SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934 For the Fiscal Year Ended June 30, 2005

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

       For the transition period from _______________ to ________________


                        COMMISSION FILE NUMBER 000-28485

                                POP3 MEDIA CORP.
       ------------------------------------------------------------------
                            (Exact Name of Registrant
                          as Specified in Its Charter)

         NEVADA                                                  88-0380343
--------------------------------------------------------------------------------
(State or Other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                              Identification No.)

            2451 W. BIRCHWOOD AVENUE, SUITE 105, MESA, ARIZONA      85202
 -------------------------------------------------------------------------------
               (Address of Principal Executive Offices)    (Zip Code)

                                 (480) 393-0423
     ----------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


           Securities registered pursuant to Section 12(b) of the Act

                                      None
                                -----------------
                                (Title of Class)

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

                                  Common Shares
                                -----------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has 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 shorter  period that the  registrant as required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]

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Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this  Form-10KSB  or any
amendment to Form 10-KSB. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).
Yes [ ] No [X]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act).
Yes [ ] No [X]

Issuer's revenues for its most recent fiscal year: $ 452,246

Aggregate   market  value  of  the  voting  stock  of  the  registrant  held  by
non-affiliates  of the  registrant  at June 30, 2005  (computed  by reference to
average of the bid and asked price on the NASD OTC Bulletin  Board of the common
shares on such date): $649,800

Number of common shares outstanding at June 30, 2005: 69,302,978



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________________________________________________________________________________


                                TABLE OF CONTENTS

PART I

Item 1.    Business ........................................................ 4
Item 2.    Properties ..................................................... 11
Item 3.    Legal Proceedings .............................................. 12
Item 4.    Submission of Matters to a Vote of Security Holders ............ 12

PART II

Item 5.    Market for the Company's Common Equity and Related
             Stockholder Matters .......................................... 14
Item 6.    Management's Discussion and Analysis of Financial Condition
             and Results of Operations .................................... 16
Item 7.    Financial Statements ........................................... 23
Item 8.    Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosure ..................................... 24


PART III
Item 9.    Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16 (a) of the Exchange Act ........... 25
Item 10.   Executive Compensation ......................................... 26
Item 11.   Security Ownership of Certain Beneficial Owners and
             Management ................................................... 29
Item 12.   Certain Relationships and Related Transactions ................. 30
Item 13.   Exhibits, List and Reports on Form 8-K ......................... 31
Item 14.   Controls and Procedures ........................................ 32

SIGNATURES ................................................................ 32



________________________________________________________________________________

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                                     PART I



Item 1. Business.

Note Regarding Forward-Looking Statements

This Form 10-KSB contains  forward-looking  statements within the meaning of the
"safe harbor"  provisions  under Section 21E of the  Securities  Exchange Act of
1934  and  the  Private  Securities  Litigation  Reform  Act  of  1995.  We  use
forward-looking  statements in our  description  of our plans and objectives for
future  operations  and  assumptions  underlying  these  plans  and  objectives.
Forward-looking  terminology  includes the words "may,"  "expects,"  "believes,"
"anticipates," "intends," "projects," or similar terms, variations of such terms
or the negative of such terms.  These  forward-looking  statements  are based on
management's  current expectations and are subject to factors and uncertainties,
which could cause actual results to differ  materially from those,  described in
such  forward-looking  statements.  We  expressly  disclaim  any  obligation  or
undertaking to release publicly any updates or revisions to any  forward-looking
statements  contained  in  this  Form  10-KSB  to  reflect  any  change  in  our
expectations or any changes in events,  conditions or circumstances on which any
forward-looking  statement is based. Factors,  which could cause such results to
differ materially from those described in the forward-looking statements include
those set forth  under "Risk  Factors"  and  elsewhere  in, or  incorporated  by
reference into this Form 10-KSB.


General

Business  Organization.  Pop3 Media Corp.  ("Company"  or "Pop3") was  organized
January 6, 1993,  under the laws of the State of Nevada,  as Lotus  Enterprises,
Inc. On April 6, 1999,  the State of Nevada  approved an increase of  authorized
capital  to  50,000,000   common  shares.   The  Company  changed  its  name  to
ClubCharlie.com;   Inc.  and  acquired  the   screenplay   and  rights  to  "The
Misadventures  of Charlie  Chance."  The Company on January 22, 2001 changed its
name to ViaStar  Holdings,  Inc. to reflect the change in its business model and
corporate  structure.  The Company on May 7, 2003  entered  into an agreement to
acquire the assets and liabilities of Moving Pictures  International through the
issuance of Common Stock and the payment of debt associated with the purchase of
the business  assets.  The Company  completed  the  purchase of Moving  Pictures
International  subsequent to June 30, 2003. The Company on July 18, 2003 entered
into an agreement and plan of merger with Level X Media Corporation  ("Level X")
to acquire all of the issued and outstanding  shares for a combination of shares
of common stock and  preferred  stock of the Company.  On January 23, 2004,  the
State of Nevada approved an increase of authorized capital to 100,000,000 common
shares and 10,000,000 Series A preferred shares . On January 5, 2004 The Company
changed its name to ViaStar Media  Corporation  to better  reflect the change in
its  business  model and  focus on  content  and  distribution  of  intellectual
properties.  On March  31,2004 the Company  entered into an agreement to acquire
all of the assets and liabilities of Masterdisk Corporation through the issuance
of Common  Stock and  assumption  of debt  associated  with the  purchase of the
business  assets.  The  surviving  entity  continued  to exist as ViaStar  Media
Corporation or the Company.

On March 31, 2005, the company entered into an agreement to sell its subsidiary,
Masterdisk Corporation back to its original owners in exchange for the return of
the  10,000,000  shares of common  stock with a par value of .001.  Management's
decision  to  sell  Masterdisk  back  to the  original  owners  was  based  upon
management's determination that Masterdisk could not reach profitability for the


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Item 1. Business - continued

following  reasons:  (1) It is management's  belief that a large number of major
record labels have  recently  begun  turning to in-house  mastering  services as
opposed to outsourcing  mastering services to companies like Masterdisk in order
to cut  costs;  and (2) there has been a  significant  decrease  in the  overall
number  of  titles  being  released  by the major  record  labels;  consequently
decreasing the number of projects open for bid.  Additionally,  certain disputes
and  disagreements  between the parties arose which prevented all of the parties
to the  Acquisition  and Exchange  Agreement  from obtaining the benefits of the
Acquisition and Exchange  Agreement to their complete  satisfaction  and all the
parties  agreed  that it was in the  best  interest  of all  concerned  that the
transaction be unwound.

As of June 30,  2005,  the date of this  report,  the Company had one  operating
Subsidiary,  Viastar  Distribution  Group,  Inc.. A  significant  portion of the
business  operations  of the Company will be  conducted  by the former  business
operations of Level X and its distribution division as described throughout this
transition  report  filed on Form  10-KSB.  The  financial  statements  included
herewith are the consolidated  financial  statements of the Company and its core
operation and subsidiary as of June 30, 2005.

