UNITED STATES
   
 FORM 10-KSB
 
 
  
  
 0-27919
 
 XRAYMEDIA Inc.
   
 Minnesota 410951123
   
 
 555 Hastings Street, Ste.# 1560, Vancouver, B.C., Canada V6B 4N6
  
 (888) 777-0658
  
  
 
 
  
 
  
 
 
 
  
  
  
 
 Page - 1 
 
 
 **PART I**
 
  
  
 
 ITEM 1. DESCRIPTION OF BUSINESS
 
  
  
  
  
  
  
  
 Page - 2
   
  
   
   
 
  
    
 Page - 3
   
  
   
   
  
 Page - 4
     
  
  
  
  
  
 
 Page - 5
  B.  DESCRIPTION OF BUSINESS MODEL
 
 EXECUTIVE SUMMARY
 
 Red Herring
 
 
 
  
 PricewaterhouseCoopers
 
  
 Page - 6
  Veronis Suhler and Stevenson
 
 eMarketer.com E-Marketer
 
 eBay.com
 
 www.invisioninc.com www.ad2media.com www.twoplus.com
 www.marketron.com www.mediatrader.co.uk www.emediatrade.net www.matchcraft.com http://www.dds.co.uk/home/e-Trading_home
  
  
 
 Page - 7
  THE XRAYMEDIA MISSION
 
  
  
  
  
  
  
  
  
  
 
 Page - 8
  
  
 THE INDUSTRY
 
  
  
 PricewaterhouseCoopers
   
  
  
  
 Information Technology Association of America, June 11, 2003
 
 Page - 9
  PricewaterhouseCoopers, June 2003
 
 Global Information Inc., January 2001
 
 PricewaterhouseCoopers
 
 Veronis Suhler and Stevenson
 
 XRAYMEDIAS COMPETITIVE ADVANTAGE
 
  
  
 THE XRAYMEDIA MEDIA SUPERPORTAL
 
  
  
 Corporate Culture
 
  
 Page - 10
  Media Services
 
  
  
  
  
  
  
 Community Resources
 
  
  
 THE XRAYMEDIA OPPORTUNITY
 
 
  
  
 Page - 11
  CURRENT MEDIA BUYING PRACTICES
 
  
  
  
  
 ADVANTAGE FOR MEDIA BUYERS
 
  
     Page - 12
   
 ADVANTAGE FOR MEDIA SELLERS
 
  
  
 THE PROCESS
 
  
  
  
  
  
 MEMBERSHIP
 
  
 
 
 Page - 13
  
 SECURITY
 
  
  
 CORPORATE STRATEGY
 
  
  
  
  
  
  
  
  
  
  
 
 G. Regulatory Overview
 
   
    
  
 H. Reports to Security Holders
 
   
   
 
 Page - 14
  
 ITEM 2. DESCRIPTION OF PROPERTY
 
     
 
 ITEM 3. LEGAL PROCEEDINGS
 
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
   
  
 
 
 **PART II**
 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
  
   
 ****
**Quarter**
**High**
**Low**2001
First(1)
.42
.14Second(2)
.16
.03Third(3)
.19
.04Fourth(4)
.09
.04**Quarter**
**High**
**Low**2002
First(1)
.12
.03Second(2)
.10
.02Third(3)
.10
.04Fourth(4)
.06
.03**Quarter**
**High**
**Low**2003
First(1)
.06
.02Second(2)
.40
.04Third(3)
.93
.22Fourth(4)
.34
.09
      Page - 15
   
 
 
 RECORD HOLDERS
 
    
 DIVIDENDS
 
  
  
 
 ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
  
  
 Sales
 
  
 Losses
 
  
   
  
 
 Page - 16
  
 
 Expenses
 
    
 B. Liquidity and Capital Resources
 
  
  
  
  
  
  
  C. Capital Expenditures
 
  
  
  
 
 Page - 17
  
 
 
 D. Income Tax Expense (Benefit)
 
  
 
 E. Impact of Inflation
 
  
 F. Critical accounting policies
 
  
 Revenue Recognition
  
  
 Research and Development
  
 G.. Going Concern
 
   
  
 Page - 18 
 
 
 **XRAYMEDIA, INC.**
 (A COMPANY IN THE DEVELOPMENT STAGE)
 
 REPORT ON AUDIT OF FINANCIAL STATEMENTS
 
 YEARS ENDED DECEMBER 31, 2003 AND 2002
 AND PERIOD ENDED MARCH 1, 1994
 (INCEPTION OF THE DEVELOPMENT STAGE)
 TO DECEMBER 31, 2003
 
 Page - 19 
 **CONTENTS**
 
 
 
 
 
 Independent Auditors' Report
 
 ***FINANCIAL STATEMENTS***
 
 Balance Sheets
  
 Statements of Operations and Accumulated Deficit
 
 Statements of Stockholders' Equity
 
 Statements of Cash Flows
  
 Notes to Financial Statements
 
   
 Page - 20
  
 
 **INDEPENDENT AUDITORS' REPORT**
 
 
 
  
 Xraymedia, Inc.
   
