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

                                   FORM 10-KSB

[X]      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

         For the fiscal year ended June 30, 2001

                                       OR

[]       TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE  SECURITIES
         AND EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                        Commission file number: 000-31355

                            GALAXY SPECIALTIES, INC.
                       (Name of registrant in its charter)

       NEVADA                                    81-0438093
(State of incorporation)            (I.  R.  S.  Employer Identification No.)

                            #149, 369 East 900 South
                           Salt Lake City, Utah 84111
                                 (801) 323-2395
          (Address and telephone number of principal executive offices
                        and principal place of business)
                                ----------------

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock

Check  whether the issuer (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 (or for such shorter period that the registrant was required to file such
reports)  and (2) has been subject to such filing  requirements  for the past 90
days. Yes X No
         ---    -----

Check if disclosure  of delinquent  filers in response 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|

State issuer's revenue for its most recent fiscal year: None.

As of August 22, 2001,  the  registrant  had  17,000,000  shares of common stock
outstanding.  The registrant does not have an active trading market and a market
value of the voting stock held by non-affiliates cannot be determined.

Documents incorporated by reference: None.

Transitional Small Business Disclosure Format (check one): Yes ____ No   X
                                                                       ----


<PAGE>



                                TABLE OF CONTENTS

                                     PART I
Item 1.  Description of business.............................................. 3
Item 2.  Description of property.............................................. 7
Item 3.  Legal proceedings.................................................... 7
Item 4.  Submission of matters to a vote of security holders.................. 7

                                     PART II

Item 5.  Market for common equity and related stockholder matters............. 7
Item 6.  Plan of operations................................................... 7
Item 7.  Financial statements................................................. 8
Item 8.  Changes in and disagreements with accountants on accounting
         and financial disclosure............................................. 8

                                    PART III

Item 9.    Directors, executive officers; Compliance with Section 16(a)....... 8
Item 10.  Executive compensation.............................................. 9
Item 11.  Security ownership of certain beneficial owners and management...... 9
Item 12.  Certain relationships and related transactions..................... 10
Item 13.   Exhibits and reports on Form 8-K.................................. 10




                                        2

<PAGE>

                           FORWARD LOOKING STATEMENTS

         In this annual  report  references  to "Galaxy,"  "we," "us," and "our"
refer to Galaxy Specialties, Inc..

         This annual report contains certain  forward-looking  statements within
the meaning of the Private  Securities  Litigation  Reform Act of 1995. For this
purpose any  statements  contained in this annual report that are not statements
of  historical  fact may be deemed  to be  forward-looking  statements.  Without
limiting  the  foregoing,  words  such as "may,"  "will,"  "expect,"  "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended to
identify  forward-looking  statements.  These statements by their nature involve
substantial  risks and  uncertainties,  and actual results may differ materially
depending  on a  variety  of  factors,  many of which  are not  within  Galaxy's
control.  These  factors  include  but are not  limited to  economic  conditions
generally  and in the  industries in which Galaxy may  participate;  competition
within  Galaxy's  chosen  industry,   including  competition  from  much  larger
competitors;  technological  advances  and  failure  by Galaxy  to  successfully
develop business relationships.


                         ITEM 1: DESCRIPTION OF BUSINESS

Business Development

         We were  incorporated  in the state of  Montana  on March 7,  1986,  as
Hystar Aerospace Marketing  Corporation of Montana ("Hystar").  On May 22, 1999,
Galaxy Specialties,  Inc. was incorporated in the state of Nevada and on June 5,
2000,  Hystar merged with Galaxy solely for the purpose of changing its domicile
from Montana to Nevada.  Hystar was incorporated as a wholly owned subsidiary of
Nautilus  Entertainment,  Inc., a Nevada corporation,  to lease, sell and market
the Hystar airship and the Burkett Mill, a waste milling  device.  However,  the
venture was found to be cost  prohibitive  and Hystar ceased such  activities in
1986. Hystar did not engage in any further commercial operations.

         We do not have active  business  operations  and remain a subsidiary of
Nautilus Entertainment, Inc., now called VIP Worldnet, Inc. We are a development
stage  company and have suffered  losses since our  inception.  Our  independent
auditors have expressed  doubt that we can continue as a going concern unless we
obtain financing.

Our Plan

         Our business plan is to seek, investigate,  and, if warranted,  acquire
an interest in a business opportunity. Our acquisition of a business opportunity
may be made by merger,  exchange of stock,  or  otherwise.  We have very limited
sources of capital,  and we probably will only be able to take  advantage of one
business  opportunity.  At the present time we have not  identified any business
opportunity  that we plan to pursue,  nor have we  reached  any  preliminary  or
definitive   agreements  or   understandings   with  any  person  concerning  an
acquisition or merger.

