UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-QSB
 
 
 [X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 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-QSB or any amendment to this Form 10-QSB [X].
 
 The issuer's total revenues for the quarter ended March 31, 2004, were $1,588.
 
 On March 31, 2004, the number of shares outstanding of the registrant's Common Stock, $0.001 par value (the only class of voting stock), was 140,682,167. On March 31, 2004 and May 17, 2004, 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.  FINANCIAL STATEMENTS
 
 
 As used herein, the term Company refers to XRAYMEDIA, INC., a Minnesota Corporation, and its subsidiaries and predecessors unless otherwise indicated. Consolidated, unaudited, condensed interim financial statements including a balance sheet for the Company as of the quarter ended MARCH 31, 2004 and statements of operations, and statements of cash flows for the interim period up to the date of such balance sheet and the comparable period of the preceding year are attched hereto as Pages F  1 through F  9 and are incorporated herein by this reference.


(THIS SPACE LEFT BLANK INTENTIONALLY)
 
 
 
 XRAYMEDIA, INC.
 (FORMERLY XRAYMEDIA.COM, INC.)
 (A COMPANY IN THE DEVELOPMENT STAGE)
 BALANCE SHEETS (UNAUDITED)
 MARCH 31, 2004
 
 
 MARCH 31**2004****ASSETS**CURRENT ASSETSCash and cash equivalents
$
139,563Accounts receivable
-Prepaid expenses
343,000TOTAL CURRENT ASSETS

482,563FIXED ASSETSFurniture and equipment (Note B)Cost.

323,558Accumulated amortization.

(218,689
)Net

104,869Software License (Note B)Cost.

25,000Accumulated amortization

(18,748
)Net

6,252TOTAL FIXED ASSETS

111,121OTHER ASSETSSecurity deposit.

2,590Patents, copyright, domain protection - in progress
924,000TOTAL OTHER ASSETS
926,590TOTAL ASSETS
$
1,520,274CURRENT LIABILITIESAccounts payable and Accrued expenses (Note C)
$
756,069Advances

26,565Advance from related party ( Note D)

614,520TOTAL CURRENT LIABILITIES

1,397,154TOTAL LIABILITIES

1,397,154STOCKHOLDERS' EQUITY <DEFICIT>(Note F)Convertible Preferred Stock, par value $.001; 1,000,000

1,000shares authorized; 1,000,000 issued and outstanding at March 31, 2004

-Additional paid in capital

-Common Stock, par value $.001; 250,000,000 shares authorized; issued and outstanding 140,682,167
March 31, 2004

140,683Additional paid in capital

19,515,659Common shares subscribed

10,000Deficit at inception date

(746,875
)Accumulated deficit during the development stage

(18,767,252
)Common stock note receivable

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

123,120TOTAL LIABILITIES ANDSTOCKHOLDERS' EQUITY <DEFICIT>
$
1,520,274
 
  
 
 Page - 23 
 
 
 XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004, 2003, AND
 THE PERIOD MARCH 1, 1994 (INCEPTION OF THE DEVELOPMENT STAGE) TO MARCH 31, 2004
 
 March 1, 1994(inception ofdevelopment stage) toThree Months Ended March 31,

March 31, 20042004


2003


(as restated)REVENUE
$
1,588

$


$
47,307COSTS AND EXPENSESPersonnel Costs

21,000


21,000


709,871Compensation expense

9,432,425


-


12,002,425Occupancy costs

22,380


17,471


392,857Professional fees

64,957


18,000


1,352,959Computer Costs

-


-


94,840Media advertising

76,759


-


355,077Marketing

23,997


11,860


261,496Travel & promotion

39,439


8,499


371,614Consulting

22,727


20,000


453,203Bank charges

1,271


285


12,875Office supplies

24,443


15,535


319,801Communication.

5,173


3,995


157,550Insurance.

-


-


77,786Miscellaneous

2,297


1,673


26,445Transfer fees

2,308


50


24,817Depreciation and amortization.

