**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, 2005
 
 
 [  
] 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)
 
 
 ***Page
- 1***
 
 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, 2005, were $37,750.
 
 
 On March
31, 2005 and May 17, 2005, the number of shares outstanding of the registrant's
Common Stock, $0.001 par value (the only class of voting stock), was
238,457,250 and
247,457,250, respectively. On March 31, 2005 and May 17, 2005, the number of
shares outstanding of the registrants Preferred Stock, $0.001 par value
(non-voting), was 1,000,000. The Company’s President, Raymond Dabney, holds 100%
of these shares.
 
 
 ***Page
- 2***
  ****
 **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 attached hereto as Pages F - 1 through F - 9 and are incorporated
herein by this reference.**
 
 
 
 **(THIS
SPACE LEFT BLANK INTENTIONALLY)**
 
 
 
 ***Page
- 3***
 
 
  
 
 **XRAYMEDIA,
INC.**
 (FORMERLY
XRAYMEDIA.COM, INC.)
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 **BALANCE
SHEET (UNAUDITED)**
 MARCH 31,
2005
 
 
 MARCH
      31**2005****ASSETS**CURRENT
      ASSETSCash
      and cash equivalents
    $
    64Accounts
      receivable
    37,596Prepaid
      expenses (Note B)
    50,000TOTAL
      CURRENT ASSETS
    
    87,660FIXED
      ASSETS (Note C)Furniture
      and equipmentCost.
    
    334,708Accumulated
      amortization.
    
    (284,404
    )Net
    
    50,304Software
      LicenseCost.
    
    25,000Accumulated
      amortization
    
    (25,000
    )Net
    
    0TOTAL
      FIXED ASSETS
    
    50,304TOTAL
      ASSETS
    $
    137,964CURRENT
      LIABILITIESAccounts
      payable and Accrued expenses (Note D)
    $
    1,237,116Advances
      from Company Officer (Note F)
    
    138,845Advance
      from related party ( Note F)
    
    636,712Advances
      - Other
      
      TOTAL
      CURRENT LIABILITIES
    
    189,777
      
      2,202,450TOTAL
      LIABILITIES
    
    2,202,450STOCKHOLDERS'
      EQUITY (Note H)Convertible
      Preferred Stock, par value $.001; 1,000,000shares
      authorized; 1,000,000 issued and outstanding at March 31, 2005
    
    1,000Additional
      paid in capital
    
    -Common
      Stock, par value $.001; 250,000,000 shares authorized; issued and
      outstanding 238,457,250
      March
      31, 2005
    
    238,457Additional
      paid in capital
    
    23,312,109Common
      shares subscribed
    
    11,000Deficit
      at inception date
    
    (746,875
    )Accumulated
      deficit during the development stage
    
    (24,880,177
    )Common
      stock note receivable
    
    (0
    )TOTAL
      STOCKHOLDERS' EQUITY
    
    2,064,486TOTAL
      LIABILITIES ANDSTOCKHOLDERS'
      EQUITY
    $
    137,964
 ***Page
- 4***
 
 
  
  **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 STATEMENTS
OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005, 2004, AND
 THE
PERIOD MARCH 1, 1994 (INCEPTION OF THE DEVELOPMENT STAGE) TO MARCH 31, 2005
 
 
 Three
      Months Ended March 31,
    March
      1, 1994
      (inception
      of development stage) to March 31,2005)2005
    
    
    2004REVENUE
    $
    37,750
    
    $
    1,588
    $
      153,907COSTS
      AND EXPENSESPersonnel
      Costs
    
    15,000
    
    
    21,000
    763,871Compensation
      expense
    
    -
    
    
    9,432,425
    12,121,750Occupancy
      costs
    
    22,208
    
    
    22,380
    479,942Professional
      fees
    
    166,364
    
    
    64,957
    1,699,589Computer
      Costs
    
    -
    
    
    -
    94,840Media
      advertising
    
    116,576
    
    
    76,759
    490,040Marketing
    
    21,772
    
    
    23,997
    355,565Travel
      & promotion
    
    13,279
    
    
    39,439
    467,585Consulting
    
    24,351
    
    
    22,727
    548,084Bank
      charges
    
    1,178
    
    
    1,271
    19,589Office
      supplies
    
    26,618
    
    
    24,443
    410,233Communication.
    
    6,262
    
    
    5,173
    179,553Insurance.
    
    192
    
    
    -
    78,170Miscellaneous
    
    670
    
    
    2,297
    27,288Transfer
      fees
    
    1,958
    
    
    2,308
    27,417Depreciation
      and amortization.
    
