**UNITED
STATES**
 **SECURITIES
AND EXCHANGE COMMISSION**
 **Washington,
D.C. 20549**
 
 **FORM
10-KSB**
 
 
 **[X]
Annual report under Section 13 or 15(d) of the Securities Exchange Act
of**
 **1934
for the fiscal year ended December 31, 2004**
 
 **[ 
] Transition report under Section 13 or 15(d) of the Securities
Exchange**
 **Act
of 1934 (No fee required) for the transition period from
to**
 
 **Commission
file number: 0-27919**
 
 **XRAYMEDIA
Inc., fka XRAYMEDIA.COM Inc.**
 **(Name
of Small Business Issuer in Its Charter)**
 
 **Minnesota
410951123**
 **(State
or Other Jurisdiction of (I.R.S. Employer**
 **Incorporation
or Organization) Identification No.)**
 
 
 **555
Hastings Street, Ste.# 1560, Vancouver, B.C., Canada V6B
4N6**
 **(Address
of Principal Executive Offices) (Zip Code)**
 
 **(888)
777-0658**
 **(Issuer's
Telephone Number, Including Area Code)**
 
 **Securities
registered under Section 12(b) of the Exchange Act:**
 
 **Title
of Each Class Name of each Exchange on Which Registered** **Common
Stock ($0.001 Par Value) None**
 **Preferred
Stock ($0.001 Par Value)**
 
 
 **Check
whether the issuer: (1) filed all reports required to be filed by Section** **13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter** **period
that the registrant was required to file such reports), and (2) has been** **subject
to such filing requirements for the past 90 days.**
 
 **Yes
[X] No [   ]**
 
 
 **Check
if there is no disclosure of delinquent filers in response to Item 405 of** **Regulation
S-B not contained in this form, and no disclosure will 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-KSB or any** **amendment
to this Form 10-KSB [X].**
 
 **The
issuer's total revenues for the year ended December 31, 2004, were** **$70,438.**
 
 **On
March 18, 2005, the number of shares outstanding of the registrant's** **Common
Stock, $0.001 par value (the only class of voting stock), was** **238,457,250.
The market value of stock held by non-affiliates as of** **March
18, 2005 was $1,937,853. On March 18, 2005, the number of shares outstanding** **of
the registrants Preferred Stock, $0.001 par value (non-voting), was
1,000,000.**
 
 **The
Company’s President, Raymond Dabney, holds 100% of these
shares.**
 
 
 ****
 ***Page
- 1***
 
 
 **PART
I**
 
 **FORWARD-LOOKING
STATEMENTS. THIS REGISTRATION STATEMENT INCLUDES** **"FORWARD-LOOKING
STATEMENTS." FORWARD-LOOKING STATEMENTS CONTAINED IN THIS** **REGISTRATION
STATEMENT ARE BASED ON MANAGEMENT'S BELIEFS AND ASSUMPTIONS AND ON** **INFORMATION
CURRENTLY AVAILABLE TO MANAGEMENT. FORWARD-LOOKING STATEMENTS** **INCLUDE
STATEMENTS IN WHICH WORDS SUCH AS "EXPECT, " "ANTICIPATE," "INTEND,"** **"PLAN,"
"BELIEVE," "ESTIMATE," "CONSIDER," OR SIMILAR EXPRESSIONS ARE
USED.**
 
 **YOU
SHOULD NOT CONSTRUE ANY FORWARD-LOOKING STATEMENT AS A GUARANTEE OF FUTURE** **PERFORMANCE.
THESE STATEMENTS INHERENTLY INVOLVE RISKS, UNCERTAINTIES AND** **ASSUMPTIONS.
THE FUTURE RESULTS AND STOCKHOLDER VALUES MAY DIFFER FROM THOSE** **EXPRESSED
IN THESE FORWARD-LOOKING STATEMENTS, AND THOSE VARIATIONS MAY BE** **MATERIAL
AND ADVERSE. MANY FACTORS THAT WILL AFFECT THESE RESULTS AND VALUES
ARE**
 **BEYOND
OUR ABILITY TO CONTROL OR PREDICT.**
 
 
 **ITEM
1. DESCRIPTION OF BUSINESS**
 
 A.
Corporate Organization
 
 As used
herein the terms "Xray" and "XRAYMEDIA " refers to XRAYMEDIA, Inc., a
Minnesota corporation, its subsidiaries and predecessors, unless
the
 context
indicates otherwise.
 
 On
November 15, 2003 the name was changed from XRAYMEDIA.COM Inc., to XRAYMEDIA,
Inc., to better reflect the company as a traditional advertising
agency
 rather
then continuing to use the negative connotation of .com being attached to the
corporate name.
 
 On June
28, 2000 the name was changed from e-bidd.com, inc., to XRAYMEDIA.com
inc. to avoid a potential conflict with another totally separate and
unrelated company by a similar name, www.Ebid.com,that also operated as an
Internet auction site.
 
 XRAYMEDIA
has had several previous names in the past including: Image Photo
Systems, Inc., AJA Merchant Banking Corporation, Cyberguides International,
Inc., Digital Reporting, Inc., and Port Industries, Inc.
 
 Although
XRAYMEDIA was initially formed to conduct any lawful activity, XRAYMEDIA
is a Media Solutions Company offering a variety of integrated products
and services through its website, including media buying and selling, live
media negotiating technology, web, logo and print ad design services, public
relations and investor relations services, as well additional media
technology to be
announced as implemented. Through affiliations with Media Industry leaders is
positioned to capitalize on the migration of advertising sales and
real-time Internet
negotiating technology as well as other related media based activity, to the
internet through Business to Business Media solutions.
 
 XRAYMEDIA
was originally incorporated in Minnesota on November 27, 1968, as Port
Industries, Inc., and operated as a real estate development
company.
 Port Industries,
Inc. commenced bankruptcy proceedings under Chapter XI in May, 1974 and
emerged from bankruptcy in April, 1976. As a result of the bankruptcy,
all
 assets
were distributed and the debtor's rights were formally discharged. Port Industries,
Inc. remained inactive from 1976 until 1994.
 
 On March
1, 1994, Port Industries, Inc. entered into an agreement of merger with Digital
Reporting, Inc., a Delaware corporation, engaged in the business of corporate
acquisitions. Upon the effective date of the merger Port Industries, Inc.,
issued 720 shares (1,800 shares prior to stock splits) of its common stock in
exchange for all of the outstanding shares of Digital Reporting, Inc., whose operations
were nominal since its inception, and became the sole surviving corporation
under its post-merger name, Digital Reporting, Inc.
 
 In
September 1997, Digital Reporting, Inc. acquired all of the outstanding common
shares Cyberguides International, Inc., a Delaware corporation, in exchange
for 3,500 restricted shares of Digital Reporting, Inc.'s common stock. Accordingly,
Digital Reporting, Inc. changed its name to Cyberguides International,
Inc. and operated a web page on the Internet that contained a database
of general information about public companies. Cyberguides International,
Inc. then merged with Corp Reports.com whose principal business activity
was similar to that of Cyberguides International, Inc., the operation of a web
page in the early days of the Internet that contained a database of public
companies annual reports.
 
 In
February, 1998 A.J. Alda & Associates acquired a majority interest in Cyberguides
International, Inc. by purchasing approximately 1,140 restricted common
shares of its stock. Mr. A.J. Alda was then appointed director, president,
and chief executive officer of Cyberguides International, Inc. which changed
its name to AJA Merchant Banking Corporation and operated as a public merchant
banking corporation. AJA Merchant Banking Corporation, also in the business
of corporate acquisitions, entered into preliminary negotiations with a printed
circuit board manufacturer in the Minneapolis - St. Paul, Minnesota area to build
a prototype circuit board but failed to reach the development or production
stage.
 
 On
December 4, 1998, AJA Merchant Banking Corporation changed its name to Image Photo
Systems, Inc. and began developing 3D picture viewers for children.
Image
 Photo
Systems, Inc. developed a prototype 3D picture viewer, but failed to reach the
manufacturing, production, or sales stage. In 1999, the officers and directors
associated with the acquisition of Image Photo Systems, Inc.
resigned.
 
 
 In July,
1999 Image Photo Systems, Inc., under new management, entered into an Agreement
with Laurier Limited, whereby it acquired its current operations as an Internet
auction site and licensor of Auction and Ad Serving Software and Laurier
Limited received 10,000,000 restricted shares of Image Photo Systems, Inc.
stock. In September 1999, Image Photo Systems, Inc. changed its name to e-bidd.com,
Inc. Subsequently, the Laurier transaction was reversed. (See below).
 
 On June
28, 2000 the name was changed from e-bidd.com, inc., to XRAYMEDIA.com inc. to
avoid a potential conflict with another totally separate and unrelated company
by a similar name, www.Ebid.com, that also operated as an Internet auction
site.
 
 As of
September 30, 2000, the Company had not received the software license from
Laurier Limited for which 10,000,000 shares of common stock had been issued.
Because of this default, the company has reversed the asset and related
stockholders' equity amounts originally recorded in this transaction retroactively
to Dec. 31, 1999.
 
 ***Page
- 2***
 
 The
company had been in development of its own Media Auction software with separate
modules being acquired from other sources. On December 18, 2000, in a 2nd Level
Public Access program XRAYMEDIA had opened its media auction site for qualified
media buyers and sellers to test. During that time, protocols for credit
approval and confirmation of inventory had been applied and checked repeatedly
for robustness. XRAYMEDIA intended to officially launch that
media auction software before the year-end of 2001.
 
 On May
29th 2001 The Company announced that it has acquired from a European Company
called TS4U LTD a breakthrough, dynamically interactive streaming-auction
/ inventory implementing software system. The transaction allows
for XRAYMEDIA to retain ownership of the revised software "XRMD System" with all
the necessary Advertising/Media Industry categories and database structures
required for the launch of its Media Auction. Under the terms of the Agreement
XRAYMEDIA is not to sell, license or distribute the software to any
t hird
parties for business use at anytime. The deal also calls for the TS4U LTD
not to compete in the Advertising/Media Industry worldwide.
XRAYMEDIA
 Can only
use the technology for the Advertising/Media Industry worldwide. The company
then proceeded to make the necessary changes to the software to launch a
full real-time advertising/media inventory negotiating system for the media
industry.
 
 XRAYMEDIA
is a traditional advertising agency that has developed leading edge live
negotiating technology. From August 21st 2001 through to today, XRAYMEDIA has
successfully launched three applications of the company’s Live Negotiating
Technology. Available via two web-applications, the current release of
XRAYMEDIA’s proprietary technology is featured within the Live Media Marketplace
v5.1.1, and the Live Open Marketplace v5.2.
 
 Recently
diversified in its services XRAYMEDIA has announced the launch of The
Screenwriter Dig, as well as the North American debut of the Asian Woman
Magazine series, both direct results of strategic partnerships formed over the
past 12 months. Complimenting the flurry of new activity for the Company,
XRAYMEDIA has released a revised Corporate website highlighting the Company’s
main areas of focus.
 
 On
November 15, 2004 the company released the latest version of the LMM v5.1.1
(LMM), featuring live negotiating capabilities. The system gives all registered
buyers and sellers flexibility and negotiating power, enabling the general
public to negotiate advertising purchases in real-time, via a powerful and cost
effective platform. As an
online tool, the LMM gives clients the ability to instantly find and negotiate
with new media opportunities worldwide. The LMM provides a 128-bit encrypted
secure forum for private,
one-on-one, and one-to-many negotiations while dynamically loading and matching
inventory changes and instantly updating new opportunities. The
system is available for Private-labeled in-house use and live general public
negotiations. All media
trading activity takes place on each user’s private "Media Trading Floor"
screen. Users can enter new media buy and sell orders, and negotiate choosing
currencies from around the world. The live updating technology automatically
creates "Media Matches" with "Media Orders" appearing on the user’s personal
"Media Trading Floor". These matches are "Media Orders" placed by other users
that match the users' Media Buy and/or Sell Order criterion. Once these matches
are generated, all users can review the details and begin to negotiate in
real-time. At any point both negotiating parties agree upon a price and close
the deal online, simultaneously deleting the sold media orders from the screens
of all other users. Recent additions to the LMM include the Media Tracker, and
Media Navigator; both designed to further enhance the user’s real-time
experience with live statistics and system information. With no sign up fees or
monthly charges, the LMM is available to buyers and/or sellers of all media.
XRAYMEDIA’s LMM maximizes its registered users' reach to find the optimum market
price for any given media inventory without compromising the seller's
proprietary pricing information or identity if they so choose.
 
 Taking
its live negotiating technology to the next level, XRAYMEDIA has now expanded
the scope of its signature operating system. Currently, available through
private licensing opportunities, the Live Open Marketplace (LOM) enables
registered system users to buy and sell virtually anything they desire. With
diverse listings from vehicles and jewelry, to books and antiques, the LOM
provides a global online community marketplace for all to use. Further upgrades
to the LOM include the implementation of new video and image components, which allow its
users to thoroughly evaluate merchandise, and other such offerings, before
initiating live negotiations . Similar
in concept to that of eBay, the XRAYMEDIA system is essentially a
technologically advanced auction, capable of accommodating the comprehensive
online marketplace needs of the public at large. The Company's registered users
can easily find and immediately negotiate on what they want, as XRAYMEDIA’s live
negotiating technology enables consumers to negotiate the best possible price,
with several vendors, simultaneously, in real-time. Auctions are currently
employed by companies like eBay, who in back in 2002, had users list over 638
million items within eBay's marketplace, a 51% increase from the prior year
alone. EBay’s net revenues totaled $1.21 billion in 2002, with the value of
items sold for that year totaling $15 billion proving out the business model.
eBay makes its money primarily from listing, feature, and final value fees
collected from registered users who make use of the company's website to conduct
their transactions. In 2003, eBay's success continued, as the company generated
net revenues of $2.17 billion, representing a 78% increase over the previous
year.
 
 The
Company has created an opportunity for all, in effect, to form their own virtual
storefront, allowing sellers the chance to make money by selling their new or
used goods, at a price that they deem appropriate. XRAYMEDIA’s live negotiating
technology provides the next level of Internet purchasing power, instant access
to thousands of items while sorting, matching and real-time simultaneous
negotiations for all registered users. By creating a private licensing business
opportunity for this technology application, XRAYMEDIA has created a new
potential revenue stream, as interested entrepreneurs approach the company
looking to private label, their own open marketplace. Setting the stage for
dynamic live negotiations for any item listed in the system's inventory; the
Company will build a series of private labeled e-commerce websites, all
connected through its real-time tracking system and pointed towards a central
live negotiating marketplace, the LOM. While each private labeled site will
represent its own online storefront, or virtual marketplace, all users are still
able to enjoy the benefits of a comprehensive, common goods and service listing
base, for all online marketplace transactions.
  ***Page
- 3***
 
 From the
first day of the revised Live Media Marketplace v3.0 launch with the new
corporate trade modules XRAYMEDIA has amassed a substantial amount of corporate
trade transactions through its corporate trade partners and affiliates. Trade
volumes reached a peak of approximately $55,000,000.00 in corporate trade
transactions from its partners in the Live Media Marketplace v3.0. As one of the
partners by contract, XRAYMEDIA received goods in consideration for use of their
marketplace, which will be liquidated and realized as soon as practicable. Based
on Accounting Principles Generally Accepted in the United States the “Corporate
Trade Transactions Fees” to date will not be reflected in the financial
statements until the company has liquidated the goods. The Company is in the
process of selling all the goods for cash to an unrelated party.
 