18,260


16,561


256,648Bad debt expense.

-


-


6,343Research and Development.

119,973


47,176


774,292Investor relations

204,507


4,513


455,896TOTAL OPERATING EXPENSES

10,081,916


186,618


18,106,795OTHER INCOME<LOSS>Dissolution of Corp Reports

-


-


(503,507
)Other (Note H)

-


-


(138,774
)-


-


(642,281
)OTHER EXPENSESInterest and penalties

1,475


6,312


24,284Other interest

3,373


10,065


41,1994,848


16,377


65,483NET LOSS
$
(10,085,176)

$
(202,995)

$
(18,767,252
)Accumulated deficit beginningAccumulated deficit endingBASICLOSS PER SHARE (NOTE A).
$
(0.092)

$
(0.0025)FULLY DILUTED LOSS PER SHARE
(0.085)

(0.0025)WEIGHTED AVERAGE NUMBER OFCOMMON SHARES OUTSTANDING.

110,116,648


83,130,778
 
 
 
 Page - 25 
 
 XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 STATEMENTS OF CASH FLOWS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004, 2003, AND
 THE PERIOD MARCH 1, 1994 (INCEPTION OF THE DEVELOPMENT STAGE) TO MARCH 31, 2004
 
 
 
 March 1, 1994(inception ofdevelopment stage) toThree Months Ended March 31,


March 31, 20042004


2003


(as restated)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
$
(10,085,176)

$
(202,995)

$
(18,767,252
)Adjustments to reconcile net lossto net cash used by operating activities:Depreciation

16,178


14,480


237,900Amortization

2,082


2,082


18,748Shares issued in exchange for servicescharged to Professional fees

232,825


-


487,325Shares issued for stock performance plan

332,425





1,876,675Shares issued under section 144-control position

9,100,000





10,150,000Shares issued for services

1,523,500





1,828,500Abandonment of furniture & equipment

-





30,809Bad debt expense

-





6,343Write-off of goodwill

-





464,831CHANGES IN CURRENT ASSETS







-AND CURRENT LIABILITIES:







-<Increase> decrease in current assets:







-Prepaids expenses

(343,000)





(343,000)Accounts receivable

-





(6,343
)Security deposit

(1,324)


10,849


(2,589)Increase <decrease> in current liabilities:Accrued expenses

(226,587)


91,464


597,722Accrued wages payableAdvances from related parties

(37,516)


95,194


827,936NET CASH USED FOR OPERATING ACTIVITIES

513,407


11,074


(2,592,395
)CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of furniture and equipment

(19,996)


-


(373,578
)Acquisition of software

-





(25,000
)<Purchase> of goodwill

-





(464,831
)Acquisition of patent, copyright, and domain protection

(924,000)


-


(924,000)NET CASH <USED> FOR INVESTING ACTIVITIES

(943,996)


-


(1,787,409
)CASH FLOWS FROM FINANCING ACTIVITIES:Issuance <repayment> of notes payable

-


-


1,704,807Shares issued for note

-





(95
)Shares subscribed

(479,600)


-


10,000Sale of common stock

1,030,100


-


2,804,655NET CASH PROVIDED BY FINANCINGACTIVITIES

550,500


-


4,519,367NET INCREASE <DECREASE> IN CASH

119,911


11,074


139,563CASH, beginning of period

19,652


466


-CASH, end of period
$
139,563

$
11,540

$
139,563SUPPLEMENTAL DISCLOSURE:Penalties and interest
$
1,475

$
-


$24,248Other Interest expense
$
3,473

$
14,273

$
41,299Noncash investing and financing activitiesShares issued for debt
$
-

$
-

$Shares issued for services

232,825


-Shares issued for stock performance plan

332,425


-Shares issued under section 144 - control position

9,100,000Shares issued in exchange for extended business modelShares issued in exchange for services

1,523,500


-$
11,188,750

$
0

$No significant amounts of taxes were paid during the periods shown above. 
 
 
 
 
 Page - 2
 XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 
 
 
 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.
 
