U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                                    OF 1934

                    For the fiscal year ended March 31, 2004
                         Commission file number: 1-12850

                                   XDOGS, INC.
                        Formerly known as XDOGS.COM, INC.
               --------------------------------------------------
              (Exact name of small business issuer in its charter)

                  Incorporated26 North Third Street, Suite 407
                          MINNEAPOLIS, MINNESOTA 55401
                     --------------------------------------
                    (Address of principal executive offices)

Incorporated under the laws of                              84-1168832
    the State of Nevada                            I.R.S. Identification Number

(Small Business Issuer's telephone number including area code):  (612) 359-9020

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

Securities  registered  pursuant to Section  12(g) of the Act:  COMMON  STOCK,
 $.01 PAR VALUE PER SHARE  (Title of Class)

Indicate by check mark whether the Company (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the
past 90 days. Yes  X  No
                 -----  -----

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

The issuer's revenues for its most recent fiscal year were  $ - 0 -

The aggregate market value of the Company's common stock held by non-affiliates
of the Company on July 21, 2004 was approximately $674,078 computed by reference
to the average of the closing bid and ask prices as quoted on that date.

Check whether the Company has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Securities Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes     X      No
      -----         -----

The Company has one class of equity securities outstanding: Common Stock, $.01
par value per share (the "Common Stock"). On July 21, 2004, there were
42,738,543 shares outstanding. As of June 30, 1998, the date of our
reorganization in Bankruptcy, our common shares were subject to a 54 for 1
reverse split. As of August 23, 2000, our common shares were further subject to
a 5 for 1 reverse split. All references to our shares in this Form 10-KSB
include the effect of these reverse splits of our common stock. The Company is
also authorized to issue 1,000,000 shares of Preferred Stock, par value $.01 per
share, of which 100 shares are Class A Convertible Preferred Stock have been
issued. See "Item 5 Market for the Company's Common Equity and Related
Stockholder Matters."

<PAGE>


                                   XDOGS, INC.

           FORM 10-KSB ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 2004

                                TABLE OF CONTENTS

                                     PART 1

                                                                            Page

ITEM 1.    DESCRIPTION OF BUSINESS........................................... 4
ITEM 2.    DESCRIPTION OF PROPERTY........................................... 5
ITEM 3.    LEGAL PRECEEDINGS................................................. 5
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............... 6

                                     PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......... 6
ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION......... 9
ITEM 7.    FINANCIALSTATEMENTS............................................... 12
ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND
           FINANCIAL DISCLOSURE.............................................. 12
ITEM 8A.   CONTROLS AND PROCEDURES........................................... 12

                                    PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT................. 13
ITEM 10.   EXECUTIVE COMPENSATION............................................ 14
ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT AND RELATED STOCKHOLDER MATTERS........................ 15
ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................... 16
ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.................................. 17
ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES............................ 17





References in this document to "us," "we," "the Registrant" or "the Company"
refer to XDOGS, Inc., and its predecessors.

This report contains "forward-looking" statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are based on
certain assumptions and describe future plans, strategies and expectations of

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the Company. They are generally identifiable by use of the words "believe",
"expect", "intend", "anticipate", "estimate", "project" or similar expressions.
These statements are not guarantees of future performance, events or results and
involve potential risks and uncertainties. Accordingly, actual performance,
events or results may differ materially from such forward-looking statements. We
undertake no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.

Factors that could cause actual results to differ materially from current
expectations include, but are not limited to, changes in general economic
conditions, changes in interest rates, legislative and regulatory changes, the
unavailability of equity and debt financing, unanticipated costs associated with
our potential acquisitions, expanding a new line of business, ability to meet
competition, loss of existing key personnel, ability to hire and retain future
personnel, our failure to manage our growth effectively and the other risks
identified in this filing or other reports of the Company filed with the U.S.
Securities and Exchange Commission. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning us and our
business, including additional factors that could materially affect our
financial results, is included in our other filings with the U.S. Securities and
Exchange Commission.

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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

Limited Operation

We currently have no operations, no revenues and have generated a loss in each
year of our operations. Previously, we were the exclusive North America
distributors of high-end European outdoor apparel and equipment for the outdoor
enthusiast. We sought to build and market our exclusive distribution rights and
these products initially through the internet and then later through a
traditional wholesale to retail business model. We were not been successful.

Due to general economic conditions and the ensuing downturn in e-commerce and
internet-based businesses generally, we abandoned our prior business plan to
exploit our exclusive distribution rights via the internet, re-focused our
strategy and adopted a traditional wholesale to retail sales distribution model
which we have been implementing since August, 2000. However, this has provided
no substantial operations or revenues to date and we do not anticipate that it
will. Due to the lack of revenues, we no longer maintain any exclusive
distribution arrangements.

In our current form, we expect to continue to generate significant losses and
without additional funding through private placements of our common stock, which
cannot be guaranteed, it is highly unlikely that we can continue to operate. As
a result, we have been focusing on a plan of operation entailing a strategic
merger, acquisition or acquisitions to enhance shareholder value

History

We were originally incorporated in Colorado in April 1991 under the name Snow
Runner (USA), Inc. We were the general partner of Snow Runner (USA) Ltd., a
Colorado limited partnership to sell proprietary snow skates under the name
"Sled Dogs" which was dissolved in August 1992 and our name was changed to Snow
Runner (USA), Inc. In late 1993, we relocated our operations to Minnesota and in
January 1994 changed our name to Snow Runner, Inc. In November 1994 we changed
our name to the Sled Dogs Company. On November 5, 1997, we filed for protection
under Chapter 11 of the U.S. Bankruptcy Code. In September 1998, we emerged from
protection of Chapter 11 of the U.S. Bankruptcy Code. In May, 1999, we changed
our state of domicile to Nevada and our name to XDOGS.COM, Inc. In August 2000,
following our bankruptcy, we made a decision to re-focus to a traditional
wholesale to retail distributor, and obtained the exclusive North American
rights to distribute high-end European outdoor apparel and equipment. We first
intended to exploit these rights over the Internet under the name XDOGS.COM,
Inc. However, due to the general economic conditions and the ensuing general
downturn in e-commerce and internet-based businesses, we decided that to best
preserve our core assets we would need to adopt a more traditional strategy.
Thus, we abandoned this approach and to better reflect our new focus, we changed
our name to XDOGS, Inc.

Acquisition Strategy

On August 7, 2003, we signed a non-binding letter of intent to acquire the
business and operations of Kathrine Baumann, LLC ("KB"), a Beverly Hills based,
California Limited Liability Company and designer of specialty women's handbags.
In November 2003, the parties agreed not to proceed with the merger.

On November 17, 2003 we signed a non-binding letter of intent to acquire the
business and operations of StravinSOFT, Incorporated ("StravinSOFT", a Dallas
Texas based, provider of Business and Custom Solutions and Best in Class Data
Transmission and File Maker Application Software. Under the terms of the LOI,
the Company will issue up to Sixty Million (60,000,000) shares of its common
stock to the shareholders of StravinSOFT in exchange for either (a) all of the
issued and outstanding capital stock of StravinSOFT, or (b) all of the assets
necessary for, used in or useful to StravinSOFT's operations. The Company and
StravinSOFT contemplate a one-for-one exchange with shareholders of StravinSOFT
receiving fifty percent (50%) of the new entity. The transaction is subject to
the negotiation of a definitive merger agreement and completion of our due
diligence investigation of StravinSOFT's business and assets. This letter of
intent expired on February 11, 2004, as the Company completed its due diligence
and the parties were unable to negotiate a definitive merger agreement.

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On June 1, 2004 we signed a non-binding Letter of Intent to acquire the business
and operations of LMP, a Los Angeles, CA based financier and distributor of
theatrical motion pictures and television programming in both traditional and
new media formats on a world-wide basis XDOGS (or a newly formed subsidiary of
XDOGS formed for the purpose of the Transaction also referred to herein as
XDOGS) will issue and deliver to LMP shares of its duly authorized common stock
free and clear of all liens, claims and encumbrances in exchange for either (a)
all of the issued and outstanding capital stock of LMP (the "LMP Stock"), or (b)
all of the assets (whether tangible or intangible) necessary for, used in or
useful to LMP's operations (the "LMP Assets"). Upon closing of the Transaction,
XDOGS would acquire the LMP Stock or the LMP Assets free and clear of all
claims, liens or encumbrances of any kind except for those liabilities of LMP
which, after completion of due diligence, XDOGS expressly agrees to assume (the
"Assumed Liabilities"). LMP, or its stockholders as the case may be, would
remain responsible for all other liabilities. XDOGS and LMP contemplate a one
for one share exchange, with LMP shareholders receiving seventy-three percent
(73%) of the new entity. The Letter of Intent expired on July 15, 2004 and the
parties have agreed to continue to negotiate a Stock Purchase Agreement per the
terms and conditions as summarized above.