  
  
  
 
 Page - 21
  
 
 Board of Directors
 Xraymedia, Inc..
 (A Company in the Development Stage)
 Vancouver, B.C., Canada
 
 
 
 
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company suffered recurring losses from operations that raised 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.
 
 
 
 
 
 
 /s/ Bedinger & Company
 
   
 
 
 Page - 22
   
 **XRAYMEDIA, INC.**
   BALANCE SHEETS
  
 
 **ASSETS**
****
**December 31******
****
****
**2003**
****
****
**2002**CURRENT ASSETSCash and cash equivalents

$
19,652

$
466TOTAL CURRENT ASSETS


19,652


466FIXED ASSETSFurniture and equipment (Note B)Cost.


303,562


289,611Accumulated amortization.


(202,511
)

(143,893
)Net


101,051


145,718Software License (Note B)Cost.


25,000


25,000Accumulated amortization


( 16,666
)

( 8,333)Net


8,334


16,667109,385


162,385OTHER ASSETSSecurity deposit.


1,266


12,941TOTAL ASSETS

$
130,303

$
175,792CURRENT LIABILITIESAccounts payable and Accrued expenses (Note C)

$
982,656

$
809,964Advances


26,565


26,565Advance from related party (Note D)


652,036


680,540TOTAL CURRENT LIABILITIES


1,661,257


1,517,069TOTAL LIABILITIES


1,661,257


1,517,069STOCKHOLDERS' EQUITY <DEFICIT>(Note F)Convertible Preferred Stock, par value $.001; 1,000,000shares authorized; 0 issued and outstanding at December 31, 2003 and 2002.


0


-Common Stock, par value $.001; 250,000,000 shares authorized; issued and outstanding 98,935,500 and.83,130,778 at December 31, 2003 and 2002, respectively.


98,936


83,131Additional paid in capital


7,339,556


6,021,905Common shares subscribed


489,600


0Deficit at inception date


(746,875
)

(746,875
)Accumulated deficit during the development stage


(8,682,076
)

(6,669,343
)Common stock note receivable


(30,095
)

(30,095
)TOTAL STOCKHOLDERS' EQUITY <DEFICIT>.


(1,530,954
)

(1,341,277
)TOTAL LIABILITIES ANDSTOCKHOLDERS' EQUITY <DEFICIT>.

$
130,303

$
175,792
 
 
 
 Page - 23 
 
 
 **XRAYMEDIA, INC.**
  STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
   
  March 1, 1994(inception ofdevelopment stage) toYear Ended December 31,

December 31,20032003


2002


2001


(as restated)REVENUE

$
303

$
431

$
0

$
45,719COSTS AND EXPENSESPersonnel Costs


84,000


84,000


92,838


688,871Compensation expense


400,000


801,000


712,300


2,570,000Occupancy costs


82,856


72,559


61,024


370,477Professional fees


270,658


167,919


239,189


1,288,002Computer Costs


-


-


-


94,840Media Advertising


278,318


-


-


278,318Marketing


128,297


29,692


19,284


237,499Travel


120,690


33,971


37,297


332,175Consulting


87,162


75,250


78,337


430,476Bank charges


4,488


781


810


11,604Office supplies


81,870


49,732


57,713


295,358Communication.


23,404


24,745


22,012


152,377Insurance.


697


-


6,984


77,786Miscellaneous


( 20
)

2,082


4,541


24,148Transfer fees


6,225


2,539


2,834


22,509Depreciation and amortization.


66,951


66,333


57,427


238,388Bad debt expense.


-


943


-


6,343Research and Development.


219,479


220,668


135,080


654,319Investor relations


151,794


8,804


30,228


251,389TOTAL OPERATING EXPENSES


2,006,869


1,641,018


1,557,898


8,024,879OTHER INCOME<LOSS>Dissolution of Corp Reports


-


-


-


(503,507
)Other (Note H)


-


-


-


(138,774
)-


-


-


(642,281
)OTHER EXPENSESInterest and penalties


-


22,809


-


22,809Other interest


6,167


16,521


13,302


37,8266,167


39,330


13,302


60,635NET LOSS

$
(2,012,733
)
$
(1,679,917
)
$
(1,571,200
)
$
(8,682,076
)BASIC AND DILUTEDLOSS PER SHARE (NOTE A).

