of the Executive and to set forth the terms and conditions of   the   Executive's employment with the Company.

WHEREAS, the Executive and the Company have agreed that   to fill this critical executive position. The Company and Executive must agree upon the terms and conditions set forth herein. The Company's Board further believes that it must provide the Executive with certain enhanced severance benefits upon the Executive's termination of employment and to provide to the Executive, through enhanced financial security, incentive to continue providing services to the Company notwithstanding the possibility of a   change of control.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties agree as follows:

1.
Term: The Company agrees to employ the Executive and the Executive hereby accepts such employment, in accordance with the terms of this Agreement, commencing as December 15, 2017 and ending on the fifth anniversary of the date hereof unless this Agreement is earlier terminated as provided herein. Notwithstanding any other provision of this Agreement, the Company shall have an obligation to make any payments to the Executive for Base Salary and Bonuses, as defined below and as required by this Agreement.

2.
Services:   So long as this Agreement shall continue in effect, the Executive shall perform duties as assigned by the Chief Executive Officer of the Company (the "CEO").The Executive shall use Executive's best efforts and abilities to promote the Company's interests and shall perform the services contemplated by this Agreement in accordance with policies established by and under the direction of the Board.   The Executive agrees to serve in such other executive capacities for one or more direct or indirect Affiliates of the Company as the CEO may from time to time request, subject to appropriate authorization by the Affiliate or Affiliates involved and any limitations under applicable law. The Executive agrees to faithfully and diligently promote the   business, affairs and interests of the Company and its Affiliates. Executive may engage in other outside interests or companies so long as the outside interests are not directly competitive with the X Rail Entertainment, Inc. Executive will be required to work from the corporate main office at 9480 S. Eastern Ave., Las Vegas, Nevada 89123 as his principal place of business for the company for not less than four days per week unless company travel or authorized vacation time is in effect.

 
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3.
Duties and Responsibilities: In addition to his duties as an employee as discussed herein, the Executive shall serve as President of the   Company for the duration of this Agreement. Executive's duties as an Executive shall be overall responsibility and authority, subject to authorities and limitations as established by the Chief Executive Officer, to implement and continue to develop the business strategies of the Company. In the performance of Executive's duties, the Executive shall report directly to the Chief Executive Officer.

The Executive agrees to observe and comply with the rules and regulations of the Company as adopted by the Board respecting the performance of the Executive's duties and agrees to carry out and perform orders, directions and policies of the Company and its Board as they may be, from time to time, stated either orally or in writing. The Company agrees that   the duties which may be assigned to the Executive shall be usual and customary duties of the position(s) to which the Executive may from time to time be appointed or elected and shall not be inconsistent with the provisions of the charter documents of the Company or applicable law. The Executive shall have such corporate power and authority as shall reasonably be required to enable the Executive to perform the duties required in any office that may be held, subject to the limitations on such powers imposed by the Board.

4.   Compensation:

Base Compensation :

During the term of this Agreement, the Company agrees to pay the Executive a base salary at the rate of Two Hundred Thousand Dollars (200,000.00) per year payable in equal installments no less frequently than twice monthly from the date hereof to December 14, 2022, subject to increases at the discretion of the Board or the Compensation Committee of the Board, payable in accordance with the Company practices in effect from time to time.

Bonuses:

Executive shall be eligible for General Bonuses (as defined below) and Performance Bonuses (as defined below) as follows (collectively, "Bonuses"):