 XRAYMEDIA
has received several joint venture opportunities, over the past year. The
Company has been selective in its consideration of these various proposals, and
has chosen to move forward with those deemed to be inline with XRAYMEDIA’s
global interests. The first such project is simply called The Screenwriter Dig
(TSD). Born out of XRAYMEDIA’s established partnership with Hollywood
entertainment conglomerate, Relativity Management, XRAYMEDIA sponsors this
contest quest to find quality scripts and pitches for potential further
development by famous producer, and contest host, Mark Canton. In his
two decades of experience in the entertainment industry, Mark Canton has
help ed bring
more than 300 pictures to the silver screen. Canton initially joined Warner
Bros. in 1980. He rose to Senior Vice President in 1983 and by 1985 was named
President of Worldwide Theatrical Production. During his tenure at Warner Bros.,
Mr. Canton was instrumental in developing - among others - the Batman , *Lethal
Weapon* , and *National
Lampoon's Vacation* franchises. Entertainment remains one of America's largest exports. Box office
records are broken nearly every year and television-advertising revenues are at
all-time highs. Revenues from all sources of media and entertainment (film,
music, video games, publishing, etc.) are expected to reach $571 billion by 2006
( *Price
Waterhouse Coopers* ). Since
the birth of the industry, Hollywood, as a city and an institution, has
represented a gateway to fame, excitement and intrigue that appeals to many
people worldwide. Over the course of this competition, launched April 12, 2005,
XRAYMEDIA will provide the online expertise and infrastructure for The
Screenwriter Dig, while Mark Canton brings creative expertise as well as access
to the major motion picture studios and television networks. Through The
Screenwriter Dig, writers from all over the country and world are given the
chance to have their screenplays, teleplays and television and film pitches read
by Mark Canton and his creative staff. At the end of the year one of each type
of project (i.e., film script, TV pitch, etc.) will be chosen for further
development and submission to a studio for production consideration. By opening
the doors to a seasoned Hollywood producer like Mark Canton, aspiring filmmakers
who traditionally would never get the attention of a producer of Mark Canton's
caliber, now have a means by which to showcase their talents.
 With the
potential to generate significant revenues, for XRAYMEDIA, The Screenwriter Dig
has features nominal fees ranging from $10.00 up to $29.00 per submission.
Overall cash flow is conservatively projected at over $8,000,000 for the first
year of the competition alone. Increases of 25% for each subsequent year are
expected in future TSD contest.
 
 XRAYMEDIA
has partnered exclusively with the Asian Woman Media Group to represent all
North American and International advertising for the company’s five magazines. Currently
published by, AIM International, one of the largest Asian print publishers in
the UK, the Asian Woman Media Group is bringing five established magazines, all
geared towards the South Asian demographic, to North America. These leading
publications include Asian Woman, as well as Asian Bride wedding magazine. Both
of these premier periodicals are the first Asian publications to be certified by
the Audit Bureau of Circulation (ABC). An International regulatory body
established since, 1914, the, the ABC is a non-profit organization auditing
publications in accordance with recognized standards, which govern, among other
things, how publishers report their circulation statistics. Asian Woman is the
best selling Asian magazine in the UK, Europe and even the world; and Asian
Bride remains the fourth biggest mainstream bridal title in the UK since 2002.
Well known throughout the South Asian community, Asian Woman, one of the
company's benchmark publications, has a circulation of over 1 million readers
alone. With widespread appeal, these magazines have already garnered 23%
readership from outside the Asian community. XRAYMEDIA's exclusive rights will
be initially focused on bringing North American advertising content to both
Asian Woman and Asian Bride magazines. With a current fee structure that
allocates 50% of all generated ad-sales revenues to XRAYMEDIA, the Company has
initiated a marketing plan to be rolled-out, first across all major North
American markets and then Internationally as the magazine’s reach
grows.
  ***Page
- 4***
 
 **XRAYMEDIA**
 
 **B.
DESCRIPTION OF BUSINESS MODEL**
 
 **EXECUTIVE
SUMMARY**
 
 John
Hagel of McKinsey coined the term “infomediaries” to describe intermediaries who
sell information about a market, creating a platform on which buyers and sellers
can do business. Many Internet researchers now believe that perhaps the most
profitable pure Internet companies, as well as the most influential, will be
business-to-business infomediaries, who will have the ability to re-organize
entire industries. *Red
Herring* , an
Internet aficionado magazine, recently called the emergence of "Internet
Infomediaries" the next bastion of economic activity to profoundly impact the
Internet. Infomediaries represent a new category of entrepreneurs. Through the
development of its online SuperPortal - and more specifically, its Live
Negotiating Technology - XRAYMEDIA has membership in this rare category.
 
 XRAYMEDIA’s
objective is ** to become
a premiere media company, encompassing everything from advertising to
entertainment. As part of the fifth-fastest growing sector in the US economy,
industry experts anticipate a 6.3 percent compound annual growth rate in media
spending, over the next few years with an upsurge in 2006 and 2007. *PricewaterhouseCoopers* forecasts that global entertainment and media spending will reach a record $1.4
Trillion by 2007, with advertising capturing $375 billion of that market.The
traditional process of buying media as well as various products or goods is
usually cumbersome and time-consuming for buyers, and can serve to effectively
shrink sellers’ consumer base.
 
 Consumers
spent an average of 3,599 hours using media in 2002; this represents an increase
of 1.8 percent over 2001. *Veronis
Suhler and Stevenson* forecast
that the average time consumers spend with media will swell to 3, 874 hours, a
compound annual growth rate of 1.5 percent. Consumers appeared to favor both
satellite and cable television as their media of choice in 2002, with total
television viewing accounting for 47.3 percent of the average consumers time
spent with media. Consumer spending on online content also rose by a dramatic
95% in 2002, totaling $1.3 billion, the majority of these revenues can be
attributed to annual subscriptions, accounting for 41 percent of online
sales.
 
 Currently,
there is a scattered presence of online auction sites. Sites such as *eBay.com* have
made the online auction famous. In terms of business-to-business eCommerce
services for buying and selling premiumgoods and/or services, major competitors
have included Onemediaplace, Reuters, Marketron. These companies generated
substantial traffic and have reported several millions in revenue with their
media auctions and Internet media buying services, signaling the desire among
media professionals for a coherent and convenient way to conduct business.
 
 XRAYMEDIA
breaks new ground, as the Company remains the only business to host a Live
Negotiating Marketplace with real-time negotiating technology. XRAYMEDIA is
positioned to surpass any potential competition by offering the services of a
traditional advertising agency, and by supplementing these services with an
all-encompassing services package - as presented at XRAYMEDIA’s SuperPortal
located at www.xraymedia.com .
 
 
 **THE
XRAYMEDIA MISSION**
 
 XRAYMEDIA
is positioned to become an industry leader, providing cutting edge live
negotiating technology to multiple industries through its premiere
business-to-business web site.
 
 Central
to XRAYMEDIA is its unique live negotiating technology; under years of
development this technology has been solely deployed in media industry.
Available to the global community, 24 hours a day, 7 days a week, XRAYMEDIA now
releases this proprietary technology to virtually every industry worldwide, with
video and image components allowing users to thoroughly evaluate merchandise,
and other such offerings, before initiating live negotiations. XRAYMEDIA proudly
releases one of the most powerful technologies in live Internet negotiating for
online marketplaces today.
  ***Page
- 5***
 
 The
company believes that:
 
 Currently,
significant untapped opportunities exist in the area of eCommerce
 
 An Online
SuperPortal has the ability to replace outdated and inefficient methods of
Internet transacting that is, selling and purchasing online
 
 An
Internet SuperPortal can replace outdated and inefficient methods of accessing
an Advertising Agency, a Media Buying Firm, a Public Relations department, a
Marketing firm, and Design Services;
 
 There are
opportunities to garner income from cooperative relationships between
subscribing outlets, agencies, agencies offering services through the XRAYMEDIA
SuperPortal, and XRAYMEDIA itself.
 
 XRAYMEDIA
has assembled the partners and technology to enable it to expand on its vision:
XRAYMEDIA's mission is to provide an Online SuperPortal site to the general
business community and professionals alike. This will make all markets more
accessible and user-friendly to national and local system-users alike, by
streamlining and centralizing the process of buying media, as well as goods.
Sellers can avail themselves of a broader, more global marketplace.
 
 We have a
common goal of bringing new efficiencies to the online marketplace. By doing so,
we can increase corporate billing and profitability prospects, creating better
results and generating additional revenue for all involved.
 
 
 **THE
INDUSTRY**
 
 The
Internet is changing historically staid industries by enabling them to operate
with unprecedented efficiency. Previously fragmented enterprises - from paper to
chemicals - are establishing centralized marketplaces online. As the technology
underlying eCommerce solutions improves, the level of trust in the security of
online commerce systems increases. The impact of this trend cannot be
overstated: both individuals and businesses are beginning to exploit the
convenience and immediacy of online eCommerce options. Just as commerce is
central to real-world business practices, eCommerce is the core of Internet
purchasing. Online marketplaces provide business solutions: they are instant and
global forums for trade. The online auction is an increasingly popular venue for
both businesses and individuals.
 
 The
Internet auction - defined as an exchange of products or inventory through
online communication channels and computer applications for a specific community
of practice - represents a particularly timely and exciting growth opportunity.
According to Jupiter Communications, online business-to-consumer auctions moved
$3.2 billion worth of merchandise annually as of 2002; this figure can be added
to further sales conducted person-to-person. A survey conducted by *PricewaterhouseCoopers* found
that online advertising revenues surpassed the $1.0 billion mark for the first
time in the third quarter of 1999, and a recent survey on online spending
indicates that online auctions accounted for $644 million in the first quarter
of 2000 (Harris Interactive) and has grown substantially since.
 ****
 
 **THE
XRAYMEDIA ONLINE SUPERPORTAL**
 
 Our first
milestone - completed in its test phase on October 24, 2000 - was to create an
online presence: XRAYMEDIA’s Online SuperPortal. The SuperPortal is divided into
three distinct sub portals (Corporate Culture, Media Services, and Community
Resources). Each sub portal is designed to deliver a specific objective in
making the practice of buying and selling media, or entertainment a convenient
and cohesive process. As we grow, both as a site and as a company, we will
expand to include a full set of services and tools for the industry
professional.
 
 
 **THE
XRAYMEDIA OPPORTUNITY**
 
 
 XRAYMEDIA
streamlines the existing process of buying and selling online; allowing
professionals to use new methods for transactions, such as Live Negotiations.
This means that buyers and sellers are eager to use our services, and that the
company is more likely to secure a significant long-term revenue stream.
XRAYMEDIA will be the first and only Internet site that integrates Live
Negotiating Technology with a network of best-of-breed media products and
services tailored to the needs of all industries around the world in a single
facility. The Online SuperPortal supplies buyers and sellers with a more
proficient and cost effective way to buy and sell their media or goods. Our Live
Negotiating technology provides an efficient means of executing every thing from
media schedules for advertising agencies and direct advertisers, to inventory
tracking for the small business users. To this essential function for
professionals and the general business community, XRAYMEDIA adds a vast array of
other tools and services. The Online SuperPortal is a full-service, convenient,
and efficient resource for the general business community and industry
professionals alike.
 
 
 ***Page
- 6***
 **CORPORATE
STRATEGY**
 
 XRAYMEDIA
intends to successfully establish its Online SuperPortal as the premiere site
for the general business community and professionals. We will provide fast,
efficient, and reliable information, and essential resources in a user-friendly
format. Our database will capture details resulting in corporate and customer
profiling, which will allow buyers, sellers, and advertisers to develop their
businesses in direct response to their market.
 
 XRAYMEDIA’s
graphical interface will simplify user operations and provide required services
through the Online SuperPortal by:
 
 Enabling
merchants to accept online information, securely;
 
 Keeping
implementation costs low;
 
 Providing
transaction data to the client for clearing on XRAYMEDIA’s system;
 
 Bringing
third party reporting and billing to both buyers and sellers.
 
 The
opportunity to create lateral synergies with corporations and organizations will
provide income streams through sponsorships, banner advertisements, and
eCommerce opportunities.
 
 XRAYMEDIA
will aggressively seek strategic partnerships, and facilitate advertising
opportunities with corporations, online search portals, and organizations with
revenue-enhancing prospects.
 
 Banner
ads, polling initiatives, sponsorship opportunities, and lateral promotion
campaigns will produce multiple revenue streams while extracting economic value
from services rendered.
 
 XRAYMEDIA
will implement business-to-business eCommerce systems such as our Live
Negotiating Technology. The availability of other traditional services such as
our Advertising Agency, Public Relations department, Request For Proposal (RFP),
Design Services, complimented with the Company’s entertainment ventures - makes
XRAYMEDIA’s Online SuperPortal a full-service online mall. The development of
other resources like free web-based email and an online chat forum will further
enhance the attractiveness of the site because of its convenience for a variety
of functions.
 
 G.
Regulatory Overview (New and Existing Regulation of the Internet)
 
 XRAYMEDIA
is subject to the same federal, state and local laws as other companies
conducting business on the Internet. Today there are relatively few laws
specifically directed towards online services. However, due to the increasing
popularity and use of the Internet and online services, it is possible
that laws and regulations will be adopted with respect to the Internet or online
services. These laws and regulations could cover issues such as online
contracts, user privacy, freedom of expression, pricing, fraud, c ontent
and quality of products and services, taxation, advertising, intellectual
property rights and information security. Applicability to the
Internet of existing laws governing issues such as property ownership, copyrights
and other intellectual property issues, taxation, libel, obscenity and
personal privacy is uncertain.
 
 In
addition, numerous states, including the State of New York, in which XRAYMEDIA's
alternate place of business is located, have regulations regarding the
manner in which "auctions" may be conducted and the liability of "auctioneers"
in conducting such auctions. No legal determination has been made with
respect to the applicability of the State of New York's regulations to XRAYMEDIA's
business to date and little precedent exists in this area. One or more
states may attempt to impose these regulations upon XRAYMEDIA in
the
 future,
which could harm XRAYMEDIA's business. Several states have proposed legislation
that would limit the uses of personal user information gathered online or
require online services to establish privacy policies.
 
 Changes
to existing laws or the passage of new laws intended to address these issues
could directly affect the way XRAYMEDIA does business or could create uncertainty
in the marketplace. This could reduce demand for the services of
XRAYMEDIA or increase the cost of doing business as a result of litigation costs or
increased service delivery costs, or could otherwise harm XRAYMEDIA's business.
In addition, because XRAYMEDIA's services are accessible worldwide, and
XRAYMEDIA facilitates sales of goods to users worldwide, foreign jurisdictions
may claim that XRAYMEDIA is required to comply with their laws. In
some jurisdictions, XRAYMEDIA will be required to collect
value-added
 taxes on
its fees.
 
 H.
Reports to Security Holders
 
 XRAYMEDIA's
annual report will contain audited financial statements. XRAYMEDIA is not
required to deliver an annual report to security holders and will not
voluntarily deliver a copy of the annual report to the security holders. XRAYMEDIA
intends to, continue filing all of its required information with the Securities
and Exchange Commission ("SEC").
 
 The
public may read and copy any materials that are filed by XRAYMEDIA with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. The Public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The statements and forms
filed by XRAYMEDIA with the SEC have also been filed electronically
and are available for viewing or copy on the SEC maintained Internet
site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The
Internet address for this site can be found at http://www.sec.gov. Additional
information can be found concerning XRAYMEDIA on the Internet at http://www.XRAYMEDIA.com .
 
 
 ***Page
- 7***
 
 **Risk
Factors**
 
 1.
          Going Concern. The
Company has experienced operating losses and its ability to continue as a going
concern in the future is dependent upon achieving profitability and/or securing
sufficient additional capital at terms economically acceptable to the Company.
 