    16,735
    
    
    18,260
    328,615Bad
      debt expense.
    
    -
    
    
    -
    36,343Research
      and Development.
    
    99,967
    
    
    119,973
    1,257,756Media
      and project development
    
    
    
    
    
    2,135,850Patent,
      copyright expense
    
    
    
    
    
    924,000Investor
      relations
    
    67,185
    
    
    204,507
    1,892,586TOTAL
      OPERATING EXPENSES
    
    600,315
    
    
    10,081,916
    24,338,666OTHER
      INCOMEDissolution
      of Corp Reports
    
    -
    
    
    -
    (503,507)Other
      (Note H)
    
    -
    
    
    -
    (138,774)-
    
    
    -
    (642,281)OTHER
      EXPENSESInterest
      and penalties
    
    -
    
    
    1,475
    13,694Other
      interest
    
    1,617
    
    
    3,373
    39,4431,617
    
    
    4,848
    53,137Total
      Expense
      
      NET
      LOSS
    $
    601,932
      
      564,182
    
    $
    10,086,764
      
      10,085,176Accumulated
      deficit, beginning
    
    24,315,995
    
    
    8,682,076Accumulated
      deficit, ending
    $
    24,880,177
    
    $
    18,767,252
    $ 24,880,177BASICLOSS
      PER SHARE (NOTE A).
    $
    (0.002)
    
    $
    (0.092)WEIGHTED
      AVERAGE NUMBER OFCOMMON
      SHARES OUTSTANDING.
    
    236,457,250
    
    
    110,116,648
 
 
 ***Page
- 5***
  **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 **STATEMENTS
OF CASH FLOWS (UNAUDITED)**
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005, 2004, AND
 THE
PERIOD MARCH 1, 1994 (INCEPTION OF THE DEVELOPMENT STAGE) TO MARCH 31, 2005
 
 
 Three
      Months Ended March 31,
    
    March
      1, 1994
      (inception
      of development2005
    
    2004
    stage) to March
31,2005)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
    $
    (564,182)
    
    $
    (10,085,176)
    
    (24,880,177
    )Adjustments
      to reconcile net lossto
      net cash used by operating activities:Depreciation
    
    16,735
    
    
    16,178
    
    303,615Amortization
    
    -
    
    
    2,082
    
    25,000Shares
      issued in exchange for servicescharged
      to Professional fees
    
    170,000
    
    
    232,825
    
    494,500Shares
      issued for stock performance plan
    
    -
    
    
    332,425
    
    1,996,000Shares
      issued under section 144-control position
    
    -
    
    
    9,100,000
    
    10,150,000Shares
      issued for services
    
    163,000
    
    
    1,523,500
    
    4,466,850Abandonment
      of furniture & equipment
    
    -
    
    
    -
    
    30,809Bad
      debt expense
    
    -
    
    
    -
    
    36,343Write-off
      of goodwill
      Write-off
      of patent, copyright
    
    -
    
    
    -
    
    464,831
      924,000CHANGES
      IN CURRENT ASSETSAND
      CURRENT LIABILITIES:decrease
      in current assets:Prepaid
      expenses
    
    (49,873)
    
    
    (343,000)
    
    (50,000)Accounts
      receivable
    
    (8,494)
    
    
    -
    
    (43,939)Security
      deposit
    
    158
    
    
    (1,324)
    
    1Increase
      in current liabilities:Accrued
      expenses
    
    172,625
    
    
    (226,587)
    
    1,078,769Advances
      from related parties
    
    9,766
    
    
    (37,516)
    
    988,973Advances
      from Others
      
      NET
      CASH USED FOR OPERATING ACTIVITIES
    
    103,424
      
      13,159
    
    
    
    
    163,212
      
      (3,851,213)513,407   ***Page
- 6***
   **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 **STATEMENTS
OF CASH FLOWS (UNAUDITED)**
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005, 2004, AND
 THE
PERIOD MARCH 1, 1994 (INCEPTION OF THE DEVELOPMENT STAGE) TO MARCH 31, 2005
(CONT)
 
 Three Months Ended March
      31,
    
    March
      1, 1994
      (inception
      of development2005
    
    
    2004
    
    stage)
      to March 31,2005)CASH
      FLOWS FROM INVESTING ACTIVITIES:Acquisition
      of furniture and equipment
    
    (6,682)
    
    
    (19,996)
    
    (384,728)Acquisition
      of software
    
    -
    
    
    -
    
    (25,000)of
      goodwill
    
    -
    
    
    -
    
    (464,831)Acquisition
      of patent, copyright and domain protection
    
    
    