$
(0.02
)
$
(0.02
)
$
(0.04
)WEIGHTED AVERAGE NUMBER OFCOMMON SHARES OUTSTANDING.


91,598,051


81,689,111


44,497,445
   Page - 24 
 
 
 **XRAYMEDIA, INC.**
  STATEMENTS OF STOCKHOLDERS' EQUITY
  Existing deficitCommon Stock


Additional


at inceptionNumber of


Paid-in


of developmentShares


Amount


Capital


stageBEGINNING BALANCEat inception of development, March 1, 1994 .


201

$
-

$
746,875

$
(746,875
)Shares issued.


720


1


1,799


-Net loss for year ending 12/31/94.


-


-


-


-BALANCESDecember 31, 1994


921


1


748,674


(746,875
)Shares issuedNet loss for year ending 12/31/95


-


-


-


-BALANCESDecember 31, 1995


921


1


748,674


(746,875
)Shares issued


90


-


28,500


-Net loss for year ending 12/31/96


-


-


-


-BALANCESDecember 31, 1996


1,011


1


777,174


(746,875
)Shares issued


14,492


15


258,536


-Net loss for year ending 12/31/97


-


-


-


-BALANCESDecember 31, 1997


15,503


16


1,035,710


(746,875
)Shares issued


15,275


15


1,237,445


-Net loss for year ending 12/31/98.


-


-


-


-BALANCESDecember 31, 1998


30,778


31


2,273,155


(746,875
)Shares issuedShares issued for cash


6,590,000


6,590


207,010


-Net loss for year ending 12/31/99


-


-


-


-BALANCESDecember 31, 1999


6,620,778


6,621


2,480,165


(746,875
)Shares issuedShares issued in exchange forextended business model.


20,000,000


20,000


(20,000
)

0Shares issued in exchange forservices


210,000


210


71,790


0Shares issued for note


150,000


150


29,850


0Shares issued for cash


4,050,000


4,050


805,950


0Shares issued under stockperformance plan


3,300,000


3,300


656,700


0Net loss for year ending 12/31/00


0


0


0


0BALANCESDecember 31, 2000 (as restated).


34,330,778


34,331


4,024,455


(746,875
)Shares issuedShares issued for services


5,100,000


5,100


209,900


0Shares issued for debt


5,900,000


5,900


171,100


0Shares issued under section 144 -control position


15,000,000


15,000


510,000


0Shares issued under stockperformance plan


5,950,000


5,950


202,300


0Net loss for year ending 12/31/01


0


0


0


0BALANCESDecember 31, 2001


66,280,778


66,281


5,117,755


(746,875
)Shares issuedShares issued for services


3,000,000


3,000


87,000


0Shares issued for debt


1,000,000


1,000


29,000


0Shares issued under section 144 - control position


7,500,000


7,500


517,500


0Shares issued under stock performance plan


5,350,000


5,350


270,650


0Net loss for year ending 12/31/02


0


0


0


0BALANCESDecember 31, 2002


83,130,778


83,131


6,021,905


(746,875
)Shares issuedShares issued for services


500,000


500


182,000Shares issued for debtShares issued under section 144  control positionShares issued under stock performance plan


1,000,000


1,000


399,000Shares issued for cash


14,304,722


14,305


736,651Shares subscribed








489,600Net loss for year ending 12/31/03.BALANCESDecember 31, 2003


98,935,500

$
98,936

$
7,829,156

$
(746,875
)
 
  
 
 Page - 25 
 
 
 **XRAYMEDIA, INC.**
    DeficitAccumulated





TotalDuring





Stockholder'sDevelopment


Note


Equitystage


Receivable


DeficitBEGINNING BALANCEat inception of development, March 1, 1994

$
-

$
-

$
-Shares issued


-


-


1,800Net loss for year ending 12/31/94.


(1,800
)

-


(1,800
)BALANCESDecember 31, 1994


(1,800
)

-


-Shares issuedNet loss for year ending 12/31/95


-


-


-BALANCESDecember 31, 1995


(1,800
)

-


-Shares issued


-


-


28,500Net loss for year ending 12/31/96


(50,165
)

-


(50,165
)BALANCESDecember 31, 1996


(51,965
)

-


(21,665
)Shares issued.


-


-


258,551Net loss for year ending 12/31/97


(174,022
)

-


(174,022
)BALANCESDecember 31, 1997


(225,987
)

-


62,864Shares issued


-


-


1,237,460Net loss for year ending 12/31/98


(1,315,249
)

-


(1,315,249
)BALANCESDecember 31, 1998.