         Based  on  current  economic  and  regulatory  conditions,   management
believes that it is possible, if not probable,  for a company like ours, without
many assets or liabilities,  to negotiate a merger or acquisition  with a viable
private company.  The opportunity arises  principally  because of the high legal
and  accounting  fees and the length of time  associated  with the  registration
process of "going public". However, should any of these conditions change, it is
very possible that there would be little or no economic  value for anyone taking
over control of Galaxy.

         In the event we merge or acquire a business opportunity,  the successor
company will be subject to our reporting obligations.  This is commonly referred
to as a  "back  door  registration."  A back  door  registration  occurs  when a
non-reporting  company  becomes the successor of a reporting  company by merger,
consolidation,  exchange  of  securities,  acquisition  of assets or  otherwise.
Pursuant to Securities and Exchange Commission ("SEC") regulations, this type of
event  requires the successor  company to provide in an 8-K current  report with
the same kind of  information  that would  appear in a  registration  statement,
including audited and pro forma financial statements.

                                        3

<PAGE>



Accordingly,  we may incur  additional  expense to  conduct  due  diligence  and
present the required  information  for the business  opportunity  in any report.
Also,  the SEC may elect to conduct a full review of the  successor  company and
may issue substantive  comments on the sufficiency of disclosure  related to the
business opportunity.

         Our  search  for a  business  opportunity  will not be  limited  to any
particular geographical area or industry,  including both U.S. and international
companies.   Our   management  has   unrestricted   discretion  in  seeking  and
participating  in a business  opportunity,  subject to the  availability of such
opportunities,  economic  conditions and other factors.  Our management believes
that  companies  who desire a public  market to enhance  liquidity  for  current
stockholders,   or  plan  to  acquire  additional  assets  through  issuance  of
securities  rather  than  for  cash  will be  potential  merger  or  acquisition
candidates.

         The  selection of a business  opportunity  in which to  participate  is
complex and  extremely  risky and will be made by  management in the exercise of
its business  judgement.  There is no assurance that we will be able to identify
and  acquire  any  business  opportunity  which  will  ultimately  prove  to  be
beneficial  to us and our  stockholders.  Should a merger or  acquisition  prove
unsuccessful,  it is  possible  management  may  decide  not to  pursue  further
acquisition  activities  and  management  may abandon its  activities and we may
become dormant or be dissolved.

         Our  activities  are subject to several  significant  risks which arise
primarily  as a result of the fact  that we have no  specific  business  and may
acquire  or  participate  in a business  opportunity  based on the  decision  of
management  which will,  in all  probability,  act  without  consent,  vote,  or
approval of our stockholders.

         It is possible that the range of business  opportunities  that might be
available  for  consideration  by us  could  be  limited  by  impact  of the SEC
regulations  regarding  purchase and sale of "penny  stock." Our common stock is
not publicly traded at this time and we cannot assure that a market will develop
or that a  stockholder  ever will be able to liquidate his  investments  without
considerable  delay, if at all. If a market develops,  our shares will likely be
subject to the rules of the Penny  Stock  Suitability  Reform  Act of 1990.  The
liquidity of penny stock is affected by specific disclosure  procedures required
by this Act to be followed by all broker-dealers,  including but not limited to,
determining  the  suitability  of  the  stock  for a  particular  customer,  and
obtaining a written agreement from the customer to purchase the stock. This rule
may affect the ability of  broker-dealers  to sell our securities and may affect
the ability of purchasers to sell our securities in any market.

Investigation and Selection of Business Opportunities

         We anticipate  that business  opportunities  will come to our attention
from various sources,  including our officers and directors,  our  stockholders,
professional  advisors,  such as attorneys and accountants,  securities  broker-
dealers, investment banking firms, venture capitalists, members of the financial
community and others who may present unsolicited  proposals.  Management expects
that prior personal and business relationships may lead to contacts for business
opportunities,  however,  we have  not  entered  into  any  direct  or  indirect
negotiations  at the time of this filing with any person,  corporation  or other
entity regarding any possible business reorganization involving Galaxy.

         Our management will analyze the business  opportunities,  however, none
of our management are professional business analysts.  Our management has had no
experience with mergers and acquisitions of business  opportunities  and has not
been involved with an initial public  offering.  However,  Mmes. Ball and Marino
are  directors of other blank check  companies and may in the future be involved
with other blank check companies.  (See, Part III, Item 9: Directors,  executive
officers;  Compliance  with Section  16(a),"  below.)  Potential  investors must
recognize  that  due to our  management's  inexperience  we may  not  adequately
evaluate a potential business opportunity.

         Certain  conflicts of interest exist or may develop  between Galaxy and
our officers and directors. Our management has other business interests to which
they  currently  devote  attention,  which include their primary  employment and
management  of other blank check  reporting  companies.  They may be expected to
continue to devote their  attention to these other business  interests  although
management time should be devoted to our business.

