##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the quarterly period ended September 30, 2008 .
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the transition period from
 __________ 
to
 __________
 Commission File Number 0-52731
 
 NovaRay Medical, Inc.
  Delaware
    
    16-1778998(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)39655 Eureka Drive, Suite A,Newark, California
    
    94560(Address of principal executive offices)
    
    (zip code)
 
 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
 þ o
  Large accelerated filer o
    
    Accelerated filer oNon-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



NOVARAY MEDICAL, INC.
(A Development Stage Company)
Table of Contents
 PART I  FINANCIAL INFORMATION
    
    
    3Item 1. Unaudited Financial Statements
    
    
    3Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2008
  and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine
Months Ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended
September 30, 2008 and 2007
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4T. Controls and Procedures
    
    
    19PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    22Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 NOVARAY MEDICAL, INC.
(A Development Stage Company)
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 September 30,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,558,788
    
    
    $
    9,233,926Receivables due from landlord
    
    
    575,652
    
    
    
    13,872Receivables from Triple Ring
    
    
    47,634Prepaid expenses
    
    
    214,121
    
    
    
    16,947Total current assets
    
    
    5,396,195
    
    
    
    9,264,745Property and equipment, net
    
    
    938,335
    
    
    
    42,455Security deposit with Triple Ring
    
    
    500,000
    
    
    
    Restricted cash for lease
    
    
    135,000
    
    
    
    Total assets
    
    $
    6,969,530
    
    
    $
    9,307,200Liabilities and Stockholders EquityCurrent liabilities:Accounts payable to Triple Ring
    
    $
    1,778,699
    
    
    $
    128,865Accounts payable trade
    
    
    366,220
    
    
    
    437,281Accrued liabilities
    
    
    218,145
    
    
    
    205,504Accrued liabilities to Triple Ring
    
    
    158,199
    
    
    
    Deferred rent-short term portion
    
    
    130,154
    
    
    
    Notes payable
    
    
    95,312
    
    
    
    125,312Total current liabilities
    
    
    2,746,729
    
    
    
    896,962Deferred rent-less short-term portion
    
    
    491,747
    
    
    
    Total liabilities
    
    
    3,238,476
    
    
    
    896,962Commitments and Contingencies (Note 8)Stockholders equitySeries A convertible preferred stock, $0.0001
par valueAuthorized shares 10,000,000; Issued and outstanding shares 6,819,548 at
September 30, 2008 and 4,946,888 at December 31, 2007 (Liquidation
preference -$0- at September 30, 2008)
    
    $
    682
    
    
    $
    495Common stock, $0.0001 par value Authorized shares - 100,000,000; Issued and
outstanding shares - 9,767,853 at September 30, 2008 and December 31, 2007
    
    
    977
    
    
    
    977Additional paid-in capital
    
    
    19,477,555
    
    
    
    14,101,223Deficit accumulated during the development stage
    
    
    (15,744,030
    )
    
    
    (5,688,327
    )Less: treasury stock, at cost, 1,239,000 shares at September 30,
2008 and December 31, 2007
    
    
    (4,130
    )
    
    
    (4,130
    )Total stockholders equity
    
    
    3,731,054
    
    
    
    8,410,238Total liabilities and stockholders equity
    
    $
    6,969,530
    
    
    $
    9,307,200
   3




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##### Table of Contents



NOVARAY MEDICAL, INC.
(A Development Stage Company)
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 From InceptionThree Months Ended
    
    
    Nine Months Ended
    
    
    (June 7, 2005)September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    to September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Operating expenses:Research and development (1)
    
    $
    3,444,666
    
    
    $
    9,410
    
    
    $
    7,728,652
    
    
    $
    121,868
    
    
    $
    8.076,345General and administrative
    
    
    709,135
    
    
    
    245,200
    
    
    
    2,380,023
    
    
    
    757,100
    
    
    
    7,103,864Total operating expenses
    
    
    4,153,801
    
    
    
    254,610
    
    
    