 2.
          Company with Limited
History of Earnings. The Company has a limited operating history and is subject
to all of the risks inherent in a developing business enterprise, including lack
of cash flow and service acceptance.
 
 3.
          Development and
Market Acceptance of Services. The Company’s success and growth will depend in
part upon the market’s acceptance of, and the Company’s ability to deliver and
support, the Company’s services.
 
 4.
          Dependence on
Technology Suppliers. While the Company currently relies upon certain outside
technology suppliers, the Company believes that there are numerous other outside
technology suppliers that perform the same services. Accordingly, the Company
believes that if current technology suppliers could not, or would not, furnish
future services to the Company, the Company could obtain such services from
other sources without interruption of its operations.
 
 5.
          Liquidity; Need for
Additional Financing. The Company believes that it does not have the cash it
needs for the next twelve months based upon its internally prepared budget and
expansion plans. Further, the Company’s cash requirements are not easily
predictable and there is a possibility that its budget estimates will prove to
be inaccurate. If the Company is unable to generate a positive cash flow, it
will be required to curtail operations substantially and seek additional
capital. There is no assurance that the Company will be able to obtain
additional capital if required, or if capital is available, or can be obtained
on terms favorable to the Company. The Company may suffer from a lack of
liquidity in the future, which could impair its short-term marketing and sales
efforts and adversely affect its results of operations.
 
 6.
          Competition. Most of
the Company’s competitors have substantially greater financial, technical and
marketing resources than the Company. In addition, the Company’s services
compete indirectly with numerous other suppliers of media services and online
marketplaces. As the market for the Company’s services expands, the Company
expects that additional competition will emerge and that existing competitors
may commit more resources to those markets.
 
 7.
          Reliance upon
Directors and Officer. The Company is primarily dependent, at the present, upon
the personal efforts and abilities of its President and Director, Raymond C.
Dabney, who exercises complete control over the daily management of the Company.
 
 8.
          Issuance of
Additional Shares:  The Company has issued nearly its entire current
authorized limit of 250 million shares and, in order to continue its growth
plans, the Company needs to increase its authorized share amount. The Company is
in the preliminary stage of proposing amendments to the Articles of
Incorporation to increase the authorized capital of the Company from 250
millions shares of Common Stock, par value $0.001, to 750 million shares of
Common Stock, par value $0.001. Additionally, the proposed amendment includes
the increase in Preferred Stock from 1 million to 11 million, par value $0.001
consisting of three separate classes; 1) 5,000,000 Preferred Stock Series A, par
value $0.001, convertible at a rate of 1 to 100 shares of Common Stock, with all
voting rights converted at the same rate, 2) 1 million shares of Preferred Stock
Series B, par value $0.001, converted at a rate of 1 to 1 share of Common Stock
with all voting rights converted at the same rate., and 3) 5 million shares of
Preferred Stock Series C, par value $0.001, with a conversion rate of 1 to 1
share of Common Stock with all voting rights converted at the same rate. The
currently issued and outstanding shares of Preferred Stock would be designated
as the type 1 described above.
 
 ***Page
- 8***
 
 9.
          Indemnification of
Officers and Directors for Securities Liabilities. The laws of the State of
Minnesota provide that the Company could indemnify any Director, Officer, agent
and/or employee as to those liabilities, and on those terms and conditions, as
are specified in the Corporation Act of the State of Minnesota. Further, the
Company may purchase and maintain insurance on behalf of such persons whether or
not the corporation would have the power to indemnify such persons against the
liability insured against. The foregoing could result in expenditures by the
Company and prevent any recovery from such Officers, Directors, agents and
employees for losses incurred by the Company as a result of their actions.
Further, the Company has been advised that, in the opinion of the Securities and
Exchange Commission, indemnification is against public policy as expressed in
the Securities Act of 1933, as amended, and is, therefore, unenforceable.
 
 10.
        Cumulative Voting, Preemptive
Rights and Control. There are no preemptive rights in connection with the
Company’s Common Stock. Shareholders may be further diluted in their percentage
ownership of the Company in the event that additional shares are issued by the
Company in the future. Cumulative voting in the election of Directors is not
provided for. Accordingly, the holders of a majority of the shares of
 Common Stock, present in person or by proxy, will be able to elect all of
the Company’s Board of Directors.
 
 11.
        No Dividends Anticipated. At the
present time, the Company does not anticipate paying dividends, cash or
otherwise, on its Common Stock in the foreseeable future. Future dividends will
depend on earnings, if any, of the Company, its financial requirements and other
factors.
 
 **ITEM
2. DESCRIPTION OF PROPERTY**
 
 XRAYMEDIA
has amalgamated its operations offices to one composite location; 555 West
Hastings Street, Suite 1560, Vancouver B.C. V6B 4N6, housing the corporate
operations and the servers.
 
 . The
facilities contains approximately 3,000 square feet of office space on
a month-to-month basis for $8,800 dollars per month. XRAYMEDIA believes
that this facility is generally suitable and adequate to accommodate its
current operations and that such facility is adequately insured.
 
 
 **ITEM
3. LEGAL PROCEEDINGS**
 
 In
October 2004, an action was filed against the Company for alleged breach of
contract. The Plantiffs seek in excess of $20 Million in damages and issuance of
125 Million shares of the Company’s Common Stock. The Company has filed an
answer and is vigorously defending the action, denying any and all liability,
and has filed a separate action against the principals of the Plantiff LLC’s
seeking damages. The action is in the preliminary stages and no discovery has
been commenced.
 
 Legal
experts hired by the Company cannot predict whether the likelihood of an
unfavorable outcome is probable or remote. Therefore, no liability has been
recognized by the Company as of the date of this report. While the outcome of
this claim cannot be predicted with certainty, management does not believe that
the outcome of any pending legal matters will have a material adverse effect on
the financial position, although results of operations or cash flows could be
affected in a particular period.
 
 **ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 On May
31, 2000 XRAYMEDIA filed for a Special Meeting of Shareholders of e-bidd.com,
Inc., was held to consider and vote upon a proposal to change the name of
the Corporation from e-bidd.com, Inc. to XRAYMEDIA.com, Inc. and to transact
such business as properly come before the meeting.
 
 On
November 5, 2003 XRAYMEDIA filed for a Special Meeting of Shareholders of XRAYMEDIA.COM
Inc., was held to consider and vote upon a proposal to change the name of
the Corporation from XRAYMEDIA.COM Inc. to XRAYMEDIA Inc., to change the
authorized common share capital to 250,000,000, create 1,000,000 new class of preferred
shares with a 1:100 conversion into common shares and to transact such business
as properly come before the meeting. Subsequently, all of which was passed at
the meeting. The SEC subsequently issued a new CUSIP and trading symbol-
XRYM.
 
 The
Company is in the preliminary stage of proposing amendments to the Articles of
Incorporation to increase the authorized capital of the Company from 250
millions shares of Common Stock, par value $0.001, to 750 million shares of
Common Stock, par value $0.001. Additionally, the proposed amendment includes
the increase in Preferred Stock from 1 million to 11 million, par value $0.001
consisting of three separate classes; 1) 5,000,000 Preferred Stock Series A, par
value $0.001, convertible at a rate of 1 to 100 shares of Common Stock, with all
voting rights converted at the same rate, 2) 1 million shares of Preferred Stock
Series B, par value $0.001, converted at a rate of 1 to 1 share of Common Stock
with all voting rights converted at the same rate., and 3) 5 million shares of
Preferred Stock Series C, par value $0.001, with a conversion rate of 1 to 1
share of Common Stock with all
voting rights converted at the same rate. The
currently issued and outstanding shares of Preferred Stock would be designated
as the type 1 described above.
 
 
 ***Page
- 9***
 
 
 **PART
II**
 
 **ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS**
 
 XRAYMEDIA's
common stock is currently traded as a fully reporting issuer on the NASD
Over The Counter Bulletin Board under the symbol "XRYM" through a Form
10-SB approved by the SEC.
 
 The table
below sets forth the high and low sales prices for XRAYMEDIA's Common
Stock for each quarter of 2001, 2002, 2003, & 2004. The quotations below
reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not represent actual transactions:
 
 Quarter
High Low
 -----------------------------------
 2001
First(1) .42 .14
 Second(2)
..16 .03
 Third(3)
..19 .04
 Fourth(4)
..09 .04
 
 Quarter
High Low
 ----------------------------------
 2002
First(1) .12 .03
 Second(2)
..10 .02
 Third(3)
.. 10 .04
 Fourth(4)
.. 06 .03
 
 
 Quarter
High Low
 -------------------------------
 2003
First(1) . 06 .02
 Second(2)
.. 40 .04
 Third(3)
..93 .22
 Fourth(4)
..34 .09
 
 
 Quarter
High Low
 -------------------------------
 2004
First(1) .28 .09
 Second(2)
..23 .05
 Third(3)
..12 .06
 Fourth(4)
..08 .03
 
 
 ***Page
- 10***
 
 **RECORD
HOLDERS**
 
 As of
March 18, 2005, there is a total of 665 shareholders of record of whom 481 are
considered active. They hold a total of 224,957,250 shares of Common Stock. The
holders of the Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of stockholders. Holders
of the Common Stock have no preemptive rights and no right to convert their
Common Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock. The Preferred stock of
1,000,000
 shares
can be converted to Common Stock on a 100 Common for 1 Preferred share but have no
voting rights directly. There are no redemption or sinking fund provisions
 applicable
to the Preferred stock.
 
 **DIVIDENDS**
 
 XRAYMEDIA
has not declared any cash dividends since inception and does not
anticipate paying any dividends in the foreseeable future.
 
 The
payment of dividends is within the discretion of the Board of Directors and will
depend on XRAYMEDIA's earnings, capital requirements, financial condition, and other
relevant factors. There are no restrictions that currently limit XRAYMEDIA's
ability to pay dividends on its Common Stock or Preferred Stock other
than those generally imposed by applicable state law.
 
 
 **** **** **ITEM
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION**
 
 A.
Results of Operations
 
 The
numbers used in this analysis are those contained in the comparative financial
statements that follow. These
reflect the changes of previous periods to reflect the current method of presentation.
 
 Sales
 
 XRAYMEDIA
has generated minimal net revenues from 2004 and 2003 operations, 
t he
periods covered by This Form 10-KSB.
 
 Losses
 
 Net
losses for the year ended December 31, 2004, increased to $15,633,919 from
2,012,733 in 2003,
(an increase of 676%).
 
 The
increase in losses was attributable to a combination of several items,
they are -
media project development, increase in compensation expense, patent copyright
expense, media research, and investor relations. The increases were partially
offset by a decrease in media advertising.
 
 XRAYMEDIA
expects to continue to incur losses at least through fiscal year 2005 and there
can be no assurance that XRAYMEDIA will achieve or maintain profitability
from revenues that may be generated or that growth can be sustained
in the future.
 
 
 
 ***Page
- 11***
 
 Expenses
 
 Selling,
general and administrative expenses for the year ended December 31, 2004,
increased to $15,136,510 from $1,720,439 for the year ended December 31, 2003, (an
increase of 779%). The increase in selling, general and administrative expenses
were the result of
the various measures implemented by Company management to move the company into
new areas outside of the media industry. Depreciation and amortization expenses
for the years ended December 31, 2004, and December 31, 2003 were $73,492, and
$66,951.
 
 Research
and Development expenses were $503,470 in 2004, and $219,479 in 2003(an increase
of 129%). The increase was the result of the company’s further development of
its Media SuperPortal to expand into other industries outside the media
industry.
 
 B.
Liquidity and Capital Resources
 
 The
increase in negative cash flows for the year ended December 31, 2004
are primarily attributable to an increase in compensation expense, media project
development, research and development, patent and copy right, and investor
relations. The Company was able to reduce media advertising and hold occupancy,
travel and professional fees constant while other expenses fluctuated slightly.
For the year ended December 31, 2003, a decrease in negative cash flows was
primarily attributable to a decrease in share costs re Sec.144 control position,
coupled with increased borrowings.
 
 Cash
flows generated by operations were a negative $758,570 for the year ended
December 31, 2004, a negative $1,178,914 for the year ended December 31,
2003.
 
 Cash
flows generated by investing activities were a negative $24,464 for the year ended
December 31, 2004, $13,951 for the year ended December 31,2003. The increase is
 attributable
to the purchase of fixed assets.
 
 Cash
flows generated from financing activities was $756,969 for the year ended December
31, 2004, and $1,212,051 for the year ended December 31,2003. XRAYMEDIA's financing
activities, in 2004 primarily consisted of the sale of XRAYMEDIA's common
stock pursuant to private placements.
 
 XRAYMEDIA
has funded its cash needs over the periods covered by this Form 10-KSB through
the issuance of its common stock for cash, settlement of unpaid services, and
 outside
advances. XRAYMEDIA intends to cover its cash needs over the next twelve
months in part
through outside advances, but also through the sale of additional
shares
 of its
common stock pursuant to a registration statement or an appropriate exemption from
registration. However, there is no guarantee that XRAYMEDIA will continue to be
able
 to raise
additional funds from the sale of its securities.
 
 On
January 18, 2000, XRAYMEDIA negotiated a private placement with two separate investment
groups in the amounts of $500,000.00 and $360,000.00 for netted proceeds
of $810,000.00 to be used as general working capital. These total gross
proceeds bought 4,200,000 units at a price of $.20 per unit. Each unit
consisted of one share ("Share") of common stock of XRAYMEDIA and one warrant
to purchase an additional share of common stock at a price of $.30 for a period
of one year from the date of issuance ("First Hold Period") and at a price
of $.50 for a period of one year from the end of the First Hold Period ("Second
Hold Period"). A portion of the shares were offered to 22 non-US residents
outside the United States in reliance upon Regulation S promulgated
under the Securities Act of 1933 and the remainder of the shares
offered to 4 investors in the United States in reliance upon
 Regulation
D.
 
 ***Page
- 12***
 ****
 **C**.
Capital Expenditures
 
 XRAYMEDIA
made no significant net capital expenditures on property or equipment during
the years ended December 31, 2004 and 2003. The major planned capital
expenditure is
 further
website development. XRAYMEDIA has budgeted $250,000 to purchase the
additional equipment
or programs needed for this development and XRAYMEDIA intends to contract sometime
in the near future to complete this work. XRAYMEDIA also plans to raise
operating f unds by a
mixture of debt and stock to provide monies needed for their new
projects.
 
 Two years
ago, XRAYMEDIA's website had passed its initial test stage on its way to
becoming operational
to handle the 'real-time' interactive business now expected. The
 newest
developments have resulted in numerous new modifications and will need other
changes as we explore the different pathways.
 
 XRAYMEDIA's
estimated cash requirements are approximately $1,500,000 annually. The majority
of our cash
requirements will be used for personnel costs, professional fees, advertising,
and further
website development. These should be offset to some extent from revenue cash
flow. The
company will continue its earlier practice of settling some debt for
shares.
 
 
 D. Income
Tax Expense (Benefit)
 
 XRAYMEDIA
has net operating loss carry forwards of approximately $24,315,000
which will expire from 2014 to 2024. All available losses may not be
utilized unless matching profits are earned.
 
 
 E. Impact
of Inflation
 
 XRAYMEDIA
believes that inflation has had a negligible effect on operations over the
past three years. XRAYMEDIA believes that it can offset inflationary increases
in the cost of materials and labor by increasing sales and improving operating
efficiencies.
 
 F.
Critical accounting policies
 
 Our
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses. In
consultation with our Board of Directors, we have identified accounting policies
that we believe are key to an understanding of our financial statements. These
are important accounting policies that require management’s most difficult,
subjective judgments.
 