                                        4

<PAGE>



As a result,  conflicts of interest may arise that can be resolved  only through
their exercise of judgement in a manner which is consistent with their fiduciary
duties to us. In  particular,  our officers and directors are directors of other
blank check companies with a structure and a business plan which is identical to
ours and, they may, in the future, be involved with other blank check companies.
In the process of negotiations  for an acquisition or merger or determination of
consulting  fees  related  to  investigation  of  a  business  opportunity,  our
principal  stockholders and management may consider their own personal pecuniary
benefit or the interests of other blank check companies they are affiliated with
rather than the best interests of Galaxy's other stockholders.

         We  presently  do not  foresee  entering  into a merger or  acquisition
transaction with any business with which our officers or directors are currently
affiliated.  We may acquire or merge with  companies  of which our  management's
affiliates or associates  have a direct or indirect  ownership  interest.  If we
determine in the future that a  transaction  with an  affiliate  would be in our
best  interest we are  permitted by Nevada law to enter into such a  transaction
if:

         (1) The material facts  regarding the  relationship  or interest of the
affiliate in the contract or transaction are disclosed or are known to the Board
of  Directors.   The  board  authorizes  the  contract  or  transaction  by  the
affirmative vote of a majority of the disinterested  directors,  even though the
disinterested directors constitute less than a quorum; or

         (2) The material facts  regarding the  relationship  or interest of the
affiliate  in  the  contract  transaction  are  disclosed  or are  known  to the
stockholders  entitled  to  vote  on  the  transaction,   and  the  contract  or
transaction is specifically approved by vote of the stockholders; or

         (3)  The  contract  or  transaction  is  fair  to us at the  time it is
authorized, approved or ratified by the Board of Directors or the stockholders.

         A decision to participate  in a specific  business  opportunity  may be
made upon our  management's  analysis  of the  quality  of the  other  company's
management  and  personnel,  the  anticipated   acceptability  of  the  business
opportunity's new products or marketing concept,  the merit of its technological
changes, the perceived benefit that it will derive from becoming a publicly held
entity,  and numerous other factors which are difficult,  if not impossible,  to
analyze through the application of any objective criteria. In many instances, we
anticipate that the historical operations of a specific business opportunity may
not  necessarily  be indicative  of the potential for the future  because of the
possible need to shift marketing approaches substantially, expand significantly,
change product emphasis,  change or substantially  augment  management,  or make
other changes. We will be dependent upon the owners of a business opportunity to
identify any such  problems  which may exist and to  implement,  or be primarily
responsible for the implementation of, required changes.

         In our analysis of a business  opportunity  we anticipate  that we will
consider, among other things, the following factors:

         (1)   Potential  for  growth  and   profitability,   indicated  by  new
technology, anticipated market expansion, or new products;

         (2) Our perception of how any particular  business  opportunity will be
received by the investment community and by our stockholders;

         (3)  Whether,   following  the  business  combination,   the  financial
condition  of the  business  opportunity  would be, or would have a  significant
prospect  in the  foreseeable  future  of  becoming  sufficient  to  enable  our
securities  to qualify  for  listing on a  exchange  or on a national  automated
securities quotation system, such as NASDAQ.

         (4)  Capital  requirements  and  anticipated  availability  of required
funds, to be provided by us or from  operations,  through the sale of additional
securities, through joint ventures or similar arrangements, or from other

                                        5

<PAGE>



sources;

         (5) The extent to which the business opportunity can be advanced;

         (6) Competitive position as compared to other companies of similar size
and experience  within the industry  segment as well as within the industry as a
whole;

         (7)  Strength  and  diversity  of existing  management,  or  management
prospect that are scheduled for recruitment;

         (8) The cost of our participation as compared to the perceived tangible
and intangible values and potential; and

         (9) The accessibility of required management expertise,  personnel, raw
materials, services, professional assistance, and other required items.

         No one of the  factors  described  above  will  be  controlling  in the
selection  of a business  opportunity.  Management  will  attempt to analyze all
factors  appropriate to each  opportunity  and make a  determination  based upon
reasonable  investigative  measures and available  data.  Potentially  available
business  opportunities  may occur in many  different  industries and at various
stages of development.  Thus, the task of comparative investigation and analysis
of  such  business  opportunities  will  be  extremely  difficult  and  complex.
Potential  investors  must  recognize  that,  because  of  our  limited  capital
available for  investigation  and  management's  limited  experience in business
analysis,  we may not discover or  adequately  evaluate  adverse facts about the
opportunity to be acquired.