    
    (924,000)NET
      CASH FOR INVESTING ACTIVITIES
    
    (6,682)
    
    
    (943,996)
    
    (874,559)CASH
      FLOWS FROM FINANCING ACTIVITIES:Issuance
      of notes payable
    
    -
    
    
    -
    
    1,704,807Shares
      issued for note
    
    -
    
    
    -Shares
      subscribed
    
    -
    
    
    (479,600)
    
    11,000Sale
      of common stock
    
    -
    
    
    1,030,100
    
    3,010,029NET
      CASH PROVIDED BY FINANCINGACTIVITIES
    
    -
    
    
    550,500
    
    4,725,836NET
      INCREASE IN CASH
    
    6,477
    
    
    119,911CASH,
      beginning of period
    
    (6,413)
    
    
    19,652CASH,
      end of period
    $
    64
    
    $
    139,563
    
    $
      64SUPPLEMENTAL
      DISCLOSURE:Penalties
      and interest
    $
    -
    
    $
    1,475
    
    22,809Other
      Interest expense
    $
    3,373
    
    $
    3,473
    
    41,199Noncash
      investing and financing activitiesShares
      issued for services
    $
    333,000
    
    $
    232,825Shares
      issued for stock performance plan
    
    -
    
    
    332,425Shares
      issued under section 144 - control position
    
    -
    
    
    9,100,000Shares
      issued in exchange for services
    
    
    
    
    1,523,500$
    333,000
    
    $
    11,188,750No
      significant amounts of taxes were paid during the periods shown above.
 
  ***Page
- 7***
 
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 **NOTES
TO THE FINANCIAL STATEMENTS (UNAUDITED)**
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 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, 2005 and for the three months ended MARCH 31, 2005 and 2004 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, 2004. 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
- 8***
 
 
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 **NOTES
TO THE FINANCIAL STATEMENTS (UNAUDITED)**
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 
 
 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 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 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 attempting to obtain protection for that portion of our technology
developments, copyrighting special features and securing our Internet domain
were to be capitalized and amortized over the estimated useful life of the
related assets. This was not feasible and the entire amount was written off in
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
- 9***
 
 
 
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 **NOTES
TO THE FINANCIAL STATEMENTS (UNAUDITED)**
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 
 
 e.
Income taxes
 
 
 No income
taxes are payable for the three months ended March 31, 2005 and 2004. The
Company has net operating losses of approximately $25,000,000, which will expire
in the 20 th year from
the date the losses were incurred, i.e. from 2014 to 2025.
 
 
 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
- 10***
 
 
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO
THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 
 NOTE A
- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Summary
of Significant Accounting Principles (Continued)
  Impact
of accounting standards
 
 
 In
December 2003, the FASB issued SFAS 132r, Employers' Disclosures about Pensions
and Other Postretirement Benefits—an amendment of FASB Statements No. 87, 88,
and 106. SFAS 132r revises employers’ disclosures about pension plans and other
postretirement benefit plans. It does not change the measurement or recognition
of those plans required by FASB Statements No. 87, Employers’ Accounting for
Pensions, No. 88, Employers’ Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits, and No. 106,
Employers’ Accounting for Postretirement Benefits Other Than Pensions. This
Statement retains the disclosure requirements contained in FASB Statement No.
132, Employers’ Disclosures about Pensions and Other Postretirement Benefits,
which it replaces. It requires additional disclosures to those in the original
Statement 132 about the assets, obligations, cash flows, and net periodic
benefit cost of defined benefit pension plans and other defined benefit
postretirement plans. The adoption of SFAS 132r did not have any impact on the
Company’s financial condition or results of operations.
 
 
 In
December 2003, the FASB issued FIN No. 46R, “Consolidation of Variable Interest
Entities.” This requires that the assets, liabilities and results of the
activity of variable interest entities be consolidated into the financial
statements of the company that has a controlling financial interest. It also
provides the framework for determining whether an entity should be consolidated
based on voting interest or significant financial support provided to it. The
adoption of FIN No. 46R did not have any impact on the Company’s financial
condition or results of operations.
 
 
 In
November 2004, the FASB issued SFAS 151, Inventory Costs—an amendment of ARB No.
43, Chapter 4. The Statement amends the guidance of ARB No. 43, Chapter 4,
Inventory Pricing, by clarifying that abnormal amounts of idle facility expense,
freight, handling costs, and wasted materials (spoilage) should be recognized as
current-period charges and by requiring the allocation of fixed production
overheads to inventory based on the normal capacity of the production
facilities. The adoption of SFAS 151 did not have any impact on the Company’s
financial condition or results of operations.
 