 ***Page
- 13***
 
 Revenue
Recognition
 Revenue
is recognized when the earning process is complete and the risk and rewards of
ownership have transferred to the customer, which is generally considered to
have occurred upon the delivery of the media to our customer. The Company
recognizes revenue in accordance with SEC Staff Accounting Bulletin
101
 
 Transactions
that involve the exchange of goods or services for other goods or services are
accounted for in accordance with APB 29 and the interpretations contained in
EITF 93-11 and EITF 99-17. Accordingly, the Company generally records exchanges
at the carrying value of the goods or services exchanged, which is typically
zero, as the fair values of the goods or services exchanged lack readily
determinable fair values within reasonable limits as the Company has no history
of receiving cash in similar transactions, and therefore the earnings process
has not been completed. The transactions involve barter as described further in
Note K.
 
 Research
and Development
 The
second critical accounting policy relates to research and development expenses.
We expense all research and development expenses as incurred. Costs incurred to
establish the technological feasibility of our web site is expensed as incurred
and included in Research and Development expenses. There are no production costs
to capitalize as defined in Statement on Financial Accounting Standards
No. 86.
 
 **G..
Going Concern**
 
 XRAYMEDIA
has suffered recurring losses from operations
that raises substantial doubt about its ability to continue as a going
concern. Management plans in regards to theses matters is to grow through
business combinations rather then to seek immediate, short-term earnings.
However, in order to support existing operations and to fund proposed
acquisitions, additional bank, private and/or equity financing must be obtained.
Additionally, XRAYMEDIA plans to increase its sales through its website,
www.xraymedia.com.
 
 Additionally,
due to the website launch delays and unexpected expenditures on internal
development of replacement auction software it was necessary for management
to arrange advances to XRAYMEDIA.
 
 ***Page
- 14***
 
 **ITEM
7.    AUDITED FINANCIAL STATEMENTS**
 
 **XRAYMEDIA,
INC.**
 **(A
COMPANY IN THE DEVELOPMENT STAGE)**
 
 **REPORT
ON AUDIT OF FINANCIAL STATEMENTS**
 
 **YEARS
ENDED DECEMBER 31, 2004 AND 2003**
 **AND
MARCH 1, 1994**
 **(INCEPTION
OF THE DEVELOPMENT STAGE)**
 **TO
DECEMBER 31, 2004**
 
  ***Page
- 15***
 
 **Report
of Independent Registered Public Accounting Firm**
 
 **FINANCIAL
STATEMENTS**
 
 **Balance
Sheet**
 
 **Statements
of Operations and Accumulated Deficit**
 
 **Statements
of Stockholders' Equity**
 
 **Statements
of Cash Flows**
 
 **Notes
to Financial Statements**
   ***Page
- 16***
   **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM**
 
 
 
 **Board
of Directors**
 **Xraymedia,
Inc.**
 **(A
Company in the Development Stage)**
 
 We have
audited the accompanying balance sheet of Xraymedia, Inc. (A Company in the
Development Stage) (the “Company”), as of December 31, 2004 and the related
statements of operations, stockholder’s equity (deficit), and cash flows for the
year then ended, 2003, and for the period from March 1, 1994 (Date of Inception)
to December 31, 2004. 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 audits.
 
 We
conducted our audits 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, based on our audit, the financial statements referred to above present
fairly, in all material respects, the balance sheet of Xraymedia, Inc. (A
Company in the Development Stage) as of December 31, 2004 and the related
statements of operations, stockholder’s equity (deficit), and cash flows for the
year then ended, 2003, and for the period from March 1, 1994 (Date of Inception)
to December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America.
 
 
   ***Page
- 17***
 
 
 
 
 
 **Board
of Directors**
 **Xraymedia,
Inc.**
 **(A
Company in the Development Stage)**
 **Page
two**
 
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. However, the Company has suffered recurring
losses from operations that raises substantial doubt about its ability to
continue as a going concern. Management plans in regards to these matters are
also described in Note I. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 
 ****     ****
 **Bedinger
& Company**
 **Certified
Public Accountants**
 **Concord,
California**
 **March
18, 2005**
 
 
 
 ***Page
- 18***
 
 
 
 **XRAYMEDIA,
      INC.****(A
      COMPANY IN THE DEVELOPMENT STAGE)****BALANCE SHEET****DECEMBER
      31, 2004**
    ****  **ASSETS**
    
    
    **December
      31****2004****CURRENT
      ASSETS****Cash**
    
    **$**
    **-****Accounts
      receivable**
    
    
    **29,102****Prepaid
      expenses**
    
    
    **127****TOTAL
      CURRENT ASSETS**
    
    
    **29,229****FIXED
      ASSETS****Furniture
      and equipment (Note B)****Cost**
    
    
    **328,026****Accumulated
      depreciation**
    
    
    **(267,669**
    **)****Net**
    
    
    **60,357****Software
      (Note B)****Cost**
    
    
    **25,000****Accumulated
      amortization**
    
    
    **(25,000**
    **)****Net**
    
    
    **0****Deposits**
    
    
    **0****TOTAL
      FIXED ASSETS**
    
    
    **60,357****OTHER
      ASSETS****Security
      deposit**
    
    
    **158****TOTAL
      ASSETS**
    
    **$**
    **89,744****LIABILITIES****CURRENT
      LIABILITIES****Overdraft**
    
    **$**
    **6,413****Accounts
      payable and accrued expenses (Note C)**
    
    
    **1,064,491****Advance
      from company officer**
    
    
    **153,845****Accrued
      wages payable (Note C)**
    
    
    **0****Advances
      (Note C)**
    
    
    **86,353****Advance
      from related party (Note D)**
    
    
    **611,946****TOTAL
      CURRENT LIABILITIES**
    
    
    **1,923,048****TOTAL
      LIABILITIES**
    
    
    **1,923,048****COMMITMENTS
      AND CONTINGENCIES (Note K & M)****STOCKHOLDERS'
      (Note F)****Convertible
      preferred stock, par value $.001; 1,000,000****shares
      authorized; 1,000,000 and 0 issued and outstanding
    at****December
      31, 2004 and 2003, respectively.**
    
    
    **1,000****Common
      Stock, par value $.001; 250,000,000 shares authorized; issued and
      outstanding 224,957,250 and 98,935,500 at December 31, 2004 and 2003,
      respectively.**
    
    
    **224,957****Additional
      paid in capital**
    
    
    **22,992,609****Common
      shares subscribed**
    
    
    **11,000****Deficit
      at inception date**
    
    
    **(746,875**
    **)****Accumulated
      deficit during the development stage**
    
    
    **(24,315,995**
    **)****Common
      stock note receivable**
    
    
    **-****TOTAL
      STOCKHOLDERS'**
    
    
    **(1,833,304**
    **)****TOTAL
      LIABILITIES AND****STOCKHOLDERS'**
    
    **$**
    **89,744**
 
   ***Page
- 19***
  **XRAYMEDIA,
      INC.****(A
      COMPANY IN THE DEVELOPMENT STAGE)**STATEMENTS
      OF OPERATIONS AND ACCUMULATED DEFICITYEAR
      ENDED DECEMBER 31, 2004, 2003 ANDTHE
      PERIOD MARCH 1, 1994 (INCEPTION OF THE DEVELOPMENT STAGE) TO DECEMBER 31,
      2004  March
      1, 1994(inception
      ofYear
      Ended December 31,
    
    development
      stage) to2004
    
    
    2003
    
    
    December
      31,2004REVENUE
    
    $
    70,438
    
    $
    303
    
    $
    116,157COSTS
      AND EXPENSESPersonnel
      Costs
    
    
    60,000
    
    
    84,000
    
    
    748,871Compensation
      expense
    
    
    9,551,750
    
    
    400,000
    
    
    12,121,750Occupancy
      costs
    
    
    87,257
    
    
    82,856
    
    
    457,734Professional
      fees
    
    
    245,223
    
    
    270,658
    
    
    1,533,225Media
      Advertising
    
    
    95,146
    
    
    278,318
    
    
    373,464Computer
      costs
    
    
    -
    
    
    -
    
    
    94,840Marketing
    
    
    96,294
    
    
    128,297
    
    
    333,793Travel
    
    
    122,131
    
    
    120,690
    
    
    454,306Consulting
    
    
    93,257
    
    
    87,162
    
    
    523,733Bank
      charges
    
    
    6,807
    
    
    4,488
    
    
    18,411Office
      supplies
    
    
    88,257
    
    
    81,870
    
    
    383,615Communication
    
    
    20,914
    
    
    23,404
    
    
    173,291Insurance
    
    
    192
    
    
    697
    
    
    77,978Miscellaneous
    
    
    2,470
    
    
    (20
    )
    
    26,618Transfer
      fees
    
    
    2,950
    
    
    6,225
    
    
    25,459Depreciation
      and amortization
    
    
    73,492
    
    
    66,951
    
    
    311,880Bad
      debt expense
    
    
    30,000
    
    
    -
    
    
    36,343Patent,
      copyright expense
    
    
    924,000
    
    
    
    
    
    924,000Research
      and development
    
    
    503,470
    
    
    219,479
    
    
    1,157,789Media
      project development
    
    
    2,135,850
    
    
    
    
    
    2,135,850Investor
      relations
    
    
    1,574,012
    
    
    151,794
    
    
    1,825,401TOTAL
      EXPENSES
    
    
    15,713,472
    
    
    2,006,869
    
    
    23,738,351OTHER
      INCOMEDissolution
      of CorpReports
    
    
    -
    
    
    -
    
    
    (503,507
    )Other
    
    
    -
    
    
    -
    
    
    (138,774
    )-
    
    
    
    
    
    -
    
    
    (642,281
    )OTHER
      EXPENSESInterest
      and penalties
    
    
    (9,115
    )
    
    
    
    
    13,694Other
      interest expense
    
    
    
    
    
    6,167
    
    
    37,826(9,115
    )
    
    6,167
    
    
    51,520NET
      LOSS
    
    $
    (15,633,919
    )
    $
    (2,012,733
    )
    $
    (24,315,995
    )BASIC
      AND DILUTEDLOSS
      PER SHARE (NOTE A)
    
    $
    (0.11
    )
    $
    (0.02
    )WEIGHTED
      AVERAGE NUMBER OFCOMMON
      SHARES OUTSTANDING
    
    
    148,017,320
    
    
    91,598,051
 
 ***Page
- 20***
 
 **XRAYMEDIA,
      INC.****(A
      COMPANY IN THE DEVELOPMENT STAGE)**STATEMENTS
      OF STOCKHOLDERS' EQUITYTHE
      PERIOD MARCH 1, 1994 (INCEPTION OF THE DEVELOPMENT STAGE) TO DECEMBER 31,
      2004    Existing
      deficit
    
    
    
    
    
    
    
    
    TotalPreferred
      Stock
    
    
    Common
      Stock
    
    
    Additional
    
    
    
    
    
    at
      inception
    
    
    Deficit
      accumulated
    
    
    
    
    
    Stockholder'sNumber
      of
    
    
    
    
    
    Number
      of
    
    
    
    
    
    Paid-in
    
    
    
    
    
    of
      development
    
    
    during
      development
    
    
    Note
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stock
      Subscribed
    
    
    stage
    
    
    stage
    
    
    Receivable
    
    
    DeficitBEGINNING
      BALANCEat
      inception of development, March 1, 1994
    
    
    
    
    $
    -
    
    
    201
    
    $
    -
    
    $
    746,875
    
    $
    -
    
    $
    (746,875
    )
    $
    -
    
    $
    -
    
    $
    -Shares
      issued
    
    
    
    
    
    
    
    
    720
    
    
    1
    
    
    1,799
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,800Net
      loss for year ending 12/31/94
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,800
    )
    
    
    
    
    (1,800
    )BALANCESDecember
      31, 1994
    
    
    -
    
    
    
    
    
    921
    
    
    1
    
    
    748,674
    
    
    
    
    
    (746,875
    )
    
    (1,800
    )
    
    -
    
    
    -Shares
      issuedNet
      loss for year ending 12/31/95
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -BALANCESDecember
      31, 1995
    
    
    
    
    
    
    
    
    921
    
    
    1
    
    
    748,674
    
    
    
    
    
    (746,875
    )
    
    (1,800
    )
    
    -
    
    
    -Shares
      issued
    
    
    
    
    
    -
    
    
    90
    
    
    -
    
    
    28,500
    
    
    -
    
    
    
    
    
    
    
    
    
    
    
    28,500Net
      loss for year ending 12/31/96
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,165
    )
    
    
    
    
    (50,165
    )BALANCESDecember
      31, 1996
    
    
    -
    
    
    -
    
    
    1,011
    
    
    1
    
    
    777,174
    
    
    -
    
    
    (746,875
    )
    
    (51,965
    )
    
    -
    
    
    (21,665
    )Shares
      issued
    
    
    
    
    
    
    
    
    14,492
    
    
    15
    
    
    258,536
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    258,551Net
      loss for year ending 12/31/97
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (174,022
    )
    
    
    
    
    (174,022
    )BALANCESDecember
      31, 1997
    
    
    
    
    
    -
    
    
    15,503
    
    
    16
    
    
    1,035,710
    
    
    -
    
    
    (746,875
    )
    
    (225,987
    )
    
    -
    
    
    62,864Shares
      issued
    
    
    
    
    
    
    
    
    15,275
    
    
    15
    
    
    1,237,445
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,237,460Net
      loss for year ending 12/31/98
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,315,249
    )
    
    
    
    
    (1,315,249
    )BALANCESDecember
      31, 1998
    
    
    
    
    
    
    
    
    30,778
    
    
    31
    
    
    2,273,155
    
    
    
    
    
    (746,875
    )
    
    (1,541,236
    )
    
    -
    
    
    (14,925
    )Shares
      issuedShares
      issued for cash
    
    
    
    
    
    
    
    
    6,590,000
    
    
    6,590
    
    
    207,010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213,600Net
      loss for year ending 12/31/99
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (205,851
    )
    
    
    
    
    (205,851
    )BALANCESDecember
      31, 1999
    
    
    -
    
    
    -
    
    
    6,620,778
    
    
    6,621
    
    
    2,480,165
    
    
    -
    
    
    (746,875
    )
    
    (1,747,087
    )
    
    -
    
    
    (7,176
    )Shares
      issuedShares
      issued in exchange for extended business model
    
    
    
    
    
    
    
    
    20,000,000
    
    
    20,000
    
    
    (20,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Shares
      issued in exchange for services
    
    
    
    
    
    
    
    
    210,000
    
    
    210
    
    
    71,790
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,000Shares
      issued for note
    
    
    
    
    
    
    
    
    150,000
    
    
    150
    
    
    29,850
    
    
    
    
    
    
    
    
    
    
    
    (30,095
    )
    
    (95
    )Shares
      issued for cash
    
    
    
    
    
    
    
    
    4,050,000
    
    
    4,050
    
    
    805,950
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    810,000Shares
      issued under stock performance plan
    
    
    
    
    
    
    
    
    3,300,000
    
    
    3,300
    
    
    656,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    660,000Net
      loss for year ending 12/31/00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,671,139
    )
    
    
    
    
    (1,671,139
    )BALANCESDecember
      31, 2000 (as restated)
    
    
    -
    
    
    -
    
    
    34,330,778
    
    
    34,331
    
    
    4,024,455
    
    
    -
    
    
    (746,875
    )
    
    (3,418,226
    )
    
    (30,095
    )
    
    (136,410
    )Shares
      issuedShares
      issued for services
    
    
    
    
    
    
    
    
    5,100,000
    
    
    5,100
    
    
    209,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215,000Shares
      issued for debt
    
    
    
    
    
    
    
    
    5,900,000
    
    
    5,900
    
    
    171,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177,000Shares
      issued under section 144 - control position
    