 
 Basis of Presentation
 
 The unaudited financial statements of Xraymedia, Inc. (the Company) as of MARCH 31, 2004 and for the three months ended MARCH 31, 2004 and 2003 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Companys Form 10-KSB for the year ended December 31, 2003. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.
  Page - 3
  XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 Summary of Significant Accounting Principles
 
 a. 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.
 
 b. Basic earnings per share
 
 Basic earnings <loss> per share have been calculated in conformity with Financial Accounting Standards Board Statement No. 128  Earnings per Share . The Company has a capital structure that has significant potential common shares. Basic earnings <loss> per share is calculated weighted on the average number of common shares outstanding each year. Diluted earnings per share are calculated as if the convertible preferred shares and warrants have been converted and/or exercised at date of issuance.
 
 c.(1) 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.
 
 c.(2) Software license
 
 Software license purchases are capitalized and the cost amortized over the estimated useful lives of the related assets, generally three to five years under the straight-line method.
 
 c.(3) Patent, copyright and domain protection
 
 Costs incurred in obtaining protection for that portion of our technology developments, copyrighting special features and securing our internet domain are capitalized and amortized over the estimated useful life of the related assets. A ten year period is deemed reasonable and amortization will commence when the legal work is completed in the second quarter ending June 30, 2004.
 
 d. Issuance of preferred and 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. The value is discounted for restricted stock for the time that restrictions are placed on the stock.
  Page - 4
  XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 e. Income taxes
 
 No income taxes are payable for the three months ended March 31, 2004 and 2003. The Company has net operating losses of approximately $18,750,000, which will expire in the 20 th year from the date the losses were incurred, i.e. from 2014 to 2024.
 
 f. 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.
 
 g. 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.
 
 
 Page - 5
 XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 
 
 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 - 6
  XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 
 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.
 
 Page - 7
 XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDEDMARCH 31, 2004
 
 
 
 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 $18,750,000. 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 2003 amounts have been reclassified to conform with 2004 classifications.
 
 k. Advertising
 
 The Company expenses all advertising as incurred. For the quarters ended March 31, 2004 and 2003, the Company charged to operations $76,959 and $0 respectively. The advertising 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.).
 
  Page - 8
  XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 n. Fair Value of Financial Instruments
 
 The Company estimates that the fair value of all financial instruments at March 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.
 
 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.
 
 Page - 9
 
 
 XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 MARCH 31, 2004 AND 2003
 
 
 NOTE B  PREPAID EXPENSE
 
 
 Prepaid expenses at March 31, 2004 consisted of:
 
  (a) Legal expenses being incurred in the 2nd
quarter of 2004 as it regards assistance
with a registration statement to be filed
with the SEC:
$35,000.(b)Investor relations efforts commenced in
the first quarter which will carry over into
the 2ndand 3rdquarters as regards approaching
various venture capitol groups, preparing
amended business plans which will meet the
requirements of venture capitalists differing
needs:
308,000.The renumeration in both (a) and (b) remains in theform of Section 144 Restricted Stock
$343,000
 
 
 
 NOTE C - FURNITURE AND EQUIPMENT
 
 
 Property and equipment at March 31, 2004 consisted of:
 
 2004Furniture and equipment

$
323,558Software License


25,000Less: Accumulated depreciation
and amortization


(237,437
)Furniture and equipment, net

$
111,121
 
 Depreciation expense for the quarters ended March 31, 2004 and 2003 was $16,178 and $14,479. , respectively. Amortization expense was $2,082 for each of the quarters ended March 31, 2004 and 2003, respectively.
 
 NOTE D  PATENTS, COPYRIGHT AND DOMAIN PROTECTION
 Intangible asset protection for the Companys
new technology and interactive internet
procedures. Patents, copyrights, and internet
domains (in progress) are included together due to
overlapping areas:
$924,000.Amortization (See Note A c.(3))
0.TOTAL
$924,000.
 
 The renumeration was in the form of Section 144 Restricted Stock.
 