Form of Acquisition

         We cannot predict the manner in which we may  participate in a business
opportunity.  Specific  business  opportunities  will be reviewed as well as our
needs and  desires  and those of the  promoters  of the  opportunity.  The legal
structure or method deemed by  management to be suitable will be selected  based
upon our review and our relative negotiating strength.  Such method may include,
but is not limited to, leases,  purchase and sale  agreements,  licenses,  joint
ventures and other contractual  arrangements.  We may act directly or indirectly
through  an  interest  in  a   partnership,   corporation   or  other  forms  of
organization.  We may be required to merge, consolidate or reorganize with other
corporations  or  forms of  business  organization.  In  addition,  our  present
management and  stockholders  most likely will not have control of a majority of
our voting shares following a merger or reorganization  transaction.  As part of
such a transaction,  our existing  directors may resign and new directors may be
appointed without any vote by our stockholders.

         We likely will  achieve  our  participation  in a business  opportunity
through the issuance of common stock or other securities.  Although the terms of
any such  transaction  cannot be predicted,  it should be noted that issuance of
additional shares might also may be done  simultaneously with a sale or transfer
of shares representing a controlling interest by current principal stockholders.

Competition

         We expect to encounter substantial  competition in our effort to locate
attractive  opportunities.   Business  development  companies,  venture  capital
partnerships and  corporations,  venture capital  affiliates of large industrial
and financial  companies,  small investment  companies,  and wealthy individuals
will be our primary competition.  Many of these entities will have significantly
greater experience, resources and managerial capabilities than we do and will be
in a  better  position  than we are to  obtain  access  to  attractive  business
opportunities.  We also will  experience  competition  from other public  "blank
check" companies, many of which may have more funds available.

Employees


                                        6

<PAGE>



         We currently have no employees.  Our management  expects to confer with
consultants, attorneys and accountants as necessary. We do not anticipate a need
to engage any  full-time  employees  so long as we are  seeking  and  evaluating
business opportunities.  We will determine the need for employees based upon the
specific business opportunity.


                        ITEM 2: DESCRIPTION OF PROPERTIES

         We do not currently own or lease any property.  We utilize office space
in the office of a  stockholder  at no cost.  Until we pursue a viable  business
opportunity and recognize income, we will not seek independent office space.

                            ITEM 3: LEGAL PROCEEDINGS

         We are not a party to any  proceedings or threatened  proceedings as of
the date of this filing.


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

         We have not submitted a matter to a vote of our shareholders during the
fourth quarter of the 2001 fiscal year.

                     ITEM 5: MARKET PRICE FOR COMMON EQUITY
                         AND RELATED STOCKHOLDER MATTERS

         We  do  not  have  an  established   public  trading  market.  We  have
approximately  86  stockholders  of  record  and  1,363,379  common  shares  are
unrestricted  stock and 15,636,621  shares are restricted shares as that term is
defined  in Rule 144.  We do not have any  outstanding  options or  warrants  to
purchase our common shares.  We have not declared  dividends on our common stock
and do not anticipate  paying  dividends on our common stock in the  foreseeable
future.

b) Recent Sales of Unregistered Securities

         We have not sold any securities  without  registration  within the past
three years.


                           ITEM 6: PLAN OF OPERATIONS

         We have no assets and have experienced  losses from inception.  For the
fiscal  year  ended  June 30,  2001,  we had no cash on hand and  total  current
liabilities of $28,000.  The $28,000 note payable is owed to a related party for
accounting  and legal fees paid on our behalf  incurred  during the fiscal  year
ended June 30, 2000.

         We have no  commitments  for capital  expenditures  for the next twelve
months. During the next twelve months we believe that our current cash needs can
be met  by  loans  from  our  directors,  officers  and  shareholders  based  on
understandings we have with these persons.  These understandings are not written
agreements and therefore  these persons are not obligated to provide  funds.  We
may repay  these  loans,  costs of  services  and  advancements  with  cash,  if
available, or we may convert them into common stock.

         We  will  incur  expenses  due to the  legal  and  accounting  services
required to prepare our  periodic  reports and the costs of filing such  reports
with the SEC.  Management  anticipates  that loans  from  related  parties  will
provide funding for these expenses.


                                        7

<PAGE>



         Our management intends to actively seek business  opportunities  during
the next  twelve  months  and if we  obtain a  business  opportunity,  it may be
necessary to raise additional  capital. We may incur additional expenses related
to proxy or  information  statements we must provide to our  stockholders  which
disclose  the  business  opportunity's   business  operations,   management  and
financial condition. If loans from related parties are insufficient to cover the
costs of these  reporting  requirements,  we may sell our common  stock to raise
additional capital.


                          ITEM 7: FINANCIAL STATEMENTS

         Reference is made to the financial  statements for the years ended June
30, 2001 and 2000 which are attached to this Form 10-KSB report.


              ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

         We  have  had no  change  in,  or  disagreements  with,  our  principal
independent accountant during our last two fiscal years.