    
    
    
    
    
    
    
    15,000,000
    
    
    15,000
    
    
    510,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    525,000Shares
      issued under stock performance plan
    
    
    
    
    
    
    
    
    5,950,000
    
    
    5,950
    
    
    202,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    208,250Net
      loss for year ending 12/31/01
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,571,200
    )
    
    
    
    
    (1,571,200
    )BALANCESDecember
      31, 2001
    
    
    -
    
    
    -
    
    
    66,280,778
    
    
    66,281
    
    
    5,117,755
    
    
    -
    
    
    (746,875
    )
    
    (4,989,426
    )
    
    (30,095
    )
    
    (582,360
    )Shares
      issuedShares
      issued for services
    
    
    
    
    
    
    
    
    3,000,000
    
    
    3,000
    
    
    87,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,000Shares
      issued for debt
    
    
    
    
    
    
    
    
    1,000,000
    
    
    1,000
    
    
    29,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000Shares
      issued under section 144 - control position
    
    
    
    
    
    
    
    
    7,500,000
    
    
    7,500
    
    
    517,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    525,000Shares
      issued under stock performance plan
    
    
    
    
    
    
    
    
    5,350,000
    
    
    5,350
    
    
    270,650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    276,000Net
      loss for year ending 12/31/02
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,679,917
    )
    
    
    
    
    (1,679,917
    )BALANCESDecember
      31, 2002
    
    
    -
    
    
    -
    
    
    83,130,778
    
    
    83,131
    
    
    6,021,905
    
    
    -
    
    
    (746,875
    )
    
    (6,669,343
    )
    
    (30,095
    )
    
    (1,341,277
    )Shares
      issuedShares
      issued for services
    
    
    
    
    
    
    
    
    500,000
    
    
    500
    
    
    182,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182,500Shares
      issued under stock performance plan
    
    
    
    
    
    
    
    
    1,000,000
    
    
    1,000
    
    
    399,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400,000Shares
      issued for cash
    
    
    
    
    
    
    
    
    14,304,722
    
    
    14,305
    
    
    736,651
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750,956Shares
      subscribed and paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489,600
    
    
    
    
    
    
    
    
    
    
    
    489,600Net
      loss for year ending 12/31/03
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,012,733
    )
    
    
    
    
    (2,012,733
    )BALANCESDecember
      31, 2003
    
    
    -
    
    
    -
    
    
    98,935,500
    
    
    98,936
    
    
    7,339,556
    
    
    489,600
    
    
    (746,875
    )
    
    (8,682,076
    )
    
    (30,095
    )
    
    (1,530,954
    )Shares
      issuedShares
      issued for services
    
    
    1,000,000
    
    
    1,000
    
    
    96,114,286
    
    
    96,114
    
    
    13,996,736
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,093,850Shares
      issued under stock performance plan
    
    
    
    
    
    
    
    
    7,310,714
    
    
    7,311
    
    
    740,513
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    747,824Shares
      issued for cash
    
    
    
    
    
    
    
    
    22,523,332
    
    
    22,523
    
    
    915,877
    
    
    (489,600
    )
    
    
    
    
    
    
    
    
    
    
    448,800Shares
      subscribed and paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,000
    
    
    
    
    
    
    
    
    
    
    
    11,000Shares
      issued under cashless warrant
    
    
    
    
    
    
    
    
    73,418
    
    
    73
    
    
    (73
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Note
      cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,095
    
    
    30,095Net
      loss for year ending 12/31/04
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,633,919
    )
    
    
    
    
    (15,633,919
    )BALANCESDecember
      31, 2004
    
    
    1,000,000
    
    $
    1,000
    
    
    224,957,250
    
    $
    224,957
    
    $
    22,992,609
    
    $
    11,000
    
    $
    (746,875
    )
    $
    (24,315,995
    )
    $
    -
    
    $
    (1,833,304
    )
  ***Page
- 21***
  **XRAYMEDIA,
      INC.****(A
      COMPANY IN THE DEVELOPMENT STAGE)**STATEMENTS
      OF CASH FLOWSYEAR
      ENDED DECEMBER 31, 2004, 2003 ANDTHE
      PERIOD MARCH 1, 1994 (INCEPTION OF THE DEVELOPMENT STAGE) TO DECEMBER 31,
      2004  March 1, 1994(inception
      ofYear
      Ended December 31
    
    
    
    development
      stage) toDecember 31, 20032004
    
    
    2003
    
    
    
    (as
      restated
    )CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
    
    $
    (15,633,919
    )
    $
    (2,012,733
    )
    
    $
    (24,315,995
    )Adjustments
      to reconcile net lossto
      net cash used by operating activities:Depreciation
    
    
    65,158
    
    
    58,618
    
    
    
    286,880Amortization
    
    
    8,334
    
    
    8,333
    
    
    
    25,000Shares
      issued in exchange for servicescharged
      to Professional fees
    
    
    70,000
    
    
    182,500
    
    
    
    324,500Shares
      issued for stock performance plan
    
    
    451,750
    
    
    400,000
    
    
    
    1,996,000Shares
      issued under section 144-control position
    
    
    9,100,000
    
    
    
    
    
    
    10,150,000Shares
      issued for services
    
    
    3,998,850
    
    
    
    
    
    
    4,303,850Abandonment
      of furniture & equipment
    
    
    -
    
    
    
    
    
    
    30,809Bad
      debt expense
    
    
    30,000
    
    
    
    
    
    
    36,343Write-off
      of goodwill
    
    
    -
    
    
    
    
    
    
    464,831Write-off
      of patent, copyright
    
    
    924,000
    
    
    
    
    
    
    924,000CHANGES
      IN CURRENT ASSETS AND CURRENTASSETS
      AND CURRENT LIABILITIES:decrease
      in current assets:Prepaids
      expenses
    
    
    (127
    )
    
    -
    
    
    
    (127
    )Accounts
      receivable
    
    
    (29,102
    )
    
    -
    
    
    
    (35,445
    )Security
      deposit
    
    
    1,108
    
    
    11,676
    
    
    
    (157
    )Increase
      in current liabilities:Accounts
      payable and accrued expenses
    
    
    81,835
    
    
    172,692
    
    
    
    906,144Advances-other
    
    
    59,788
    
    
    
    
    
    
    59,788Advances
      from related parties
    
    
    113,755
    
    
    
    
    
    
    979,207NET
      CASH USED FOR OPERATING ACTIVITIES
    
    
    (758,570
    )
    
    (1,178,914
    )
    
    
    (3,864,372
    )CASH
      FLOWS FROM INVESTING ACTIVITIES:Acquisition
      of furniture and equipment
    
    
    (24,464
    )
    
    (13,951
    )
    
    
    (378,046
    )Acquisition
      of software
    
    
    -
    
    
    -
    
    
    
    (25,000
    )of
      goodwill
    
    
    
    
    
    
    
    
    
    (464,831
    )NET
      CASH FOR INVESTING ACTIVITIES
    
    
    (24,464
    )
    
    (13,951
    )
    
    
    (867,877
    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Issuance
      of notes payable
    
    
    
    
    
    (28,504
    )
    
    
    1,704,807Shares
      issued for note
    
    
    95
    
    
    
    
    
    
    -Shares
      subscribed and paid
    
    
    (478,600
    )
    
    489,600
    
    
    
    11,000Sale
      of common stock
    
    
    1,235,474
    
    
    750,955
    
    
    
    3,010,029NET
      CASH PROVIDED BY FINANCINGACTIVITIES
    
    
    756,969
    
    
    1,212,051
    
    
    
    4,725,836NET
      INCREASE IN CASH
    
    
    (26,065
    )
    
    19,186
    
    
    
    (6,413
    )CASH,
      beginning of period
    
    
    19,652
    
    
    466
    
    
    
    -CASH,
      end of period
    
    $
    (6,413
    )
    $
    19,652
    
    
    $
    (6,413
    )SUPPLEMENTAL
      DISCLOSURE:Penalties
      and interest
    
    
    
    
    $
    -
    
    
    $
    22,809Other
      Interest expense
    
    $
    -
    
    $
    6,167
    
    
    $
    37,826Noncash
      investing and financing activitiesShares
      issued for services
    
    $
    4,992,850
    
    $
    182,500Shares
      issued for stock performance plan
    
    
    451,750
    
    
    400,000Shares
      issued under section 144 - control position
    
    
    9,100,000
    
    
    0$
    14,544,600
    
    $
    582,500No
      significant amounts of taxes were paid during the periods shown
      above.
 ***Page
- 22***
   **NOTE
A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Organization**
 
 **In
November 2003, the Company changed its name to XRAYMEDIA, INC. (XRYM) from
XRAYMEDIA.COM.**
 
 **The
Company is incorporated in the United States in the state of Minnesota and
operates in Vancouver, British Columbia and New York. The Company’s principal
business is a general media Internet supersite portal currently under
development. The website XRAYMEDIA.com, when completed, will be comprised of a
main general media supersite portal that will branch out into three media
specific business portals: Buy & Sell Services; Public Relations Services;
and Advertising Agency Services (Live Media Marketplace).  The Company
intends to sell conventional media advertising space, online advertising, and
advertising and public relations services via its internet site. Because the
Company is in the development stage, the accompanying financial statements
should not be regarded as typical for normal operating
periods.**
 
 **Summary
of Significant Accounting Principles**
 
 **Accounting
estimates**
 
 **The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.**
 
 **Basic
earnings per share**
 
 **Basic
earnings per share have been calculated in conformity with Financial Accounting
Standards Board Statement No. 128 “** ***Earnings
per Share*** **”.
The Company has a simple capital structure with no significant potential common
shares. Basic earnings per share is calculated weighted on the average number of
common shares outstanding each year.**
 
 
 **NOTE
A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)**
 
 **Summary
of Significant Accounting Principles (Continued)**
 
 **Office
furniture and equipment**
 
 **Office
furniture and equipment purchases are capitalized and the cost depreciated over
the estimated useful lives of the related assets, generally five to seven years
under the straight-line method. Office furniture and equipment abandoned is
written off at the time of the abandonment.**
 
 **Issuance
of Common Stock**
 
 **The
issuance of common stock for other than cash is recorded by the Company at
managements estimate of the fair value of the assets acquired or services
rendered.**
 
 **Income
taxes**
 
 **No
income taxes were paid or are payable for the years ended December 31, 2004 and
2003.**
 
 **Functional
Currency**
 
 **The
financial statements are stated in U.S. dollars, which is the functional
currency of the Company.**
 
 **The
Company maintains their financial records in U.S. dollars. If transactions had
been recorded in foreign currency (Canadian dollars) and then translated into
U.S. dollars using a weighted-average translation rate the difference between
that amount and the activities expressed in U.S. dollars is
immaterial.**
 
 
 
 ***Page
- 23***
 
 
 
 
 **NOTE
A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)**
 
 **Summary
of Significant Accounting Principles (Continued)**
 
 **Research
and Development**
 
 **All
research and development expenses are expensed as incurred. Costs incurred to
establish the technological feasibility of the web site is expensed as incurred
and included in Research and Development expenses. There are no production costs
to capitalize as defined in Statement on Financial Accounting Standards
NO.86.**
 
 **Cash
and cash equivalents**
 
 **For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with an original maturity of three months or less to
be cash equivalents.**
 
 **Accounts
receivable**
 
 **Accounts
receivable are reported at the customers' outstanding balances less any
allowance for doubtful accounts. Interest is not accrued on overdue accounts
receivable. The Company evaluates receivables on a regular basis for potential
reserve.**
 
 **Concentrations
of credit risk**
 
 **The
Company performs ongoing credit evaluations of its customers. For the year ended
December 31, 2004, two customers individually accounted for 86% and 10% of
accounts receivable.**
 
 **In
the year ended December 31, 2004, the Company’s two largest customers accounted
for 53% and 36% of sales.**
 
 
 
 ***Page
- 24***
 
 
 **NOTE
A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)**
 
 **Summary
of Significant Accounting Principles (Continued)**
 
 **Impact
of accounting standards**
 
 **In
January 2003 the FASB issued Interpretation 46** ***“Consolidation
of Variable Interest Entities, an interpretation of ARB No. 51”.*** **This
Interpretation requires a Company to consolidate the financial statements of a
“Variable Interest Entity” “VIE”, sometimes also known as a “special purpose
entity”, even if the entity does not hold a majority equity interest in the VIE.
The Interpretation requires that if a business enterprise has a “controlling
financial interest” in a VIE, the assets, liabilities, and results of the
activities of the VIE should be included in consolidated financial statements
with those of the business enterprise, even if it holds a minority equity
position. This Interpretation was effective immediately for all VIE’s created
after January 31, 2003; for the first fiscal year or interim period beginning
after June 15, 2003 for VIE’s in which a Company holds a variable interest that
it acquired before February 1, 2003.**
 
 **In
April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities. This statement amends SFAS 133 to provide
clarification on the financial accounting and reporting of derivative
instruments and hedging activities and requires contracts with similar
characteristics to be accounted for on a comparable basis. The adoption of SFAS
149 did not have any impact on the Company’s financial condition or results of
operations.**
 
 **In
May 2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity. SFAS 150 establishes
standards on the classification and measurement of financial instruments with
characteristics of both liabilities and equity. The adoption of SFAS 150 did not
have any impact on the Company’s financial condition or results of
operations.**
 
 
 
 ***Page
- 25***
 
 
 **NOTE
A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)**
 
 **Summary
of Significant Accounting Principles (Continued)**
 
 **Impact
of accounting standards (Continued)**
 
 **In
December 2003, the FASB issued SFAS 132r, Employers' Disclosures about Pensions
and Other Postretirement Benefits—an amendment of FASB Statements No. 87, 88,
and 106. SFAS 132r revises employers’ disclosures about pension plans and other
postretirement benefit plans. It does not change the measurement or recognition
of those plans required by FASB Statements No. 87, Employers’ Accounting for
Pensions, No. 88, Employers’ Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits, and No. 106,
Employers’ Accounting for Postretirement Benefits Other Than Pensions. This
Statement retains the disclosure requirements contained in FASB Statement No.
132, Employers’ Disclosures about Pensions and Other Postretirement Benefits,
which it replaces. It requires additional disclosures to those in the original
Statement 132 about the assets, obligations, cash flows, and net periodic
benefit cost of defined benefit pension plans and other defined benefit
postretirement plans. The adoption of SFAS 132r did not have any impact on the
Company’s financial condition or results of operations.**
 
 **In
December 2003, the FASB issued FIN No. 46R, “Consolidation of Variable Interest
Entities.” This requires that the assets, liabilities and results of the
activity of variable interest entities be consolidated into the financial
statements of the company that has a controlling financial interest. It also
provides the framework for determining whether an entity should be consolidated
based on voting interest or significant financial support provided to it. The
adoption of FIN No. 46R did not have any impact on the Company’s financial
condition or results of operations.**
 
 **In
November 2004, the FASB issued SFAS 151, Inventory Costs—an amendment of ARB No.
43, Chapter 4. The Statement amends the guidance of ARB No. 43, Chapter 4,
Inventory Pricing, by clarifying that abnormal amounts of idle facility expense,
freight, handling costs, and wasted materials (spoilage) should be recognized as
current-period charges and by requiring the allocation of fixed production
overheads to inventory based on the normal capacity of the**
 **NOTE
A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)**
 
 **Summary
of Significant Accounting Principles (Continued)**
 
 **Impact
of accounting standards (Continued)**
 
 **production
facilities. The adoption of SFAS 151 did not have any impact on the Company’s
financial condition or results of operations.**
 