We plan to raise additional capital during the coming fiscal year, but currently
have not identified additional funding sources. Our ability to continue
operations is highly dependent upon our ability to obtain immediate additional
financing, or generate revenues from a combined operation with LMP or another
acquisition candidate, none of which can be guaranteed. Unless additional
funding is located, it is highly unlikely that we can continue to operate.
Ultimately, our success is dependent upon our ability to generate revenues from
a combined operation with our potential acquisition candidate and.to achieve
profitability, which is dependent upon a number of factors, including general
economic conditions and the sustained profitability of the operations of any
potential candidates. There is no assurance that even with adequate financing or
combined operations, we will generate revenues and be profitable.

PATENTS, TRADEMARKS, AND PROPRIETARY RIGHTS

We currently do not have any patents, trademarks or proprietary rights.

ENVIRONMENTAL MATTERS

During the last three fiscal years, compliance with environmental laws and
regulations did not have a specific impact on the Company's operations. The
Company does not anticipate that it will incur any material capital expenditures
for environmental control facilities for environmental facilities during the
next fiscal year.

EMPLOYEES

As of March 31, 2004 we had one full time employee consisting of our President.

RESEARCH AND DEVELOPMENT

During the last three fiscal years, we did not incur research and development
expenses.

ITEM 2. PROPERTIES

Our corporate office is located at 126 North Third Street, Suite 407,
Minneapolis, Minnesota 55401. This office space is leased from an unaffiliated
third party on a month to month basis for a monthly rental of $780.00.

ITEM 3. LEGAL PROCEEDINGS
Mr. Henry Furst filed a complaint against us in the U.S. District Court for the
District of Minnesota alleging that the Company breached its contractual
obligations to him and seeking $144,000 in damages. The parties subsequently

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negotiated a settlement whereby the Company agreed to pay Mr. Furst $94,000 in
installments and executed a confession of judgment in favor of Mr. Furst for
that amount. The Company failed to pay Mr. Furst in accordance with this
settlement agreement. During the year ended March 31, 2002, we paid Mr. Furst a
total of $22,363 in interest and principal. We are currently negotiating with
Mr. Furst to settle this judgement.

On or about March 14, 2000, the Company's former adviser consultant, Stephen
Carlson, loaned the Company $100,000. We executed a note in favor of Mr.
Carlson, which required payment in full on December 31, 2000. We were in default
on March 9, 2001, and Mr. Carlson initiated a legal action against us in the
District Court of Hennepin County, MN to collect the loan. In November 2001, we
entered into a settlement agreement with Mr. Carlson whereby we agreed to pay
him $125,000 over time and on or before June 30, 2002. On July 25, 2003, the
Company's president advanced the Company $86,840, which was used to retire the
amount owed on the settlement. Mr. Carlson is now paid in full.

We also have various matters pending alleging nonpayment for services and
aggregating not more than $25,000.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's shareholders during the
fiscal year ended March 31, 2004.

                                     PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)      Principal Market or Markets

Effective with the close of business on June 19, 1997, our Common Stock was
delisted from the NASDAQ Small Cap Market. In June of 1997, our Common Stock
began trading on the NASD Over-the-Counter Bulletin Board ("OTCBB"). Market
makers and other dealers provided bid and ask quotations of our Common Stock. We
trade under the symbol "XDGI".

The table below represents the range of high and low bid quotations of our
Common Stock as reported during the reporting period herein. The following bid
price market quotations represent prices between dealers and do not include
retail markup, markdown, or commissions; hence, they may not represent actual
transactions.

                                      High                     Low

Fiscal Year Ended
March 31, 2004
First Quarter                        $ 0.08                  $ 0.01
Second Quarter                         0.01                    0.01
Third Quarter                          0.03                    0.01
Fourth Quarter                         0.03                    0.01


Fiscal Year Ended
March 31, 2003
First Quarter                        $ 0.13                  $ 0.04
Second Quarter                         0.10                    0.03
Third Quarter                          0.09                    0.02
Fourth Quarter                         0.03                    0.01

(b)  Approximate Number of Holders of Common Stock

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As of June 30, 2004, 42,738,543 shares of our Common Stock were outstanding and
the number of holders of record of our Common Stock at that date was
approximately 545. However, we estimate that it has a significantly greater
number of shareholders because a substantial number of our shares are held in
nominee names by our market makers.

(c) Dividends

No dividends on the Common Stock were paid by us during the fiscal year ended
2003 or the fiscal year ended 2002, nor do we anticipate paying dividends on
Common Stock in the foreseeable future. Holders of Common Stock are entitled to
receive such dividends as may be declared by our Board of Directors.

(c) Securities Authorized for Issuance Under Equity Compensation Plans.

We have not established an Equity Compensation Plan and have not authorized the
issuance of any securities for under such plan.

(d) Preferred Stock.

Our Articles of Incorporation authorize us to issue up to 1,000,000 shares of
$0.10 par value preferred stock, with such classes, series and preferences as
our Board of Directors may determine from time to time. In June 2002, our Board
of Directors authorized the issuance of 100 shares of Series A Convertible
Preferred Stock (the "Series A Preferred Stock"). Our Board further agreed to
issue all of the Series A Preferred Stock to our Chairman and President, Kent
Rodriguez, in satisfaction of $500,000 in loans made by Mr. Rodriguez.

The Series A Preferred Stock accrues dividends at the rate of 8% per annum on
the original purchase price for the shares. If declared by the Board of
Directors, these dividends are payable quarterly, beginning in September 2002.
We are prohibited from paying any dividends on our Common Stock until all
accrued dividends are paid on our Series A Preferred Stock.

If we liquidate or dissolve, and after payment of our debts, the holders of the
Series A Preferred Stock are entitled to a preference payment before we make any
distributions to our Common Stockholders. The preference amount equal is the
original purchase price for the Series A Preferred shares plus accrued, but
unpaid dividends.

The Series A Preferred Stock is convertible at anytime into 40% of the then
outstanding shares of Common Stock and securities convertible into Common Stock
on a fully diluted basis. However, conversion is limited to the number of shares
of Common Stock available for issuance under our articles of incorporation.

Regardless of whether or not the Series A Preferred Stock has been converted to
our Common Stock, the Series A Preferred Stockholder is entitled to vote, at all
times, on an as-if converted basis. The Preferred Stockholder, Mr. Rodriguez,
has the right to vote the Series A Preferred Stock together with his other
holdings in the Company, which may be a majority of the outstanding voting
securities of the Company.

Other than the Series A Preferred Stock, no preferred stock has been issued. See
"Security Ownership of Certain Beneficial Owners and Management".

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(e) Sales of Unregistered Shares

Fiscal 2004

During the fiscal year ended March 31, 2004, we issued a total of 11,383,000
shares of our Common Stock for total compensation of $148,700 for cash,
repayment of debt and services as follows:

During the year ended March 31, 2004, we issued 4,200,000 shares of our Common
Stock to 10 accredited investors, at an average of approximately $0.0154 per
share, pursuant to the exemptions afforded by Section 4(2) of the Securities Act
of 1933, as amended, for which we received total cash proceeds of $64,500.

During the fiscal year ended March 31, 2004, we issued to consultants 6,510,000
shares of our Common Stock at approximately $0.029 per share totaling $65,200
for consulting services rendered. The shares were valued at the quoted market
price of the stock on the date of issuance.

During the fiscal year ended March 31, 2004, we issued to Mr. Kent Rodriguez,
the Company's president, 100,000 shares of our Common Stock for services
rendered at $0.03 per share, totaling $3,000.00. The shares were valued at the
quoted market price of the stock on the date of issuance.

Fiscal 2003

During the fiscal year ended March 31, 2003, we issued a total of 20,842,500
shares of our Common Stock for total compensation of $1,088,356 for cash,
repayment of debt and services as follows:

During the year ended March 31, 2003, we issued 8,162,500 shares of our Common
Stock to 20 accredited investors, for an average of approximately $0.026 per
share, pursuant to the exemptions afforded by Section 4(2) of the Securities Act
of 1933, as amended, for which we received total cash proceeds of $209,075.

During the fiscal year ended March 31, 2003, we issued to our officers, 350,000
shares of our Common Stock at approximately $0.029 per share totaling $10,000
for consulting services rendered. The shares were valued at the quoted market
price of the stock on the date of issuance.

During the fiscal year ended March 31, 2003, we issued to our directors,
1,000,000 shares of our Common Stock at $0.02 per share totaling $20,000 for
services. The shares were valued at the quoted market price of the stock on the
date of issuance.

During the fiscal year ended March 31, 2003, we issued 1,200,000 shares of our
Common Stock at approximately $0.01 per share to retire $11,248 in outstanding
liabilities.

During the fiscal year ended 2003, we issued 1,430,000 shares of our Common
Stock to outside service providers for services at approximately $0.04 per share
totaling $58,000.

During the fiscal year ended March 31, 2003, we issued to Mr. Kent Rodriguez,
the Company's president, 7,000,000 shares of our Common Stock for salaries
earned during the years ended March 31, 2003, 2002 and 2001, at approximately
$0.026 per share, totaling $180,000 ($60,000 for the year ended 2003). The
shares were valued at the quoted market price of the stock on the date of
issuance.