General Bonuses: Executive shall be eligible for bonuses in accordance with any bonus or other incentive compensation plans adopted and approved by the Board ("General Bonuses").
Stock Option Plan Grant .  The Executive is entitled to receive additional shares under the Stock Option plan as "Option Shares". If the Company issues Preferred Shares, the Preferred Shares shall be calculated as if converted into Common shares and the calculated shares thereof shall be considered as newly issues Common Shares. The strike price shall be set at $0.0001 per share and the Executive may exercise a cashless transaction if the common stock is trading over and above the strike price which shall remain in force.
Executive Bonus , The Company agrees to a cash award as follows:
(a)   Effective on the date which an Agreement with Union Pacific Railroad Company is executed (the "Grant Date"), the Company hereby grants to the Executive, as compensation for the Executive's service as an Executive of the Company, the right to be paid a sum equal to Three Million Dollars (3,000,000.00), subject to the terms, conditions and provisions of this Agreement. Payment shall be due upon execution of said Agreement.
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(b)   The Executive shall be entitled to receive an additional grant on the date which an Agreement with National Passenger Railroad Corporation is executed (the "Grant Date"), the Company hereby grants to the Executive, as compensation for the Executive's service as an Executive of the Company, the right to be paid a sum equal to Two Million Dollars (2,000,000.00), subject to the terms, conditions and provisions of this Agreement. Payment shall be due upon execution of said Agreement.

Additional Benefits:   The Company agrees to provide the following "Additional Benefits" to Executive:

Payment of a medical plan coverage for the Executive at the expense of the Company, with such payment of coverage (or comparable coverage) to continue following termination of employment (other than for "Cause" or without "Good Reason" as each term is defined in this Agreement) until the Executive is eligible for Medicare or Cobra coverage or if employed elsewhere and other insurance coverage is offered.

All rights and benefits for which the Executive is otherwise eligible under any pension plan, profit-sharing plan, dental, disability, or insurance plan or policy or other plan or benefit that the Company or its Affiliates may provide for the Executive or (provided the Executive is eligible to participate therein) for employees of the Company generally, as from time to time in effect, during the term of this Agreement.

In the event the Company does not offer a medical and dental plan the Company agrees to pay for the Executive's personal health plan.
Perquisites : The Executive shall be entitled to five weeks paid vacation and other perquisites in accordance with the plans, policies, programs and practices which are at least as favorable as those in effect with respect to other peer employees of the Company.

Auto Allowance : Executive shall not be entitled to an auto allowance.

5 .         Termination :

This Agreement and all obligations hereunder (except the obligations contained in Additional Benefits Sections 4, and Sections 7, 8, 9 and 10, (Confidential Information, Non-Competition, Non-Solicitation of Customers and Noninterference with the Executives) which shall survive any termination hereunder) shall terminate upon the earliest to occur of any of the following:
Expiration of Term: The expiration of the term provided for in Section 1 or the voluntary termination by Executive or retirement from the Company in accordance with the normal retirement policies of the Company.
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Death or Disability of Executive : For the purposes of this Agreement, disability shall mean the absence of the Executive performing Executive's duties with the Company for a period of three (3) months period, as a result of incapacity due to mental or physical illness. If the Executive shall become disabled, the Executive's employment may be terminated by written notice from the Company to the Executive.
For Cause or Without Good Reason : The Company may terminate the Executive's employment and all of the Executive's rights to receive Base Salary and Bonuses hereunder for Cause or upon the resignation of Executive without Good Reason. Termination for "Cause" shall mean termination of the Executive by the Company for any of the following reasons: (a) the Executive's willful criminal misconduct or habitual neglect in the performance of his duties under this Agreement, (b) commission of any felony by the Executive, (c) the Executive's commission of any   felony involving fraud, dishonesty or moral turpitude, (d) the Executive's material breach of any material provision of this Agreement that remains uncured ten (10) days following receipt by the Executive from Company of written notice thereof, unless such breach is of a kind not susceptible to cure within such ten (10) day period, (e) material violation of any Company policies by Executive, (f) the Executive's material    dishonesty, moral, turpitude, fraud  or misrepresentation, if not disclosed, with respect to his material duties or the Executive's misrepresentation in inducement to enter into this Agreement, or (g) any willful or intentional action or inaction by the Executive resulting in any injury to the reputation of or the financial detriment of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been (i) delivered to him a notice of termination which shall include a statement to the effect that the Executive was guilty of conduct justifying termination for Cause, AND (ii) an opportunity given to him on not less than seventy two (72) hours' notice to be heard before at least a majority of the Board of Directors. "Good Reason" shall be defined as (i) demotion of Executive from the position of Chief Executive Officer without the consent of the Executive; (ii) any attempt   to decrease the Executive's Base Salary; (iii) any breach of this Agreement by the Company; or (iv) any requirement that the Executive relocate to an office more than 30 miles from Las Vegas, Nevada. In the event the Executive is discharged for any other reason whatsoever the Company shall be obligated to pay the Executive a severance sum in cash. The severance amount shall be calculated by taking the sum of all shares held by the Executive plus any shares held in trust or by an entity where the Executive is the beneficial owner of said shares and combining all share amounts. This shall also include any shares, options, or warrants which are contractually obligated by the company and the total of these instruments shall be added to the share count as if earned. The severance amount to be paid shall be based on the total share count multiplied by the market share price of the trailing 14 day trading average times twenty percent (20%). Said severance sum shall be paid to the Executive prior to any termination becoming effective. Failure by the company to pay the full amount of the severance to the Executive within 5 days of the notice of termination, unless Executive agrees in writing to alternative terms, will negate any discharge of the Executive.
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Without Cause or With Good Reason : Notwithstanding any other provision of this Section 5, the Board shall have the right to terminate the Executive's employment with the Company without Cause, and the Executive shall have the right to resign with good reason, at any time. If the Company terminates the Executive without Cause or the Executive terminates for good reason, then the Company shall, within two (2) weeks of such termination, make an immediate lump sum payment in the amount of  one time the applicable Base Salary for a period equal to two (2) years following the date of termination (the "Severance Period"), net of applicable taxes, plus  any Bonuses as set by the Board of Directors and duly approved (based on the assumption that the Company would achieve all performance targets for a 100% bonus), and the Company shall provide the Additional Benefits provided for under Section 4 for the remainder of the term, including the accelerated full vesting of Stock Options. The present value of the aggregate unpaid Base Salary and Bonuses shall be determined under the then applicable federal rates under the Internal Revenue Code. Further, if Executive is terminated without Cause or resigns with Good Reason, all stock options held by Executive shall become fully vested.