Operations

The Company is one a few  companies in the world having all of the  capabilities
necessary  to develop,  produce and  distribute  films,  videos and music CDs to
millions of  consumers  worldwide.  By the  ownership  of a retail  distribution
network,  the Company has  significant  control over the  distribution  of media
related  products to over 20,000 retail  outlets  nationwide  and globally.  The
gross margins from this  distribution  channel and the  development  of products
in-house have effectively  doubled that of a traditional media content provider.
The Company believes that this advantage dissipates the Company and its products
from being at the mercy of  distributors  which demand  substantial  payments to
receive our  products.  The Company is  distinguished  from its  competition  by
possession  and  control  of  the  "complete  pipeline"  enabling   development,
production and placement of its media product on the shelves of major  retailers
nationwide and globally.

The Company  boasts a powerful  in-house  arsenal  that  includes an  aggressive
product  development  division for music, film and television;  an international
distribution  network of major retail chains,  servicing more than 20,000 retail
locations  worldwide;  a  complete   state-of-the-art   marketing  &  promotions
department;  and a carefully  hand-picked  management team possessing  unrivaled
talent and industry visibility.


Products and Services

Distribution  of Product.  Distribution  is the heart of the media sales and the
marketing process that exists between production companies and the international
retailers, through on-line services, and brick and mortar retailers. The primary
mission of the  Company's  distribution  division,  ViaStar  Distribution  Group
("VDG"),  is to create demand for the Company's  products and supply the product
too. VDG is responsible for fulfillment of both physical and digital product. As
an integral  element,  VDG  facilitates  all label credits,  collection and cash
flow. Globally VDG supports all the Company's music, video and electronic games,
software,  DVD, and media publishing products.  VDG handles the distribution and
sales for the Company's  entire diverse and vast roster of labels as well as the
wide variety of client labels.

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Item 1. Business - continued

VDG's  coverage  includes over 20,000  retailers  with  fulfillment  to national
chains such as: Tower Records,  Wal-Mart,  Virgin Mega Stores, HMV, Blockbuster,
Musicland, Sam Goody, MediaPlay,  Wherehouse, Best Buy, Camelot, Barnes & Noble,
Borders,  Record Town,  Strawberries,  Coconuts,  For Your Entertainment  (FYE),
Transworld,  Specs, Peaches, Plan 9, Hastings, Music Millennium and thousands of
other independent music retailers.

VDG's customers include all key one-stop  distribution  businesses such as: AEC,
Super D,  Norwalk,  Galaxy  and  Baker & Taylor  Entertainment.  These  one-stop
distribution accounts are critical in servicing smaller stores, remote locations
and secondary markets.

As part of the service package to vendor labels and retail accounts,  VDG offers
marketing  services such as radio support,  touring  campaigns,  publicity with-
retail  point of  purchase  ("P.O.P.")  programs.  These  initiatives  brand the
artist, the label and VDG.

VDG is a member of NARM (National  Association of Record Merchandisers) and AFIM
(Association For Independent Music).

With numerous awards and world-class  artist rosters to its credit,  The Company
and its label affiliates  expect to establish a significant role in the new look
of the music industry over the next decade. Much of the business program for The
Company is built on being in position to offer an enhanced  entertainment  value
for consumers of music, audio books and DVDs.

Artists and  Product.  The Company  has both a unique  strength  and a legacy of
music that flows from a diverse family of both in-house and  distributed  record
labels  which  include:  Fahrenheit  Records,  Celsius,  Circadian,  Finer  Arts
Classical,  Horizon Music,  Accurate  Records,  Sefarad  Records,  Synergy Music
Group, Music City Records, Sunbird Records, Truart Records,  Flightzone Records,
Light of the Spirit Records and Quadra Records,  Viastar  Records,  Viastar Home
Entertainment, Viastar Classical, Acclaim Records, Chocolate Fireguard, First on
Board, Hawkeye Entertainment, Pine Canyon Recordings and Spirit Voyage Records.

Artists  marketed  by Pop3 Media Corp  through  the label /  distribution  group
include: Willie Nelson, Tim Weisberg,  David Benoit, Roy Clark, Above the Clouds
with Michael McDonald, Bobby Vee, Kenny Rankin, The St. Petersburg Philharmonic,
The London Philharmonic, Moscow String Quartet, Ekaterinburg Classical Trio, Sam
Harris,  Andreas Klein,  Stepfanie Kramer, Cliff Richard,  Opie Gone Bad, Sister
Sledge,  Vespertina,  Khani Cole, Above the Cloud,  Tony Guerrero,  Ed Hamilton,
Images,  Gregg Karukas,  Jeff Kashiwa,  Roy  Meriwether,  Dean Peer, Kim Pensyl,
Erotic Liquid Culture , Peter Cetera, and Peter Murphy.

The Studios.  A.V.O. Studios is designed for acoustic excellence.  A.V.O.'s main
control room features a 104 input Euphonix CS 3000 console with mixview platform
total  recall  automation  capable of handling  all of the  attributes  of audio
postproduction  for  even  the  largest  feature  film  release.  Sound  design,
sequencing  and  development  are  handled by our Pro Tools  (TM) and  legendary
Synclavier  Tapeless  Studio(TM)  systems,  the very same  technologies that has
become the  standard for feature  films such as Titanic,  Star Wars and Jurassic
Park.  These  technologies  allow  A.V.O.  the  ability  to bring the same Oscar
winning sound to commercials,  television and web development projects.  Digital
audio networking  services offer our productions the opportunity to work both on
and  off-line  as well as on and  off-site  to better  move  through the complex
production  process.  The studio is fully  compatible  with all of the  standard
audio output formats  available today including a complete 5.1 digital  surround
multi-track output.

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Item 1. Business - continued

A.V.O. offers its clients the following: production services: music supervision,
project   coordination  and  management,   talent   coordination,   composition,
arranging,  sequencing,  complete audio  postproduction  including sound design,
sound FX design,  Foley,  sound to picture  lay-back and music editorial for any
medium as well as ADR audio engineering  services.  Additionally,  A.V.O. offers
complete  tracking/mixing   facilities  for  all  output  mediums,  stereo,  and
surround,  5.1.  Dialog  editing,  pre-lay  for  mixing  for  TV,  film,  music,
interactive media DVD  VO/Foley/ADR/Walla  recording,  M&E re-mixing for foreign
distribution,  CD ROM  compression  technologies  for all output  mediums and hi
speed digital networking service for remote sample accurate audio


Industry Overview

Music

The music business is highly  competitive and dominated by major companies.  The
Company faces competition for discretionary  consumer  purchases of its products
from other record companies and other  entertainment  sources,  such as film and
video  companies.  Several major record companies in the United States including
Bertelsmann AG, Sony Corp., Time Warner, Inc. and Universal Music Group dominate
the market for  pre-recorded  music.  The  Company  does not have the  financial
resources,  nor  does it have the  depth or  breadth  of  catalog,  distribution
capabilities or current repertoire of these companies. Its ability to compete in
this market depends upon:

     o    the skill and  creativity  of its  employees to expand and utilize its
          music catalog to create compilation packages;

     o    its ability to build upon and maintain its  reputation  for producing,
          licensing, marketing and distributing high quality music.