 **In
December 2004, the FASB issued a revision to SFAS 123 (revised 2004),
Share-Based Payment. The revision requires all entities to recognize
compensation expense in an amount equal to the fair value of share-based
payments granted to employees. The statement eliminates the alternative method
of accounting for employee share- based payments previously available under APB
25. The provisions of SFAS 123R are effective as of the first interim period
that begins after June 15, 2005. The adoption of SFAS 123R did not have any
impact on the Company’s financial condition or results of operations.**
 
 **In
December 2004, the FASB issued SFAS No. 153 "Exchanges of Nonmonetary
Assets-amendment of APB Opinion No. 29". Statement 153 eliminates the exception
to fair value for exchanges of similar productive assets and replaces it with a
general exception for exchange transaction that do not have commercial
substance, defined as transaction that are not expected to result in significant
changes in the cash flows of the reporting entity. This statement is effective
for exchanges of nonmonetary assets occurring after June 15, 2005. The Company
does not believe that this recent accounting pronouncement will have a material
impact on their financial position or results of operations.**
 
 
 
 
 ***Page
- 26***
 
 
 
 
 
 **NOTE
A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)**
 
 **Summary
of Significant Accounting Principles (Continued)**
 
 **Deferred
tax assets**
 
 **Differences
between accounting rules and tax laws cause differences between the bases of
certain assets and liabilities for financial reporting purposes and tax
purposes. The tax effects of these differences, to the extent they are
temporary, are recorded as deferred tax assets and liabilities under SFAS 109
and consist primarily of net operating loss carryforward amounting to
approximately $6,700,000. Because of the uncertainty of utilizing the net
operating loss carryforward, a valuation allowance of the maximum has been
provided against the deferred tax asset (See Note F).**
 
 **Reclassification**
 
 **Certain
2003 amounts have been reclassified to conform with 2004
classifications.**
 
 **Advertising**
 
 **The
Company expenses all advertising as incurred. For the years ended December 31,
2004 and 2003, the Company charged to operations $95,146 and $278,318,
respectively.**
 
 
 
 ***Page
- 27***
 
 
 
 **NOTE
A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)**
 
 **Summary
of Significant Accounting Principles (Continued)**
 
 **Allowance
for Doubtful Accounts**
 
 **The
allowance for doubtful accounts on accounts receivable is charged to income in
amounts sufficient to maintain the allowance for uncollectible accounts at a
level management believes is adequate to cover any probable losses. Accounts
receivable are charged off against the allowance when collectibility is
determined to be permanently impaired (bankruptcy, lack of contact, account
balance over one year old, etc.).**
 
 **Fair
Value of Financial Instruments**
 
 **The
Company estimates that the fair value of all financial instruments at December
31, 2004, as defined in FASB 107, does not differ materially from the aggregate
carrying values of its financial instruments recorded in the accompanying
balance sheet. The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. Considerable judgment is required in interpreting market data to
develop the estimates of fair value, and accordingly, the estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.**
 
 **Revenue
Recognition Policy**
 
 **Revenue
is recognized when the earning process is complete and the risk and rewards of
ownership have transferred to the customer, which is generally considered to
have occurred upon the delivery of the media to our customer. The Company
recognizes revenue in accordance with SEC Staff Accounting Bulletin
101.**
 
 **Transactions
that involve the exchange of goods or services for other goods or services are
accounted for in accordance with APB 29 and the interpretations contained in
EITF 93-11 and EITF 99-17. Accordingly, the Company generally records exchanges
at the carrying value of the goods or services exchanged, which is typically
zero, as the fair values of the goods or services exchanged lack**
 
 
 
 ***Page
- 28***
 ****
 **NOTE
A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)**
 
 **Summary
of Significant Accounting Principles (Continued)**
 
 **Revenue
Recognition Policy (Continued)**
 
 **readily
determinable fair values within reasonable limits as the Company has no history
of receiving cash in similar transactions, and therefore the earnings process
has not been completed.**
 
 **NOTE
B - FURNITURE AND EQUIPMENT**
 
 **Property
and equipment at December 31, 2004 and 2003 consisted of:**
 
 **2004**
    
    **2003****Furniture
      and equipment**
    **$328,026**
    
    **$303,562****Software
      License**
    **25,000**
    
    **25,000****Less:
      Accumulated depreciation**
    **(267,669)**
    
    **(202,511)****Less:
      Accumulated depreciation**
    **(25,000)**
    
    **(16,666)****Furniture
      and equipment, net**
    **$60,357**
    
    **$109,385**
 
 **Depreciation
expense for the year ended December 31, 2004 and 2003 was $65,158 and $58,618,
respectively. Amortization expense was $8,334 and $8,333 for the years ended
December 31, 2004 and 2003, respectively.**
 
 
 
 
 ***Page
- 29***
 
 
 **NOTE
C - ACCRUED EXPENSES AND ADVANCES**
 
 **Accrued
expenses at December 31, 2004 and 2003 consisted of the following
categories:**
 
 **2004**
    
    **2003****Accrued
      Consulting expense**
    
    **$354,421**
    
    **$316,133****Accrued
      Office expense**
    
    **81,473**
    
    **102,845****Accrued
      Professional fees expense**
    
    **176,869**
    
    **98,646****Accrued
      Website/Internet expense**
    
    **255,007**
    
    **163,568****Accrued
      Other expenses**
    
    **35,514**
    
    **12,614****Accrued
      Wages payable**
    
    **116,350**
    
    **253,850****Accrued
      Media advertising**
    
    **44,857**
    
    **35,000****Total
      Accrued Expenses**
    
    **$1,064,491**
    
    **$982,656**
 
 **Advances
were made by another company and individuals for operating expenses during the
years ended December 31, 2004 and 2003. The total amount extended was $86,353
and $26,565, respectively. The advances were made on open terms and without
interest.**
 
 **NOTE
D - RELATED PARTY TRANSACTIONS**
 
 **A
shareholder and spouse of the Company President advanced money without interest
to the Company in 2004 and 2003 to be used in daily operations. If the interest
expense was imputed it would be immaterial to the financial statements taken as
a whole and thus is not included. The balances at December 31, 2004 and 2003
were $611,946 and $652,036, respectively.**
 
 **The
President charges the Company for his management fees in lieu of an employee
salary. Management fees for the year ended December 31, 2004 and 2003 $93,257
and $87,162, respectively and are included in consulting in the Statement of
Operations and Accumulated Deficit. XRAYMEDIA owed the President’s management
company $107,219 as of December 31, 2004 for these services which are included
in accounts payable on the Balance Sheet. In addition the President advanced the
Company $153,845 during the year without specified terms of repayment and
without interest. During the year ended December 31, 2004 1,000,000 convertible
shares of preferred stock were issued to the President in consideration for
services to the Company. The valuation was based on 70% of fair market value on
the date of issuance and as if the**
 
 **NOTE
D - RELATED PARTY TRANSACTIONS (Continued)**
 
 **shares
were fully converted for a total valuation of $9,100,000 and is recognized in
compensation expense in the Statements of Operations and Accumulated Deficit. If
converted, the stock remains covered by the SEC‘s control position release
rules**
 
 **NOTE
E - STOCK PERFORMANCE PLAN**
 
 **The
Board of Directors offers common stock, on a discretionary basis, to certain
individuals who have been instrumental in the Company’s continuance. During the
years ended December 31, 2004 and 2003, 7,830,487 and 1,000,000 shares were
issued of common stock under the stock performance plan, respectively. The
shares issued are valued at fair market value at the date of issuance, ranging
from $0.03 to $0.40 per share, and were recognized in compensation expense in
the Statements of Operations and Accumulated Deficit.**
 
 **NOTE
F - COMMON STOCK**
 
 **During
the year ended December 31, 2003 the Company was authorized to increase common
shares from 100 million to 250 million shares. Additionally, the Company was
approved to add a new class of convertible preferred stock. Convertible
Preferred stock shares authorized are 1 million with par value of $0.001 and are
convertible to common stock 1 for 100 common shares with all voting rights. The
Company changed its ticker symbol to XRYM in November
2003.**
 
 **During
the year ended December 31, 2003, private placement sales of common stock at
prices ranging from $0.025 to $0.125 per share, to accredited investors, were
arranged for 14,304,722 shares. Total amount of capital raised through this
private placement is $750,956 and is reflected in the Statement of Stockholders’
Equity. Stock issued in 2003, with the exception of stock issued for legal
services as described above, is subject Rule 144
restrictions.**
 
 **During
the year ended December 31, 2004, private placement sales of common stock at
prices ranging from $0.03 to $0.12 per share, to accredited investors, were
arranged for 18,484,999 shares. Total amount of capital raised through this
private placement is $765,800 and is reflected in the Statement of Stockholders’
Equity. Private placement stock issued in 2004, is subject Rule 144
restrictions.**
 
 ***Page
- 30***
 
 **NOTE
F - COMMON STOCK (Continued)**
 
 **At
December 31, 2004 and 2003 share subscriptions for 333,333 and 4,038,333 shares
of common stock, respectively, were received, ranging from $0.03 to $0.15 per
share for a total of $11,000 and $489,600, respectively.**
 
 **Subsequent
to December 31, 2004 the Company issued 13,500,000 shares of common stock, as
discussed further in Note O.**
 
 **Future
share issuance is restricted by the following:**
 
 **Unexpired
      warrants as of December 31, 2004**
    **1,060,000****Unconverted
      preferred shares**
    **100,000,000****Cashless
      warrants exercised in 2004 to be issued in 2005**
    **101,538****Remaining
      cash subscriptions from December 31, 2004**
    **333,333****Total
      share issuance restriction**
    **101,494,871****Total
      shares issued as of December 31, 2004**
    **224,957,250****Total
      possible shares**
    **326,452,121**
 
 **The
Company issued warrants during the course of private placement offerings. The
warrants can be converted into shares of stock in lieu of payment through a
formula which divides the value of the warrants at the time the conversion right
is exercised by the market value. Earnings per share is not adjusted to include
the weighted average outstanding warrants as to do so would be
antidilutive.**
 
 **As
of December 31, 2004 and the date of this report the unexpired cashless warrants
were calculated to be approximately 1,060,000 and 120,000, respectively.
Significant amounts of warrants were unexercised and expired during the first
quarter of 2005.**
 
 
 
 
 ***Page
- 31***
 
 
 **NOTE
G - NET OPERATING LOSS CARRY FORWARD**
 
 **The
Company’s net operating loss carrryforward since inception is as
follows:**
 
 **Year**
    **Net
      Operating Loss**
    **Year
      of**
      **Expiration****2004**
    **15,633,919**
    **2024****2003**
    **2,012,733**
    **2023****2002**
    **1,679,917**
    **2022****2001**
    **1,571,200**
    **2021****2000**
    **1,671,139**
    **2020****1999**
    **205,851**
    **2019****1994-1998**
    **1,541,236**
    **2014-2018******
    ****
    ********
    **$24,315,995**
    ****
 
 **SFAS
No. 109 requires a valuation allowance to be recorded when it is more likely
than not that some or all of the deferred tax assets will not be realized. The
Company has recorded a valuation allowance for the full amount of the net
deferred tax asset because of uncertainties as to the amount of taxable income
that would be generated in future years. The change in the valuation allowance
was $6,337,243 and $811,857 for the years ended December 31, 2004 and 2003,
respectively.**
 
 **NOTE
H -** **OTHER
INCOME**
 
 **The
other income for the year ended December 31, 1999 arose from the forgiveness of
certain indebtedness to an unrelated stockholder.**
 
 **NOTE
I - GOING CONCERN**
 
 **The
Company has had minor sales and suffered recurring losses from operations that
raise substantial doubt about its ability to continue as a going concern.
However, the financial statements do not include any adjustments that might
result from the outcome of this uncertainty.**
 
 **The
Company has been in the development stage since March 1, 1994. It is
the**
 **NOTE
I - GOING CONCERN (Continued)**
 
 **Company’s
intention to grow through generating sales. However, in order to support
existing operations, the Company plans to seek additional financing, form
strategic partnerships to increase market share, and acquire additional
shareholder capital. The ability to achieve these objectives raises substantial
doubt about the company’s ability to continue as a going concern.**
 
 **NOTE
J - JOINT VENTURES**
 ****
 **In
2003, the Company signed five Joint Venture agreements to generate advertising
revenue. Two were through the sale of advertising and related media services
through the Live Media Marketplace, which is further described in Note A. The
other three are based on the Company purchasing advertising for their respective
products. Each of the agreements provides for a sharing of the net revenue
generated as a result of the media advertising between the joint venture
partners, as described in the table below. The Company does not have equity
interest or management rights in any of the joint ventures. Their investment in
all of the joint ventures is $0. Joint venture A and B have Company share
issuance clauses for reaching certain levels of sales beyond the net revenue
sharing agreement.**
 
 **Joint
venture F was the only joint venture signed during 2004. The transaction fee
(15% of the media trade) is split between the two parties. Additionally, if
Xraymedia brings the buyer to the purchase they receive 50% of the net profits
from the sale.**
 ****
 **Joint
      Venture**
    
    **Company
      Investment**
      **In
      Joint Venture**
    
    **Profit
      Sharing Percentage**
    
    **Joint
      Venture revenue for 2004****A**
    ****
    **$0**
    ****
    **50%**
    ****
    **$0****B**
    ****
    **$0**
    ****
    **50%**
    ****
    **$0****C**
    ****
    **$0**
    ****
    **20%**
    ****
    **$0****D**
    ****
    **$0**
    ****
    **40%-50%**
    ****
    **$0****E**
    ****
    **$0**
    ****
    **15%-20%**
    ****
    **$1,588****F**
    
    **$0**
    
    **7.5%-50%**
    
    **$0**
 ****
 ****
 **During
the year ended December 31, 2004 and 2003 $1,588 and $0, respectively, in
revenues were generated under the above agreements and the Company incurred
$95,146 and $278,318 in media advertising expenses associated with the joint
ventures during the same period.**
 
 
 
 ***Page
- 32***
 **NOTE
J - JOINT VENTURES (Continued)**
 
 **Joint
ventures D & E were discontinued by mutual consent during the year ended
December 31, 2004.**
 ****
 **NOTE
K - COMMITMENTS**
 
 **During
February 2003 the Company signed a three-year lease agreement for office space
in Vancouver, B.C. The term of the lease extended from May 2003 through April
2006. The minimum monthly rent payments are $6,830. Future minimum lease
payments are as follows:**
 ****
 **2005                
81,960**
 **2006** **27,320**
 **Total** **$
109,280**
 
 **Rental
and other occupancy expenses for the years ended December 31, 2004 and 2003 is
$86,658 and $78,273, respectively.**
 
 **NOTE
L - STATUTORY VIOLATION**
 
 **During
the year ended December 31, 2002 the Company did not remit required payroll
taxes for employee withholdings and Company related payroll tax expenses. These
withholdings and expenses were accrued as an accounts payable at December 31,
2002 in the amount of $47,540, including violation penalties and interest in the
amount of $22,809. Subsequently, in 2003, the Canadian Revenue Agency (CRA)
assessed a tax lien against the Company for these unpaid payroll taxes. The
Company made the final payment during the quarter ended September 30, 2004. The
total amount owing CRA at September 30, 2004, in this regard is
$0.**
 
 **During
the third quarter of 2004 the CRA conducted a further audit and assessed an
additional $30 for the year 2003, but advised that some portion of earlier
penalties/interest would be reversed. CRA does not make a practice of cash
refunds in these matters. The amounts involved are not deemed sufficient to
require a restatement of prior financials, but have created a reverse balance in
interest/penalty expenses for the year ended December 31, 2004. The Company
again fell into arrears in remitting payroll taxes in late 2004. The Company has
included in its accrued expenses approximately $11,000 for these unpaid payroll
taxes including the Company’s estimate of any penalties.**
 