    10,108,675
    
    
    
    878,968
    
    
    
    15,180,209Operating loss
    
    
    (4,153,801
    )
    
    
    (254,610
    )
    
    
    (10,108,675
    )
    
    
    (878,968
    )
    
    
    (15,180,209
    )Miscellaneous income
    
    
    69
    
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    80,069Interest income
    
    
    29,415
    
    
    
    1,271
    
    
    
    61,631
    
    
    
    3,774
    
    
    
    67,742Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199,764Interest expense
    
    
    (2,883
    )
    
    
    (70,712
    )
    
    
    (8,729
    )
    
    
    (193,727
    )
    
    
    (911,396
    )Net loss
    
    $
    (4,127,200
    )
    
    $
    (324,051
    )
    
    $
    (10,055,704
    )
    
    $
    (1,068,921
    )
    
    $
    (15,744,030
    )Deemed dividend
    
    
    2,177,707
    
    
    
    
    
    
    
    2,177,707
    
    
    
    
    
    
    
    2,177,707Net loss available to common
stockholders
    
    $
    (6,304,907
    )
    
    $
    (324,051
    )
    
    $
    (12,233,411
    )
    
    $
    (1,068,921
    )
    
    $
    (17,921,737
    )Basic and diluted loss per
share available to common
shareholders
    
    $
    (0.65
    )
    
    $
    (0.06
    )
    
    $
    (1.25
    )
    
    $
    (0.19
    )
    
    $
    (2.80
    )Weighted average number of
common shares outstanding
used in basic and diluted
loss per share available to
common shareholders
    
    
    9,767,853
    
    
    
    5,692,713
    
    
    
    9,767,853
    
    
    
    5,692,713
    
    
    
    6,394,782
 
   4




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##### Table of Contents



NOVARAY MEDICAL, INC.
(A Development Stage Company)
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended
    
    
    From InceptionSeptember 30,
    
    
    September 30,
    
    
    (June 7, 2005) to2008
    
    
    2007
    
    
    September 30, 2008Operating activities:Net loss
    
    $
    (10,055,703
    )
    
    $
    (1,068,921
    )
    
    $
    (15,744,030
    )Adjustments
to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    20,584
    
    
    
    11,725
    
    
    
    58,570Gain on
extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (452,083
    )Loss on conversion of preferred debt
    
    
    
    
    
    
    
    
    
    
    252,328Beneficial
conversion of convertible debt
    
    
    
    
    
    
    
    
    
    
    263,528Writedown
of purchased intellectual property
    
    
    
    
    
    
    
    
    
    
    2,015,999Non-cash research and development
expenses associated with performance based warrant
    
    
    668,188
    
    
    
    
    
    
    
    697,542Interest expense
capitalized as long term debt
    
    
    
    
    
    
    83,876
    
    
    
    255,146Interest
expense converted to preferred stock
    
    
    
    
    
    
    
    
    
    
    273,059Changes in
operating assets and liabilitiesReceivables
from Triple Ring
    
    
    (33,762
    )
    
    
    
    
    
    
    (47,634
    )Receivables other
    
    
    
    
    
    
    5,927
    
    
    
    Receivables from landlord
    
    
    (575,652
    )
    
    
    
    
    
    
    (575,652
    )Prepaid expenses
    
    
    (197,174
    )
    
    
    (220,796
    )
    
    
    (214,121
    )Accounts payable
    
    
    (71,061
    )
    
    
    (141,374
    )
    
    
    366,220Accounts Payable Triple Ring


    1,649,834



    47,322
    

    
    1,778,699Accrued liabilities
    
    
    12,641
    
    
    
    (51,513
    )
    
    
    218,145Accrued liabilities Triple Ring


    158,199







    158,199Deferred rent
    
    
    621,901
    
    
    
    
    
    
    
    621,901Net cash used in operating activities
    
    
    (7,802,005
    )
    
    
    (1,051,006
    )
    