Teen music  sales have been  steadily  declining  over the past 14 years,  while
sales among consumers in the 45+ age group have been increasing  rather sharply.
Most  significant,  sales to consumers' age 35 and older represented over 45% of
total  music sales in 2002.  As CD  purchases  in 2002  totaled in excess of $32
billion  world wide,  reflecting a decline in overall  sales from the prior year
(due to  technological  advances in the consumer  electronics)  the 35 and older
sectors  continued to increase  overall,  thus reflecting $14.4 billion in total
sales.  One  major  reason  for the  decrease  in  purchases  by  teens is their
increasing  use of online  file  sharing  (distribution)  systems to obtain free
music.  Important  reasons for the increase in CD  purchases by older  consumers
includes their desire to tap into their youth through music,  the fact that they
have  the  disposable  income  to do  so,  and  because  they  are  increasingly
comfortable ordering music through such online retailers as Amazon.com.

In the music industry,  a significant  market sector that we will focus on will,
therefore,  be these older consumers. To do so we must recruit the best of those
established and highly visible artists with whom this  constituency  identifies.
It is certain that our ability to recruit such recording artists and effectively
market  to this  audience  will  play a  significant  role in our  success  as a
company.  Management  believes  that the company will achieve  great  success in
achieving these goals for the following reasons:

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Item 1. Business - continued

     o    The Company's  executive  team is  experienced  and  entrenched in the
          entertainment industry with numerous important  relationships with top
          industry executives and artists.

     o    The  Company  posses  the  ability  to   cross-pollinate   our  video,
          publishing,  music and  distribution  capabilities  within  our target
          markets.

     o    Major labels are "top-heavy" and have very high overheads, and are not
          interested in producing and promoting new content by older artists who
          cannot  generate the raw sales volume  required for them to break-even
          and profit.

     o    The Company's  overhead is  significantly  lower than the majors,  its
          break-even  points are much lower and therefore have to sell far fewer
          units to establish our desired margins with our major artists. Without
          having to sell  millions  of albums,  or having to search out the next
          "Hit",  we  save   substantial   resources  in  all  areas  of  artist
          acquisition, development.

     o    The Company is the content  provider and the wholesaler.  Whereas most
          independent  labels  must  first  sell to and  then  pay  distribution
          companies to make their  products  available to consumers  The Company
          requires no middleman. Accordingly, the Company's breakeven points for
          audio and video  production,  marketing and distribution are therefore
          substantially  lower then our  independent  competitors  resulting  in
          gross margins on a per unit basis that are significantly increased.

     o    Our in-house  legal and IT departments  permit us to  "in-source"  the
          majority  of such  related  activities  and respond  more  quickly and
          efficiently.  This  provides a  significant  advantage in our response
          time and ability to close on any opportunities.

The true power of the  Company's  business  model is the ease with  which  their
artists will be acquired and translate into meaningful revenue opportunities. No
one in the industry is currently  offering artists the royalty  opportunity that
The Company can offer,  and artists  already  recognized  this and are coming to
work with us. Due to the increasing  abundance of established  artist looking to
release new content the company feels that there is no lack of potential artists
to sign. The Company believes its business model represents the best opportunity
such  artists  have to achieve  their goal of  profiting  from a new  release in
today's demanding marketplace.


Employees

As of June 30,  2005,  the  Company had fifteen  (15)  employees,  See "Item 10.
Executive Compensation."

Factors that Might Affect the  Company's  Business,  Future  Operating  Results,
Financial Condition and/or Stock Price

The more prominent risks and  uncertainties  inherent in the Company's  business
are described below. However, additional risks and uncertainties may also impair
its business  operations.  If any of the following  risks  actually  occur,  the
Company's business, financial condition or results of operations may suffer.

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Item 1. Business - continued

Necessary Capital

The  Company  believes  that  with  the  successful  completion  of its  private
placement  offering,  sufficient  cash  resources  will  be  available  to  meet
anticipated  working  capital  and  capital  expenditure  needs  for the next 12
months. If the private placement officering is fully subscribed to the Company's
chances  for  success  will  be  significantly   impaired.   The  expansion  and
development  of the  Company's  business  will  require  significant  additional
capital.  The Company will need to secure  additional  financing  beyond the net
proceeds  of the  private  placement  offering  in order to fund its  operations
beyond  the  first  year of  operation.  The  Company  may be  unable  to secure
additional  capital on acceptable  terms, or at all. If the Company is unable to
secure additional capital, its business will be significantly harmed,  including
its inability to meet  operating  capital  requirements,  complete  contemplated
acquisitions  and to compete  within its  market  successfully.  There can be no
assurance  that the Company  will be able to obtain  additional  financing  upon
acceptable terms or at all.

Furthermore,   any  debt  financing,  if  available,   may  involve  restrictive
covenants,  which may limit the  Company's  flexibility  with respect to certain
business matters. If additional funds are secured through the issuance of equity
securities, percent ownership of existing stockholders will be severely reduced,
its stockholders may experience additional dilution in net book value per share,
and such equity securities may have rights,  preferences or privileges senior to
those of existing stockholders.


Common Stock Eligible For Public Sale

Future sales of shares of common stock,  $0.001 par value (the "Common  Stock"),
by existing holders of the Company's Common Stock or by holders of the Series A,
Preferred  Convertible  stock, upon the exercise thereof,  under Rule 144 of the
Securities Act or otherwise, could have a negative impact on the market price of
the  Company's  Common  Stock.  The Company is unable to estimate  the number of
shares  that may be sold  under  Rule 144 since  this will  depend on the market
price for the Common Stock of the Company,  the  personal  circumstances  of the
sellers and numerous  other factors.  Any sale of substantial  amounts of Common
Stock of the Company in the open market may adversely affect the market price of
the  Company's  Common Stock and may adversely  affect the Company's  ability to
obtain  future  financing  in the capital  markets as well as create a potential
market overhang.


Significant Control Over The Company

The Company's  directors,  officers and principal  stockholders,  and certain of
their affiliates,  beneficially own over 50% of the outstanding shares of Common
Stock on a fully  diluted  as-converted  to basis  at June  30,  2005,  and such
stockholders  have  significant  influence  over  the  outcome  of  all  matters
submitted to the stockholders for approval,  including the election of directors
of the Company and other corporate actions. In addition, such influence by these
affiliates could have the effect of discouraging  others from attempting to take
over the Company thereby  increasing the likelihood that the market price of the
Common Stock will not reflect a premium for control.