 **NOTE
M - THREATENED LITIGATION**
 
 **Due
to the on-going negative cash flow the Company has been unable to pay certain
vendors for services. Certain items have been forwarded to collection agencies
and legal action has been threatened. No additional liability has been accrued
beyond the original amount payable.**
 
 **NOTE
N - CONTINGENCIES**
 
 **In
October 2004, an action was filed against the Company for alleged breach of
contract. The Plantiffs seek in excess of $20 Million in damages and issuance of
125 Million shares of the Company’s Common Stock. The Company has filed an
answer and is vigorously defending the action, denying any and all liability,
and has filed a separate action against the principals of the Plantiff LLC’s
seeking damages. The action is in the preliminary stages and no discovery has
been commenced.**
 
 **Legal
experts hired by the Company cannot predict whether the likelihood of an
unfavorable outcome is probable or remote. Therefore, no liability has been
recognized by the Company as of the date of this report. While the outcome of
this claim cannot be predicted with certainty, management does not believe that
the outcome of any pending legal matters will have a material adverse effect on
the financial position, although results of operations or cash flows could be
affected in a particular period.**
 
 **NOTE
O - SUBSEQUENT EVENTS (Unaudited)**
 
 **Subsequent
to year end the Company issued a total of 13,500,000 shares of common stock. The
common shares were issued for the following reasons and prices as indicated;
5,000,000 shares issued with no restrictions for legal services at $0.034 per
share; 2,500,000 shares issued with no restrictions for media development at
$0.034 per share; 6,000,000 shares issued with Section 144 restrictions for
media development at $0.034 per share.**
 
 **The
Company is in the preliminary stage of proposing amendments to the Articles of
Incorporation to increase the authorized capital of the Company from 250 million
shares of Common Stock, par value $0.001, to 750 million shares of Common Stock,
par value $0.001. Additionally, the proposed amendment includes the increase in
Preferred Stock from 1 million to 11 million, par value $0.001 consisting of
three separate classes; 1) 5,000,000 Preferred Stock Series A, par value $0.001,
convertible at a rate of 1 to 100 shares of Common Stock, with all voting rights
converted at the**
  ***Page
- 33***
 
 **NOTE
O - SUBSEQUENT EVENTS (Unaudited) (Continued)**
 
 **same
rate, 2) 1 million shares of Preferred Stock Series B, par value $0.001,
converted at a rate of 1 to 1 share of Common Stock with all voting rights
converted at the same rate., and 3) 5 million shares of Preferred Stock Series
C, par value $0.001, with a conversion rate of 1 to 1 share of Common Stock with
all voting rights converted at the same rate. The currently issued and
outstanding shares of Preferred Stock would be designated as the type 1
described above.**
 
 **The
Company signed a Non-Exclusive Technology Master Licensing Agreement which would
allow the non-exclusive sub-licensing of the XRYM System for a fee.**
 
 **The
Company signed a revenue sharing agreement to externally market the XRYM System
through the other parties clients and the general business
community.**
 
 **These
events had no effect on the financial statements for the year ended December 31,
2004.**
 
 
 
 ***Page
- 34***
 
 
 
 **ITEM
8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS**
 
 
 
 **THE
COMPANY HAS HAD NO CHANGES IN OR DISAGREEMENTS WITH ITS ACCOUNTANTS IN ITS THREE
MOST RECENT FISCAL YEARS OR ANY LATER INTERIM PERIOD.**
 
 
 
 **PART
III**
 
 
 **ITEM
9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS**
 
 
 **XRAYMEDIA'S
DIRECTORS HOLD OFFICE UNTIL THE ANNUAL MEETING OF SHAREHOLDERS NEXT HELD AFTER
THEIR ELECTION. THE OFFICERS AND DIRECTORS OF XRAYMEDIA AS OF MARCH 01, 2004 ARE
AS FOLLOWS:**
 
 
 **--------------------------------------------------------------------------------------------------**
 
 **NAME 
     
                       
AGE 
                                   
POSITION**
 **--------------------------------------------------------------------------------------------------**
 
 **RAYMOND
DABNEY       40 
            
PRESIDENT, CHIEF EXECUTIVE**
 
 **OFFICER AND DIRECTOR**
 
 **--------------------------------------------------------------------------------------------------**
 
 **MEIR
KAHTAN                 47 
             
DIRECTOR**
 
 **-------------------------------------------------------------------------------------------------**
 
 **Sarb
Teja    
                      
35 
              
DIRECTOR**
 
 **-------------------------------------------------------------------------------------------------**
 
 **Raymond
Dabney was appointed President, CEO, and Director of XRAYMEDIA on October 25,
1999. From 1990 to present, Raymond Dabney has been the President and CEO of
Command Communications, Inc. of Vancouver, British Columbia. From 1991 to 1993,
Mr. Dabney acted as the Western Regional General Manager of Unitel
Communications of Vancouver, British Columbia, and from 1988 to 1990 Mr. Dabney
was in Inside Sales Manager for Morgan Whitney Trading Group of Venice Beach,
California.**
 
 **Meir
Kahtan, was appointed as a director of XRAYMEDIA on February 7, 2000. Mr. Kahtan
has over fifteen years of industry experience in the world of public relations
and advertising. He has initiated ad campaigns and media coverage for countless
financial, high technology, medical, legal, and real estate clients, and as a
provider of advertising and public relations, was a forefront of the movement to
the web. Mr. Kahtan heads up a public relations department at Miller
Advertising, a major New York agency, with which he has enjoyed a long and
fruitful association.**
 
  **Sarb
Teja was appointed as a director of XRAYMEDIA on October 12, 2004. Mr. Teja
brings more than 10 years of financial management experience to XRAYMEDIA. Most
recently, Mr. Teja held the position of Manager at KPMG LLP where he was
involved in several mergers and acquisition transactions involving both public
and private corporations in the high-technology sector. Complementing his 8
years of public accounting experience, Mr. Teja has also held the position of
Director of Finance for the Multiple Sclerosis Society of Canada (B.C. Division)
as well as the position of Controller for a wireless software startup company in
past years.**
  **Professionally
qualified as a Certified General Accountant in 1998, Mr. Teja graduated from the
British Columbia Institute of Technology (a Polytechnic Institute) in 1993 with
a Diploma in Financial Management. Additionally, Mr. Teja is nearing completion
of his part-time studies towards an Honors Bachelor of Commerce degree from the
Laurentian University in Ontario, Canada.**
 
 
 ***Page
- 35***
 **ITEM
10.     EXECUTIVE COMPENSATION**
 
 
 **THE
FOLLOWING TABLE PROVIDES SUMMARY INFORMATION FOR THE YEARS 1999, 2000, 2001 AND
2002 CONCERNING CASH AND NON-CASH COMPENSATION PAID OR ACCRUED BY XRAYMEDIA TO
OR ON BEHALF OF THE PRESIDENT AND ANY OTHER EMPLOYEE(S) TO RECEIVE COMPENSATION
IN EXCESS OF $100,000.**
 
 
 **SUMMARY
COMPENSATION TABLE**
 
 
 
 
 **ANNUAL
      COMPENSATION**
    **LONGTERM
      COMPENSATION****NAME
      AND**
    
    
    
    
    **RESTRICTED****PRINCIPAL**
    **YEAR**
    **SALARY**
    **BONUS**
    **OTHER
      ANNUAL**
    **STOCK****POSITION**
    **($)**
    **($)**
    **COMPENSATION**
    **AWARD**
    **(S)****RAYMOND
      DABNEY**
    **1999**
    **10,000**
    **0**
    **0**
    **0****PRESIDENT,
      CEO**
    **2000**
    **72,000**
    **0**
    **0**
    **20,000,000(1)****AND
      DIRECTOR**
    **2001**
    **69,786**
    **0**
    **$525,000**
    **15,000,000(2)****2002**
    **75,250**
    **0**
    **$525,000**
    **7,500,000(3)****2003**
    **87,162**
    **0**
    **0**
    **0****2004**
    **93,257**
    **0**
    **0**
    **1,000,000
      preferred (4)****MEIR
      KAHTAN**
    **1999**
    **0**
    **0**
    **0**
    **0****DIRECTOR**
    **2000**
    **50,622**
    **0**
    **0**
    **0****2001**
    **68,348**
    **0**
    **0**
    **0****2002**
    **60,000**
    **0**
    **0**
    **0****2003**
    **60,000**
    **0**
    **0**
    **0****2004**
    **60,000**
    **0**
    **0**
    **0**
 
 ****
 
 
 
 **(1)
MR. DABNEY RECEIVED THE 20,000,000 SHARES IN CONSIDERATION FOR CREATING AND
IMPLEMENTING XRAYMEDIA'S EXTENDED BUSINESS MODEL.**
 
 
 **(2)
MR. DABNEY RECEIVED THE 15,000,000 SHARES IN RECOGNITION OF SERVICES PERFORMED.
THE SHARES WERE VALUED AT $0.035 PER SHARE.**
 
 
 **(3)
MR. DABNEY RECEIVED THE 7,500,000 SHARES IN RECOGNITION OF SERVICES PERFORMED.
THE SHARES WERE VALUED AT $0.03 PER SHARE.**
 
 **(4)
MR. DABNEY RECEIVED 1,000,000 PREFERRED SHARES OF STOCK IN RECOGNITION OF
SERVICES PERFORMED. THE SHARES WERE VALUED AT $9 PER SHARE BASED ON A 1 TO 100
CONVERSION RATE TO COMMON STOCK AT $0.09 PER SHARE.**
 
 
 **SALARIES
ARE PRIMARILY ON AN ACCRUAL RATHER THAN CASH BASIS.**
 
 
 **COMPENSATION
OF DIRECTORS**
 
 
 **THERE
IS NO PLAN IN PLACE AT THIS TIME FOR XRAYMEDIA'S DIRECTORS TO BE COMPENSATED,
FOR SERVICES RENDERED IN THIS CAPACITY.**
 
 
 **ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**
 
 
 **THE
FOLLOWING TABLE SETS FORTH CERTAIN INFORMATION REGARDING THE BENEFICIAL
OWNERSHIP OF THE STOCK OF XRAYMEDIA AS OF MARCH 18, 2005, BY EACH SHAREHOLDER
WHO IS KNOWN BY XRAYMEDIA TO BENEFICIALLY OWN MORE THAN 5% OF THE OUTSTANDING
COMMON STOCK, BY EACH DIRECTOR, AND BY ALL EXECUTIVE OFFICERS AND DIRECTORS AS A
GROUP.**
 
 
 ***Page
- 36***
 
 
 
 
 **Percent
      of Class****Title
      of Class**
      
      **Beneficial
      Owner**
    **Name
      and Address of**
      **Beneficial
      Ownership**
    **Amount
      and Nature of**
      **Stockholdings**
    **Common**
    **Preferred****(a)
      Common Stock**
    **Raymond
      Dabney**
    **47,785,000**
    **20.04%**
    **0****555
      West Hastings Street,****Suite
      1560****(b)
      Preferred Stock**
    **Vancouver,
      B.C., Canada**
    **1,000,000**
    **0**
    **100%****V6B
      4N6****(a)
      Common Stock**
    **Meir
      Kahtan**
    **7,750,000**
    **3.25%**
    **0****555
      West Hastings Street,****Suite
      1560****(b)
      Preferred Stock**
    **Vancouver,
      B.C., Canada**
    **0**
    **0**
    **0****V6B
      4N6****(a)
      Common Stock**
    **All
      Executive Officers**
    **55,535,000**
    **23.29%**
    **0****and
      Directors as a Group****(3
      people)****(b)
      Preferred Stocks**
    
    **1,000,000**
    **0**
    **100%**
 
 
 
 
 
 ***NOTE:
SUBSEQUENT TO DECEMBER 31, 2004, 5,000,000 COMMON SHARES WERE ISSUED TO MR.
KAHTAN.**
 
 **ITEM
12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 
 **ON
JULY, 29, 1999, XRAYMEDIA ENTERED INTO AN AGREEMENT WITH LAURIER LIMITED WHEREBY
XRAYMEDIA GAINED EXCLUSIVE RIGHTS TO ITS AUCTION AND AD SERVING SOFTWARE FROM
LAURIER LIMITED, IN EXCHANGE FOR 10,000,000 RESTRICTED SHARES OF XRAYMEDIA'S
COMMON STOCK VALUED AT $9,000.00**
 
 **ON
NOVEMBER 12, 1999, XRAYMEDIA ENTERED INTO AN AGREEMENT WITH MEIR KAHTAN, (A
DIRECTOR OF XRAYMEDIA) PUBLIC RELATIONS, A DIVISION OF MILLER ADVERTISING
AGENCY, INC. THE AGREEMENT WILL PROVIDE XRAYMEDIA WITH PROMOTIONAL AND BUSINESS
CONSULTING AND A PUBLIC RELATIONS CAMPAIGN. THE AGREEMENT CALLS FOR THE PAYMENT
OF $5,000 A MONTH TO MR. KAHTAN AS COMPENSATION FOR HIS SERVICES IN THIS
CAPACITY THE TERM OF THIS AGREEMENT COMMENCED MARCH 8, 2000, AND MAY BE CANCELED
AT ANY TIME BY EITHER PARTY UPON 60 DAYS PRIOR NOTICE.**
 
 **ON
MARCH 1, 2000, IN A UNANIMOUS BOARD MEETING VOTE, WITH MR. RAYMOND DABNEY
ABSTAINING, THE BOARD APPROVED THE ISSUANCE OF 20,000,000 RESTRICTED SHARES OF
XRAYMEDIA'S COMMON STOCK TO RAYMOND DABNEY IN EXCHANGE FOR THE EXTENDED BUSINESS
MODEL OF XRAYMEDIA.COM. THE EXTENDED BUSINESS MODEL IS TO INCLUDE A FULL RANGE
OF MEDIA SERVICES VIA A BRAND NEW INTERNET MEDIA SUPERSITE INCLUDING ASSEMBLING
THE PARTNERS AND TECHNOLOGY THAT WOULD ENABLE XRAYMEDIA TO ENGAGE IN THE
BUSINESS OF SELLING CONVENTIONAL MEDIA ADVERTISING SPACE, ONLINE ADVERTISING,
AND ADVERTISING AGENCY AND PUBLIC RELATIONS SERVICES VIA A NEW INTERNET WEBSITE.**
 
 **DURING
THE YEAR 2002, MR. RAYMOND DABNEY WAS ISSUED 7,500,000 RESTRICTED SHARES OF
XRAYMEDIA'S COMMON STOCK IN EXCHANGE FOR SERVICES RENDERED. THE STOCK IS ADDED
TO MR. DABNEY'S CONTROL POSITION OF SEC RULE 144 RESTRICTED COMMON STOCK.**
 
 **THE
COMPANY AWARDED 1,000,000 PREFERRED SHARES OF STOCK TO MR. RAYMOND DABNEY DURING
February 2004 IN RECOGNITION OF SERVICES PERFORMED. THE STOCK IS ADDED TO MR.
DABNEY'S CONTROL POSITION OF SEC RULE 144 RESTRICTED COMMON STOCK.**
 
 
 **ITEM
13.     EXHIBITS AND REPORTS ON FORM 8-K**
 
 
 **(A)
EXHIBITS: EXHIBITS REQUIRED TO BE ATTACHED BY ITEM 601 OF REGULATION S-B ARE
LISTED IN THE INDEX TO EXHIBITS BEGINNING ON PAGE 23 OF THIS FORM**
 