    
    (10,074,274
    )Investing activities:Property and equipment
    
    
    (916,464
    )
    
    
    (10,215
    )
    
    
    (996,905
    )Restricted cash for lease deposit
    
    
    (135,000
    )
    
    
    
    
    
    
    (135,000
    )Security deposit with Triple Ring
    
    
    (500,000
    )
    
    
    
    
    
    
    (500,000
    )Net cash used in investing activities
    
    
    (1,551,464
    )
    
    
    (10,215
    )
    
    
    (1,631,905
    )Financing activities:Proceeds from issuance of short term debt
    
    
    
    
    
    
    1,000,000
    
    
    
    2,043,884Proceeds from sale of Series A convertible preferred stock
    
    
    4,708,331
    
    
    
    
    
    
    
    15,383,312Repayment of notes payable
    
    
    (30,000
    )
    
    
    
    
    
    
    (30,000
    )Payment on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (10,000
    )Issuance costs incurred in sale of Series A convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (1,272,363
    )Proceeds from sale of common stock
    
    
    
    
    
    
    
    
    
    
    154,164Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (4,130
    )Net cash provided by financing activities
    
    
    4,678,331
    
    
    
    1,000,000
    
    
    
    16,264,967Net (decrease) increase in cash and cash equivalents
    
    
    (4,675,138
    )
    
    
    (61,221
    )
    
    
    4,558,788Cash and cash equivalentsbeginning of period
    
    
    9,233,926
    
    
    
    141,326
    
    
    
    Cash and cash equivalentsend of period
    
    $
    4,558,788
    
    
    $
    80,105
    
    
    $
    4,558,788Supplemental Disclosures of Cash Flow Information:Cash paid for interest
    
    $
    
    
    
    $
    
    
    
    $
    26,696Cash paid for taxes
    
    $
    29,743
    
    
    $
    1,529
    
    
    $
    34,582Supplemental Disclosure of Non-Cash Financing ActivitiesWarrants issued in connection with financing
    
    $
    
    
    
    $
    
    
    
    $
    3,768,603Convertible
preferred stock issued in exchange for cancellation of debt
    
    $
    
    
    
    $
    
    
    
    $
    4,000,693Long term
debt assumed at inception in connection with intellectual property
    
    $
    
    
    
    $
    
    
    
    $
    2,015,999Interest expense capitalized as long term debt
    
    $
    
    
    
    $
    83,876
    
    
    $
    255,146Interest expense converted to preferred stock
    
    $
    
    
    
    $
    
    
    
    $
    273,059
   5




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NOVARAY MEDICAL, INC.
(A Development Stage Company)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008 and 2007
(Unaudited)
 1. Summary of Significant Accounting Policies
 Organization and Business description
    Reclassifications
  Statement of Cash Flow.
 Uses of estimates in the preparation of financial statements
  Research and development
   6




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Cash and cash equivalents
  Property and equipment
  September 30,
    
    
    December 31,2008
    
    
    2007Computer hardware, software, and equipment
    
    $
    293,753
    
    
    $
    80,439Less: accumulated depreciation
    
    
    (58,570
    )
    
    
    (37,984
    )Leasehold improvements in progress
    
    
    703,152
    
    
    
    Property and equipment, net
    
    $
    938,335
    
    
    $
    42,455
  Loss per share
   Three months ended September 30,
    
    
    Nine months ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Basic and Diluted:Net loss available to common shareholders
    
    $
    (6,304,907
    )
    
    $
    (324,051
    )
    
    $
    (12,233,411
    )
    
    $
    (1,068,921
    )Net loss per share available to common shareholders
    
    $
    0.65
    
    
    $
    (0.06
    )
    
    $
    (1.25
    )
    
    $
    (0.19
    )Weighted average common shares outstanding
    
    
    9,767,853
    
    
    
    5,692,713
    
    
    
    9,767,853
    
    
    