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Item 1. Business - continued

Volatility and Declines In Market Price

The market price of the Company's Common Stock has experienced historically high
volatility  and might  continue to experience  high  volatility in the future in
response to quarter-to-quarter variations in:

     o    Operating results;

     o    analysts' or investor reports;

     o    market conditions in the industry;

     o    changes in governmental regulations; and

     o    changes in general conditions in the economy or the financial markets.

The US stock  market has also  experienced  a  significant  decrease  in overall
value.  This  volatility  and the most recent  market  declines has affected the
market  prices  of  securities  issued  by many  companies,  often  for  reasons
unrelated to their operating performance,  and may adversely affect the price of
the Company's Common Stock.

The  Company  has never paid cash  dividends  on its  Common  Stock and does not
anticipate paying cash dividends in the foreseeable  future. The Company intends
to retain future earnings for reinvestment in the business.

The  Company's  Common  Stock  began  trading  on  the  NASDAQ  Over-the-Counter
Electronic Bulletin Board in February 2000 and has experienced a limited trading
market.  The Company  cannot  assure  that in the future that an active  trading
market will develop or, if developed, will be maintained for even a short period
of time.  As a result,  the  Company's  shareholders  may find it  difficult  to
dispose of shares of the Company's  Common Stock and, as a result,  may suffer a
loss of all or a substantial portion of their investment.

In  addition,  delisting  from  the OTC  Bulletin  Board  for any  reason  could
adversely affect the liquidity and price of the Company's Common Stock and could
have a  long-term  impact on the  Company's  ability  to secure  future  capital
through a sale of Common Stock and or debt/equity  securities.  Furthermore,  it
could make it more difficult for investors to obtain  quotations or trade in the
Company's  Common Stock if it begins to trade on the National  Market  Quotation
system commonly known as the "pink sheets," a limited trading market.

Common Stock Dilution

The Company may issue  additional  shares of its Common  Stock in order to raise
additional  capital to fund acquisitions or for general working capital.  If the
Company issues  additional  shares of its Common Stock,  current  holders of the
Company's Common Stock will experience  significant dilution in their percentage
of ownership in the Company.

There can be no assurance  that our Common Stock will ever  appreciate in value.
The  Company's  Common Stock is publicly  traded on the NASDAQ  Over-the-Counter
Electronic  Bulletin  Board,  which provides for a highly illiquid market in the
Company's Common Stock.


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Item 1. Business - continued

"Penny Stock" Regulation

The SEC has adopted  rules that regulate  broker-dealer  practices in connection
with   transactions  in  "penny  stocks."  Penny  stocks  generally  are  equity
securities with a price of less than $5.00 (other than securities  registered on
certain national securities  exchanges or quoted on the NASDAQ system,  provided
that current price and volume  information  with respect to transactions in such
securities  is provided by the exchange or system).  Penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure  document prepared by the
SEC,  which  specifies  information  about  penny  stocks  and  the  nature  and
significance  of risks of the penny  stock  market.  A  broker-dealer  must also
provide the customer  with bid and offer  quotations  for the penny  stock,  the
compensation of the broker-dealer,  and our sales person in the transaction, and
monthly account statements  indicating the market value of each penny stock held
in the  customer's  account.  In addition,  the penny stock rules  require that,
prior to a transaction  in a penny stock not otherwise  exempt from those rules,
the broker-dealer must make a special written determination that the penny stock
is a suitable  investment for the purchaser and receive the purchaser's  written
agreement to the transaction.

These  disclosure  requirements  may have the  effect of  reducing  the  trading
activity in the secondary  market for stock that becomes  subject to those penny
stock rules.  Our  securities  are subject to the penny stock rules;  holders of
those  securities may provide  difficulty to our  shareholders  in selling their
securities.

Competitive Industry

Significant  factors in determining  whether the Company will be able to compete
successfully  include:  o  consultative,  creative  and design  capabilities;  o
reputation  for on-time and quality  performance;  o expertise and experience in
the distribution of products;  o the scope of service  offerings;  o strength in
various  geographic  markets;  o the price and  availability of services;  o the
ability to  acquire,  process,  analyze  and report  data in a  time-saving  and
accurate  manner; o the ability to manage  large-scale  distribution of products
both domestically and internationally; and o the Company's size. If our products
or services are not competitive  based on these or other factors,  the Company's
business,  financial  condition  and results of  operations  will be  materially
harmed

Item 2. Properties.

The Company  leases  approximately  8,000 square feet of office space located in
Mesa,  Arizona.  This lease expires June 2008 and provides for a fixed base rent
of approximately $5,450 per month with an annual inflation increase.

The Company's web sites are:

http://www.pop3media.com


                                       11
<PAGE>

Item 3. Legal Proceedings.

On October 25, 2004, former Directors and Officers of Pop3 Media Corp. ("Pop3"),
("Complainants")  filed with the U.S.  Department of Labor Occupational Safety &
Health Administration  ("OSHA") a complaint alleging  discriminatory  employment
practices in violation of the Sarbanes-Oxley Act of 2002. Pop3 fervently asserts
that these claims are false and will  vigorously  defend itself until the matter
has reached a just  conclusion.  Pop3  firmly  believes  that the  Complainants'
allegations  amount to nothing more than an attempt to extort  additional  value
from the shareholders of Pop3. If final  adjudication is reached in favor of the
complainants  they are  entitled to receive  all back pay,  interest on the back
pay, and  reinstatement  of their  position with Pop3.  This amount could exceed
$150,000.  Currently, OSHA has not ruled on the complaint and the statutory time
period for such a ruling has past.  The company has no  knowledge of any attempt
by the Complainants to seek an appeal on this matter.

On September 27, 2005, Pop3 Media Corp.  ("Pop3) filed a complaint for breach of
contract against Peter Cetera ("Cetera"), one of its distributed artists, on the
master licensing agreement signed on September 24, 2004. The case was filed with
the Maricopa County Superior Court in Arizona, case caption, Pop3 Media Corp. v.
Peter Cetera, Case No.  CV2005-015197.  Management felt it was necessary to file
this lawsuit in order to preserve shareholder value after it was unable to reach
a  reasonable  solution  during  arbitration  held by the  American  Arbitration
Association in June 2005.


Item 4. Submission of Matters to a Vote of Security Holders.

The  following  actions  were put forth to a vote of the  holders  of a majority
interest in the Company's voting capital on March 31, 2004.

     o    The  acquisition  of  MasterDisk   Corporation  and  the  issuance  of
          10,000,000 shares of common stock, $0.001 par value.