                     ITEM 9: DIRECTORS, EXECUTIVE OFFICERS;
                          COMPLIANCE WITH SECTION 16(a)

a) Directors and Executive Officers

         Our  executive  officers  and  directors  and  their  respective  ages,
positions  and term of  office  are set forth  below,  along  with  biographical
information  for each. Our bylaws require two directors who serve until our next
annual meeting or until each is replaced by a qualified director.  Our executive
officers are chosen by our Board of Directors and serve at its discretion. There
are no  existing  family  relationships  between  or among any of our  executive
officers or directors.

Name              Age   Position Held                  Director or Officer Since
----              ---   -------------                  -------------------------

M. Jeanne Ball    43    President/ Director            June 5, 2000
April L. Marino   27    Secretary/Treasurer/Director   June 5, 2000

         M. Jeanne Ball For over 20 years Ms. Ball has worked as an  independent
contractor performing duties of a legal secretary.  She is a director of Bennion
Corporation,  Skinovation Pharmaceutical  Incorporated and Wings & Things, Inc.,
which are blank check reporting companies.

         April L. Marino Ms.  Marino has been employed as a secretary for Mutual
Ventures  Corporation since December 18, 1997. From January 1995 to October 1997
she  was  employed  by  Universal  Business  Insurance  as  a  Customer  Service
Representative.  She is a director of Bennion  Corporation,  Pinecrest Services,
Inc. and Libra Alliance Corporation, which are blank check reporting companies.

b) Compliance with Section 16(a) of the Exchange Act.

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  our
directors,  executive  officers  and persons who own more than five percent of a
registered  class of our  equity  securities,  to file with the  Securities  and
Exchange  Commission  initial  reports of  ownership  and  reports of changes in
ownership of common stock and our other equity securities.  Officers,  directors
and greater than ten-percent  beneficial  owners are required by SEC regulations
to furnish us with copies of all Section 16(a)  reports they file.  Based solely
upon review of the copies of such forms  furnished  to us during the fiscal year
ended June 30, 2001, we believe all filing requirements under Section 16(a)

                                        8

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were complied within a timely manner.


                         ITEM 10: EXECUTIVE COMPENSATION

         Our named executive  officers have not received any cash  compensation,
bonuses,  stock appreciation  rights,  long term  compensation,  stock awards or
long-term  incentive  rights from us during the past three fiscal years. We have
not entered into  employment  contracts  with our  executive  officers and their
compensation,  if any,  will be  determined  at the  discretion  of our Board of
Directors.

Compensation of Directors

         We do  not  have  any  standard  arrangement  for  compensation  of our
directors  for  any  services  provided  as  director,  including  services  for
committee participation or for special assignments.


                ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                              OWNERS AND MANAGEMENT

         The  following  table  sets  forth  the  beneficial  ownership  of  our
outstanding common stock of each person or group known by us to own beneficially
more than 5% of our  outstanding  common stock and ownership of our  management.
Beneficial  ownership is determined in accordance  with the rules of the SEC and
generally includes voting or investment power with respect to securities. Except
as indicated by footnote,  the persons named in the table below have sole voting
power and  investment  power with respect to all shares of common stock shown as
beneficially  owned by them. The percentage of beneficial  ownership is based on
17,000,000 shares of common stock outstanding as of August 22, 2001.

                            CERTAIN BENEFICIAL OWNERS

                                       Common Stock Beneficially Owned
Name and Address of                Number of Shares of
Beneficial Owners                  Common Stock            Percentage of Class

VIP Worldnet, Inc.                 15,036,621*             88.5%
154 E.  Ford Avenue
Salt Lake City, Utah 84115

         * VIP  Worldnet,  Inc.  holds  15,000,000  shares and its directors and
officers  beneficially  own the  following  shares of our common  stock:  Joanne
Clinger, President, owns 28,597 shares and Wayne Reichman, Secretary, owns 8,024
shares.

                                   MANAGEMENT

                                   Common Stock Beneficially Owned
Name and Address of             Number of Shares
Beneficial Owners               Common Stock      Percentage of Class

M. Jeanne Ball                  200                        **
968 Bloomsburg Cove
Murray, Utah 84123

April L. Marino                 400                        **

                                        9

<PAGE>



402 East Maxwell Lane
Salt Lake City, Utah 84115

** Less than 1%


             ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         We have not engaged in any transactions in excess of $60,000 during the
past two  years  involving  our  executive  officers,  directors,  more  than 5%
stockholders or immediate family members of such persons.

Parent Company

         VIP  Worldnet,  Inc.  is  our  parent  company  and  beneficially  owns
15,036,621  shares of our common  stock.  Such  shares  represent  88.5 % of our
issued and outstanding shares.


                    ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits

Exhibit
Number            Description

3.1      Articles  of  Incorporation,   dated  May  22,  2000  (Incorporated  by
         reference to exhibit 3.1 of Form 10-SB, filed August 21, 2000.)

3.2      Articles of Merger  filed June 5, 2000  (Incorporated  by  reference to
         exhibit 3.2 of Form 10-SB, filed August 21, 2000.)