6.
Buy Out Provision:   If the Employer terminates the Executive's employment because the business is sold, the Employer will pay to the Executive (1) the Executive's accrued salary and vacation, including the then unused accrued vacation, up to and  including the date of termination and (2) the equivalent of two (2) years of the Executive's Base Salary, less applicable deductions and withholdings, pursuant   to the Employer's standard pay periods and practices; provided, however, that such payments shall be deemed severance pay and not wages. Such payment shall be made to the Executive as soon as administratively practicable after the termination of the Executive's employment, but no later than two weeks from the date the Executive's employment is so terminated. The Executive shall execute a release of all current or future claims, known or unknown, arising on or before the date of the release, against the Employer and its subsidiaries and the directors, officers, employees and affiliates of any of them, in a form approved by the Employer and (3) the Executive shall be entitled to all stock grants on section 4 which shall be issued upon termination.

7.
Golden Parachute Limitation: The payments and benefits payable to the Executive under this Agreement and all other contracts, arrangements, or programs with the Company shall not, in the aggregate exceed the maximum amount that may be paid to the Executive without triggering golden parachute penalties under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), as determined in good faith by the Company's independent auditors.  The Executive agrees that, to the extent payments or benefits under this Agreement would not be deductible under Code Section 162(m) if made or provided when otherwise due under this Agreement, such payments and benefits shall be made or provided later, immediately after Section 162(m) ceases to preclude their deduction, with interest thereon at the rate provided in Code Section 1274(b) (2) (B). If even after such deferral the payments and benefits otherwise payable to the Executive must be reduced to avoid triggering such penalties, the payments and benefits will be reduced in the priority order designated by the Executive, or, if the Executive fails promptly to designate an order, in the priority order designated by the Company. If an amount in excess of the   limit set forth in this Section 7 is paid to the Executive, the Executive shall repay the excess amount to the Company upon demand. The Executive and the Company agree to cooperate with each other in connection with any administrative or judicial proceedings concerning the existence or amount of golden parachute penalties on payments or benefits received by the Executive.