 
 In
December 2004, the FASB issued a revision to SFAS 123 (revised 2004),
Share-Based Payment. The revision requires all entities to recognize
compensation expense in an amount equal to the fair value of share-based
payments granted to employees. The statement eliminates the alternative method
of accounting for employee share- based payments previously available under APB
25. The provisions of SFAS 123R are effective as of the first interim period
that begins after June 15, 2005. The adoption of SFAS 123R did not have any
impact on the Company’s financial condition or results of operations.
 
 
 In
December 2004, the FASB issued SFAS No. 153 "Exchanges of Non-monetary
Assets-amendment of APB Opinion No. 29". Statement 153 eliminates the exception
to fair value for exchanges of similar productive assets and replaces it with a
general exception for exchange transaction that do not have commercial
substance, defined as transaction that are not expected to result in significant
changes in the cash flows of the reporting entity. This statement is effective
for exchanges of non-monetary assets occurring after June 15, 2005. The Company
does not believe that this recent accounting pronouncement will have a material
impact on their financial position or results of operations.
 
 ***Page
- 11***
 
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO
THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 
 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 $25,000,000. 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
2004 amounts have been reclassified to conform to 2005 classifications.
 
 
 k.
Advertising
 
 
 The
Company expenses all advertising as incurred. For the quarters ended March 31,
2005 and 2004, the Company charged to operations $116,576 and $76,959
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 collection 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 March 31,
2005, 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
- 12***
  
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO
THE FINANCIAL STATEMENTS (UNAUDITED)
 MARCH 31,
2005 AND 2004
 NOTE B -
PREPAID EXPENSES
 
 
 Prepaid
expenses at March 31, 2005 consist of:
 
 
 
 
 2005(a)
      Legal expenses being incurred in the 2nd
      quarter
      of 2005 as it regards assistance
      with
      a registration statement to be filed
      with
      the SEC:
    $  
      50,000The
      renumeration in both (a) and (b) was in the form of Section 144 Restricted
      Stock
  
  NOTE C -
FURNITURE AND EQUIPMENT
  Property
and equipment at March 31, 2005 consist of:
  2005Furniture
      and equipment
    
    $334,708Software
      License
    
    
    25,000Less:
      Accumulated depreciation
      and
      amortization
    
    
    (284,404
    )Furniture
      and equipment, net
    
    $
    50,304
  Depreciation
expense for the quarters ended March 31, 2005 and 2004 was $16,735 and $16,178,
respectively. Amortization expense was $2,082 only for the quarter ended March
31, 2004, as the software license was fully amortized at December 31, 2004.
 
 NOTE D -
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND ADVANCES
  Accounts
payable and accrued expenses at March 31, 2005 were comprised of the following:
  
 2005Accrued
      Consulting expense
    
    $
    227,101Accrued
      Office expense
    
    
    201,571Accrued
      Professional fees expense
    
    
    267,776Accrued
      Website/Internet expense
    
    
    339,545Accrued
      Other expenses
    
    
    6,833Accrued
      Wages payable
    
    
    131,350Accrued
      Media advertising
    
    
    62,940Total
      Accrued Expenses
    
    $
    1,237,116
 
 
 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, 2005.
 
 ***Page
- 13***
  
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 **NOTES
TO THE FINANCIAL STATEMENTS (UNAUDITED)**
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 
 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, 2005 show additional investment of $22,192 during this quarter.
 
 
 The
President charges the Company for his management fees in lieu of an employee
salary. Management fees for the quarters ended March 31, 2005 and 2004 were
$24,351 and $22,727 respectively and are included in consulting in the Statement
of Operations and Accumulated Deficit. The Company owed the President $138,845
as of March 31, 2005 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 for the
quarter ended March 31, 2005, no shares were issued under this plan. However
during the years ended December 31, 2004 and 2003, 7,830,487 and 1,000,000
shares were issued of common stock under the stock performance plan,
respectively. The shares issued were 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
- 14***
 
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO
THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 
 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, 2005, are as follows:
  #
      of Shares
    Pricea.Cash
      transactions
    N/Cb.
      Non-cash transactionsIssued
      for services past and future
    13,500,000
    $ 0.013-$0.034Total
      common shares issued
    13,500,000Common
      shares issued toDecember
      31, 2004
    224,957,250Total
      common shares issued toMarch
      31, 2005
    238,457,250Common
      Shares Issued from April 1, 2005 - May 17, 2005
      For
      services past and future
      