 **10-KSB,
WHICH IS INCORPORATED HEREIN BY REFERENCE.**
 
 
 **(B)
REPORTS ON FORM 8-K: NOVEMBER 30, 2000, THE COMPANY FILED A FORM 8-K IN RESPECT
TO THE RESIGNATION OF ONE OF OUR DIRECTORS, BRIAN WALKER. MR. WALKER HAD
SUBMITTED A WRITTEN RESIGNATION TO US ON NOVEMBER 1, 2000.**
 
 **ITEM
14.     PRINCIPAL ACCOUNTANT FEES AND
SERVICES**
 
 **(1)**
    **AUDIT
      FEES** 
 **THE
AGGREGATE FEES BILLED FOR PROFESSIONAL SERVICES RENDERED BY Bedinger &
Company FOR THE AUDIT OF THE REGISTRANT’S ANNUAL FINANCIAL STATEMENTS AND REVIEW
OF THE FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANT’S FORMS 10-QSB OR
SERVICES THAT ARE NORMALLY PROVIDED BY THE ACCOUNTANT IN CONNECTION WITH
STATUTORY AND REGULATORY FILINGS OR ENGAGEMENTS FOR FISCAL YEAR 2004 WERE
$37,215.**
 
 **(2)**
    **AUDIT
      COMMITTEE POLICIES AND PROCEDURES** 
 **THE
REGISTRANT DOES NOT HAVE AN AUDIT COMMITTEE. THE BOARD OF DIRECTORS OF THE
REGISTRANT APPROVED ALL OF THE SERVICES RENDERED BY Bedinger & Company FOR
FISCAL YEAR 2004.**
 
 
 
 ***Page
- 37***
 
 **(3)**
    **AUDIT
      WORK ATTRIBUTED TO PERSONS OTHER THAN Bedinger & Company’S FULL-TIME,
      PERMANENT EMPLOYEES** 
 **NOT
APPLICABLE.**
 
 
 **[THIS
SPACE LEFT BLANK INTENTIONALLY]**
 
 
 
  ***Page
- 38***
 
 
 
 **SIGNATURES**
 
 
 **IN
ACCORDANCE WITH SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT CAUSED THIS FORM 10-KSB TO BE SIGNED ON ITS BEHALF BY**
 
 **THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, THIS 14TH DAY OF April 2005.**
 
 
 **XRAYMEDIA
INC.**
 
 
 **/S/
RAYMOND DABNEY**
 
 **NAME:
RAYMOND DABNEY**
 
 **TITLE:
PRESIDENT, CEO AND DIRECTOR**
 
 
 **IN
ACCORDANCE WITH THE EXCHANGE ACT, THIS REPORT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE
DATES INDICATED.**
 
 
 **SIGNATURE       
      TITLE          
   DATE**
 
 
 **** **/S/
RAYMOND DABNEY** **PRESIDENT AND DIRECTOR       
APRIL 14, 2005.**
 
 **RAYMOND DABNEY**
 
 
 
 
 ***Page
- 39***
 
 
 
 
 
 **EXHIBIT
31**
 
 
 
 
 ***Page
- 40***
 
 
 
 
 **CERTIFICATIONS
PURSUANT TO**
 
 **SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002**
 
 
 
 **I,
Raymond Dabney, Chief Executive Officer of XRAYMEDIA, Inc. certify
that:**
 
 
 
 **1.
I have reviewed this annual report on Form 10-KSB of  XRAYMEDIA, Inc;**
 
 **2.**
 **Based
on my knowledge, this annual 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 annual report;**
 
 **3.**
 **Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrants of,
and for, the periods presented in this annual report;**
 
 **4.**
 **The
registrant’s other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have;**
 
 **a)
  designed such disclosure controls and procedures 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 annual report is being prepared;**
 
 
 **b)
   evaluated the effectiveness of the registrant’s disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the “Evaluation Date”); and**
 
 
 **c)
   presented in this annual report our conclusions about the
effectives of the disclosure controls and procedures based on our evaluation as
of the Evaluation Date;**
 
 
 **5.The
registrant’s other certifying officers and I have disclosed, based on our most
recent evaluation, to the registrant’s auditors and the audit committee of
registrant’s board of directors (or persons performing the equivalent
functions):**
 
 
 **a)
   all significant deficiencies in the design or operation in internal
controls which could adversely affect the registrant’s ability to record,
process, summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls; and**
 
 
 **b)
   any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant’s internal
controls; and**
 
 
 **6)The
registrant’s other certifying officers and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.**
 
 
 
 **Date:
April, 14, 2004         Signature:** **/s/Raymond
C. Dabney**
 
 **Raymond C. Dabney**
 **Chief Executive Officer**
 
 
 ****
 ***Page
- 41***
 
 
 **CERTIFICATIONS
PURSUANT TO**
 
 **SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002**
 
 
 
 **I,
Raymond Dabney,  Chief Financial Officer  of XRAYMEDIA,
Inc. certify that:**
 
 
 
 **1.
I have reviewed this annual report on Form 10-KSB of  XRAYMEDIA, Inc;**
 
 **2.**
 **Based
on my knowledge, this annual 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 annual report;**
 
 **3.**
 **Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrants of,
and for, the periods presented in this annual report;**
 
 **4.**
 **The
registrant’s other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have;**
 
 **a)
  designed such disclosure controls and procedures 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 annual report is being prepared;**
 
 
 **b)
   evaluated the effectiveness of the registrant’s disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the “Evaluation Date”); and**
 
 
 **c)
   presented in this annual report our conclusions about the
effectives of the disclosure controls and procedures based on our evaluation as
of the Evaluation Date;**
 
 
 **5.The
registrant’s other certifying officers and I have disclosed, based on our most
recent evaluation, to the registrant’s auditors and the audit committee of
registrant’s board of directors (or persons performing the equivalent
functions):**
 
 
 **a)
   all significant deficiencies in the design or operation in internal
controls which could adversely affect the registrant’s ability to record,
process, summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls; and**
 
 
 **b)
   any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant’s internal
controls; and**
 
 
 **6)The
registrant’s other certifying officers and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.**
 
 
 
 **Date:
April 14, 2005         Signature:** **/s/Raymond
C. Dabney**
 
 **Raymond C. Dabney**
 **Chief Financial Officer**
 
 
 ****
 ***Page
- 42***
 
 
  
 
 
 **EXHIBIT
32**
 
 
 ***Page
- 43***
 
 
 
 
 
 **CERTIFICATION
PURSUANT TO 18 U.S.C.**
 
 **SECTION
1350, AS ADOPTED PURSUANT TO**
 
 **SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002**
 
 
 **In
connection with the Annual Report of XrayMedia, Inc. on Form 10-KSB
for the period ending December 31, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Raymond Dabney,
President and Chief Executive Officer of XrayMedia, Inc and a member of the
Board of Directors, certify, pursuant to § 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 represents, the financial
condition and result of operations of the Company.**
 
 
 
 
 
 **Date:
April 14, 2005         Signature:** **/s/Raymond
C. Dabney**
 
 **Raymond C. Dabney**
 **Chief Executive Officer**
 
 
 
 
 ***Page
- 44***
 
 
 
 **CERTIFICATION
PURSUANT TO 18 U.S.C.**
 
 **SECTION
1350, AS ADOPTED PURSUANT TO**
 
 **SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002**
 
 
 **In
connection with the Annual Report of XrayMedia, Inc. on Form 10-KSB
for the period ending December 31, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Raymond Dabney,
President and Chief Financial Officer of XrayMedia, Inc and a member of the
Board of Directors, certify, pursuant to § 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 represents, the financial
condition and result of operations of the Company.**
 
 
 
 
 
 **Date:
April 14, 2005         Signature:** **/s/Raymond
C. Dabney**
 
 **Raymond C. Dabney**
 **Chief Financial Officer**
 
 
 ***Page
- 45***
 
 
 **ITEM
2.     DESCRIPTION OF EXHIBITS.**
 
 
 **INDEX
TO EXHIBITS**
 
 
 
 **EXHIBIT**
 
 **NO. 
         PAGE NO.       
   DESCRIPTION**
 
 
 
 
 **2(A) 
         *       
      ARTICLES OF MERGER AND PLAN AND OF MERGER, PORT
INDUSTRIES,**
 
 **INC. MARCH 1, 1994. (INCORPORATED BY REFERENCE FILED WITH**
 
 **THE COMPANY'S FORM 10-SB/A-2 ON MARCH 29, 2000).**
 
 
 **2(B) 
         *       
      STOCK PURCHASE AGREEMENT DATED SEPTEMBER 20, 1996.
(DIGITAL**
 
 **REPORTING, INC. ACQUIRES ALL OF THE ISSUED AND OUTSTANDING**
 
 **SHARES OF R&D INDUSTRIES, INC.). (INCORPORATED BY REFERENCE**
 
 **FILED WITH THE COMPANY'S FORM 10-SB/A-2ON MARCH 29, 2000).**
 
 
 **2(C) 
         *       
      DIGITAL REPORTING, INC. BOARD RESOLUTION DATED
SEPTEMBER 3,**
 
 **1997, AUTHORIZING THE ACQUISITION OF ALL THE OUTSTANDING**
 
 **STOCK OF CYBERGUIDES, INC. (INCORPORATED BY REFERENCE FILED**
 
 **WITH
THE COMPANY'S FORM 10-SB/A-2 ON MARCH 29, 2000).**
 
 
 **3(I)(A)
        *          
   ARTICLES OF INCORPORATION OF PORT INDUSTRIES, INC.**
 
 **(INCORPORATED BY REFERENCEFILED WITH THE COMPANY'S FORM**
 
 **10-SB/A-2 ON MARCH 29, 2000).**
 
 
 **3(I)(B) 
        *          
   ARTICLES OF AMENDMENT OF ARTICLES OF INCORPORATION OF PORT**
 
 **INDUSTRIES, INC. DATED OCTOBER 28, 1969 AUTHORIZING TOTAL**
 
 **NUMBER OF SHARES TO BE 30,000 AT $10.00 EACH. (INCORPORATED**
 
 **BY REFERENCE FILED WITH THE COMPANY'S FORM 10-SB/A-2 ON**
 
 **MARCH 29, 2000).**
 
 
 **3(I)(C) 
        *         
   ARTICLES OF AMENDMENT OF ARTICLES OF INCORPORATION OF PORT**
 
 **INDUSTRIES, INC. DATED MARCH 6, 1972 AUTHORIZING THE NUMBER**
 
 **OF SHARES TO BE 1,000,000 AT $.10 EACH. (INCORPORATED BY**
 
 **REFERENCE FILED WITH THE COMPANY'S FORM 10-SB/A-2 ON MARCH**
 
 **29, 2000).**
 
 
 **3(I)(D)
        *          
   MINNESOTA SECRETARY OF STATE AMENDMENT OF ARTICLES OF**
 
 **INCORPORATION (DIGITAL REPORTING INC. CHANGES ITS NAME TO**
 
 **CYBERGUIDES INTERNATIONAL, INC., SEPTEMBER 30, 1997).**
 
 **(INCORPORATED BY REFERENCE FILED WITH THE COMPANY'S FORM**
 
 **10-SB/A-2 ON MARCH 29, 2000).**
 
 
 **3(I)(E) 
        *          
   MINNESOTA SECRETARY OF STATE AMENDMENT OF ARTICLES OF**
 
 **INCORPORATION (CYBERGUIDES INTERNATIONAL, INC., CHANGES ITS**
 
 **NAME TO AJA MERCHANT BANKING CORPORATION FEBRUARY 10, 1998)**
 
 **(INCORPORATED BY REFERENCE FILED WITH THE COMPANY'S FORM**
 
 **10-SB/A-2 ON MARCH 29, 2000).**
 
 
 ***Page
- 46***
 
 
 
 
 
 
 **3(I)(F) 
            *    
        MINNESOTA SECRETARY OF STATE AMENDMENT OF
ARTICLES OF**
 
 **INCORPORATION (AJA MERCHANT BANKING CORPORATION CHANGES ITS**
 
 **NAME
TO IMAGE PHOTO SYSTEMS, INC. DECEMBER 3, 1998).**
 
 **(INCORPORATED BY REFERENCE FILED WITH THE COMPANY'S FORM**
 
 **10-SB/A-2 ON MARCH 29, 2000).**
 
 
 **3(I)(G)
            *    
        MINNESOTA SECRETARY OF STATE AMENDMENT OF
ARTICLES OF**
 
 **INCORPORATION (IMAGE PHOTO SYSTEMS, INC. CHANGES ITS NAME**
 
 **TO XRAYMEDIA.COM, INC., SEPTEMBER 16, 1999). (INCORPORATED**
 
 **BY REFERENCE FILED WITH THE COMPANY'S FORM 10-SB/A-2 ON**
 
 **MARCH 29, 2000).**
 
 
 **3(I)(H) 
            *    
         ARTICLES OF INCORPORATION OF IMAGE PHOTO
SYSTEMS, INC.**
 
 **(INCORPORATED BY REFERENCE FILED WITH THE COMPANY'S FORM**
 
 **10-SB/A-2 ON MARCH 29, 2000).**
 
 
 **3(II)(A)
            *    
         BY-LAWS OF PORT INDUSTRIES, INC.
(INCORPORATED BY REFERENCE**
 
 **FILED WITH THE COMPANY'S FORM 10-SB/A-2 ON MARCH 29, 2000).**
 
 
 **3(II)(B) 
            *    
         BY-LAWS OF IMAGE PHOTO SYSTEMS, INC.
(INCORPORATED BY**
 
 **REFERENCE FILED WITH THE COMPANY'S FORM 10-SB/A-2 ON MARCH**
 
 **29, 2000).**
 
 
 **23
22                
         CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT,
DATED MARCH 15,**
 
 **2000.**
 
 
 ***Page
- 47***
 
 
 **MATERIAL
CONTRACTS**
 
 
 **EXHIBIT**
 
 **NO. 
            PAGE NO.    
      DESCRIPTION**
 
 
 **6(A) 
            *    
         AGREEMENT, DATED JULY 29, 1999, BETWEEN
XRAYMEDIA.COM,**
 
 **INC. AND LAURIER LIMITED. (INCORPORATED BY REFERENCE FILED WITH THE**
 
 **COMPANY'S FORM 10- SB/A-2 ON MARCH 29, 2000).**
 
 
 **10(I) 
            *    
         BENEFIT PLAN DATED OCTOBER 15, 1999.
(INCORPORATED BY**
 
 **REFERENCE FILED WITH THE COMPANY'S FORM 10-SB/A-2 ON MARCH**
 
 **29, 2000).**
 
 
 **10(II) 
            *    
         MANAGEMENT AGREEMENT BETWEEN MEIR KAHTAN
AND**
 
 **XRAYMEDIA.COM, INC. DATED MARCH 15, 2000. (FILED WITH AMENDMENT NO. 1 TO**
 
 **10-KSB
ON MAY 8, 2000).**
 
 
 
  
 
 
  
 
 
 ***Page
- 48***
 ****
 **CONSENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS**
 
 
 **BEDINGER
& COMPANY**
 **CERTIFIED
PUBLIC ACCOUNTANTS**
 **1200
CONCORD AVE, SUITE 250**
 **CALIFORNIA**
 
 
 **MARCH
18, 2005**
 
 
 
 **CONSENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS**
 
 
 
 **WE
HEREBY CONSENT TO USE IN THIS FORM 10 - SB/A-2 OF OUR REPORT DATED MARCH 18,
2005, RELATING TO THE FINANCIAL STATEMENTS OF XRAYMEDIA.COM FOR THE YEARS ENDED
DECEMBER 31, 2004 AND 2003.**
 
 
 **/S/BEDINGER
& COMPANY**
 
 **BEDINGER
& COMPANY**
 
 **CERTIFIED
PUBLIC ACCOUNTANTS**
 
 
  ***Page
- 49***