During the fiscal year ended March 31, 2003, we issued to Mr. Kent Rodriguez,
the Company's president, 700,000 shares of our Common Stock and 100 shares of
our $0.10 par value Series A Preferred Stock as payment for a total of $500,000
of principal and $29,000 accrued interest towards Notes previously issued by us
to Mr. Rodriguez. The Notes totaled $645,120 and the principal balance of
$145,120 remains as a Note payable at 12% interest per annum. The Series A
Preferred Stock carries a dividend of 8% per annum and may be converted to 40%
of the then issued and outstanding Common Stock of the Company at the time of
conversion.

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During the fiscal year ended March of 2003, we issued to Mr. Kent Rodriguez, the
Company's president, 1,000,000 shares of our Common Stock as payment for $32,986
in accumulated dividend payments regarding the Series A Preferred Stock and
$38,047 in accrued interest related to Mr. Rodriguez's Promissory Notes.

Fiscal 2002

During the fiscal year ended March 31, 2002, we issued 85,000 shares of our
Common Stock to various vendors in lieu of payment of our outstanding
liabilities valued at $94,885, the outstanding liabilities amount.

During the fiscal year ended March 31, 2002, we issued 1,558,153 shares of our
Common Stock to our officers, directors, various employees and outside service
providers, in exchange for compensation valued at $406,546.

During the fiscal year ended March 31, 2002, we issued 2,585,000 shares of our
Common Stock to 24 investors for gross proceeds of approximately $350,000. We
also issued 355,000 shares of our Common Stock to 20 investors for prior years
subscriptions.

During the year ended March 31, 2002 we issued 1,000,000 shares of our Common
Stock to Mr. Rodriguez's affiliate for interest accruing through December 31,
2001 on an outstanding note payable.



ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS AND PLAN OF OPERATION

No Real Operations

As of March 31, 2004, we had no operations other than paying past debts and
seeking merger or acquisition candidates, which activities generated no
revenues. Due to general economic conditions and the ensuing downturn in
e-commerce and internet-based businesses generally, we abandoned our prior
business plan to exploit our exclusive distribution rights via the internet and
re-focused our strategy and adopted a traditional wholesale to retail sales
distribution model seller of specialty action sports hard goods and related
apparel which we have been implementing since August, 2000. We expect to
continue to generate significant losses and without additional funding through
private placements of our Common Stock, which cannot be guaranteed, it is highly
unlikely that we can continue to operate. As a result, we have been focusing on
a plan of operation entailing a strategic acquisition or acquisitions.

Acquisition Strategy

On August 7, 2003, we signed a non-binding letter of intent to acquire the
business and operations of Kathrine Baumann, LLC ("KB"), a Beverly Hills based,
California Limited Liability Company and designer of specialty women's handbags.
In November 2003, the parties agreed not to proceed with the merger.

On November 17, 2003 we signed a non-binding letter of intent to acquire the
business and operations of StravinSOFT, Incorporated ("StravinSOFT", a Dallas
Texas based, provider of Business and Custom Solutions and Best in Class Data
Transmission and File Maker Application Software. Under the terms of the LOI,
the Company will issue up to Sixty Million (60,000,000) shares of its common
stock to the shareholders of StravinSOFT in exchange for either (a) all of the
issued and outstanding capital stock of StravinSOFT, or (b) all of the assets
necessary for, used in or useful to StravinSOFT's operations. The Company and

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StravinSOFT contemplate a one-for-one exchange with shareholders of StravinSOFT
receiving fifty percent (50%) of the new entity. The transaction is subject to
the negotiation of a definitive merger agreement and completion of our due
diligence investigation of StravinSOFT's business and assets. This letter of
intent expired on February 11, 2004, as the Company completed its due diligence
and the parties were unable to negotiate a definitive merger agreement.

Subsequent Events

On June 1, 2004 we signed a non-binding Letter of Intent to acquire the business
and operations of LMP, a Los Angeles, CA based financier and distributor of
theatrical motion pictures and television programming in both traditional and
new media formats on a world-wide basis XDOGS (or a newly formed subsidiary of
XDOGS formed for the purpose of the Transaction also referred to herein as
XDOGS) will issue and deliver to LMP shares of its duly authorized common stock
free and clear of all liens, claims and encumbrances in exchange for either (a)
all of the issued and outstanding capital stock of LMP (the "LMP Stock"), or (b)
all of the assets (whether tangible or intangible) necessary for, used in or
useful to LMP's operations (the "LMP Assets"). Upon closing of the Transaction,
XDOGS would acquire the LMP Stock or the LMP Assets free and clear of all
claims, liens or encumbrances of any kind except for those liabilities of LMP
which, after completion of due diligence, XDOGS expressly agrees to assume (the
"Assumed Liabilities"). LMP, or its stockholders as the case may be, would
remain responsible for all other liabilities. XDOGS and LMP contemplate a one
for one share exchange, with LMP shareholders receiving seventy-three percent
(73%) of the new entity. The Letter of Intent expired on July 15, 2004 and the
parties have agreed to continue to negotiate a Stock Purchase Agreement per the
terms and conditions as summarized above.

We have been funding our obligations through the issuance of our Common Stock
for services rendered or for cash in private placements. The Company may seek
additional funds in the private or public equity or debt markets in order to
execute its plan of operation and business strategy. There can be no assurance
that we will be able to attract capital or obtain such financing when needed or
on acceptable terms in which case the Company's ability to execute its business
strategy will be impaired.

Operations for Fiscal 2004

As of March 31, 2004, we had current assets of $22, total assets of $748, and
outstanding liabilities of $655,889. We did not generate any revenues as of the
year ended March 31, 2004. During this period, our selling, general, and
administrative expenses were $141,171 our interest expense was $26,452 and our
stock-based consulting and compensation expense relating to stock issued for
services was $142,000. We had a net loss for the year ending March 31, 2004, of
$300,367 or $0.01 per share.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents were $22 at the year ended March 31, 2004,
compared to $10,863 at year ended March 31, 2003. As a result of having little
cash during our fiscal year 2004, we meet our liquidity needs through the
issuance of our common shares for cash or for services rendered. For fiscal
2004, we issued 4,200,000 shares of our Common Stock in private placements
raising $64,500 in cash and 7,210,000 shares for accrued compensation or
services rendered, and borrowed $50,000 from a shareholder. For the twelve
months ended March 31, 2004 we used $0 in investing activities. During the
twelve months ended March 31, 2002, we used did not purchase any equipment.

Our financing activities for the period ended March 31, 2004 provided cash of
$114,340 as compared to $188,325 for the period ended March 31, 2003. We plan to
raise additional capital during the coming fiscal year, but currently have not
identified additional funding. Our ability to continue operations is highly
dependent upon our ability to obtain immediate additional financing, or generate
revenues from a combined operation with Legion Media Partners or another

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acquisition candidate, none of which can be guaranteed. Unless additional
funding is identified, it is highly unlikely that we can continue to operate.
Ultimately, our success is dependent upon our ability to generate revenues from
a combined operation with any acquisition candidate and to achieve
profitability, which is dependent upon a number of factors, including the
sustained profitability of the operations of these candidates. There is no
assurance that even with adequate financing or combined operations, we will
generate revenues and be profitable.

Risk Factors.

An investment in our securities is very speculative. You should not purchase our
shares if you cannot afford to lose your entire investment. You should consider
the following risks before acquiring any of our shares.

We have never been, and may never be, profitable.

During the past several years, we have attempted, without success, to generate
revenues and profits by the resale of branded clothing and accessories. For the
year ended March 31, 2004, we incurred a net loss of $300,367. On March 31,
2004, we had a working capital deficiency of $655,867. We cannot assure that we
will ever be profitable.

We have no business operations and may not successfully acquire any new
business.

We have discontinued the marketing of branded clothes and accessories due to our
lack of working capital. We seek to acquire one or more operating businesses and
have entered into a letter of intent to merger with Legion Media Partners, Los
Angeles, California. We cannot assure that we will make this or any other
acquisition or that we can profitably operate any business that we acquire. If
we make the Legion Media Partners acquisition or any other acquisition, we will
issue a number of shares to which will substantially dilute your interest in us.

We need additional capital.

We need additional financing to continue operations. The amount required depends
upon our business operations, including whether we actually acquire a new
business. We may be unable to secure this additional required financing on.a
timely basis, under terms acceptable to us or at all. To obtain additional
financing, we will likely sell additional equity securities, which will further
dilute your ownership in us. Ultimately, if we do not raise the required
capital, we may need to cease operations.

We are dependent on our key personnel.

We are highly dependent upon the services of Kent A. Rodriguez, our President
and Chief Executive Officer. We have an employment agreement with him. However,
if he terminated his services with us, our business would suffer.

There is only a limited trading market for our securities.