      Total
      Common shares issued to May 17, 2005
      
      c.Future
      shares issuance is restricted by
    9,000,000
      
      
      247,457,250
    $
      0.01Unexpired
      warrants as of March 31, 2005
    120,000Cashless
      warrants exercised in 2004 still to be issued in 2005
    101,538Unconverted
      preferred shares
    100,000,000Remaining
      cash subscriptions from December 31, 2004
    333,333Total
      share issuance restriction
    100,554,871Total
      shares issued as of May 17, 2005
    247,457,250Total
      possible shares
    348,012,121The
      Company issued warrants during the course of private placement offerings.
      The warrants could be converted into shares of stock in lieu of payment
      through a formula, which divides the value of the warrants at the time the
      conversion right is exercised by the market value. Earnings per share is
      not adjusted to include the weighted average outstanding warrants as to do
      so would be antidilutive.As
      of March 31, 2005 and the date of this report the unexpired cashless
      warrants were calculated to be approximately 120,000. Significant amounts
      of warrants were unexercised and expired during this quarter of
      2005.
 
 
 ***Page
- 15***
 
 
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 **NOTES
TO THE FINANCIAL STATEMENTS (UNAUDITED)**
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 
 Previous
Equity Transactions
 
 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.
 
 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
      Expiration2005
      - First Quarter
    $
      564,182
    $
      225,672
    20252004
      2003
    15,633,919
      2,012,733
    6,253,567
      805,093
    2024
      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$24,880,177
    9,952,069
 
 
 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
- 16***
 
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGE)
 NOTES TO
THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 
 NOTE J -
GOING CONCERN
  The
Company has had minor sales and suffered recurring losses from operations that
raise substantial doubt about its ability to continue as a going concern.
However, the financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
  The
Company has been in the development stage since March 1, 1994. It is the
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. One additional joint venture agreement was signed in 2004.
None have been entered into in the first quarter of 2005.
 
 Joint
      Venture
    Company
      Investment in Joint Venture
    Profit
      Sharing Percentage
    Joint
      Venture revenue for First Quarter 2005A
    $0
    50%
    $0B
    $0
    50%
    $0C
    $0
    20%
    $0D*
    $0
    40%-50%
    $0E*
      F
    $0
      $0
    15%-20%
      7.5%-50%
    $0
      $0
 
 
 
 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. In the quarter ended March 31, 2005, $0 in
revenues were generated and incurred $116,576 in media advertising
expenses.
  Two of
the joint ventures (marked with an *) were discontinued by mutual consent in
2004.
 
  ***Page
- 17***
 
 **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGES)
 NOTES TO
THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 
  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 $6,830. Future minimum lease
payments are as follows:
 
 
 2005
        61,470
 
 2006  27,320
 
 Total $88,790
 
 
 Rental
and other occupancy expenses for the quarter ended March 31, 2005 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 accounts payable at December 31,
2002 in the amount of $47,540, including violation penalties and interest in the
amount of $22,809. Subsequently, in 2003, the Canadian Revenue Agency (CRA)
assessed a tax lien against the Company for these unpaid payroll taxes. The
Company made the final payment during the quarter ended September 30, 2004. The
total amount owing CRA at September 30, 2004, in this regard is $0. During the
third quarter of 2004 the CRA conducted a further audit and assessed an
additional $30 for the year 2003, but advised that some portion of earlier
penalties/interest would be reversed. CRA does not make a practice of cash
refunds in these matters. The amounts involved are not deemed sufficient to
require a restatement of prior financials, but have created a reverse balance in
interest/penalty expenses for the year ended December 31, 2004. The Company
again fell into arrears in remitting payroll taxes in late 2004, a problem which
has continued into 2005. The Company has included in its accrued expenses
approximately $32,000 for these unpaid payroll taxes including the Company’s
estimate of any penalties.
 
 ***Page
- 18***
  **XRAYMEDIA,
INC.**
 (A
COMPANY IN THE DEVELOPMENT STAGES)
 NOTES TO
THE FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE
THREE MONTHS ENDED MARCH 31, 2005
 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
- CONTINGENCIES
 
 In
October 2004, an action was filed against the Company for alleged breach of
contract. The Plantiffs seek in excess of $20 Million in damages and issuance of
125 Million shares of the Company’s Common Stock. The Company has filed an
answer and is vigorously defending the action, denying any and all liability,
and has filed a separate action against the principals of the Plantiff LLC’s
seeking damages. The action is in the preliminary stages and no discovery has
been commenced.
 