(1,541,236
)

-


(14,925
)Shares issuedShares issued for cash


-


-


213,600Net loss for year ending 12/31/99


(205,851
)

-


(205,851
)BALANCESDecember 31, 1999


(1,747,087
)

-


(7,176
)Shares issuedShares issued in exchange for extendedbusiness model.


0


0


-Shares issued in exchange for services


0


0


72,000Shares issued for note


0


(30,095
)

(95
)Shares issued for cash


0


0


810,000Shares issued under stock performance plan


0


0


660,000Net loss for year ending 12/31/00


(1,671,139
)

0


(1,671,139
)BALANCESDecember 31, 2000 (as restated).


(3,418,226
)

(30,095
)

(136,410
)Shares issuedShares issued for services


0


0


215,000Shares issued for debt


0


0


177,000Shares issued under section 144 - control position


0


0


525,000Shares issued under stock performance plan


0


0


208,250Net loss for year ending 12/31/01


(1,571,200
)

0


(1,571,200
)BALANCESDecember 31, 2001


(4,989,426
)

(30,095
)

(582,360
)Shares issuedShares issued for services


0


0


90,000Shares issued for debt


0


0


30,000Shares issued under section 144 - control position


0


0


525,000Shares issued under stock performance plan


0


0


276,000Net loss for year ending 12/31/02


(1,679,917
)

0


(1,679,917
)BALANCESDecember 31, 2002


(6,669,343
)

(30,095
)

(1,341,277
)Shares issuedShares issued for services


0


0


182,500Shares issued under stock performance plan


0


0


400,000Shares issued for cash


0


0


750,956Shares subscribed


0


0


489,600Net loss for year ending 12/31/03.


(2,012,733
)

-


(2,012,733
)BALANCESDecember 31, 2003

$
(8,682,076
)
$
(30,095
)
$
(1,530,954
)
  
 
 
 Page - 26
  
 **XRAYMEDIA, INC.**
  **STATEMENTS OF CASH FLOWS**
 
 March 1, 1994(inception ofdevelopment stage) toYear Ended December 31


December 31, 20032003



2002


2001


(as restated)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(2,012,733
)

$
(1,679,917
)
$
(1,571,200
)
$
(8,682,076
)Adjustments to reconcile net lossto net cash used by operating activities:Depreciation


58,618



58,000


57,427


221,722Amortization


8,333



8,333





16,666Shares issued in exchange for servicescharged to Professional fees


182,500









254,500Shares issued for stock performance plan


400,000



276,000


208,250


1,544,250Shares issued under section 144-control position






525,000


525,000


1,050,000Shares issued for services






90,000


215,000


305,000Abandonment of furniture & equipment












30,809Bad debt expense






943





6,343Write-off of goodwill












464,831CHANGES IN CURRENT ASSETS








-AND CURRENT LIABILITIES:












-<Increase> decrease in current assets:












-Prepaids expenses


-



3,793


(3,793
)

-Accounts receivable


-



-


5,700


(6,343
)Security deposit


11,676



(2,557
)




(1,265
)Increase <decrease> in current liabilities:












-Accrued expenses


88,692



195,033


133,472


570,459Accrued wages payable


84,000



84,000


83,850


253,850Advances from related parties






409,303


159,660


865,452NET CASH USED FOR OPERATING ACTIVITIES


(1,178,914
)


(32,069
)

(186,634
)

(3,105,802
)CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of furniture and equipment


(13,951
)


-


(4,953
)

(353,582
)Acquisition of software


-






(25,000
)

(25,000
)<Purchase> of goodwill









-


(464,831
)NET CASH <USED> FOR INVESTING ACTIVITIES


(13,951
)


-


(29,953
)

(843,413
)CASH FLOWS FROM FINANCING ACTIVITIES:Issuance <repayment> of notes payable


(28,504
)


30,000


177,000


1,704,807Shares issued for note












(95
)Shares subscribed


489,600









489,600Sale of common stock


750,955









1,774,555NET CASH PROVIDED BY FINANCINGACTIVITIES


1,212,051



30,000


177,000


3,968,867NET INCREASE <DECREASE> IN CASH


19,186



(2,069
)

(39,587
)

19,652CASH, beginning of period


466



2,535


42,122


-CASH, end of period

$
19,652


$
466

$
2,535

$
19,652SUPPLEMENTAL DISCLOSURE:Penalties and interest

$
-


$
22,809

$
-


$22,809Other Interest expense

$
6,167


$
16,521

$
13,302

$
37,826Noncash investing and financing activitiesShares issued for debt

$
-


$
30,000

$
177,000Shares issued for services


182,500



90,000


215,000Shares issued for stock performance plan


400,000



276,000


208,250Shares issued under section 144 - control position


0



525,000


525,000Shares issued in exchange for extended business model


0



0


0Shares issued in exchange for services


0



0


0$
582,500


$
921,000

$
1,125,250No significant amounts of taxes were paid during the periods shown above.
 