Our Common Stock traded on the OTC Bulletin Board. The prices quoted may not
reflect the price at which you can resell your shares. Because of the low price
of our stock, we are subject to particular rules of the U.S. Securities and
Exchange Commission that make it difficult for stock brokers to solicit
customers to purchase our stock. This reduces the number of potential buyers of
our stock and may reduce the value of your shares. We cannot assure that a
trading market for our stock will continue or that you will ever be able to
resell your shares at a profit, or at all. We pay no dividends. We have never
paid any cash dividends and do not expect to do so in the future. If you need
current income, you should not purchase our stock.

                                       11

<PAGE>


Our management controls us.

Our current officers and directors own approximately 66.05% of our
outstanding stock and are able to affect the election of the members of our
Board of Directors and make corporate decisions. In particular, Mr. Rodriguez
controls approximately 61.01% of our voting securities. This voting
concentration may also have the effect of delaying or preventing a change in our
management or control or otherwise discourage potential acquirers from
attempting to gain control of us. If potential acquirers are deterred, you may
lose an opportunity to profit from a possible acquisition. See "Security
Ownership of Certain Beneficial Owners and Management" and "Market for the
Company's Common Stock and Related Stockholder Matters".

A significant number of shares will become eligible for public sale, potentially
depressing our stock price.

During the last fiscal year, we issued an aggregate of approximately 11,383,000
shares of our Common Stock in private transactions not registered with the U.S.
Securities and Exchange Commission. Under the SEC's Rule 144, these shares
generally first become eligible for public resale after one year. Shareholders
generally may resell only a limited number of their privately acquired shares
after one year. Generally, after two years, stockholders who are not affiliated
with us may resell any number of their privately acquired shares pursuant to
Rule 144(k). The resale of the shares we have privately issued, or the potential
for their future public resale, may depress our stock price. Our governing
documents and Nevada law may discourage the potential acquisitions of our
business.

Our Board of Directors may issue additional shares of capital stock and
establish their rights, preferences and classes, in most cases without
stockholder approval. In addition, we may become subject to anti-takeover
provisions of Nevada law. These provisions may deter or discourage takeover
attempts and other changes in control of us not approved by our Board of
Directors. If potential acquirers are deterred, you may lose an opportunity to
profit from a possible acquisition.


ITEM 7. FINANCIAL STATEMENTS.  Our audited Financial Statements are attached as
a Schedule.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

ITEM 8A. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, Kent Rodriguez, our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the design and operation of our disclosure controls and procedures pursuant to
Rule 13a-15b under the Securities Exchange Act of 1934. Based on his review of
our disclosure controls and procedures, Mr. Rodriguez has concluded that our
disclosure controls and procedures are effective in timely alerting him to
material information relating to us that is required to be included in our
periodic SEC filings. Further, there were no significant changes in the internal
controls or in other factors that could significantly affect these controls
after the evaluation date and the date of this report.

                                       12

<PAGE>


                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Our Directors and Executive Officers are shown below:

Name                     Age                      Position
----                     ---                      --------
Kent Rodriguez           44        Chief Executive Officer, President, Director

Douglas Barton           61        Director

Craig Avery              54        Secretary, Director


Each Director is serving a term of office, which will continue until the next
annual meeting of shareholders and until the election and qualification of his
respective successor.

KENT A. RODRIGUEZ

Mr. Rodriguez joined the Company as Chief Executive Officer, President, and
Chief Executive Officer in January, 1997. Since 1995, he has been the Managing
Partner of Weyer Capital Partners, a Minneapolis-based venture capital
corporation. From 1985 to 1995, he was employed by the First National Bank of
Elmore, Elmore, Minnesota, in various capacities. He has a B.A. degree from
Carleton College.

DOUGLAS BARTON

Mr. Barton has served as a Director of the Company since November, 1998. From
1987 to the present, he has been the President and sole owner of Venture
Communications, Inc., (formerly known as Douglas Communications, Inc.) a private
promotion, development, and marketing consulting firm. He has a B.S. degree in
Economics/History from the University of Minnesota. Mr. Barton shall devote such
time as is necessary to carry out his responsibilities as a Director of the
Company.

CRAIG C. AVERY

Mr. Avery has served as Secretary and a Director of the Company since August,
1997. For the past 15 years, he has been the owner of Craig C. Avery Company, a
Minneapolis-based real estate development and investment company, which has
developed apartments, senior housing, office buildings, and industrial and
residential land subdivisions. He has a B.A. and MBA degree in Finance from the
University of Minnesota. Mr. Avery shall devote such time as is necessary to
carry out his responsibilities as an Officer of the Company.

The Company's Directors will serve in such capacity until the next annual
meeting of the Company's shareholders and until their successors have been
elected and qualified. There are no family relationships among the Company's
officers and directors, nor are there any arrangements or understanding between
any of the directors or officers of the Company or any other person pursuant to
which any officer or director was or is to be selected as an officer or
director. The Directors held two (2) meetings and took action four (4) times by
written consent during the fiscal year ended March 31, 2004.

In 1999, the Board of Directors established a Compensation Committee comprised
of Messrs. Avery and Barton. The Compensation Committee held one meeting in
fiscal 2004. In May 2000, the Board of Directors established an Audit Committee.
It is currently comprised of Messrs. Avery and Barton. The Audit Committee held
one meeting in fiscal 2004.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

                                       13

<PAGE>


Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act") requires our
officers and directors and persons owning more than ten percent of our Common
Stock to file initial reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Additionally, Item 405 of Regulation
S-B under the 34 Act requires us to identify in our Form 10-KSB and proxy
statement those individuals for whom one of the above referenced reports was not
filed on a timely basis during the most recent fiscal year or prior fiscal
years. Given these requirements, we have the following report to make under this
section. None of our officers or directors, and all persons owning more than ten
percent of its shares have filed the subject reports, if required, on a timely
basis during the past fiscal year.
ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION OF BOARD OF DIRECTORS

Members of the Board of Directors receive no cash compensation for their service
on the Board of Directors, the Compensation Committee or the Audit Committee but
are reimbursed for any out-of-pocket expenses incurred by them in connection
with our business. During fiscal 2004, our directors were each granted but not
issued the following shares of our Common Stock as director compensation:

         Director                       Amount            Price

         Kent Rodriguez               1,000,000          $ 0.01
         Craig Avery                  1,000,000             .01
         Douglas Barton               1,000,000             .01


EXECUTIVE COMPENSATION

The following table sets forth the compensation received for the three fiscal
years ended March 31, 2004, by the Company's Chief Executive Officer (the "Named
Executive Officer"). No executive officer of the Company received in excess of
$100,000 during that period. Compensation does not include minor
business-related and other expenses paid by us for our officers. Such amounts in
the aggregate do not exceed $10,000.

      Name and
Principal Position                         Year            Salary (1)
                                           ----            ----------

Kent A. Rodriguez,
Chief Executive Officer and President      2004           $60,000 (1) (2)
                                           2003           $60,000 (1) (2) (4)
                                           2002           $97,200 (2) (3) (4)

(1) No salary was paid in any year but was accrued on a monthly basis. No
bonuses were paid for the years ending March 31, 2004 and March 31, 2003. A
stock bonus was paid in the years ending March 31, 2002, 2003 and 2004 as
explained below.

(2) Effective on November 23, 1999, Mr. Rodriguez became subject to an
employment agreement pursuant to which he accrues $5,000 per month in wages.

(3) In 2002, we issued 150,000 shares of Common Stock as a bonus valued at
$37,200.

(4) On March 31, 2003, Mr. Rodriguez accrued $180,000 in wages for fiscal year
2001, 2002 and 2003 and received 7,000,000 shares of Common Stock as
compensation for those wages. Additionally, on June 18, 2002, Mr. Rodriguez was
issued a 40,000 share bonus valued at $1,600. On September 30, 2003, Mr.
Rodriguez was issued 100,000 shares as a bonus valued at $1,000.

                                       14

<PAGE>


Mr. Rodriguez did not receive any other annual compensation, or other
compensation during the Company's fiscal years ended March 31, 2004, 2003 or
2002

OPTION GRANTS IN LAST FISCAL YEAR

The Company did not grant any options to purchase any equity securities of the
Company during fiscal 2004.

EMPLOYMENT AGREEMENTS

We have an employment agreement with Kent Rodriguez, our Chief Executive Officer
and President dated November 23, 1999. The employment agreement extends through
November 23, 2004, unless terminated earlier. If we terminate Mr. Rodriguez
without cause, we are required to pay him. Under the employment agreement, Mr.
Rodriguez earns a base salary of $60,000. Since November 1999, Mr. Rodriguez has
agreed to allow the Company to accrue such amount. All prior options granted to
Mr. Rodriguez were terminated. He is also entitled to health, life and
disability benefits. If Mr. Rodriguez's employment is terminated for any reason,
he is entitled to a severance payment equal to one year's salary. During the
term of his employment, if Mr. Rodriguez is responsible for obtaining financing
for the Company, we agreed to grant him a stock option in an amount equal to a
five percent of the funds raised by him.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding ownership of our
Common Stock as of June 30, 2004 by (i) each person known by us to be the
beneficial owner of more than five percent of our outstanding Common Stock; (ii)
each director of our Company; and (iii) all executive officers and directors of
our Company as a group. As of June 30, 2003, we had a total of 42,738,543 common
shares issued and outstanding.