 Legal
experts hired by the Company cannot predict whether the likelihood of an
unfavorable outcome is probable or remote. Therefore, no liability has been
recognized by the Company as of the date of this report. While the outcome of
this claim cannot be predicted with certainty, management does not believe that
the outcome of any pending legal matters will have a material adverse effect on
the financial position, although results of operations or cash flows could be
affected in a particular period.
 
 
 NOTE P -
SUBSEQUENT EVENTS
 
 During
the quarter ending June 30, 2005, the Company is intends to propose amendments
to the Articles of Incorporation
to increase the authorized capital of the Company from 250 million shares of
Common Stock, par value $0.001, to 750 million shares of Common Stock, par value
$0.001. Additionally, the proposed amendment includes the increase in Preferred
Stock from 1 million to 11 million, par value $0.001 consisting of three
separate classes; 1) 5,000,000 Preferred Stock Series A, par value $0.001,
convertible at a rate of 1 to 100 shares of Common Stock, with all voting rights
converted at the same rate, 2) 1 million shares of Preferred Stock Series B, par
value $0.001, converted at a rate of 1 to 1 share of Common Stock with all
voting rights converted at the same rate., and 3) 5 million shares of Preferred
Stock Series C, par value $0.001, with a conversion rate of 1 to 1 share of
Common Stock with all voting rights converted at the same rate. The currently
issued and outstanding shares of Preferred Stock would be designated as the type
1 described above.
 
 The
Company signed a Non-Exclusive Technology Master Licensing Agreement which would
allow the non-exclusive sub-licensing of the XRYM System for a fee.
 
 The
Company signed a revenue sharing agreement to externally market the XRYM System
through the other parties clients and the general business community.
 
 These
events had no effect on the financial statements for the quarter ended March 31,
2005.
 
  ***Page
- 19***
 
 **ITEM
6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**
 
 The
following information should be read in conjunction with the unaudited condensed
consolidated financial information and the notes thereto included in this
Quarterly Report on Form 10-Q.
 
 
 In
addition to the other information in this report, the following Management's Discussion
and Analysis should be considered carefully in evaluating Xraymedia, Inc. and our
business. This Quarterly Report on Form 10-Q contains forward-looking statements.
These statements relate to future events or our future financial performance
and are identified by terminology such as "may," "will," "could," "should,"
"expects," "plans," "intends," "seeks," "anticipates," "believes," "estimates,"
"potential" or "continue," or the negative of such terms or other comparable
terminology. These statements are only predictions. You should not place
undue reliance on these forward-looking statements. Actual events or results
may differ materially. In evaluating these statements, you should specifically
consider various important factors, including the risks outlined under
"Certain Factors Which May Impact Future Results" in this section of this report
and our other filings with the Securities and Exchange Commission. These factors
may cause our actual results to differ materially from any forward-looking
statement.
 
 Management
Statement:
 
 
 Commencing
in the later part of 2004, XRAYMEDIA has positioned to become an industry
leader, by providing cutting edge live negotiating technology to multiple
industries through its premiere business-to-business web site.
 
 Central
to XRAYMEDIA is its unique live negotiating technology; under years of
development this technology has been solely deployed in media industry.
Available to the global community, 24 hours a day, 7 days a week, XRAYMEDIA now
releases this proprietary technology to virtually every industry worldwide, with
video and image components allowing users to thoroughly evaluate merchandise,
and other such offerings, before initiating live negotiations. XRAYMEDIA proudly
releases one of the most powerful technologies in live Internet negotiating for
online marketplaces today.
 
 From the
first day of the revised Live Media Marketplace v3.0 launch with the new
corporate trade modules XRAYMEDIA has amassed a substantial amount of corporate
trade transactions through its corporate trade partners and affiliates. Trade
volumes reached a peak of approximately $55,000,000.00 in corporate trade
transactions from its partners in the Live Media Marketplace v3.0. As one of the
partners by contract, XRAYMEDIA received goods in consideration for use of their
marketplace, which will be liquidated and realized as soon as practicable. Based
on Accounting Principles Generally Accepted in the United States the “Corporate
Trade Transactions Fees” to date will not be reflected in the financial
statements until the company has liquidated the goods. The Company is in the
process of selling all the goods for cash to an unrelated party.
 