 
 
 
 
 Page - 27 
 
 
 
 **XRAYMEDIA, INC.**
  NOTES TO THE FINANCIAL STATEMENTS
  
   
 Organization
 
  
  
 Summary of Significant Accounting Principles
 
 a. Accounting estimates
 
  
 b. Basic earnings per share
 
 Earnings per Share
 
 c. Office furniture and equipment
 
  
 d. Issuance of Common Stock
 
  
 e. Income taxes
 
  
 f. Functional Currency
 
  
  
 g. Research and Development
 
  
 
 
 Page - 28
  
 
 
 **XRAYMEDIA, INC.**
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
  
 
 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Summary of Significant Accounting Principles (Continued)
 
 h. Impact of Accounting Standards
 
 In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations", which establishes financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, Business Combinations, and FASB statement No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises. SFAS No.141 requires that all business combinations be accounted for using one method, the purchase method. The provisions apply to all business combinations initiated after September 30, 2001.
 
 In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which establishes financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No.17 Intangible Assets. SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition, and after they have been initially recognized in the financial statements. The provisions of SFAS No.142 were effective for fiscal years beginning after December 15, 2001. We adopted SFAS No. 142 during the first quarter of fiscal 2002, and the adoption of SFAS No.142 had no material impact on the financial reporting and related disclosures.
 
 In August 2001, the FASB issued SFAS No.143, Accounting for Asset Retirement Obligations, which is effective for us beginning fiscal 2003. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, with the associated asset retirement costs capitalized as part of the carrying amount of the long-lived assets. We do not expect the adoption of SFAS No. 143 to have a material impact on the financial position or results of operations.
 
 
 
 Page - 29
  
 
 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Summary of Significant Accounting Principles (Continued)
 
 h. Impact of Accounting Standards
 
 In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, which is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal periods. SFAS N0.144 supersedes FASB Statement No. 121 and parts of APB opinion NO. 30, Reporting the Results of Operations  Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions Relating to Extraordinary Items. However, SFAS No. 144 retains the requirement of APB Opinion No. 30 to report discontinued operations separately from continuing operations and extends that reporting to a component of an entity that either has been disposed of (by sale, by abandonment or in a distribution to owners) or is classified as held for sale. SFAS No. 144 addresses financial accounting and reporting for the impairment of certain long-lived assets and for long-lived assets to be disposed of. We do not expect the adoption of SFAS No. 144 to have a material impact on the financial positions or results of operations.
 
 On April 30, 2002 the FASB issued Statement No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. The Statement updates, clarifies and simplifies existing accounting pronouncements. Statement 145 rescinds Statement 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Opinion 30 will now be used to classify those gains and losses. Statement 64 amended Statement 4, and is no longer necessary because Statement 4 has been rescinded. The Company does not expect any effect on the financial position or results of operations from the adoption of this statement.
 
 
 
 Page - 30
 
 **XRAYMEDIA, INC.**
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
  
 
 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Summary of Significant Accounting Principles (Continued)
 
 h. Impact of Accounting Standards
 
 In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities", which nullifies EITF Issue 94-3. SFAS 146 is effective for exit and disposal activities that are initiated after December 31, 2002 and requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred in contrast to the date of an entity's commitment to an exit plan, as required by EITF Issue 94-3. We do not expect the adoption of SFAS No. 146 to have a material impact on the financial position or results of operations.
 
 In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based Compensation an amendment to SFAS No.123. SFAS No.148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement is effective for fiscal years ending after December 15, 2002 for transition guidance and annual disclosure provisions; for financial reports containing financial statements for interim periods beginning after December 15, 2002 for interim disclosure provisions. The adoption of SFAS No. 148 did not have a material impact on the financial position or results of operations.
 