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8.
Business Expenses: During the term of this Agreement, the Company shall reimburse the Executive promptly for business expenditures made and substantiated in accordance with policies, practices and procedures established from time to time by the Company generally with respect to other employees and incurred in the pursuit and furtherance of the Company's business and good will.
9.
Confidential Information :   The Executive acknowledges that the nature of the Executive's engagement by the Company is such that the Executive shall have access to information of a confidential and/or trade secret nature which has great value to the Company and which constitutes a   substantial basis and foundation upon which the business of the Company is based.   Such information includes financial, marketing data, techniques, processes, formulas, developmental or experimental work, work in process, methods, trade secrets (including, without limitation, customer lists and lists of customer sources), or any other   secret or confidential information relating to the products, services, customers, sales or business affairs of the Company or its Affiliates (the "Confidential  Information"). The Executive shall keep all such Confidential Information in confidence during the term of this Agreement and at any time thereafter and shall not disclose any of such Confidential Information to any other person, except to the extend such disclosure is (i) required by applicable law, (ii) lawfully obtainable from other sources, or (iii) authorized in writing by the Company. Upon termination of the Executive's employment with the Company, the Executive shall deliver to the Company all documents, records, notebooks, work papers, and all similar material containing any of the foregoing information, whether prepared by the Executive, the Company or anyone else.
10.
Non-Competition : In order to protect the Confidential Information, the Executive agrees that during the term of the Executive's employment, and for a period of one years thereafter if the Executive employment is terminated by the Company with Cause or by the Executive without Good Reason, Executive shall not, directly or indirectly, whether as an owner, partner, shareholder, agent, employee, creditor or otherwise, promote, participate or engage in any activity or other business competitive with the Company's business or the business of any present Affiliate of the Company in   the state of Nevada if such activity or other business involves any use by the Executive of any of the Confidential Information. The Company shall notify the Executive of any perceived violation of this Section 10, and the Executive shall have 30 days to cure such violation.

11.
Non-Solicitation of Customers : The Executive agrees that for a period of two (2) year after   the   termination of employment with the Company, the Executive will not, on behalf of himself or any other individual, association or entity, whether or not affiliated with the Executive call on any of the customers of the Company or any Affiliate of the Company for the purpose of soliciting or inducing any of such customers to acquire (or providing to any of such customers) any product or service provided by the Company or any Affiliate of the Company, nor will the Executive in any way, directly or indirectly, as agent or otherwise, in any other manner solicit, influence   or encourage such customers to take away or to divert or direct their business to the Executive or any other person or entity by or with which the Executive is employed, associated, affiliated or otherwise related if such business is competitive with the Company.

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12.
Noninterference with Executives :  In order to protect the Confidential Information, the Executive agrees that during the term hereof and for a period of two (2) years thereafter, the Executive will not, directly or indirectly, induce or entice any employee of the Company or  its  Affiliates to  leave such employment or cause  anyone  else to  leave  such employment.

13.
Indemnity : To the fullest extend permitted by applicable law and the bylaws of the Company, as from time to time in effect, the Company shall indemnify the Executive and hold the Executive harmless for any acts or decisions made in good faith while performing services for the Company, and the Company shall use commercially reasonable efforts to obtain coverage for the Executive (provided the same may be obtained at reasonable cost) under any liability insurance policy or policies now in force or hereafter obtained during the term of this Agreement that cover other officers of the Company having comparable or lesser status and responsibility.   The Company will pay and, subject to any legal limitations, advance all reasonable expenses, including reasonable attorneys' fees and costs of   court approved settlements, actually and necessarily incurred by the Executive in connection with the defense of any action, suit or proceeding and in connection with any appeal thereon, which has been brought against the Executive by reason of the Executive's service as an officer, employee or agent of the Company, except if shown that the Executive has breached his duties and obligations to the Company.

14.
Severability: If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, to achieve the intent of the parties to the extent possible.   In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.

15.
Succession:    This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, "successor" and "assignee" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the stock of the Company or to which the Company assigns this Agreement by operation of law or otherwise.    The obligations and duties of the Executive hereunder are personal and otherwise not assignable. The Executive's obligations and representations under this Agreement will survive the termination of the Executive's employment, regardless of the manner of such termination.