    5,692,713
  Recent accounting pronouncements
 Fair Value Measurements
  7




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Interests in Consolidated Financial Statements
 Business Combinations
 The Hierarchy of Generally Accepted Accounting Principles
 Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
 Disclosures About Derivative Instruments and Hedging Activities
 Determining Whether an Instrument (or Embedded Feature) Is Indexed to
an Entitys Own Stock Accounting
for Derivatives and Hedging Activities
 2. Notes payable
   Application of Issue 98-5 to Certain Convertible
Instrument,
  8




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3. Income taxes
    4. Stockholders equity
   9




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10




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Exercise Price
    
    
    Calculated Fair ValueDate of Acceptance of the Deliverables
    
    per Share
    
    
    of warrants*On or prior to March 30, 2009
    
    $
    0.06
    
    
    $
    3,476,000On or after March 31, 2009 but on or prior to July 30, 2009
    
    $
    0.15
    
    
    $
    3,365,000On or after July 30, 2009 but on or prior to December 30, 2009
    
    $
    1.33
    
    
    $
    1,956,000On or after December 30, 2009 but on or prior to February 28, 2010
    
    $
    2.67
    
    
    $
    907,000
 
 *
    
    Calculated using Black Scholes method using exercise price, volatility, a stock price of $ 2.67 per share, an
expected term of two years, and a risk free rate of 3.98%.   Induced Conversions of Convertible Debt
  11




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Common andWarrant

    
    Number of
    

    
    Exercise
    

    
    Preferred
    

    
    Expected
    

    
    Risk Free
    

    
    
    
    

    
    ValuationGroup
    
    Warrants
    
    
    Price
    

    
    Stock Price
    

    
    Term in Years
    
    
    Rate
    
    
    Volatility
    
    
    ComputationSeries A

    
    
    1,648,960
    

    
    $
    4.25
    

    
    $
    2.67
    

    
    5
    

    
    
    3.63
    %

    
    
    37.81
    %

    
    $
    1,038,754Amended Series J-A
    
    
    1,248,440
    
    
    $
    4.25
    

    
    $
    2.67
    

    
    5
    
    
    
    1.21
    %
    
    
    43.27
    %
    
    $
    231,082Series J-A
additional shares
    
    
    1,872,660
    
    
    $
    5.00
    

    
    $
    2.67
    

    
    5
    
    
    
    1.21
    %
    
    
    43.27
    %
    
    $
    1,041,544Amended Series J
    
    
    3,745,320
    
    
    $
    2.67
    

    
    $
    2.67
    

    
    0.1
    
    
    
    1.77
    %
    
    
    43.27
    %
    
    $
    504,290Consultants
    
    
    600,000
    
    
    $
    4.25
    

    
    $
    2.67
    

    
    5
    
    
    
    3.63
    %
    
    
    37.81
    %
    
    $
    377,967Triple Ring
    
    
    1,332,000
    
    
    $
    1.33
    

    
    $
    2.67
    

    
    1.4
    
    
    
    3.98
    %
    
    
    37.81
    %
    
    $
    1,897,694
 Series A Convertible Preferred Stock NovaRay Medical Inc.
  September 30, 2008
    
    
    December 31, 2007Liquidation
    
    
    
    
    
    
    
    
    
    
    LiquidationAuthorized
    
    
    Issued
    
    
    Preference
    
    
    Authorized
    
    
    Issued
    
    
    PreferenceSeries A (NovaRay
Medical, Inc.)
    
    
    10,000,000
    
    
    
    6,819,548
    
    
    $
    0
    
    
    
    10,000,000
    
    
    
    4,946,888
    
    
    $
    0
 Common stock
  September 30, 2008
    
    
    December 31, 2007Authorized
    
    
    Issued
    
    
    Authorized
    
    
    IssuedCommon Stock (NovaRay Medical, Inc.)
    