 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
 
 Page - 31
  
 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Summary of Significant Accounting Principles (Continued)
 
 h. Impact of Accounting Standards
 
 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 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. SFAS 150 will become effective for financial instruments entered into or modified after May 31, 2003. The Company is in the process of assessing the effect of SFAS 150 and does not expect the implementation of the pronouncement to have a material effect on its financial condition or results of operations.
  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 required information should be provided separately for pension plans and for other postretirement benefit plans.
  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 required information should be provided separately for pension plans and for other postretirement benefit plans.
    Page - 32
  **XRAYMEDIA, INC.**
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
  
 
 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Summary of Significant Accounting Principles (Continued)
 
 i. 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 carry forward amounting to approximately $8,700,000. Because of the uncertainty of utilizing the net operating loss carry forward, the Company has provided a full valuation allowance against the deferred tax asset (See Note G).
 
 j. Reclassification
 
 Certain 2002 and 2001 amounts have been reclassified to conform with 2003 classifications.
 
 k. Advertising
 
 The Company expenses all advertising as incurred. For the years ended December 31, 2003 and 2002, the Company charged to operations $278,318 and $804, respectively. The advertising for 2003 was used in the joint ventures as described further in Note K but included Company information in the advertisement.
 
 l. 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.
 
 m. 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.).
 
 n. Fair Value of Financial Instruments
 
 The Company estimates that the fair value of all financial instruments at December 31, 2003, 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.
 
 o. 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 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.
 
 
 Page - 33
   
 **XRAYMEDIA, INC.**
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2003, 2002,AND 2001
  
 NOTE B - FURNITURE AND EQUIPMENT
  
 Property and equipment at December 31, 2003 and 2002 consisted of:
 
 2003


2002Furniture and equipment

$
303,562

$
289,611Software License


25,000


25,000Less: Accumulated depreciation
and amortization


(219,177
)

(152,226
)Furniture and equipment, net

$
109,385

$
162,385
 
 Depreciation expense for the year ended December 31, 2003 and 2002 was $58,618 and $58,000, respectively. Amortization expense was $8,333 for each of the years ended December 31, 2003 and 2002, respectively.
 
 NOTE C - ACCOUNTS PAYABLE, ACCRUED EXPENSES AND ADVANCES
 
 Accounts payable and accrued expenses at December 31, 2003 and 2002 consisted of the following categories:
 
 2003


2002Accrued Consulting expense

$
316,133

$
290,889Accrued Office expense


102,845


113,712Accrued Professional fees expense


98,646


134,953Accrued Website/Internet expense


163,568


83,116Accrued Other expenses


12,614


17,444Accrued Wages payable


253,850


169,850Accrued Media advertising


35,000


0Total Accrued Expenses

$
982,656

$
809,964
 
 Advances were made by another company for rental expenses incurred during the year ended December 31, 2002 in the amount of $26,565. The advances were extended on open terms.
 
 
 Page - 34
  
 
 NOTE D  RELATED PARTY TRANSACTIONS
 
 A shareholder and spouse of the Company President advanced money without interest to the Company in 2003 and 2002 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, 2003 and 2002 were $652,036 and $680,540, respectively. During the years ended December 31, 2002 and 2001, 1,000,000 and 5,900,000 shares were issued to the same related party in consideration of forgiveness of advances, respectively. The shares issued were valued at $0.03 per share for a total amount of $30,000 and $177,000 of debt forgiven for the years ended December 31, 2002 and 2001, respectively. No shares were issued in consideration of forgiveness of advances in 2003.
 
 Year ended December 31,

# of common shares issued

Value of debt forgiven

FMV of stock issued2002

1,000,000

$30,000

$70,0002001

5,900,000

$177,000

$325,500
 
 The President charges the Company for his management fees in lieu of an employee salary. Management fees for the years ended December 31, 2003, 2002 and 2001 were $87,162, $75,250 and $69,786, respectively and $314,198 total since inception and are included in consulting in the Statement of Operations and Accumulated Deficit. The Company owed the President $39,607 as of December 31, 2003 for these services which are included in accounts payable on the Balance Sheet.
 
 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, 2003 and 2002 and 2001, 1,000,000, 5,350,000, and 5,950,000 shares were issued of common stock under the stock performance plan, respectively. No shares have been issued to employees through this plan. The shares issued are valued at fair market value at the date of issuance, ranging from $0.03 to $0.40 per share, and are recognized in compensation expense in the Statements of Operations and Accumulated Deficit.
    Page - 35
  **XRAYMEDIA, INC.**
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
 
 
 NOTE F  EQUITY TRANSACTIONS
 
 In 1999 the Company executed a 1000 for 1 reverse stock split. This stock split has been reflected retroactively in the financial statements and notes thereto.
 
 In February 2000 the Company issued 20,000,000 restricted shares of common stock to its President and Director, Raymond Dabney in exchange for the Extended Business Model. The model was created when the Company changed direction from banner ad placement to media buying and selling. The value assigned to the Extended Business Model has been recorded at $0.00 based on AIN-APB 16, paragraph 39 requiring the valuation be recorded as such for transactions between entities under common control.
 