3.3      Bylaws of Galaxy  (Incorporated  by  reference  to exhibit  3.3 of Form
         10-SB, filed August 21, 2000.)

b) Reports on Form 8-K

         None.





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<PAGE>


                                   SIGNATURES


         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934,  the  registrant  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.




Date  September 7, 2001      Galaxy Specialties, Inc.



                            By: _/s/ M. Jeanne Ball
                              ----------------------------------------
                                M. Jeanne Ball, President and Director


         In  accordance  with the Exchange Act this report has been signed below
by the following person on behalf of the registrant and in the capacities and on
the dates indicated.





Date  September 7, 2001    By: /s/ April L. Marino
                             ---------------------------------------------------
                               April L. Marino, Secretary/Treasurer and Director


                                       11

<PAGE>




                                      Smith
                                        &
                                     Company

           A Professional Corporation of Certified Public Accountants

                          INDEPENDENT AUDITOR'S REPORT

Board of Directors
Galaxy Specialties, Inc.
(A Development Stage Company)

We have audited the accompanying  balance sheets of Galaxy Specialties,  Inc. (a
Nevada  development  stage  corporation)  as of June 30, 2001 and 2000,  and the
related  statements of operations,  changes in stockholders'  deficit,  and cash
flows for the years ended June 30, 2001 and 2000, and for the period of March 7,
1986 (date of inception) to June 30, 2001.  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 auditing standards generally accepted
in the  United  States of  America.  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 Galaxy  Specialties,  Inc. (a
development  stage company) as of June 30, 2001 and 2000, and the results of its
operations,  changes in stockholders'  deficit, and its cash flows for the years
ended  June 30,  2001 and 2000,  and for the  period  of March 7, 1986  (date of
inception) to June 30, 2001, in conformity with accounting  principles generally
accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As shown in the financial  statements,
the Company has at June 30, 2001 a retained deficit of $45,000.  The Company has
suffered losses from operations and has a substantial  need for working capital.
This raises  substantial doubt about its ability to continue as a going concern.
Management's  plans in regard to these  matters are  described  in Note 2 to the
financial statements.  The accompanying  financial statements do not include any
adjustments that may result from the outcome of this uncertainty.


                                                             /s/ Smith & Company
                                                    CERTIFIED PUBLIC ACCOUNTANTS

Salt Lake City, Utah
July 25, 2001

         10 West 100 South, Suite 700 o Salt Lake City, Utah 84101-1554
              Telephone: (801) 575-8297 o Facsimile: (801) 575-8306
                          E-mail: smithco@dotplanet.com
          Members: American Institute of Certified Public Accountants o
                Utah Association of Certified Public Accountants

                                       F-1

<PAGE>



                            GALAXY SPECIALTIES, INC.
                          (A Development Stage Company)
                                 BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                                  June 30,
                                                                            2001           2000
                                                                        -------------  -------------
             ASSETS
CURRENT ASSETS
<S>                                                                     <C>            <C>
         Cash in bank                                                   $           0  $           0
                                                                        -------------  -------------

                      TOTAL ASSETS                                      $           0  $           0
                                                                        =============  =============

             LIABILITIES & DEFICIT
CURRENT LIABILITIES
         Accounts payable - related party (Note 4)                      $      28,000  $      28,000
                                                                        -------------  -------------

                      TOTAL CURRENT LIABILITIES                                28,000         28,000

STOCKHOLDERS' DEFICIT
             Common Stock $.001 par value:
             Authorized - 20,000,000 shares
             Issued and outstanding 17,000,000 shares                          17,000         17,000
             Deficit accumulated during
                  the development stage                                       (45,000)       (45,000)
                                                                        -------------  -------------

                          TOTAL STOCKHOLDERS'  DEFICIT                        (28,000)       (28,000)
                                                                        -------------  -------------

                      TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT         $           0  $           0
                                                                        =============  =============
</TABLE>

See Notes to Financial Statements.


                                       F-2

<PAGE>



                            GALAXY SPECIALTIES, INC.
                          (A Development Stage Company)
                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                             3/7/86
                                                                Year ended                  (Date of
                                                                  June 30,                inception) to
                                                          2001               2000            6/30/2001
                                                       -------------    -------------   -----------------
<S>                                                    <C>              <C>             <C>
Net sales                                              $           0    $           0   $               0
Cost of sales                                                      0                0                   0
                                                       -------------    -------------   -----------------

                GROSS PROFIT                                       0                0                   0

General & administrative expenses                                  0           28,000              45,000
                                                       -------------    -------------   -----------------

                  NET LOSS                             $           0    $     (28,000)  $         (45,000)
                                                       =============    =============   =================

Basic & diluted net loss per weighted
         average share                                 $       (.000)   $       (.002)
                                                       =============    =============

Weighted average number of common
         shares used to compute  net loss
         per weighted  average share                      17,000,000       17,000,000
                                                       =============    =============
</TABLE>







See Notes to Financial Statements.