Names and Addresses                Beneficial                     Percent
of Beneficial Owner                Ownership                      of Class

Kent Rodriguez                   37,682,700 (1)                    61.01%
126 North Third Street
Suite 407
Minneapolis, MN 55401

Craig Avery                       1,635,000 (2)                     3.72%
126 North Third Street
Suite 407
Minneapolis, MN 55401

Douglas Barton                     578,0000                         1.32%
126 North Third Street
Suite 407
Minneapolis, MN 55401

Officers and Directors           39,885,700 (3)                    66.05%
as a Group (3 persons)

(1) Includes 1,200,200 shares of Common Stock owned Weyer Capital Corporation,
an affiliate of Mr. Rodriguez, and 28,492,500 shares of Common Stock issuable
upon conversion of 100 shares of Series A Preferred Stock.

(2) Includes 1,100,000 shares of Common Stock owned by Rock Cliff Development,
an affiliate of Mr. Avery.

                                       15

<PAGE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party - Notes Payable

During the years ended March 31, 2002, 2001 and 2000, the Company signed several
notes with an officer/director, for $128,120, $317,000 and $200,000 in proceeds.
These notes accrue interest at 12 percent per annum and are secured by all
available business assets. During the year ended March 31, 2003, the Company
issued 100 shares of its Series A preferred stock and 700,000 shares of its
Common Stock to the officer/director as payment for $500,000 of principal and
$29,000 of accrued interest on the notes. The remaining principal balance of
$145,120 is included in the accompanying financial statements as "notes payable,
related party". The Company paid $20,186 in interest on these notes in during
the year ending March 31, 2004. Accrued interest payable on the notes at March
31, 2004 was $-0-. The notes were in default at March 31, 2004.

During the year ended March 31, 2002, the Company issued 1,000,000 shares of its
Common Stock to an officer/director as payment for accrued interest totaling
$81,784.

During the year ended March 31, 2002, the Company issued 1,100,000 shares of its
Common Stock to an affiliate in lieu of payments for a note payable in the
amount of $100,000 and its related accrued interest in the amount of $16,133.
The note payable was considered paid in full at March 31, 2002. The Company
issued 100 shares of Series A Preferred Stock, to an officer/director as payment
for $500,000 in promissory notes, are convertible into the number of shares of
Common Stock sufficient to represent 40 percent of the fully diluted shares
outstanding after their issuance. The Series A Preferred Stock pays eight
percent dividends. The dividends are cumulative and payable quarterly. The
Series A Preferred Stock carries a liquidating preference, over all other
classes of stock, equal to the amount paid for the stock plus any unpaid
dividends. The Series A Preferred Stock provides for voting rights on an "as
converted to Common Stock" basis.

As of March 31, 2004, the preferred stock's cumulative dividend totaled
$72,986.During March 2003, the Company issued 1,000,000 shares of its Common
Stock to the officer/director as payment for the $32,986 dividend and $38,047 in
accrued interest related to the officer/director's promissory notes. During the
years nded March 31, 2003 and 2002, the Company issued its officers 350,000 and
295,000 shares of its Common Stock, respectively, in exchange for consulting
services. The transactions were recorded at the quoted market price of the stock
on the date of issuance. The services, valued at $10,000 and 92,200,
respectively, are included in the accompanying financial statements as
"stock-based compensation".

During the year ended March 31, 2003, the Company issued its directors 1,000,000
shares of its Common Stock for directors fees earned during the year. The
transactions were recorded at the quoted market price of the stock on the date
of issuance. The services, valued at $20,000, are included in the accompanying
financial statements as "stock-based compensation".

During the year ended March 31, 2003, the Company issued an officer/director
7,000,000 shares of its Common Stock for salaries earned during the years ended
March 31, 2003, 2002, and 2001. The transactions were recorded at the quoted
market price of the stock on the date of issuance. The services, valued at
$180,000 ($60,000 earned during the year ended March 31, 2003), are included in
the accompanying financial statements as "stock-based compensation".

                                       16

<PAGE>


During the year ended March 31, 2002, we issued in two transactions a total of
1,100,000 shares of our Common Stock valued by us at $116,113 to retire the
principal and interest owing to Rock Cliff Development, an affiliate of one of
our directors, who loaned us $100,000 in April 2000.

Related Party - Other
On June 18, 2002, we issued to Thomas Lawson, a major stockholder of bigTime
with whom we had a pending Letter of Intent, 100,000 shares of our Common Stock
at a price of $.11 per share for director compensation for fiscal 2003 and
consulting services to us during the interim period until our pending
transaction with bigTime is completed.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits. None

(b) Reports on Form 8-K. During the fiscal year ended March 31, 2004, and
through August 7, 2003, we filed the following on Form 8-K:

     1.   Filed May 6, 2003, Notice of action by majority stockholders to Amend
          Articles of Incorporation

     2.   Filed August 7, 2003, Notice of signing of Letter of Intent to acquire
          Kathrine Baumann, LLC.

     3.   Filed November 25, 2003 Notice of termination of Letter of Intent to
          acquire Kathrine Baumann, LL.

     4.   Filed November 25, 2003 Notice of signing a Letter of Intent to
          acquire StravinSoft, Inc.

     5    Filed June 4, 2004, Notice of signing a Letter of Intent to acquire
          Legion Media, Inc.



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees.

We were billed by our independent auditors, Cordovano and Honeck, $14,625.00 in
fees for the fiscal year ended March 31, 2004 and $8,800 for the fiscal year
ended March 31, 2003.

                                       17

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Company has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated: July 21, 2004.


/s/  Kent Rodriguez
-----------------------------
     Kent Rodriguez,
     President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed by the following persons on behalf of the Company in the
capacities and on the dates indicated.


Signature and Title                                                 Date



/s/  Kent Rodriguez                                             July 21, 2004
----------------------------------
     Kent Rodriguez, President,
     Chief Executive Officer And Director
     (Principal Executive Officer and
     Chief Financial Officer)



/s/  Craig Avery                                                July 21, 2004
----------------------------------
     Craig Avery, Secretary and Director



/s/  Douglas Barton                                             July 21, 2004
----------------------------------
     Douglas Barton, Director

                                       18

<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   XDOGS, INC.
                          EXHIBIT INDEX TO FORM 10-KSB


                    For the fiscal year ended March 31, 2003
                         Commission File Number 1-12850

Exhibit
Number       Description                                                    Page

3.1          Restated Articles of Incorporation (Incorporated by
             reference to Exhibit 3.1 to Registration Statement on Form
             SB-2, Registration No. 33-74240C).                               *

3.2          Restated Bylaws (Incorporated by reference to Exhibit 3.2 to
             Registration Statement on Form SB-2, Registration No.
             33-74240C).                                                      *

3.3          Articles of Incorporation for the State of Nevada.
             (Incorporated by reference to Exhibit 2.2 to Form 10-KSB
             filed February 2000)                                             *

3.4          Articles of Merger for the Colorado Corporation and the
             Nevada Corporation (Incorporated by reference to Exhibit 3.4
             to Form 10-KSB filed February 2000)                              *

3.5          Bylaws of the Nevada Corporation (Incorporated by reference
             to Exhibit 3.5 to Form 10-KSB filed February 2000)               *

4.1          Specimen of Common Stock (Incorporated by reference to
             Exhibit 4.1 to Registration Statement on Form SB-2,
             Registration No. 33-74240C).                                     *

10.1         Incentive Compensation and Employment Agreement for Kent A.
             Rodriguez (Incorporated by Reference to Exhibit 10.12 of our
             Form 10-KSB filed July 20, 2001)                                 *

23.1         Consent of Cordovano and Honeck CPA                              *

31.1         Certification of Chief Executive Officer and Chief Financial
             Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
             2002.

32.1         Certification of Chief Executive Officer and Chief Financial
             Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
             2002.


*  Incorporated by reference to a previously filed exhibit or report.

                                       19

<PAGE>

                                   XDOGS, INC.

                          INDEX TO FINANCIAL STATEMENTS



                                                                            Page
                                                                            ----
Report of Independent auditors............................................  F-2

Balance sheet, March 31, 2004.............................................  F-3

Statements of operations, for the years
     ended March 31, 2004 and 2003........................................  F-4

Statement of changes in shareholders' deficit,
     April 1, 2002 through March 31, 2004.................................  F-5

Statements of cash flows, for the years
     ended March 31, 2004 and 2003........................................  F-6

Notes to financial statements.............................................  F-7

                                      F-1

<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders
XDOGS, Inc.:


We have audited the balance sheet of XDOGS, Inc. as of March 31, 2004, and the
related statements of operations, changes in shareholders' deficit, and cash
flows for the years ended March 31, 2004 and 2003. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of XDOGS, Inc. as of March 31,
2004, and the results of its operations and its cash flows for the years ended
March 31, 2004 and 2003, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A, the Company has a net
capital deficit at March 31, 2004 and has suffered significant operating losses
since inception, which raise a substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note A. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.