 During the years ended December 31, 2002 and 2001 stock was issued to related and other parties to whom the Company owed money for debt and services. The stock was issued for values ranging from $0.03 to $0.07 per share for a total relief of debt of $30,000 and $177,000, and $90,000 and $215,000 for services, respectively. During the year ended December 31, 2003 shares were issued to their legal counsel for services and forgiveness of debt. The stock was issued for $.365 per share for a total amount of $182,500 and is recognized as part of professional fees in the Statements of Operations and Accumulated Deficit for the year ended December 31, 2003.
 
 During the year ended December 31, 2002 and 2001 stock was issued to its President and Director, Raymond Dabney in recognition of services performed. The total number of shares issued was 7,500,000 and 15,000,000, respectively. The issued shares were valued at $0.03 and $0.035 per share, respectively. These issuances are recognized in compensation expense in the Statements of Operations and Accumulated Deficit.
 
 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.
 
 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, 2003 share subscriptions for 4,038,333 shares of common stock were received, ranging from $0.10 to $0.15 per share. Total shares subscribed and paid was $489,600.
 
 Subsequent to December 31, 2003 the Company issued 12,013,333 and 1,000,000 common and convertible preferred stock, respectively, as discussed further in Note O.
 
 NOTE G  NET OPERATING LOSS CARRY FORWARD
 
 The net operating loss carry forward since inception is as follows:
  Year

Net Operating Loss

Valuation
Allowance

Year of
Expiration2003

$2,012,733

$805,093

20232002

1,679,917

671,967

20222001

1,571,200

628,480

20212000

1,671,139

668,456

20201999

205,851

82,340

20191994-1998

1,541,236

616,494

2014-2018$8,682,076

3,472,830
 
 
 
 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. A valuation allowance for the full amount of the net deferred tax asset, using an anticipated income tax rate of 40%, was recorded each year because of uncertainties as to the amount of taxable income that would be generated in future years.
 
 
 Page - 36
  
 
 
 
 **XRAYMEDIA, INC.**
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
  
 
 NOTE H  AMENDMENT TO ARTICLE IV OF THE ARTICLES OF INCORPORATION
  
 In November 2003, the shareholders approved an amendment to the Articles of Incorporation to increase the authorized capital of the Company from 100 million shares of Common Stock, par value $.001 to 250 million shares of Common Stock, par value $.001.
 
 The shareholders also authorized an amendment to add a new class of stock: 1,000,000 shares of Convertible Preferred Stock, par value $.001 with a conversion rate of 1 share of Convertible Preferred Stock for 100 shares of Common Stock, with all voting rights converted at the same rate.
 
 NOTE I  GOING CONCERN
 
 The Company has 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 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 generate revenue, 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  CORRECTION OF ERROR
  
 During the fiscal year ended December 31, 2000, the Company fully expensed certain computer expenditures as website/internet developmental costs. During the year 2001 it was discovered that the equipment was being used in daily operations and a retroactive adjustment was made to accumulated depreciation, accumulated deficit and fixed assets. The adjustments increased fixed assets by $217,000, accumulated depreciation increased by $21,700 and the accumulated deficit was decreased by $195,300
 
 
 Page - 37
  
 
 NOTE K  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

Company Investment in Joint Venture

Profit Sharing Percentage

Joint Venture revenue for 2003A

$0

50%

$0B

$0

50%

$0C

$0

20%

$0D

$0

40%-50%

$0E

$0`

15%-20%

$0
  
 As of December 31, 2003, no revenue had been generated under any of these agreements and accordingly no net revenue had accrued to the Company. The Company incurred $278,318 in media advertising expenses associated with the joint ventures for which the Company, under the terms of the agreements, will not be reimbursed.
 
 An earlier joint venture, which involved barter, has had no activity since the fourth quarter in 2003 and there are no plans to revive that venture at the present time. All transactions were valued as zero as described further in Note A under the revenue recognition policies.
 
 
 
 Page - 38
 
 **XRAYMEDIA, INC.**
 (A COMPANY IN THE DEVELOPMENT STAGES)
 NOTES TO THE FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
 
 
 NOTE L  COMMITTMENTS
 
 During February 2003 the Company signed a three-year lease agreement for office space in Vancouver, B.C. The term of the lease extends from May 2003 through April 2006. The minimum monthly rent payments are $6,690. Future minimum lease payments are as follows:
 
 2004     $80,280
 2005     80,280
 2006     26,760
 Total     $187,320
 
 Rental expense for the year ended December 31, 2003 amounted to $78,273.
   