The  following  actions  were put forth to a vote of the  holders  of a majority
interest in the Company's voting capital on January 5, 2004.

1. The proposed  adoption of the Amended and Restated  Articles of Incorporation
(the "Amended and Restated Articles") by the Written Consent of the holders of a
majority in interest of the Company's  voting  capital  stock  consisting of the
Company's  outstanding common stock,  $0.001 par value (the "Common Stock").  On
January 5, 2004,  the  Company's  Board of  Directors  (pursuant  to the Written
Consent)  approved and recommended that the Articles of Incorporation be amended
and restated in order to:

     o    Reflect current developments in Nevada law;

     o    Provide for the exculpation of directors;

     o    Address interested party transactions;

     o    Increase the number of authorized  shares of common stock,  $0.001 par
          value; and

     o    Authorize  the  creation of a new class of equity,  and to authorize a
          certain number of shares of "Blank Check" preferred  stock,  $0.01 par
          value.

                                       12
<PAGE>

Item 4. Submission of Matters to a Vote of Security Holders - continued

2. The proposed  adoption of Amended  Bylaws dated January 5, 2004 (the "Amended
Bylaws") by the Written  Consent of the holders of a majority in interest of the
Company's  voting capital stock consisting of the Company's  outstanding  Common
Stock.  On January 5, 2004,  the Company's  Board of Directors  (pursuant to the
Written Consent) approved and recommended that the Amended Bylaws be amended and
adopted.

3. The proposed  adoption of  Certificate  of Designation of Class A Convertible
Preferred Stock (the "Certificate of Designation") by the Written Consent of the
holders  of a  majority  in  interest  of the  Company's  voting  capital  stock
consisting of the Company's  outstanding  Common Stock.  On January 5, 2004, the
Company's  Board of  Directors  (pursuant to the Written  Consent)  approved and
recommended that the Certificate of Designation be approved and adopted.

4. The proposed adoption and change of the Company's name from ViaStar Holdings,
Inc. to ViaStar  Media  Corporation  by the Written  Consent of the holders of a
majority in interest of the Company's  voting  capital  stock  consisting of the
Company's  outstanding  Common Stock. On January 5, 2004, the Company's Board of
Directors  (pursuant to the Written  Consent)  approved and recommended that the
name ViaStar Media Corporation be approved and adopted. On December 5, 2004, the
Company's Board of Directors  approved and recommended  that the name Pop3 Media
Corp. be approved and adopted.

5. The  proposed  adoption of the Amended  Articles  of Merger  between  ViaStar
Holdings,  Inc. and Level X Media Corporation (the "Amended Articles of Merger")
by the Written Consent of the holders of a majority in interest of the Company's
voting capital stock  consisting of the Company's  outstanding  Common Stock. On
January 5, 2004,  the  Company's  Board of  Directors  (pursuant  to the Written
Consent)  approved  and  recommended  that the  Amended  Articles  of  Merger be
approved  and  adopted by the Company  and the  resultant  issuance of shares of
Common Stock and preferred stock.

6. The proposed adoption, ratification of the Amended 2003 Employees/Consultants
Common Stock  Compensation  Plan of ViaStar  Holdings,  Inc.  (the "Amended 2003
Stock Compensation Plan") by the Written Consent of the holders of a majority in
interest of the  Company's  voting  capital  stock  consisting  of the Company's
outstanding  Common Stock.  On January 5, 2004, the Company's Board of Directors
(pursuant to the Written  Consent)  ratified,  approved and recommended that the
Amended 2003 Stock  Compensation Plan be approved and adopted by the Company and
the resultant  increase in the number of shares authorized  pursuant to the plan
be reserved for.

7. The proposed  adoption of the Amended Articles of  Incorporation,  by written
consent of the holders of a majority in interest of the Company's voting capital
stock consisting of the Company's outstanding Common Stock, changing the name to
Pop3 Media Corp.,  increasing  the amount of  authorized  shares to  490,000,000
common  shares  and  10,000,000  Class  A  Preferred  Convertible  shares  and a
resolution  to permit the Board of Directors to implement a reverse stock in any
ratio the Board deems in the best  interest of the company and its  shareholders
at any time in the future. On December 4, 2004,  written consent of the majority
interest of the  Company's  voting  capital  stock  consisting  of the Company's
outstanding common stock and was delivered to the company on the same date.

The elimination of the need for a special meeting of shareholders to approve the
Amended and  Restated  Articles  of  Incorporation  is made  possible by Section
78.320 of the Nevada  Revised  Statutes  (the "NRS"),  which  provides  that the
written consent of the holders of outstanding shares of voting stock, having not
less than the minimum  number of votes which would be  necessary to authorize or


                                       13
<PAGE>

Item 4. Submission of Matters to a Vote of Security Holders - continued

take such action at a meeting at which all shares  entitled to vote thereon were
present and voted,  may be substituted for such a special  meeting.  Pursuant to
Section 78.320 of the NRS, a majority of the outstanding  shares of voting stock
entitled to vote thereon is required in order to amend the Company's Articles of
Incorporation.  In order to eliminate  the costs and time  involved in holding a
special  meeting  and in order to effect the Amended  and  Restated  Articles as
early  as  possible  in order to  accomplish  the  purposes  of the  Company  as
hereafter described,  the Board of Directors of the Company voted to utilize the
written consent of the holders of a majority interest of the voting stock of the
Company. On January 5, 2004, there were 24,572,916  outstanding shares of Common
Stock and  approximately  65 holders of record of Common Stock.  The approval of
the Amended and  Restated  Articles  and Amended  Bylaws,  requires  the written
consent of the holders of a majority of the outstanding  shares of Common Stock,
and each  share of Common  Stock was  entitled  to one vote with  respect to the
approval of the Amended and Restated Articles and the Amended Bylaws. By written
consent in lieu of a meeting,  holders of 14,650,820 shares of our Common Stock,
representing approximately 59.62% of our outstanding voting power, have approved
the above listed corporate actions.

Under  applicable  federal  securities  laws, the Amended and Restated  Articles
cannot  be  effected  until at least 20  calendar  days  after  the  information
statement was sent or given to the shareholders of the Company.  The approximate
date on which all actions are believed to be effective is February 16, 2004

No  other  matters  were  put  forth to a vote of the  security  holders  of the
Company.


________________________________________________________________________________

                                       14
<PAGE>

                                     PART II


Item 5. Market for the Company's Common Equity and Related Stockholder Matters.

The  Company's  Common  stock is  listed  on the NASD OTC  Bulletin  Board  (the
"OTCBB")  under the symbol  "POPT." Prior to it's listing as POPT; the Company's
Common Stock was traded on the OTCBB as VISH,  prior VIST and prior,  CLUC.  The
Company  may in the  future  seek a new  trading  symbol in  conjunction  with a
listing on a national market system.