 
 NOTE E - ACCOUNTS PAYABLE, ACCRUED EXPENSES AND ADVANCES
 
 
 Accounts payable and accrued expenses at March 31, 2004 consisted of the following categories:
 
 2004Accrued Consulting expense

$
69,568Accrued Office expense


153,786Accrued Professional fees expense


107,262Accrued Website/Internet expense


192,479Accrued Other expenses


38,729Accrued Wages payable


137,500Accrued Media advertising


56,745Total Accrued Expenses

$
756,069
 
 Advances were made by another company for rental expenses incurred during the three months ended December 31, 2002 in the amount of $26,565. The advances were extended on open terms and remain outstanding on March 31, 2004.
 
 
 Page - 10
 XRAYMEDIA, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2004
 
 NOTE F  RELATED PARTY TRANSACTIONS
 
 
 A shareholder and spouse of the Company President advanced money on a partially revolving basis without interest to the Company since 2001, 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. Balances of March 31, 2004 show net repayments of $37,516.
  During the years ended December 31, 2002 and 2001, 1,000,000 and 5,900,000 shares and as outlined below 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, nor in the first quarter of 2004.
 
 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 quarters ended March 31, 2004 and 2003 were $22,727 and $20,000 respectively and are included in consulting in the Statement of Operations and Accumulated Deficit. The Company owed the President $54,498 as of March 31, 2004 for these services which are included in accounts payable on the Balance Sheet.
 
 NOTE G  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. In the quarter ended March 31, 2004, 3,044,773 restricted Section 144 shares of common stock were issued under the plan and because of the one year restriction, these were priced at $0.07 per share, 70% of the closing price on the day of issuance. This total includes 1,075,000 shares issued in the employees names, but delivered in stages. The first, during April was upon completion of the new website. Other releases are planned later in May upon the presentation of the new LMM venue. During the years ended December 31, 2003 and 2002, 1,000,000 shares and 5,350,000 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.
 
 
 Page - 11
 XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 
 
 
 NOTE H  EQUITY TRANSACTIONS
 
 During the last quarter of 2003, at a special general meeting, the shareholders of the Corporation voted and subsequently received regulatory approvals, to amend the authorized capital:
 
 COMMON SHARES (voting) : 250,000,000 shares par value $0.001 per share
 
 CONVERTIBLE PREFERRED SHARES: 1,000,000 shares par value $0.001 per share (non voting) Convertible at the option of the holder to 100
 common shares for each preferred share.
 
 The Corporation changed its name by dropping the .com. This change necessitated new stock certificates being issued to existing shareholders and the stock to trade under its new name and ticker symbol XRYM. When the switchover was completed the existing stock ceased to trade, i.e.; the old shares had to be exchanged for new certificates through the transfer agent.
 
 The Preferred shares are not being called for trading, but as they are convertible to a specific number of Common shares, the value of the Preferred will easily be calculated as a multiplier of the Common.
 
 Stock Transaction - in the first quarter to the date of this report, May 17,2004, are as follows:
 
 Non voting Convertible Preferred Stock: 1,000,000 shares issued at their par value $0.001 per share.
  Charged to compensation expense   $9,100,000.
 Restricted under Section 144, and recorded at 70% of FMV on the date of issuance. If converted, stock remains covered by the SEC s control position release rules.
 
 Voting Common Stock : Authorized 250,000,000 shares.
 
 A recap of stock transaction as follows:
    # of Shares
Pricea.Cash transactionsCash subscriptions received byDecember 31, 2003
4,038,333
$0.10  0.15Cash subscriptions received
January to March 2, 2004
(audit date)
2,875,000
0.03  0.12Cash subscriptions receivedMarch 3 to March 31, 2004
8,258,334
0.03  0.12Total issued for cash during quarter
15,716,667=========b.Non-cash transactionsStock performance plan
3,044,773
0.07Issued for services past and future
10,330,227
0.07 - 0.11Issued for patent/domain protection
13,200,000
0.07Total issued for non-cash transactions
26,575,000========Total common shares issued
41,746,667Common shares issued toDecember 31, 2003
98,935,500Total common shares issued toMarch 31, 2004
140,682,167=========c.Future shares issuance is restricted byCash subscriptions receivedprior to March 31, 2004
100,000
0.10Cash subscriptions receivedsubsequent to March 31, 2004
975,000
0.03  0.10Unconverted preferred shares
100,000,000Unexpired warrants
5,000,000Other common shares stillavailable for issuance afterMay 17, 2004
3,242,833109,317,833Total authorized common shares
250,000,000=========