 
 XRAYMEDIA
has received and considered several joint venture opportunities, over the past
12 months, although none have been selected in 2005, to date. The Company has
been very selective in its consideration of these various proposals, and is
considering move forward with those deemed to be inline with XRAYMEDIA’s global
interests. The first such project, agreed to in late 2004, is simply called The
Screenwriter Dig (TSD). Born out of XRAYMEDIA’s established partnership with
Hollywood entertainment conglomerate, Relativity Management, XRAYMEDIA sponsors
this contest quest to find quality scripts and pitches for potential further
development by famous producer, and contest host, Mark Canton. In his two
decades of experience in the entertainment industry, Mark Canton has help ed
bring more than 300 pictures to the silver screen. Canton initially joined
Warner Bros. in 1980. He rose to Senior Vice President in 1983 and by 1985
 
 ***Page
- 20***
 
 was named
President of Worldwide Theatrical Production. During his tenure at Warner Bros.,
Mr. Canton was instrumental in developing - among others - the Batman , *Lethal
Weapon* , and *National
Lampoon's Vacation* franchises.
Entertainment remains one of America's largest exports. Box office records are
broken nearly every year and television-advertising revenues are at all-time
highs. Revenues from all sources of media and entertainment (film, music, video
games, publishing, etc.) are expected to reach $571 billion by 2006 ( *Price
Waterhouse Coopers* ). Since
the birth of the industry, Hollywood, as a city and an institution, has
represented a gateway to fame, excitement and intrigue that appeals to many
people worldwide. Over the course of this competition, launched April 12, 2005,
XRAYMEDIA will provide the online expertise and infrastructure for The
Screenwriter Dig, while Mark Canton brings creative expertise as well as access
to the major motion picture studios and television networks. Through The
Screenwriter Dig, writers from all over the country and world are given the
chance to have their screenplays, teleplays and television and film pitches read
by Mark Canton and his creative staff. At the end of the year one of each type
of project (i.e., film script, TV pitch, etc.) will be chosen for further
development and submission to a studio for production consideration. By opening
the doors to a seasoned Hollywood producer like Mark Canton, aspiring filmmakers
who traditionally would never get the attention of a producer of Mark Canton's
caliber, now have a means by which to showcase their talents.
 
 With the
potential to generate significant revenues, for XRAYMEDIA, The Screenwriter Dig
has features nominal fees ranging from $10.00 up to $29.00 per submission.
Overall cash flow is conservatively projected at over $8,000,000 for the first
year of the competition alone. Increases of 25% for each subsequent year are
expected in future TSD contest.
 
 Specifically
during the first quarter, covered in this report, XRAYMEDIA has partnered
exclusively with the Asian Woman Media Group to represent all North American
advertising for the company’s five magazines with a current fee structure that
allocates 50% of all North American generated ad-sales revenues to XRAYMEDIA.
Currently published by, AIM International, one of the largest Asian print
publishers in the UK, the Asian Woman Media Group is bringing five established
magazines, all geared towards the South Asian demographic, to North America.
These leading publications include Asian Woman, as well as Asian Bride wedding
magazine. Both of these premier periodicals are the first Asian publications to
be certified by the Audit Bureau of Circulation (ABC). An International
regulatory body established since, 1914, the, the ABC is a non-profit
organization auditing publications in accordance with recognized standards,
which govern, among other things, how publishers report their circulation
statistics. Asian Woman is the best selling Asian magazine in the UK, Europe and
even the world; and Asian Bride remains the fourth biggest mainstream bridal
title in the UK since 2002. Well known throughout the South Asian community,
Asian Woman, one of the company's benchmark publications, has a circulation of
over 1 million readers alone. With widespread appeal, these magazines have
already garnered 23% readership from outside the Asian community. XRAYMEDIA's
exclusive rights will be initially focused on bringing North American
advertising content to both Asian Woman and Asian Bride magazines. The Company
has initiated a marketing plan to be rolled-out, first across all major North
American markets and then Internationally as the magazine’s reach grows. Because
of lag times in publishing and distribution, XRAYMEDIA’s input into the
advertising and text materials will not be on the newsstands until the end of
May, of this year (approximately 10 days after this 10QSB becomes public). The
financial returns to the company show firstly on the 2 nd quarter
report, June 30, 2005, and more positively in the 3 rd quarter.
 
 ***Page
- 21***
 
 PLAN OF
OPERATIONS;
 
 
 XRAYMEDIA's
plan of operations for the remainder of the year 2005 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 2005 were $37,750 and $1,588 for the same quarter in
2004.
  *Losses*
  Net
losses for the quarter ended March 31, 2005, decreased to $564,182 over the same
period in 2004 of $10,085,176, a decrease of ($9,520,994).
  The
decrease in losses was attributable to decrease in compensation expense and
investor relations expense, offset by increases
in professional fees and media advertising.
 