The following  table sets forth the high and low bid  quotations  for the Common
Stock as reported on the OTCBB for each of the quarters ended September 30, 2004
through June 30, 2005.  Such quotations  reflect  inter-dealer  prices,  without
retail   mark-up,   markdown  or  commission   and  may  not  represent   actual
transactions.


                                                    Common Stock
                Quarter Ended                   High           Low
             ---------------------            ----------    -----------
               September 30, 2004                0.17         0.036

               December 31, 2004                 0.09          0.03

                 March 31, 2005                 0.053          0.02

                 June 30, 2005                   0.05         0.015



Common Stock The authorized capital stock of the Company consists of 490,000,000
shares  of common  stock,  par value  $0.001 of which  69,302,978  shares of the
Company's  Common Stock were issued and outstanding at June 30, 2005. As of June
30,  2005,  the number of holders of record of the Common  Stock was 110 and the
approximate  number of beneficial  holders of the Common Stock was approximately
2,000.

Preferred Stock The Board of Directors voted to create a new class of equity and
will put forth to a vote if its  security  holders the  proposal to increase the
authorized  capital  stock  of the  Company  to  include  the  authorization  of
10,000,000 shares of Series A - Convertible  preferred stock, par value $0.01 of
which 1,854,100 shares are issued and outstanding on the date hereof. All issued
and outstanding shares of preferred stock are fully paid and non-assessable. The
Series A shares were issued  pursuant to the Amended Plan of Merger  between the
Company and Level X Media Corporation ("Level X"), filed with the Securities and
Exchange  Commission on report Form 14-C, dated January 28, 2004. As part of the
Amendment  Articles of Plan the Company issued 11,376,000 shares of Common Stock
as  part  of the  purchase  price  of  Level X for a  total  purchase  price  of
$10,650,000  based on analysis and valuation using the following  methods:  Book
Value, Capitalization of Earnings, and Straight Capitalization.

The Company has neither  paid nor  declared  dividends on its Common Stock since
inception  and  does  not  plan to pay  dividends  on its  Common  Stock  in the
foreseeable future. The Company expects that any earnings, which the Company may
realize, will be retained to finance the growth of the Company.


                                       15
<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

Certain matters discussed in this Form 10-KSB are  "forward-looking  statements"
intended to qualify  for the safe  harbors  from  liability  established  by the
Private  Securities   Litigation  Reform  Act  of  1995.  Such   forward-looking
statements may be identified by, among other things,  the use of forward-looking
terminology  such  as  "believes,"   "expects,"   "may,"  "will,"  "should,"  or
"anticipates" or the negative thereof or other variations  thereon or comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
In particular, the Company's statements regarding the integration of Intelligent
Imaging  into  the  Company,   the  demand  for  the   Company's   services  and
technologies,  growing  recognition for the use of independent  centralized core
laboratories,  trends  toward the  outsourcing  of imaging  services in clinical
trials,  realized return from the Company's marketing efforts,  increased use of
digital medical images in clinical trials and the favorable  impact of the FDA's
initiatives to streamline and accelerate its review process are examples of such
forward-looking  statements.  The  forward-looking  statements include risks and
uncertainties,  including, but not limited to, the timing of revenues due to the
variability  in  size,  scope  and  duration  of  projects,  estimates  made  by
management  with  respect  to  the  Company's  critical   accounting   policies,
regulatory   delays,   clinical  study  results  which  lead  to  reductions  or
cancellations  of  projects,  and  other  factors,  including  general  economic
conditions and regulatory  developments,  not within the Company's control.  The
factors  discussed  herein  and  expressed  from  time to time in the  Company's
filings with the Securities and Exchange  Commission  could cause actual results
and  developments to be materially  different from those expressed in or implied
by such statements.  The forward-looking statements are made only as of the date
of this filing and the Company  undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.


General:

On July 18, 2003 the Company entered into a stock purchase  agreement with Level
X Media Corporation ("Level X") wherein the Company issued 10,650,000 restricted
common  shares  valued at $1.00 per share  (prior  historical  market  price) to
purchase all of the assets,  liabilities and  outstanding  shares of Level X. On
January 5, 2004, the minority  shareholders  brought in by the Level X purchase,
requested  Company  management and the majority  shareholders  to reconsider its
July 18, 2003 purchase agreement of Level X. This action was precipitated by the
Company's  inability to maintain its $1.00 market price per share. The resultant
amendment  dated  January 5, 2004  authorized  the Company to maintain  the same
purchase price of  $10,650,000  but reduce the value of shares issued from $1.00
to $0.20 per share.  Therefore,  in January 2004 the Company  issued  additional
shares to the  appropriate  shareholders  bring the total shares  issued for the
purchase of Level X to 1,904,100  preferred  shares  (convertible  to 38,082,000
common  shares)  valued at  $3,809,918  and  15,164,671  common shares valued at
$6,840,082, for a total value of $10,650,000. As a result, the revised agreement
resulted in a change of majority control.

Level X has the licenses and  agreements  necessary to distribute  media related
products  to over 20,000  retail  outlets  nationwide  and  globally.  The gross
margins  from  this  distribution  channel  and the  development  of music  CD's
in-house has enabled to Company to be more  competitive  than  typical  start-up
record labels which are at the mercy of  distributors  which demand  substantial
payments  to receive  their  products.  The  Company is  distinguished  from its
competition  by  possession  and  control of the  "complete  pipeline"  enabling
development,  production  and  placement  of its product on the shelves of major


                                       16
<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations - continued

retailers  nationwide and globally.  On August 21, 2003, the Company changed its
fiscal year end from December 31 to June 30.

On April 23, 2003 the Company  entered  into a  transaction  to purchase  Moving
Pictures  International  Ltd,  ("MPI") an  entertainment  magazine.  The Company
issued 3,500,000 shares of common stock, par value $0.001 in connection with the
purchase of MPI. The purchase of MPI was an elaborate  brokered  transaction  by
the  recipient of the shares.  The brokered  purchase of MPI was  accounted  for
under the purchase method of accounting. Total investment required in MPI by the
Company included the assumption of (undisclosed at the time of sale) substantial
liabilities  and the  payment of shares of the  Company's  common  stock,  which
approximated  $1,200,000.  The  purchase  of MPI was to be  solely  through  the
issuance  of shares of the  Company's  common  stock.  The  Company  through the
actions of a member of prior management and a related party of the seller became
obligated for payments on behalf of MPI. The  obligations  were never audited or
verified  for purposes of the Company and its  shareholders  as required by law.
The transaction was denominated in the English pounds ((pound))  converted to US
dollars ($) for financial  statement purposes.  No foreign currency  translation
adjustment was necessary. On September 26, 2003 The Company sold the controlling
interest in MPI of 80% to Rhiannon Holdings,  Inc. ("RH")(see  "Encumbrances and
Related Party  Transactions")  The purchase  price was as follows,  the RH would
return to the Company, seven million (7,000,000) shares of common stock received
as collateral  for the  advances/note  payable  between RH and the Company,  the
assumption  of all  liabilities  associated  with  MPI,  the  assumption  of the
$700,000 note payable to BFT and the issuance of two million  (2,000,000) shares
of common stock with a stated value of $340,000.  The Company  recognized a loss
of  $240,000 on the sale of the 80%  interest  in MPI.  The Company is no longer
liable for any MPI debt.