Page - 12
  XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 All common stock issued during first quarter of 2004 are restricted under Section 144.
 
 Previous 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.
 
 
 NOTE I  NET OPERATING LOSS CARRY FORWARD
 
 
 The net operating loss carry forward since inception is as follows:
 
 Year

Net Operating Loss

Valuation
Allowance

Year of
Expiration2004  First Quarter

$ 10,085,176

$4,034,070

20242003

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$18,767,252

7,506,900
 
 
 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 - 13
 
 XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 
 
 NOTE J  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 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. No additional joint venture agreements were signed in the first quarter of 2004.
 
 Joint Venture

Company Investment in Joint Venture

Profit Sharing Percentage

Joint Venture revenue for First Quarter 2004A

$0

50%

$0B

$0

50%

$0C

$0

20%

$0D*

$0

40%-50%

$0E*

$0

15%-20%

$1,588
 
 
 During the quarter ended March 31, 2004, $1,588 in revenues had been generated under the above agreements and incurred $76,759 in media advertising expenses associated with the joint ventures. The Company under the terms of the agreements will not be reimbursed.
 
 Two of the joint ventures (marked with an *) were discontinued by mutual consent during the quarter ended March 31, 2004.
 
 
  Page - 14
   XRAYMEDIA, INC.
 (A COMPANY IN THE DEVELOPMENT STAGES)
 NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2004
 
 
 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 extended from May 2003 through April 2006. The minimum monthly rent payments are $6,690. Future minimum lease payments are as follows:
 
 2004        $60,210
 2005        80,280
 2006        26,760
 Total        $167,250
 
 Rental and other occupancy expenses for the quarter ended March 31, 2004 amounted to $22,380.
 
 
 
 NOTE M  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 account payable at the 2002 year-end in the amount of $47,540, including violation penalties and interest in the amount of $22,809.
 
 In 2003, the Canadian Revenue Agency (now referred to as the CRA) assessed a tax lien against the Company for these unpaid payroll taxes. The total amount owing CRA at March 31, 2004, with regard to the lien is $17,000. Management has arranged a payment plan with the CRA to pay the remainder off by mid-2004. The Company has agreed to a payment plan of approximately $3,800 per month.
 
 
 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
 
 Subsequent to March 31, 2004 the Company have received subscriptions for 1,075,000 shares of common stock at prices ranging from $0.03 to $0.10 per share (see also Note F). Also, subsequent to the quarter end, XRAYMEDIA, as the result of an unsolicited sponsorship of a large German brokerage house, has had its shares listed on the Berlin Breman Stock Exchange. No inducements have been offered for this broadening of the base for any interested investors.
 
 
 Page - 15
 
 
 ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 Management Statement:
  
 During the quarter ended March 31, 2004 XRAYMEDIA continued to focus on the release of its new Media SuperPortal web site and the launch of the newest version of the Live Media Marketplace (LMM) web site. XRAYMEDIA's joint venture partnership agreements for the LMM has continued to move forward, XRAYMEDIA has attracted a strong group of business professionals to work with XRAYMEDIA to develop advertising and promotion industry relationships while assisting in the progress of the XRAYMEDIA business model.
 
 The first half of this quarter showed growth for the Companys infomercial joint ventures, unfortunately the capital expenditures required to maintain the consistent revenue growth necessary to give XRAYMEDIA a profit was beyond the XRAYMEDIAs financial ability. The Company has dissolved its joint venture agreements with By Doctors Only and By Vets Only. The IHP and Revelation America joint ventures have not been officially severed but the investment activity from XRAYMEDIA has ended for the foreseeable future.
 