                                       F-3

<PAGE>



                            GALAXY SPECIALTIES, INC.
                          (A Development Stage Company)
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT


<TABLE>
<CAPTION>
                                                                                             Deficit
                                                                                           Accumulated
                                                                Common Stock                  During
                                                              Par Value $0.001              Development
                                                             Shares         Amount            Stage
                                                         -------------  -------------   -----------------
<S>                                                      <C>            <C>             <C>
Balances at 3/7/86 (Date of inception)                               0  $           0   $               0
         Issuance of common stock (restricted)
           at $.001 per share at 4/24/86                    17,000,000         17,000
         Net loss for period                                                                       (3,400)
                                                         -------------  -------------   -----------------
Balances at 6/30/86                                         17,000,000         17,000              (3,400)
         Net loss for year                                                                         (3,400)
                                                         -------------  -------------   -----------------
Balances at 6/30/87                                         17,000,000         17,000              (6,800)
         Net loss for year                                                                         (3,400)
                                                         -------------  -------------   -----------------
Balances at 6/30/88                                         17,000,000         17,000             (10,200)
         Net loss for year                                                                         (3,400)
                                                         -------------  -------------   -----------------
Balances at 6/30/89                                         17,000,000         17,000             (13,600)
         Net loss for year                                                                         (3,400)
                                                         -------------  -------------   -----------------
Balances at 6/30/90                                         17,000,000         17,000             (17,000)
         Net income for year                                                                            0
                                                         -------------  -------------   -----------------
Balances at 6/30/91                                         17,000,000         17,000             (17,000)
         Net income for year                                                                            0
                                                         -------------  -------------   -----------------
Balances at 6/30/92                                         17,000,000         17,000             (17,000)
         Net income for year                                                                            0
                                                         -------------  -------------   -----------------
Balances at 6/30/93                                         17,000,000         17,000             (17,000)
         Net income for year                                                                            0
                                                         -------------  -------------   -----------------
Balances at 6/30/94                                         17,000,000         17,000             (17,000)
         Net income for year                                                                            0
                                                         -------------  -------------   -----------------
Balances at 6/30/95                                         17,000,000         17,000             (17,000)
         Net income for year                                                                            0
                                                         -------------  -------------   -----------------
Balances at 6/30/96                                         17,000,000         17,000             (17,000)
         Net income for year                                                                            0
                                                         -------------  -------------   -----------------
Balances at 6/30/97                                         17,000,000         17,000             (17,000)
         Net income for year                                                                            0
                                                         -------------  -------------   -----------------
Balances at 6/30/98                                         17,000,000         17,000             (17,000)
         Net income for year                                                                            0
                                                         -------------  -------------   -----------------
Balances at 6/30/99                                         17,000,000         17,000             (17,000)
         Net loss for year                                                                        (28,000)
                                                         -------------  -------------   -----------------
Balances at 6/30/00                                         17,000,000         17,000             (45,000)
         Net loss for year                                                                              0
                                                         -------------  -------------   -----------------

Balances at 6/30/01                                         17,000,000  $      17,000   $         (45,000)
                                                         =============  =============   =================
</TABLE>

See Notes to Financial Statements.


                                       F-4

<PAGE>



                            GALAXY SPECIALTIES, INC.
                          (A Development Stage Company)
                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                            3/7/86
                                                                                 Year ended                 (Date of
                                                                                 June 30,                 inception) to
                                                                           2001             2000            6/30/2001
                                                                       -------------    -------------   -----------------
OPERATING ACTIVITIES
<S>                                                                    <C>              <C>             <C>
         Net loss                                                      $           0    $     (28,000)  $         (45,000)
         Adjustments to reconcile net loss to cash
           used by operating activities:
             Amortization                                                          0                0              17,000
             Accounts payable - related party                                      0           28,000              28,000
                                                                       -------------    -------------   -----------------

                NET CASH USED BY
                OPERATING ACTIVITIES                                               0                0                   0

INVESTING ACTIVITIES
         Organization costs                                                        0                0             (17,000)
                                                                       -------------    -------------   -----------------

                NET CASH REQUIRED BY
                INVESTING ACTIVITIES                                               0                0             (17,000)

FINANCING ACTIVITIES
         Proceeds from sale of
          common stock                                                             0                0              17,000
                                                                       -------------    -------------   -----------------

                NET CASH PROVIDED BY
                FINANCING ACTIVITIES                                               0                0              17,000
                                                                       -------------    -------------   -----------------

                INCREASE IN CASH
                AND CASH EQUIVALENTS                                               0                0                   0

         Cash and cash equivalents at beginning
           of period                                                               0                0                   0
                                                                       -------------    -------------   -----------------

                CASH & CASH EQUIVALENTS
                AT END OF PERIOD                                       $           0    $           0   $               0
                                                                       =============    =============   =================

</TABLE>



See Notes to Financial Statements.