On January 23,  2004,  the State of Nevada  approved  an increase of  authorized
capital  (100,000,000  common and 10,000,000  preferred) and changed its name to
ViaStar Media Corporation.

On March 31, 2004, the Company issued  10,000,000  shares of its common stock to
the  shareholders  of  MasterDisk  in  exchange  for  all of  their  issued  and
outstanding shares resulting in MasterDisk becoming a wholly owned subsidiary of
the Company.  MasterDisk  headquartered  in New York City, has audio,  video and
multimedia  mastering  facilities  in the  U.S.  and  provides  state of the art
authoring for digital  videodisks,  and  multichannel  5.1  mastering.  For over
thirty years  MasterDisk has provided  quality media mastering  through personal
service, expertise and creativity. The Company recognized goodwill for its trade
name in the amount of  $546,681  and  accounted  for the  acquisition  under the
purchase method of accounting.

The  purchase  price of this company was arrived at by valuing the net assets as
listed below and then  utilizing  the average  purchase  price of the  Company's
stock at the time of the purchase, which was $0.40 per share, for a total of the
10,000,000 shares.

On December  5, 2004,  the State of Nevada  approved  an increase of  authorized
capital  (490,000,000  common and 10,000,000  preferred) and changed its name to
Pop3 Media Corp.

On March 31, 2005, the company entered into an agreement to sell its subsidiary,
Masterdisk Corporation back to its original owners in exchange for the return of
the  10,000,000  shares of common  stock with a par value of .001.  Management's
decision  to  sell  Masterdisk  back  to the  original  owners  was  based  upon


                                       17
<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations - continued

management's determination that Masterdisk could not reach profitability for the
following  reasons:  (1) It is management's  belief that a large number of major
record labels have  recently  begun  turning to in-house  mastering  services as
opposed to outsourcing  mastering services to companies like Masterdisk in order
to cut  costs;  and (2) there has been a  significant  decrease  in the  overall
number  of  titles  being  released  by the major  record  labels;  consequently
decreasing the number of projects open for bid.  Additionally,  certain disputes
and  disagreements  between the parties arose which prevented all of the parties
to the  Acquisition  and Exchange  Agreement  from obtaining the benefits of the
Acquisition and Exchange  Agreement to their complete  satisfaction  and all the
parties  agreed  that it was in the  best  interest  of all  concerned  that the
transaction be unwound.


Results of Operations

FOR THE TWELVE MONTHS ENDED JUNE 30, 2005 COMPARED TO THE TWELVE MONTHS ENDED

JUNE 30, 2004

As  discussed  elsewhere  in this  report the  Company  merged  with Level X and
acquired  Masterdisk,  which  became  the  primary  operations  of the  Company.
Managements'  discussion  and  analysis  is the  results  of  operations  of the
"post-merger"  business  and  the  "pre-merger"  operations.   The  "pre-merger"
operations  of the  Company  were  strictly  limited  to the  identification  of
business  opportunities  and  compliance  with  the  laws  of the  SEC.  Limited
activities  were  conducted  in  the   identification   of  various  merger  and
acquisition targets but without much success. The Company's capital requirements
depend on numerous  factors,  including  the  profitability  of our products and
services  and our  ability to  control  costs.  We may need to seek  substantial
investment from either financial  institutions or individual investors.  Any new
investment could cause substantial dilution to existing stockholders.

Results of Operations For the Twelve Months Ended June 30, 2005, Compared to the
Twelve Months ended June 30, 2004


Revenues

During the twelve months ended June 30, 2005, the Company generated  $452,246 in
revenues which was a decrease of $2,574,732,478 when compared to our revenues of
$3,026,978 for the twelve months ended June 30, 2004. The  significant  decrease
in revenue was  primarily due to following:  (1)  management's  decision to sell
back one of its subsidiaries,  Masterdisk Corporation, to its original owners in
exchange for the 10,000,000 shares of common stock with a par value of .001; (2)
a  corporate  administrative  matter  that has  consumed  management's  time and
management  was unable to focus on sustaining  the business,  which  resulted in
significantly  lower revenue for the period;  (3) management's  focus of ongoing
discussions with Roxxy  Corporation for the sale of its  distribution  division,
Viastar  Distribution  Group,  Inc.;  (4)  management's  effort to  refocus  its
business operations on the final stages of negotiations to acquire the rights to
a new  proprietary  portable data storage  technology  which is currently  under
development;  and (5)  management's  discussions  with SBC  Operations,  Inc., a
subsidiary of SBC  Communications,  Inc., to license and exhibit upto 12 premier
movie features per year.

                                       18
<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations - continued

Revenue from  mastering  was $0 during the twelve  month period  ending June 30,
2005  compared to  $2,467,359  for the twelve month period ending June 30, 2004.
The decrease in revenue is primarily due to  management's  decision to sell back
one of its  subsidiaries,  Masterdisk  Corporation,  to its  original  owners in
exchange  for the  10,000,000  shares of common  stock with a par value of .001.
Management's  decision to sell  Masterdisk back to the original owners was based
upon management's  determination  that Masterdisk could not reach  profitability
for the following reasons:  (1) It is management's belief that a large number of
major record labels have recently begun turning to in-house  mastering  services
as opposed to outsourcing  mastering  services to companies  like  Masterdisk in
order to cut costs; and (2) there has been a significant decrease in the overall
number  of  titles  being  released  by the major  record  labels;  consequently
decreasing the number of projects open for bid.  Additionally,  certain disputes
and  disagreements  between the parties arose which prevented all of the parties
to the  Acquisition  and Exchange  Agreement  from obtaining the benefits of the
Acquisition and Exchange  Agreement to their complete  satisfaction  and all the
parties  agreed  that it was in the  best  interest  of all  concerned  that the
transaction be unwound.

Revenue from the distribution of music CD's was $285,147 comprising 20% of total
revenue was from the  distribution  of music CD's  compared to $504,613  for the
twelve month period ending June 30, 2004.  The decrease was primarily due to the
following:  (1) a corporate administrative matter that has consumed management's
time and  management  was  unable to focus on  sustaining  the  business,  which
resulted in significantly  lower revenue for the period;  (2) management's focus
of ongoing  discussions with Roxxy  Corporation for the sale of its distribution
division,  Viastar  Distribution Group, Inc.; (3) management's effort to refocus
its  business  operations  on the final  stages of  negotiations  to acquire the
rights to a new proprietary  portable data storage technology which is currently
under development; and (4) management's discussions with SBC Operations, Inc., a
subsidiary of SBC  Communications,  Inc., to license and exhibit upto 12 premier
movie features per year.