 XRAYMEDIA is actively working with corporate trade partners to assist in liquidating the trade inventory from the "Corporate Trade Transactions Fees" received from the use of the LMM web site. Based on Generally Accepted Accounting Principles in the United States, and in accordance with APB 29 and the interpretations contained in EITF 93-11 and EITF 99-17, the Company has made a full valuation reserve on this asset. The Company is negotiating to sell this asset for cash to an unrelated party.
 
 On March 8, 2004, XRAYMEDIA announced the upcoming launch of its new corporate website to be released March 31, 2004, closely followed by the much anticipated release of the newest version of the LMM web site which will launch on May 15, 2004. The corporate website and the LMM web site will both be launched with a fresh new look and feel. Both websites will offer a number of progressive new features, additional user-friendly tools, and powerful upgrades to the existing live media negotiating technology designed to attract the attention of corporate America and the media industry worldwide.
 
 On March 25, 2004, XRAYMEDIA announced the launch of its new Media SuperPortal web site. Following the Media SuperPortal launch closely, the newest version of the LMM web site has been slated for unveiling May 15, 2004. The newest Media SuperPortal outlines the Companys corporate vision and is home to the technologically advanced LMM. XRAYMEDIA intends to establish its Media SuperPortal as the premier media negotiating website for the general business community and media professionals worldwide. XRAYMEDIA will provide fast, efficient, reliable information, and essential resources in a user-friendly format. The Companys databases capture details for corporate and consumer targeting, which allows buyers, sellers, and media professionals to develop their businesses in direct response to their market. Part of what makes the Media SuperPortal an exceptional site for media professionals is that the Company is actively developing new technologies from myriad of Traditional Media Services and at the same time simplifying existing processes. XRAYMEDIA believes that there is significant opportunity for cross selling by offering a comprehensive set of advertisting services that encapsulate the full array of on- and off-line media requirements. As well as the on-line services the LMM web site will offer t he Traditional Services page of the Media Services sub portal, which contains links to the traditional methods of carrying out Advertising Agency and Public Relations services. To capture the need for a knowledgeable mixed-medium approach - the cohesion and convenience of the Media SuperPortal ensures its relevance to its industry. XRAYMEDIA provides a choice; clients can access services in both virtual- and real-world environments.
 
 On April 12, 2004, XRAYMEDIA announced affirmative progress and plans to preview the newest version of the LMM web site. Prior to the launch, select clients will receive previews of the latest release of the LMM in preparation for increased exposure and usage. Along with the broad media inventory already listed in the LMM, XRAYMEDIA's team of buyers are actively pursuing premium media inventory for the new release covering the main targeted media genres. The genres include television, radio, print, out-of-home, specialty and on-line. The preview will be made available to registered media providers, advertising agencies, corporate buyers, media buyers, and media whole-sellers. The LMM hosts XRAYMEDIA's live Internet negotiating technology, designed to provide the business community with the essential reach and timing needed to secure advertising and promotion inventory in real-time throughout North America as well as Internationally when such media becomes available for its registered users. XRAYMEDIA released its corporate website earlier than anticipated, to rave reviews. The latest Media SuperPortal located at http://www.xraymedia.com/ will house the newest version of the Live Media Marketplace. With a brand-new interface the Media SuperPortal offers all Internet users the opportunity to peruse the Company's expanding repertoire of media services with ease.
 
 Along with LMM new release XRAYMEDIA is planning a broad marketing campaign to cover several targeted areas focusing on media buyers, corporate buyers, advertising agencies, media whole-sellers, television, radio, print, and Internet companies. The marketing program will emphasize several key advantages of the Live Media Marketplace including a substantial and diversified media portfolio. Along with the extensive current media inventory already downloaded on the site, the Company will also emphasize significant potential savings through wholesale pricing and buyer incentive programs.
 Page - 16
 From January 2003 until now the company began test marketing several versions of the web site to potential customers for actual market penetration and viability studies for the complete XRAYMEDIA business model. XRAYMEDIA has received several types of joint venture opportunities for these economies, but it has chosen to primarily focus on its core live negotiating technology located in the Live Media Marketplace.
 