    
    100,000,000
    
    
    
    9,767,853
    
    
    
    100,000,000
    
    
    
    9,767,853
  Treasury stock
  5. Related party transactions
 Triple Ring Technologies, Inc.
 Receivable from Triple Ring and headquarters lease
   12




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Deposits
  September 30,
    
    
    December 31,2008
    
    
    2007Security Deposit with to Triple Ring
    
    $
    500,000
    
    
    $
    
  Accounts payable and accrued liabilities
  September 30,
    
    
    December 31,2008
    
    
    2007Accounts payable to Triple Ring
    
    $
    1,778,699
    
    
    $
    128,865Accrued liabilities to Triple Ring
    
    $
    158,199
    
    
    $
    
  Professional Services Agreement and Warrants
  Exercise PriceDate of Acceptance of the Deliverables
    
    per ShareOn or prior to March 30, 2009
    
    $
    0.06On or after March 31, 2009 but on or prior to July 30, 2009
    
    $
    0.15On or after July 30, 2009 but on or prior to December 30, 2009
    
    $
    1.33On or after December 30, 2009 but on or prior to February 28, 2010
    
    $
    2.67
   Triple RingName
    
    NovaRay Medical Affiliation
    
    Interest OwnershipMarc Whyte
    
    CFO, COO, Director, Stockholder
    
    
    21.15
    %Edward Solomon
    
    CTO, Director
    
    
    21.15
    %Joseph Heanue
    
    Stockholder
    
    
    21.15
    %Augustus Lowell
    
    Stockholder
    
    
    21.15
    %Brian Wilfey
    
    Stockholder
    
    
    15.40
    %
  13




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Series A Warrants
  Number ofSeries AName
    
    WarrantsBioBridge LLC
    
    
    33,044Lynda Wijcik
    
    
    40,646Wheatley MedTech Partners, LP
    
    
    47,544W Capital Partners II, L.P.
    
    
    147,647Heartstream Capital B.V
    
    
    90,632359,513
 Restricted Stock Purchase Agreement
  6. Commitments and contingencies
    Monthly Rate
    
    
    MonthlyMonths of Term
    
    Per Square Foot
    
    
    Base RentMonth 1  Month 18
    
    $
    0.85
    
    
    $
    34,950.30Month 19  Month 30
    
    $
    0.88
    
    
    $
    36,183.84Month 31  Month 42
    
    $
    0.90
    
    
    $
    37,006.20Month 43  Month 54
    
    $
    0.93
    
    
    $
    38,239.74Month 55  Month 64
    
    $
    0.96
    
    
    $
    39,473.28
  14




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7. Subsequent Events
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
   15




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Critical Accounting Policies and Estimates
  Property and equipment
  Warrants
 Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services.
   16




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Results of Operations
 Research and Development
   General and Administrative
   Interest Expense
   Liquidity and Capital Resources
   17




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18




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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4T. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures.
    
    
    In July 2008, we engaged a third party consultant to assist in day to day accounting matters.
    
    In July and August 2008, we upgraded our knowledge of accounting pronouncements related to debt extinguishment and
conversion through training and study on the relevant pronouncements related to debt extinguishment, debt conversion
and the related accounting for warrants issued during a debt conversion and warrants issued in exchange for
services.
    
    We plan to improve our internal review of our
financial statements including our statements of cash flows.
  Changes in Internal Controls
   19




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PART II  Other Information
 
 Item 1. Legal Proceedings.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
   20




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Item 6. Exhibits.
  2.1
    
    Agreement and Plan of Merger, dated December 26, 2007, by and among Vision Acquisition I, Inc., NovaRay, Inc. and
Vision Acquisition Subsidiary, Inc.(1)3.1
    
    Complete Copy of the Certificate of Incorporation, as amended.(2)3.2
    
    Bylaws.(3)10.1
    
    Amendment to Series J Warrant To Purchase Shares of Series A Convertible Preferred Stock Number W-J-07-1, dated
August 29, 2008, by and between Vision Opportunity Master Fund, Ltd. and NovaRay Medical, Inc.(5)10.2
    