                                       F-5

<PAGE>



                            GALAXY SPECIALTIES, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                  June 30, 2001


NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
         Organization & Consolidation Policy

         Galaxy  Specialties,  Inc. (the  Company),  a Nevada  corporation,  was
         incorporated  on May 22, 2000. On June 5, 2000, the Company merged with
         Hystar Aerospace  Marketing  Corporation of Montana Inc. (Hystar).  The
         Company is the surviving corporation.

         Hystar  Aerospace  Marketing  Corporation  of Montana was  incorporated
         March 7, 1986 to lease, sell, and market airships and the Burkett Mill,
         a waste milling  device,  which rights were acquired from VIP Worldnet,
         Inc., initially the only shareholder. The technology to further develop
         the  airship  and  the  mill  by  the  parent   company  proved  to  be
         prohibitive,  and shortly after the acquisition of the marketing rights
         further activity ceased. Hystar has been inactive since that date.

         The merger  was  recorded  under the  pooling  of  interests  method of
         accounting. Each share of the Company remained outstanding as one fully
         paid  and  non-assessable  share  of  capital  stock  of the  surviving
         corporation.

         The accompanying  financial  statements present the financial condition
         and  results of  operations  of Hystar from its  inception  through the
         merger date and of the surviving entity, the Company,  as of the merger
         date.

         Recognition of Revenue

         The  Company  recognizes  income and  expense on the  accrual  basis of
         accounting.

         Loss Per Share

         Basic and  diluted  net income  (loss) per common  share is computed by
         dividing net income (loss) by the weighted  average shares  outstanding
         during each period.

         Cash and Cash Equivalents

         The Company considers all highly liquid  investments with maturities of
         three months or less to be cash equivalents.

         Provision for Income Taxes

         The Company  records the income tax effect of  transactions in the same
         year that the  transactions  enter  into the  determination  of income,
         regardless of when the  transactions  are  recognized for tax purposes.
         Tax credits are  recorded in the year  realized.  Since the Company has
         not yet realized income as of the date of this report, no provision for
         income taxes has been made.

         In February,  1992, the Financial  Accounting  Standards  Board adopted
         Statement of Financial  Accounting  Standards No. 109,  Accounting  for
         Income Taxes, which supersedes substantially all existing authoritative
         literature for  accounting  for income taxes and requires  deferred tax
         balances  to be  adjusted to reflect the tax rates in effect when those
         amounts are expected to become payable or refundable. The Statement was
         applied in the  Company's  financial  statements  for the  fiscal  year
         commencing July 1, 1992.

         No provision  for income taxes have been  recorded due to net operating
         loss carryforwards  totaling  approximately $45,000 that will be offset
         against future taxable income.  These NOL carryforwards begin to expire
         in the year 2001.  No tax  benefit has been  reported in the  financial
         statements  because the Company believes that there is a 50% or greater
         chance that the carryforwards will expire unused.


                                       F-6

<PAGE>


                            GALAXY SPECIALTIES, INC.
                          (A Development Stage Company)
                    NOTES TO FINANCIAL STATEMENTS (continued)
                                  June 30, 2001


NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
         Use of Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  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  statement  and the reported  amounts of revenues
         and expenses during the reporting  period.  Actual results could differ
         from those estimates.

         Dividend Policy

         The  Company  has not yet  adopted  any  policy  regarding  payment  of
         dividends.

         Organization Costs

         The Company amortized its organization costs over a five year period.

NOTE 2:  GOING CONCERN
         The accompanying  financial statements have been prepared assuming that
         the Company will continue as a going concern. The Company has no assets
         and has had recurring  operating  losses for the past several years and
         is dependent  upon  financing  to continue  operations.  The  financial
         statements  do not include any  adjustments  that might result from the
         outcome  of  this  uncertainty.  It is  management's  plan  to  find an
         operating  company to merge with,  thus  creating  necessary  operating
         revenue.

NOTE 3:  CAPITALIZATION
         In 1986, the Company issued  17,000,000  shares of common stock for the
         marketing rights to a waste milling device.  The value of this issuance
         was $17,000.

NOTE 4:  RELATED PARTY TRANSACTIONS
         During the year ended June 30, 2000,  the Company  incurred  $28,000 of
         professional  fees payable to Mutual  Ventures  Corp. An officer of the
         Company is also an employee of Mutual Ventures Corp.

NOTE 5:  DEVELOPMENT STAGE COMPANY
         The  Company is a  development  stage  company as defined in  Financial
         Accounting  Standards  Board  Statement  No.  7.  It  is  concentrating
         substantially all of its efforts in raising capital and searching for a
         business operation with which to merge, or assets to acquire,  in order
         to generate significant operations.




                                       F-7