 Certain potential areas have been addressed, including the corporate trade modules, infomercial joint ventures, and the "XR2 System". The XR2 system, focuses on creating jobs & Agency Branches. The infomercial test market had been accomplished through three specific joint venture partnership agreements with companies that have identified infomercial products. Its penetration into the infomercial sector of the media industry has proven valuable for future its clients looking to purchase advertising for their infomercial products through the LMM. The corporate trade modules, as previously mentioned, helped the Company earn trade inventory, which they are now attempting to liquidate.
 
 The Live Media Marketplace test-marketing program will commence once both sites have been launched and will be the focus for the remainder of the year. This will be a multi-market penetration test and is going to target all small to medium sized businesses (defined as companies spending $10,000 to $1,000,000 per year in advertising) looking to purchase advertising opportunities for their products and services strictly on a cash basis. The test marketing study will be conducted using several coinciding market penetration models for achieving a maximum number of registered cash buyers in the system. This test will be conducted for cash buyers only, allowing XRAYMEDIA to monitor the compounded strength of several individual cash buyers harnessed through a single point of purchase. The largest test-marketing program will be for the newest version of the Live Media Marketplace, alongside the launch of a new XRAYMEDIA corporate website in 2004.
 
 PLAN OF OPERATIONS;
 
 XRAYMEDIA's plan of operations for the remainder of the year 2004 will consist of continuing to build on its revenue stream through increased transactions in the Live Media Marketplace through the new release and marketing program announced for the Live Media Marketplace, as well as liquidating inventory for additional revenue and assets on the balance sheet. The trade inventory obtained by the company through corporate trade transactions can also be converted to cash or used for acquiring additional media inventory for its clients. During the remainder of this fiscal year, we intend to show how this plan will translate into strong cash flow for the Company. Going forward we will continue to focus on the three areas that we feel will add significantly to shareholder value: transactional business flow, cash flow, and liquid asset accumulation.
 
 
 
 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
 
 Revenues for the first quarter of 2004 were $1,588 and $0 for the same quarter in 2003.
 
 Losses
 
 Net losses for the quarter ended March 31, 2004, increased to $10,085,176 over the same period in 2003 of only $202,995, an increase of approximately 4900% ($9,882,181).
 
 The increase in losses was attributable to a combination of six items, they are - increase in (1) compensation expense (2) professional fees (3) media advertising (4) travel (5) research and development (6) investor relations. The increases are the result of efforts by the Company to maximize the publics perception of XRAYMEDIAs expanded corporate website and the newest version of LMM  due for release May 15,2004 and the preferred shares issued to the Company President during the quarter.
 
 XRAYMEDIA expects to continue to incur losses at least through fiscal year 2004 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 - 17
 
 
 Expenses
 
 Selling, general and administrative expenses for the quarter ended March 31, 2004, increased to $9,961,943 from $139,442 for the quarter ended March 31, 2003. The disproportionate increase was primarily the inclusion of $9,100,000 in Section 144 control position expenses, along with $332,425 in stock performance plan, both amounts charged to compensation expense. Without the inclusion of these two non-cash items, this category would be reduced to $530,518. The large increase in selling general and administrative expenses, exclusive of those non-cash activities, were the result of the various measures implemented by Company management to move the company into new areas. Depreciation and amortization expenses for the quarters ended March 31, 2004 and March 31, 2003 were $18,260 and $16,561 respectively.
 
 Research and Development expenses were $119,973 in 2004 and $47,176 in 2003. The company has spent more heavily in 2004 to expedite the development and spring launch of its Media Service Portal of the Live Media Marketplace.
 