Cordovano and Honeck, P.C.
Denver, Colorado
July 17, 2004

                                      F-2

<PAGE>
<TABLE>
<CAPTION>


                                         XDOGS, INC.

                                        BALANCE SHEET

                                       March 31, 2004



                                           Assets


<S>                                                                            <C>
Current assets:
     Cash ..................................................................   $         22
                                                                               ------------
                 Total current assets ......................................             22


Idle equipment, at cost, net of accumulated depreciation
     of $6,538 .............................................................            726
                                                                               ------------
                                                                               $        748
                                                                               ============


                            Liabilities and Shareholders' Deficit


Current liabilities:
     Accounts and notes payable:
        Accounts payable ...................................................   $    149,543
        Notes payable, related party (Note 2) ..............................        229,960
        Notes payable, other (Note 4) ......................................         75,000
     Accrued expenses, related party (Note 2) ..............................         60,000
     Accrued expenses, other ...............................................         15,460
     Accrued dividends payable (Note 2) ....................................         40,000
     Litigation liabilities (Note 7) .......................................         85,926
                                                                               ------------
                 Total current liabilities .................................        655,889
                                                                               ------------

Commitments and contingencies (Note 7) .....................................           --

Shareholders' deficit (Note 5):
     Preferred stock, Series A, $.10 par value, 1,000,000 shares authorized,
        100 shares issued and outstanding ..................................             10
     Common stock, $0.001 par value, 200,000,000 shares authorized,
        42,738,543 shares issued and outstanding ...........................         42,739
     Additional paid-in capital ............................................     14,276,877
     Retained deficit ......................................................    (14,974,767)
                                                                               ------------
                 Total shareholders' deficit ...............................       (655,141)
                                                                               ------------
                                                                               $        748
                                                                               ============


                       See accompanying notes to financial statements

                                            F-3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                         XDOGS, INC.
                                  STATEMENTS OF OPERATIONS



                                                                   For the Years Ended
                                                                         March 31,
                                                               ----------------------------
                                                                   2004            2003
                                                               ------------    ------------
<S>                                                            <C>             <C>
Operating expenses:
    Selling, general and administrative expenses ...........   $    144,171    $    161,844
    Stock-based compensation:
       Officer compensation (Note 2) .......................          3,000          60,000
       Directors fees (Note 2) .............................           --            20,000
       Consulting, related parties (Note 2) ................           --            10,000
       Legal and consulting (Note 5) .......................        142,000          58,000
    Asset impairment (Note 3) ..............................           --            25,080
    Loss on asset disposals (Note 3) .......................          4,299            --
    Accounts payable settlement gains ......................        (19,555)       (481,855)
                                                               ------------    ------------
                    Total operating expenses ...............        273,915        (146,931)
                                                               ------------    ------------

                    Operating income (loss) ................       (273,915)        146,931

Non-operating income (expense):
    Interest expense (Notes 2 and 4) .......................        (26,452)        (50,064)
    Other income ...........................................           --             1,670
                                                               ------------    ------------
                    Income (loss) before income taxes ......       (300,367)         98,537

Provision (benefit) for income taxes (Note 6) ..............           --              --
                                                               ------------    ------------
                    Net income (loss) ......................       (300,367)         98,537

Preferred stock dividend requirements (Note 2) .............        (40,000)        (32,986)
                                                               ------------    ------------
                    Income (loss) applicable to common stock   $   (340,367)   $     65,551
                                                               ============    ============
Basic and diluted income (loss) per common share ...........   $      (0.01)   $      (0.01)
                                                               ============    ============
Basic and diluted weighted average
    common shares outstanding ..............................     37,429,376      12,931,248
                                                               ============    ============


                       See accompanying notes to financial statements

                                            F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                        XDOGS, INC.

                                        STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT



                                                                   Preferred Stock, Series A            Common Stock
                                                                  ---------------------------   ---------------------------
                                                                      Shares       Par Value       Shares        Par Value
                                                                  ------------   ------------   ------------   ------------
<S>                                                              <C>             <C>             <C>           <C>

                                         Balance, April 1, 2002           --     $       --       10,486,043   $     10,486

Common stock sold for cash ....................................           --             --        8,162,500          8,163

Common and preferred stocks issued to an officer as payment
     for promissory notes and related accrued interest (Note 2)            100             10        700,000            700

Common stock issued to related parties in exchange for
     services recorded quoted market value (Note 2) ...........           --             --          350,000            350

Common stock issued for directors' fees (Note 2) ..............           --             --        1,000,000          1,000

Common stock issued in exchange for liabilities (Note 5) ......           --             --        1,200,000          1,200

Common stock issued to attorney in exchange for
    services recorded at fair value (Note 5) ..................           --             --          300,000            300

Common stock issued to consultants in exchange for
     services recorded at fair value (Note 5) .................           --             --        1,130,000          1,130

Common stock issued to an officer in exchange for
     compensation recorded at quoted market value (Note 2) ....           --             --        7,000,000          7,000

Common stock issued to an officer as payment for accrued
     interest and preferred stock dividends (Note 2) ..........           --             --        1,000,000          1,000

Common stock options and warrants cancelled and
     expired (Note 5) .........................................           --             --             --             --

Dividends on preferred stock (Note 2) .........................           --             --             --             --

Net income ....................................................           --             --             --             --
                                                                  ------------   ------------   ------------   ------------
                                        Balance, March 31, 2003            100             10     31,328,543         31,329


Common stock sold for cash ....................................           --             --        4,200,000          4,200

Common stock issued to attorney in exchange for
     services recorded at fair value (Note 5) .................           --             --          600,000            600

Common stock issued to consultants in exchange for
    services recorded at fair value (Note 5) ..................           --             --        6,510,000          6,510

Common stock issued to an officer in exchange for
     compensation recorded at quoted market value (Note 2) ....           --             --          100,000            100

Common stock options and warrants expired (Note 5) ............           --             --             --             --

Dividends on preferred stock (Note 2) .........................           --             --             --             --

Net loss ......................................................           --             --             --             --
                                                                  ------------   ------------   ------------   ------------
                                        Balance, March 31, 2004            100   $         10     42,738,543   $     42,739
                                                                  ============   ============   ============   ============


                                       See accompanying notes to financial statements

                                                             F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                          XDOGS, INC.

                                         STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
                                                         (Continued)


                                                                   Additional
                                                                     Paid-in       Accrued        Retained
                                                                     Capital     Compensation      Deficit          Total
                                                                  ------------   ------------    ------------    ------------
<S>                                                               <C>            <C>             <C>             <C>
                                         Balance, April 1, 2002   $ 10,508,957   $  2,502,327    $(14,699,951)   $ (1,678,181)

Common stock sold for cash ....................................        200,912           --              --           209,075

Common and preferred stocks issued to an officer as payment
     for promissory notes and related accrued interest (Note 2)        528,290           --              --           529,000

Common stock issued to related parties in exchange for
     services recorded quoted market value (Note 2) ...........          9,650           --              --            10,000

Common stock issued for directors' fees (Note 2) ..............         19,000           --              --            20,000

Common stock issued in exchange for liabilities (Note 5) ......         10,048           --              --            11,248

Common stock issued to attorney in exchange for
    services recorded at fair value (Note 5) ..................         14,700           --              --            15,000

Common stock issued to consultants in exchange for
     services recorded at fair value (Note 5) .................         41,870           --              --            43,000

Common stock issued to an officer in exchange for
     compensation recorded at quoted market value (Note 2) ....        173,000           --              --           180,000

Common stock issued to an officer as payment for accrued
     interest and preferred stock dividends (Note 2) ..........         70,033           --              --            71,033

Common stock options and warrants cancelled and
     expired (Note 5) .........................................      2,298,264     (2,298,264)           --              --

Dividends on preferred stock (Note 2) .........................           --             --           (32,986)        (32,986)

Net income ....................................................           --             --            98,537          98,537
                                                                  ------------   ------------    ------------    ------------
                                        Balance, March 31, 2003     13,874,724        204,063     (14,634,400)       (524,274)


Common stock sold for cash ....................................         60,300           --              --            64,500

Common stock issued to attorney in exchange for
     services recorded at fair value (Note 5) .................         29,400           --              --            30,000

Common stock issued to consultants in exchange for
    services recorded at fair value (Note 5) ..................        105,490           --              --           112,000

Common stock issued to an officer in exchange for
     compensation recorded at quoted market value (Note 2) ....          2,900           --              --             3,000

Common stock options and warrants expired (Note 5) ............        204,063       (204,063)           --              --

Dividends on preferred stock (Note 2) .........................           --             --           (40,000)        (40,000)

Net loss ......................................................           --             --          (300,367)       (300,367)
                                                                  ------------   ------------    ------------    ------------
                                        Balance, March 31, 2004   $ 14,276,877   $       --      $(14,974,767)   $   (655,141)
                                                                  ============   ============    ============    ============