    Amendment To Series J-A Warrant To Purchase Shares of Common Stock Number W-JA-07-1, dated August 29, 2008, by
and between Vision Opportunity Master Fund, Ltd. and NovaRay Medical, Inc.(6)10.3
    
    Letter Agreement, dated August 29, 2008, by and between NovaRay Medical, Inc. and Vision Opportunity Master Fund,
Ltd.(7)3.3
    
    Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock of
the NovaRay Medical, Inc.(4)31.1
    
    Certification of Jack E. Price, Chief Executive Officer, pursuant to Rules 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Marc C. Whyte, Chief Financial Officer, pursuant to Rules 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934,as amended.32.1
    
    Certification of Jack E. Price, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Marc C. Whyte, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Incorporated by reference to the Exhibit 2.1 to the Registrants Current Report on Form 8-K filed with the SEC on
December 28, 2007.(2)
    
    Incorporated by reference to Exhibit 3.1 to the Registrants Quarterly Report on Form 10-Q filed with the SEC on
May 14, 2008.(3)
    
    Incorporated by reference to Exhibit 3.2 to the Registrants Registration Statement on Form 10-SB (No.
000-52731) filed with the SEC on July 20, 2007.(4)
    
    Incorporated by reference to Exhibit 3.4 to the Registrants Current Report on Form 8-K filed with the SEC on
December 28, 2007.(5)
    
    Incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on
September 8, 2008.(6)
    
    Incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC
on September 8, 2008.(7)
    
    Incorporated by reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K filed with the SEC on
September 8, 2008.  21




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##### Table of Contents



SIGNATURES
  NOVARAY MEDICAL, INC.By:
    /s/ Jack E. PriceJack E. PricePresident and Chief Executive OfficerBy:
    /s/ Marc C. WhyteMarc C. WhyteChief Financial Officer and Chief Operating Officer  22




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description2.1
    
    Agreement and Plan of Merger, dated December 26, 2007, by and among Vision Acquisition I, Inc., NovaRay, Inc. and
Vision Acquisition Subsidiary, Inc.(1)3.1
    
    Complete Copy of the Certificate of Incorporation, as amended.(2)3.2
    
    Bylaws.(3)3.3
    
    Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock of
the NovaRay Medical, Inc.(4)10.1
    
    Amendment to Series J Warrant To Purchase Shares of Series A Convertible Preferred Stock Number W-J-07-1, dated
August 29, 2008, by and between Vision Opportunity Master Fund, Ltd. and NovaRay Medical, Inc.(5)10.2
    
    Amendment To Series J-A Warrant To Purchase Shares of Common Stock Number W-JA-07-1,  dated August 29, 2008, by
and between Vision Opportunity Master Fund, Ltd. and NovaRay Medical, Inc.(6)10.3
    
    Letter Agreement, dated August 29, 2008, by and between NovaRay Medical, Inc. and Vision Opportunity Master Fund,
Ltd.(7)31.1
    
    Certification of Jack E. Price, Chief Executive Officer, pursuant to Rules 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Marc C. Whyte, Chief Financial Officer, pursuant to Rules 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934,as amended.32.1
    
    Certification of Jack E. Price, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Marc C. Whyte, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Incorporated by reference to the Exhibit 2.1 to the Registrants Current Report on Form 8-K filed with the SEC on
December 28, 2007.(2)
    
    Incorporated by reference to Exhibit 3.1 to the Registrants Quarterly Report on Form 10-Q filed with the SEC on
May 14, 2008.(3)
    
    Incorporated by reference to Exhibit 3.2 to the Registrants Registration Statement on Form 10-SB (No.
000-52731) filed with the SEC on July 20, 2007.(4)
    
    Incorporated by reference to Exhibit 3.4 to the Registrants Current Report on Form 8-K filed with the SEC on
December 28, 2007.(5)
    
    Incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on
September 8, 2008.(6)
    
    Incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC
on September 8, 2008.(7)
    
    Incorporated by reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K filed with the SEC on
September 8, 2008.  23