 B. Liquidity and Capital Resources
 
 The increase in cash flows for the quarter ended March 31, 2004 are primarily attributable to an increase in the expense categories: media advertising, travel, marketing, professional fees, supplies and investor relations.
 
 Cash flows generated by operations were $513,407 for the quarter ended March 31, 2004, and $11,074 for the quarter ended March 31, 2003.
 
 Cash flows generated by investing activities were a negative $943,996 for the quarter ended March 31, 2004 and $0 for the quarter ended March 31, 2003. The substantial increase is attributable to the payment, in restricted shares, for protection of patents, copyrights and domain.
 
 Cash flows generated from financing activities was $550,500 for the quarter ended March 31, 2004 and $0 for the quarter ended March 31, 2003. XRAYMEDIA's financing activities, in the quarter primarily consisted of the sale of XRAYMEDIA's common stock pursuant to private placements.
 
 XRAYMEDIA has funded its cash needs over the period covered by this Form 10-QSB through the issuance of its common stock for cash, and for services. XRAYMEDIA intends to cover its cash needs over the next twelve months in part 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.
 
 C. Capital Expenditures
 
 XRAYMEDIA made no significant net capital expenditures on property or equipment  during the quarters ended March 31, 2004 and 2003. The major planned capital expenditure is further website development. XRAYMEDIA has budgeted $100,000.00 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 funds 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, this goal is expected to be reached on May 15,2004 or shortly thereafter. The newest developments have resulted in numerous new modifications.
 
 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.
 
 
 Page - 18
 
 D. Income Tax Expense (Benefit)
 
 XRAYMEDIA has net operating loss carry forwards of approximately $18,750,000. 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.
 
 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 of the Financial Statements.
 
 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 - 19
 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.
 
 
 [THIS SPACE LEFT BLANK INTENTIONALLY]
 
 
 Page - 20
 
 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 20TH DAY OF MARCH, 2004.
 
 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    MAY 17, 2004.
 RAYMOND DABNEY
 
 Page - 21
 
 
 EXHIBIT 31
 
 
 
 Page - 22
 
 
 
 
 CERTIFICATIONS PURSUANT TO
 SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
 
 I, Raymond Dabney, Chief Executive Officer of XRAYMEDIA, Inc. certify that:
 
 I have reviewed this quarterly report on Form 10-QSB of  XRAYMEDIA, Inc;Based on my knowledge, this quarterly 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 quarterly report;Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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; 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 quarterly 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 quarterly report (the Evaluation Date); and
 
 c)  presented in this quarterly 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 quarterly 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: May 17, 2004        Signature: /s/Raymond C. Dabney
 Raymond C. Dabney
 Chief Executive Officer
 
 
 
 
 Page - 23
 
 
 CERTIFICATIONS PURSUANT TO
 SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
 
 I, Raymond Dabney,  Chief Financial Officer  of XRAYMEDIA, Inc. certify that:
 
 I have reviewed this quarterly report on Form 10-QSB of  XRAYMEDIA, Inc;Based on my knowledge, this quarterly 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 quarterly report;Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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; 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 quarterly 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 quarterly report (the Evaluation Date); and
 
 c)  presented in this quarterly 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 quarterly 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: May 17, 2004        Signature: /s/Raymond C. Dabney
 Raymond C. Dabney
 Chief Financial Officer
 
 
 
 Page - 24
 
 
 EXHIBIT 32
 
 
 
 
 
 
 Page - 25
   
 
 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 Quarterly Report of XrayMedia, Inc. on Form 10-QSB for the period ending March 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: May 17, 2004        Signature: /s/Raymond C. Dabney
 Raymond C. Dabney
 Chief Executive Officer
 
 
 
 Page - 26
 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 Quarterly Report of XrayMedia, Inc. on Form 10-QSB for the period ending March 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: May 17, 2004        Signature: /s/Raymond C. Dabney
 Raymond C. Dabney
 Chief Financial Officer
 
 Page - 27
 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 - 28
 
 
 
 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 - 29
 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 - 30