16.
Notices:   Any notice or other communication provided for in this Agreement shall be in writing and sent if to the Company to its office at:

X Rail Entertainment, Inc.
9480 South Eastern Ave, Suite 205
Las Vegas, Nevada 89123
(702) 583-6698

or at such other address as the Company may from time to time in writing designate, and if to the Executive at such address as Executive may from time to time in writing designate. Each such notice or other communication shall be effective (i) if given by telecommunication, when transmitted to the applicable number so specified in (or pursuant to) this Section 16 and a verification of receipt is received, (ii) if given by mail, three days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when actually delivered at such address.
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17.
Entire Agreement : This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes agreements, undertakings, commitments and practices relating to the Executive's employment by the Company.

18.
Amendments :   No amendment or modification of the terms of this Agreement shall be valid unless made in writing and duly executed by both parties. All previous Agreement's shall be null and void.

19.
Waiver :   No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof or of any other right, nor shall any single or partial exercise preclude any further or other exercise of such right or any other right.

20.
Governing Law :   This Agreement, and the legal relations between the parties, shall be governed by and construed in accordance with the laws of the State of Nevada without regard to conflicts of law doctrines, and any court action arising out of this Agreement shall be brought in any court of competent jurisdiction within the State of Nevada.

21.
Arbitration:   The parties may, if they so desire and elect, submit any claim for payment under this   Agreement or any dispute regarding the interpretation of this Agreement to arbitration upon such terms and provisions to which they agree.

22.
Withholding:   All compensation payable hereunder, including salary and other benefits, and amounts payable under Section 4 above, shall be subject to applicable taxes, withholding and other required, normal or elected employee deductions.

23.
Counterparts :  This Agreement and any amendment hereto may be executed in one or more counterparts. All of such counterparts shall constitute one and the same agreement and shall become effective when a copy signed by each party has been delivered to the other party.

24.
Headings :  Section and other headings contained in this Agreement arc for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

25.
Representation by Counsel; Interpretation : The Company and the Executive each acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the matters contemplated by this Agreement. Accordingly, any rule of law, including but not limited to Section 1654 of the California civil Code, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provision of this Agreement shall be interpreted in a reasonable manner to affect the intent of the parties.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.



       
THE COMPANY
         
       
X Rail Entertainment, Inc.
         
       
By: /s/ Michael Barron
         
       
Its: CEO
         
         
         
       
THE EXECUTIVE
         
       
Joseph A. Cosio-Barron
       President
         
       
/s/ Joseph Cosio-Barron
 
 
 
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Exhibit 31.1
 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES – OXLEY ACT OF 2002

I, Michael A. Barron, certify that:

1.      I have reviewed this quarterly report on Form 10-K of X Rail Entertainment, Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.      The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date: April 2, 2018
 
/s/  Michael A. Barron
 
Michael A. Barron
Chief Executive Officer
 
 
Exhibit 31.2
 

CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER PURSUANT TO SECTION 302 OF THE SARBANES – OXLEY ACT OF 2002

I, Wanda Witoslawski, certify that:

1.      I have reviewed this quarterly report on Form 10-K of X Rail Entertainment, Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5.      The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date: April 2, 2018
 
/s/  Wanda Witoslawski
 
Wanda Witoslawski
Chief Financial Officer
 
 
Exhibit 32.1
 
CERTIFICATION PURSUANT TO 18 U.S.C. Sec. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 

In connection with the Yearly Report of X Rail Entertainment, Inc. (the "Company") on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael A. Barron, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/  Michael A. Barron
Michael A. Barron
Chief Executive Officer
 
 
 
 
Exhibit 32.2
 
 
CERTIFICATION PURSUANT TO 18 U.S.C. Sec. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 

In connection with the Yearly Report of X Rail Entertainment, Inc. (the "Company") on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Wanda Witoslawski, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/  Wanda Witoslawski
Wanda Witoslawski
Chief Financial Officer