 XRAYMEDIA
expects to continue to incur losses at least through fiscal year 2005 and there
can be no assurance that XRAYMEDIA will achieve or maintain profitability from
revenues that may be generated or that growth can be sustained in the future.
 
 ***Page
- 22***
 
  *Expenses*
  Selling,
general and administrative expenses for the quarter ended March 31, 2005,
decreased to $500,348 from $9,961,943 for the quarter ended March 31, 2004. The
disproportionate decrease was primarily the inclusion, in 2004, 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, the 2004 category would be reduced to $530,518, making
the two quarters fairly comparable. Depreciation and amortization expenses for
the quarters ended March 31, 2005 and March 31, 2004 were $16,735 and $18,260
respectively.
  Research
and Development expenses were $99,967 in 2005 and $119,973 in 2004. The company
spent slightly 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*
 
 For the
first quarter of 2005, the issuance of 13,500,000 non-cash-shares
and the increase in borrowings, barely offset the loss for the first quarter.
However, the increase in cash flows for the quarter ended March 31, 2004 can be
primarily attributed to an increase in the expense categories: media
advertising, travel, marketing, professional fees, supplies and investor
relations.
  Cash
flows generated by operations were $13,159 for the quarter ended March 31, 2005,
as versus $513,407 for the quarter ended March 31, 2004, a falling away of
$500,000. The heavy issuance of non-cash-shares in 2004 more than offset the
$1,000,000 use of funds in the current assets and liability accounts.
  Cash
flows generated by investing activities were a negative $6,682 for the quarter
ended March 31, 2005 and $943,996 for the quarter ended March 31, 2004. The
substantial decrease is attributable to the payment, in 2004, in restricted
shares, for protection of patents, copyrights and domain.
  Cash
flows generated from financing activities were nil for the quarter ended March
31, 2005 and $550,500 for the quarter ended March 31, 2004. XRAYMEDIA's
financing activities, in the 2004 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
increasing debt and the issuance of its common stock 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, 2005 and 2004. 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.
  Several
years ago, XRAYMEDIA's website had passed its initial test stage on its way to
becoming operational to handle the 'real-time' interactive business, a goal
which was reached in 2004. 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
- 23***
 
 *D.
Income Tax Expense (Benefit)*
  XRAYMEDIA
has net operating loss carry forwards of approximately $25,000,000. which will
expire from 2014 to 2025. 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
four 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
- 24***
 
 **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
- 25***
 
  
 **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, 2005.
 
 RAYMOND DABNEY
 
  ***Page
- 26***
 
 
 
 **EXHIBIT
31**
 
  ***Page
- 27***
 
 
 
 **CERTIFICATIONS
PURSUANT TO**
 
 **SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002**
 
 
 
 I,
Raymond Dabney, Chief Executive Officer of XRAYMEDIA, Inc. certify
that:
  1. I have
reviewed this quarterly report on Form 10-QSB of XRAYMEDIA, Inc;
 
 2. 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;
 
 3. 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;
 
 4. The
registrant’s other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have;
 
 a)  
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this 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, 2005         Signature: /s/Raymond
C. Dabney
 
 Raymond C. Dabney
 Chief
Executive Officer
 
 
 
 ***Page
- 28***
 
 **CERTIFICATIONS
PURSUANT TO**
 
 **SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002**
 
 
 
 I,
Raymond Dabney,  Chief Financial Officer  of XRAYMEDIA,
Inc. certify that:
  1. I have
reviewed this quarterly report on Form 10-QSB of  XRAYMEDIA, Inc;
 
 2. 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;
 
 3. 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;
 
 4. The
registrant’s other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have;
 
 a)  
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this 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, 2005         Signature: /s/Raymond
C. Dabney
 
 Raymond C. Dabney
 Chief Financial Officer
 
 
  ***Page
- 29***
  
 **EXHIBIT
32**
 
   ***Page
- 30***
 
 **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, 2005 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, 2005         Signature: /s/Raymond
C. Dabney
 
 Raymond C. Dabney
 Chief
Executive Officer
 
  ***Page
- 31***
 
 **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, 2005 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, 2005         Signature:/s/Raymond
C. Dabney

Raymond C. Dabney
Chief
Executive Officer
 
 
  ***Page
- 32***
 
 **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).
 
 
 ***Page
- 33***
 
 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).
 
  
 
  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).
 
 ***Page
- 34***
 
 
 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
- 35***
 
  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
- 36***