                                        See accompanying notes to financial statements

                                                           F-5(Con't)
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                           XDOGS, INC

                                     STATEMENTS OF CASH FLOWS


                                                                          For the Years Ended
                                                                                March 31,
                                                                         ----------------------
                                                                            2004         2003
                                                                         ---------    ---------

<S>                                                                      <C>          <C>
Cash flow from operating activities:
    Net (loss) income ................................................   $(300,367)   $  98,537
       Transactions not requiring cash:
         Preferred stock dividends ...................................     (40,000)     (32,986)
         Loss on asset impairment (Note 3) ...........................        --         25,080
         Loss on asset disposals (Note 3) ............................       4,299         --
         Stockbased compensation (Notes 2 and 5) .....................     145,000      148,000
         Gains on settlement of accounts payable .....................     (20,555)    (481,855)
         Changes in current assets and current liabilities:
            Deposits .................................................        --            350
            Accounts payable and other accrued expenses ..............      86,442       65,356
                                                                         ---------    ---------

                             Net cash (used in) operating activities .    (125,181)    (177,518)
                                                                         ---------    ---------

Cash flow from financing activities:
        Net proceeds from sale of common stock (Note 5) ..............      64,500      209,075
        Payment of litigation payable (Note 7) .......................     (85,000)        --
        Proceeds from note payable to officer (Note 2) ...............      84,840         --
        Proceeds from other note payable (Note 4) ....................      50,000         --
        Payments on other promissory notes ...........................        --        (20,750)
                                                                         ---------    ---------
                             Net cash provided by financing activities     114,340      188,325
                                                                         ---------    ---------




                                                Net change in cash ...     (10,841)      10,807
Cash at beginning of year ............................................      10,863           56
                                                                         ---------    ---------

Cash at end of year ..................................................   $      22    $  10,863
                                                                         =========    =========

Supplemental cash flow information:
       Cash paid during the year for interest ........................   $    --      $    --
                                                                         =========    =========
       Cash paid during the year for income taxes ....................   $    --      $    --
                                                                         =========    =========
       Noncash investing and financing activities:
           Stock issued for payment of liabilities ...................   $    --      $  11,248
                                                                         =========    =========


                         See accompanying notes to financial statements

                                              F-6
</TABLE>

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS



NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

The Company was incorporated in Colorado in 1991 as a distributor of SnowRunner
snow skates. Between 1991 and 1994, the Company was restructured, and the name
of the Company was changed several times, including such names as SnowRunner
(USA) Inc., SnowRunners, Inc., and The Sled Dogs Company. The Company filed for
bankruptcy protection in 1997. As a result of the bankruptcy, the Company was
reorganized and in 1999 was renamed XDOGS, Inc. Subsequently, the Company
focused its effort on an Internet based distribution model and a traditional
wholesale to retail distribution model. These efforts have not been successful.
The Company's current business plan is to evaluate, structure and complete a
merger with, or acquisition of, a privately owned corporation. The Company's
ability to sustain future operations is dependent upon the Company's ability to
achieve the objectives of its business plan described above.

Basis of Presentation

The Company has a net capital deficit at March 31, 2004 resulting from among
other things; recurring operating losses. In addition, the Company is unable to
meet its obligations as they come due and is in default on certain debt
obligations. The Company's ability to achieve its business plan (see Nature of
Business above), which may be necessary to permit the realization of assets and
satisfaction of liabilities in the ordinary course of business, is uncertain.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with original
maturities of three months or less when acquired, to be cash equivalents. The
Company had no cash equivalents at March 31, 2004.

Property, Equipment and Depreciation

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets, which is estimated to be three to seven years (see
Note 3). Depreciation is not recorded on idle property and equipment. Upon
retirement or disposition of equipment, the cost and accumulated depreciation
are removed from the accounts and any resulting gain or loss is reflected in
operations. Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated.

Income Taxes

Deferred taxes are provided on an asset and liability method whereby deferred
tax assets are recognized for deductible temporary differences and operating
loss and tax credit carryforwards, and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax basis.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.

Impairment of Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. Statement No. 144 requires impairment losses to be recorded

                                      F-7

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


on long-lived assets used in operations when indicators of impairment are
present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying value or fair value, less
costs to sell.

Income (Loss) Per Share

Basic earnings/loss per share is computed by dividing income available to common
shareholders (the numerator) by the weighted-average number of common shares
(the denominator) for the period. The computation of diluted earnings per share
is similar to basic earnings per share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if potentially dilutive common shares had been issued.

At March 31, 2004, there was no variance between basic and diluted loss per
share as there were no potentially dilutive common shares outstanding.

Use of Estimates

The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America 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.

Fair Value

The Company's financial instruments consist of cash and short-term debt. The
carrying amounts of cash and short-term debt approximate fair value due to the
short-term maturity of the instruments. The fair value of the Company's
short-term debt is estimated based on the quoted market prices for the same or
similar issues or on the current rates to the Company for debt of the same
remaining maturities with similar collateral requirements.

Stock-Based Compensation

SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995. This accounting standard permits the use of either a "fair value based
method" or the "intrinsic value method" defined in Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees" (APB 25) to account for
stock-based compensation arrangements. Companies that elect to use the method
provided in APB 25 are required to disclose pro forma net income and pro forma
earnings per share information that would have resulted from the use of the fair
value based method. The Company has elected to continue to determine the value
of stock-based compensation arrangements with employees under the provisions of
APB 25. Pro forma disclosures are included with the accompanying financial
statements when required; however, the Company did not grant any stock options
or other stock-based arrangements during the years ended March 31, 2004 and
2003.

Common stock issued as payment to outside service providers is recorded at fair
value. Common stock issued as payment to related parties is recorded based on
the quoted market value of the stock.

Reclassifications

Certain 2003 amounts have been reclassified to conform to the 2004 presentation.

                                      F-8

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE 2: RELATED PARTY TRANSACTIONS

Promissory Notes

During the years ended March 31, 2002, 2001 and 2000, the Company issued notes
to an officer/director, in exchange for $128,120, $317,000 and $200,000 in cash
proceeds. These notes accrued interest at 12 percent per annum and are secured
by all available business assets. During the year ended March 31, 2003, the
Company issued 100 shares of its Series A preferred stock and 700,000 shares of
its common stock to the officer/director as payment for $500,000 of principal
and $29,000 of accrued interest on the notes. The remaining principal balance of
$145,120 is included in the accompanying financial statements as "notes payable,
related party". The $145,120 note currently carries a 10 percent interest rate
and matures in June 2004.

During the year ended March 31, 2004, the officer loaned the Company an
additional $84,840 in exchange for a promissory note. The $84,840 note carries a
10 percent interest rate and matures in July 2004.

The Company paid the officer $20,186 for interest expense during the year ended
March 31, 2004. Accrued interest payable and interest expense on the notes
totaled $849 and $21,035, respectively, as of and for the year ended March 31,
2004.

Preferred Stock

The 100 shares of Series A Preferred Stock, issued to the officer/director as
payment for $500,000 in promissory notes, are convertible into the number of
shares of common stock sufficient to represent 40 percent of the fully diluted
shares outstanding after their issuance. The Series A Preferred Stock pays eight
percent dividends. The dividends are cumulative and payable quarterly. The
Series A Preferred Stock carries a liquidating preference, over all other
classes of stock, equal to the amount paid for the stock plus any unpaid
dividends. The Series A Preferred Stock provides for voting rights on an "as
converted to common stock" basis.

As of March 31, 2004, the 100 shares of preferred stock's cumulative dividend
totaled $72,986. During March 2003, the Company issued 1,000,000 shares of its
common stock to the officer/director as payment for the $32,986 dividend earned
as of March 31, 2003 and $38,047 in accrued interest related to the
officer/director's promissory notes. The preferred dividend for the year ended
March 31, 2004 totaled $40,000 and was unpaid as of March 31, 2004.

Stock-Based Compensation

In September 2003, the Company issued an officer 100,000 shares of its common
stock, valued at $3,000, as compensation for services rendered. For financial
accounting purposes, the Company valued the common stock transactions based on
the quoted market price.

During the year ended March 31, 2003, the Company issued its officers 350,000
shares of its common stock in exchange for consulting services. The transactions
were recorded at the quoted market price of the stock on the date of issuance.
The services, valued at $10,000, are included in the accompanying financial
statements as "stock-based compensation".

During the year ended March 31, 2003, the Company issued its directors 1,000,000
shares of its common stock for directors fees earned during the year. The
transactions were recorded at the quoted market price of the stock on the date
of issuance. The services, valued at $20,000, are included in the accompanying
financial statements as "stock-based compensation".

                                      F-9

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


During the year ended March 31, 2003, the Company issued an officer/director
7,000,000 shares of its common stock for salaries earned during the years ended
March 31, 2003, 2002, and 2001. The transactions were recorded at the quoted
market price of the stock on the date of issuance. The services, valued at
$180,000 ($60,000 earned during the year ended March 31, 2003), are included in
the accompanying financial statements as "stock-based compensation".