 NOTE M  STATUTORY VIOLATION
 
 At December 31, 2003 the Company had not remitted payroll taxes for employee withholdings and Company related payroll tax expenses of approximately $9,600, which was accrued as an account payable at year end. Subsequent to year end the full amount was remitted to the Canada Customs and Revenue Agency (CCRA).
 
 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 account payable at year-end in the amount of $47,540, including violation penalties and interest in the amount of $22,809.
 
 The CCRA assessed a tax lien against the Company during the year ended December 31, 2003 for the unpaid payroll taxes accrued through December 31, 2002. The total amount owing CCRA at December 31, 2003 with regard to the lien is approximately $19,000. Management has arranged a payment plan with the CCRA to pay the remainder off by mid-2004. The Company has agreed to a payment plan of approximately $3,800 per month.
 
 
 
 Page - 39
  
 
 
 NOTE N  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 O  SUBSEQUENT EVENTS (UNAUDITED)
  
 Subsequent to year end the Company issued 11,613,333 and 1,000,000 shares of common and convertible preferred stock, respectively.  The common shares were issued for the following reasons; 1,969,773 shares issued for Stock Performance Plan ranging from $.11 to $.20 totaling $257,175; 1,250,000 shares issued for accrued wages payable in the amount of $137,500; 1,480,227 shares issued for forgiveness of debt in accounts payable in the amount of $162,825; 4,038,333 shares subscribed in 2003 issued in 2004; and 2,875,000 shares issued for cash.  Of the 6,913,333 private placement shares issued subsequent to year end, approximately 5,000,000 were sold as units with one year warrants attached.
 
 All 1 million authorized shares of Convertible Preferred stock were issued to Ray Dabney, President in February 2004.  These shares if converted would be equal to 100 million common shares of stock with all voting rights.
 
 The authorized common shares of 250 million have restrictions place on issuance by the following:
 
 a)  Unconverted Preferred shares                100,000,000
 b)  Unexpired Warrants                                     5,000,000
 
 Total shares available for issuance at March 2, 2004 is 34,451,167.
 
 
 
 Page - 40
   
 ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
 
 
  
 
 PART III
 
 ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
 
  
  
  
 
  
  
  
 
  
   
   
 ITEM 10.  EXECUTIVE COMPENSATION
 
  
  
 
 ANNUAL COMPENSATION
LONGTERM COMPENSATIONNAME AND




RESTRICTEDPRINCIPAL
YEAR
SALARY
BONUS
OTHER ANNUAL
STOCKPOSITION
($)
($)
COMPENSATION
AWARD
(S)RAYMOND DABNEY
1999
10,000
0
0
0PRESIDENT, 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
0MEIR KAHTAN
1999
0
0
0
0DIRECTOR
2000
50,622
0
0
02001
68,348
0
0
02002
60,000
0
0
02003
60,000
0
0
0
 
  
  
  
  
 
  
  
  
  
    
 Percent of ClassTitle 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
43.2%
0555 West Hastings Street,Suite 1560(b) Preferred Stock
Vancouver, B.C., Canada
1,000,000
0
100%V6B 4N6(a) Common Stock
Gord Woodward
1,000,000
0.9%
0555 West HastingsSuite 1560(b) Preferred Stock
Vancouver, B.C., Canada
0
0
0V6B 4N6(a) Common Stock
Meir Kahtan
2,750,000
3.0%
0555 West Hastings Street,Suite 1560(b) Preferred Stock
Vancouver, B.C., Canada
0
0
0V6B 4N6(a) Common Stock
All Executive Officers
51,535,000
46.6%
0and Directors as a Group(3 people)(b) Preferred Stocks

1,000,000
0
100%
 
 
 
 ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  
  Page - 41
  
  
   
  
 ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K
 
   
  
 
  
  Page - 42
  
 SIGNATURES
 
   
 XRAYMEDIA INC.
 
 /S/ RAYMOND DABNEY
   
  
 
 
 /S/ RAYMOND DABNEY
 
 
 Page - 43
   
 EXHIBIT 31
  
   Page - 44
 
 CERTIFICATION
 
 
  
 I have reviewed this annual report on Form 10-K of XRAYMEDIA, Inc;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;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;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; 
  
 
 
 
  
 
 
 
 
  
 
 
 
  
 
  Page - 45
  
 ITEM 2.  DESCRIPTION OF EXHIBITS.
 
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Page - 46
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Page - 47
   
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Page - 48
   
 
 CONSENT OF INDEPENDENT AUDITOR
 
 EXHIBIT 23
   
 
 Page - 49
  
     
 
 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
     
  
 
  
 
   /S/BEDINGER & COMPANY
   
 Page - 50