Accrued Wages

The Company accrues wages for its president at $5,000 per month. As of March 31,
2004, the Company has accrued $60,000 in wages for its president, which is
included in the accompanying financial statements as "accrued expenses".

NOTE 3: EQUIPMENT

During the year ended March 31, 2004, the Company disposed of some of its old
fixed assets. The Company recognized a loss on the disposal of the assets
totaling $4,299.

As of March 31, 2003, the Company completed a balance sheet review and
determined that the carrying amount of its equipment exceeded its fair value. As
a result of this review, the Company recorded an asset impairment charge of
$25,080.

NOTE 4: NOTES PAYABLE, OTHER

On December 2, 2003, the Company received $50,000 from an individual in exchange
for a promissory note. The note carries a ten percent interest rate and matures
on December 2, 2004. Accrued interest payable on the note totaled $1,667 at
March 31, 2004.

At March 31, 2004, the Company owed a $25,000 promissory note to a shareholder.
The note carries a 15 percent interest rate, matured on December 31, 2002, and
is personally guaranteed by an officer of the Company. The note is in default as
of March 31, 2004. Accrued interest on the note totaled $6,818 at March 31,
2004.

NOTE 5: SHAREHOLDERS' DEFICIT

Common Stock Issued For Debt, Interest and Other Liabilities

During the year ended March 31, 2003, the Company issued 1,200,000 shares of its
common stock to settle outstanding liabilities totaling $11,248.

Common Stock Issued For Compensation

During the years ended March 31, 2004 and 2003, the Company issued 7,110,000 and
1,430,000 shares of common stock to outside service providers, in exchange for
legal and consulting services. The value of the stock issued was recorded at
fair value based on the stock's quoted market price on the date of issuance and
totaled $142,000 and $58,000, respectively. The services are included in the
accompanying financial statements as "stock-based compensation".

                                      F-10

<PAGE>
<TABLE>
<CAPTION>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


Sale of Common Stock

During the years ended March 31, 2004 and 2003, the Company sold, through its
officers and directors, 4,200,000 and 8,162,500 shares of its common stock for
$64,500 and $209,075, respectively.

Options and Warrants - Employee Grants

The Company has granted nonqualified options for shares of common stock to
certain of its officers, directors, and employees. As permitted under generally
accepted accounting principles, these grants are accounted for following APB
Opinion No. 25 and related interpretations. Accordingly, compensation cost has
been recognized for those grants whose exercise price is less than the fair
market value of the stock on the date of grant.

Options and Warrants--Nonemployee Grants

The Company also grants options to non-employees for services and in conjunction
with certain agreements. These grants are accounted for under SFAS No. 123 based
on the grant date fair values. No options or warrants were granted for the years
ended March 31, 2004 and 2003.

The following table summarizes changes in stock options and warrants during the
years ended March 31, 2004 and 2003:

                                   Warrants & Options                        Weighted
                               ----------------------------   Number of       Average       Weighted
                                Number of      Number of        Shares     Exercise Price    Average
                                 Warrants       Options      Exercisable     Per Share      Fair Value
                               ------------   ------------   ------------   ------------   ------------
<S>                                 <C>           <C>            <C>       <C>            <C>
Balance at March 31, 2002....        60,000        195,000        255,000   $       2.93   $       6.98

   Warrants/Options issued...          --             --             --              --             --
   Warrants/Options expired
     or canceled.............          --             --             --              --             --
                               ------------   ------------   ------------   ------------   ------------

Balance at March 31, 2003....        60,000        195,000        255,000   $       2.93   $       6.98

   Warrants/Options issued...          --             --             --              --             --
   Warrants/Options expired
     or canceled.............       (60,000)      (195,000)      (255,000)  $      (2.93)  $      (6.98)
                               ------------   ------------   ------------   ------------   ------------

Balance at March 31, 2004....          --             --             --     $        --    $        --
                               ============   ============   ============   ============   ============


NOTE 6: INCOME TAXES

At March 31, 2004, the Company has accumulated a net operating loss of
approximately ($25,000,000) (including pre-reorganization), which may be used to
reduce future taxable income through 2024. A valuation allowance has been
recognized to completely reserve for the deferred tax assets related to the loss
carryforwards. The reserve has been established because of the uncertainty of
future taxable income, which is necessary in order to realize the benefits of
the net operating loss carryforwards. Any tax benefits realized in the future
from pre-confirmation operating loss carryforwards will be reported as a direct
addition to additional paid-in capital. The Company's ability to utilize these
carryforwards to offset future taxable income is subject to restrictions under
Section 382 of the Internal Revenue Code due to certain changes in the equity
ownership of the Company. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for tax purposes. Components
of the Company's deferred tax assets are:

                                      F-11
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


                                                                                  March 31,
                                                                       -------------------------------
                                                                           2004               2003
                                                                       ------------       ------------
<S>                                                                    <C>                <C>
Deferred tax assets from net operating loss carryforward............   $  8,593,005       $  8,475,753

Less valuation allowance............................................   $ (8,593,005)      $ (8,475,753)
                                                                       ------------       ------------

Net deferred tax assets.............................................   $       --         $       --
                                                                       ============       ============


A reconciliation of the U.S. statutory federal income tax rate to the effective
rate is as follows:



                                                                                  March 31,
                                                                       -------------------------------
                                                                           2004               2003
                                                                       ------------       ------------
U.S. federal statutory graduated rate...............................          32.77%             20.78%

State income tax rate,
   net of federal benefit...........................................           6.59%              7.76%

Permanent differences...............................................          -0.32%              0.00%

Net operating loss for which no tax
   benefit is currently available...................................         -39.04%            -28.54%
                                                                       ------------       ------------
                                                                               0.00%              0.00%
                                                                       ============       ============


NOTE 7: LITIGATION

On or about March 14, 2000, a former advisory consultant, Stephen Carlson,
loaned the Company $100,000. The Company executed a note in favor of Mr. Carlson
that required payment in full on December 31, 2000. The Company became in
default and Mr. Carlson, on March 9, 2001, initiated a legal action against the
Company in the District Court of Hennepin County to collect the loan. The
Company also granted Mr. Carlson options to purchase 60,000 shares of the
Company's common stock (see Note 5), all of which were not in-the-money. In
November 2001, the Company entered into a settlement agreement with Mr. Carlson
whereby the Company agreed to pay him $125,000 over time and on or before June
30, 2002 and secured its obligation with a mortgage on the president of the
Company's personal residence. Through March 31, 2003, the Company had paid Mr.
Carlson $40,000. On July 25, 2003, the Company's president advanced the Company
$84,840 (see Note 2), which was used to repay the settlement owed to Mr.
Carlson.

Mr. Henry Furst filed a complaint against the Company in the U.S. District
Court, for the District of Minnesota, alleging that the Company breached its
contractual obligations to him and seeking $144,300 in damages. The parties
subsequently negotiated a settlement whereby the Company agreed to pay Mr. Furst
$94,000 in installments and executed a confession of judgment in favor of Mr.
Furst for that amount. The Company has failed to pay Mr. Furst in accordance
with the settlement agreement. During the year ended March 31, 2002, the Company
paid Mr. Furst a total of $22,363 in interest and principal. As of March 31,
2004, the remaining principal balance of $85,926 is included in the accompanying
financial statements as "litigation liabilities". The Company is negotiating
with Mr. Furst to further reduce the outstanding settlement amount.

NOTE 8: LETTERS OF INTENT

On August 7, 2003, the Company signed a non-binding letter of intent to acquire
the business and operations of Katherine Baumann, LLC ("KB"), a Beverly Hills
based, California Limited Liability Company and designer of specialty women's
handbags. The Company had a ninety day option to acquire 25 percent of KB's
fully-diluted capital stock for $250,000, payable in cash. In November 2003, the
option expired and the parties agreed not to proceed with the acquisition.

                                      F-12
</TABLE>

<PAGE>


                                   XDOGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


On November 17, 2003, the Company signed a non-binding letter of intent to
acquire the business and operations of StravinSOFT, Inc. ("StravinSOFT"), a
Dallas, Texas based provider of Business and Custom Solutions, Best in Class
Data Transmission, and File Maker Application Software. In February 2004, the
letter of intent expired and the parties agreed not to proceed with the
acquisition.

NOTE 9: SUBSEQUENT EVENT

On June 1, 2004, the Company signed a non-binding letter of intent to acquire
the business and operations of Legion Media Partners, ("LMP"), a Los Angeles,
California based financier and distributor of theatrical motion pictures and
television programming on a world-wide basis. Under the terms of the LOI, the
Company will issue shares of its common stock to the shareholders of LMP in
exchange for either (a) all of the issued and outstanding capital stock of LMP,
or (b) all of the assets necessary for, used in or useful to LMP's operations.
The Company and LMP contemplate a one-for-one share exchange with the
shareholders of LMP receiving 73 percent of the new entity. The transaction is
subject to negotiation of a definitive merger agreement and completion of due
diligence investigations.

                                      F-13