For the twelve month period ending,  the remaining $167,099 or 8% of the revenue
was from settlement of accounts payable to several of the  Distributor's  Vendor
accounts, advertising and rebates as compared $55,006 revenue from settlement of
accounts payable for the twelve month period ending June 30, 2004.


Cost of Sales

For the twelve months ending June 30, 2005, the Company  recognized  $152,483 as
compared  $1,425,946 in cost of sales for the period  ending June 30, 2004.  The
decrease  was  primarily  due to lower sales  volume for the twelve month period
ending June 30, 2005.


Gross Profit

During the twelve  months  ended June 30, 2005,  the Company  recognized a gross
profit of $299,763  compared to  $1,601,032  for the twelve month period  ending
June 30, 2004.  During the twelve month period ending June 30, 2005, a corporate
administrative  matter has consumed  management's time and management was unable
to focus on sustaining the business,  which has resulted in significantly  lower
sales and subsequently  lower gross profit for the period. For the twelve months
ending June 30, 2005, the CD distribution recognized a gross margin of $299,763.
During the twelve months ended June 30, 2004, the Company recognized  $1,601,032


                                       19
<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations - continued

in gross profit which was  comprised of $1,125,339  from the mastering  division
and  $440,670  from the CD sales.  The gross margin  realized for the  mastering
business and CD sales was 45% and 87%  respectively  for the twelve month period
ending June 30, 2004,  while gross margin on a consolidated  basis was 52.9% for
the twelve month period ending June 30, 2004.


Expenses

For the twelve months ending June 30, 2005, our operating costs were $10,112,250
as compared to  $5,586,956  for the twelve  months  ending  June 30,  2004.  The
increased  costs  of  $4,525,294  were  primarily  due  the  write  off  of  its
distribution  agreement in the amount of $6,466,860 upon the  recommendation  of
our independent  registered accountant and legal counsel as well as management's
decision  under  the   recommendation  of  legal  counsel  and  its  independent
registered  accountant  to write off its  capitalized  software in the amount of
$870,750 after the Supreme Court  Decision on the Case No. 04-480,  MGM Studios,
Inc., et al v Grokster, Ltd., et al on June 27, 2005.

For the twelve month period ending June 30, 2005,  operating costs  attributable
to the  distribution  business  were  $10,112,250  which was  comprised of about
$694,085 of payroll  costs,  $209,854 in the  write-off  of obsolete  inventory,
$366,322 in consulting,  legal and other professional expenses,  $67,271 in rent
and office expenses,  $100,000 in amortized Business  Development Costs, $95,250
in amortized  Offering Costs,  $34,915 of insurance  expense,  $25,153 in travel
expenses,  $25,968  in  production  costs,  $6,466,860  for  the  write  down of
intangible assets,  $870,750 on the write off of capitalized software,  $754,252
in  depreciation  expense  and the  remaining  $401,750  in  other  general  and
administrative  and  marketing  expenses.   The  resulting  net  loss  from  the
operations of the distribution business was $9,812,487.

For the twelve  months  period  ending  June 30,  2004,  operating  costs of the
replication  business was $1,290,413  which was comprised of $419,862 of payroll
costs, $104,951 of bad debt, $101,226 of insurance expense, $222,826 in rent and
office expenses,  $73,228 in travel costs, $51,879 in professional fees, $37,764
in  depreciation  expense  and the  remaining  $278,677  in  other  general  and
administrative  expenses.  The  resulting  net loss from the  operations  of the
replication business was $165,074.

For the twelve month period ending June 30, 2004,  operating costs  attributable
to the  distribution  business were $960,152  which was comprised of $415,672 of
payroll  costs,  $180,754  in  depreciation,  equipment  write  downs  and small
equipment purchases,  $93,171 in rent and office expenses,  $47,611 of insurance
expense,  $30,559  in travel  expenses,  $59,019  in  professional  fees and the
remaining $133,336 in other general and  administrative and marketing  expenses.
The resulting  net loss from the  operations  of the  distribution  business was
$484,459.

For the twelve month period ending June 30, 2004,  operating costs  attributable
to  the  corporate  administration  and  operation  were  $3,337,191  which  was
comprised  of a loss on obsolete  equipment  of $600,000  which was  intended to
support  the  website  and  software  design,  a total loss of  $595,000  on the
investment  in MPI  including  an  impairment  on the  investment  of  $355,000,
$737,527 in consulting services, $415,672 in payroll expenses, $267,502 in legal
fees,  $186,000 in director fees and the remaining $535,490 in other general and
administrative expenses.

                                       20
<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations - continued

The total loss of  $3,986,724  for the year ended June 30,  2004 was a result of
corporate restructuring and its new operations commencing.

Extraordinary Items

For the twelve months ending June 30, 2005, Pop3 had also  recognized  losses on
two extraordinary items, the sale of its subsidiary,  Masterdisk Corporation, in
the amount of $3,351,342 and the loss from  discontinued  operations of $288,146
which total  $3,639,488  as compared  to no  extraordinary  items for the twelve
months ending June 30, 2004.


Net Losses

As a  result  of the  foregoing  factors,  the  Company  incurred  a net loss of
$13,451,975 for the twelve months ended June 30, 2005 compared to $3,986,924 for
the same period ended June 30, 2004.  The increased loss is primarily due to the
fact that during June 2005, the Company impaired its distribution agreement upon
the recommendation of its independent  registered  accountant and legal counsel.
The  distribution  agreement,  which was acquired from Level X during 2003,  was
originally  accounted  for under the  purchase  accounting  method.  The Company
impaired the distribution agreement to the original cost basis of Level X, which
would have been the amount  recorded had the Company  accounted  for the Level X
acquisition as a reverse merger.

Additionally,  the loss was due to management's decision to sell Masterdisk back
to the original  owners  which was based upon  management's  determination  that
Masterdisk could not reach  profitability for the following  reasons:  (1) It is
management's  belief that a large  number of major record  labels have  recently
begun turning to in-house mastering services as opposed to outsourcing mastering
services to companies like  Masterdisk in order to cut costs;  and (2) there has
been a significant  decrease in the overall  number of titles being  released by
the major record labels; consequently decreasing the number of projects open for
bid. Additionally,  certain disputes and disagreements between the parties arose
which  prevented all of the parties to the  Acquisition  and Exchange  Agreement
from obtaining the benefits of the Acquisition  and Exchange  Agreement to their
complete  satisfaction  and  all the  parties  agreed  that  it was in the  best
interest of all concerned that the transaction be unwound.

The increased loss is also due to a corporate administrative matter has consumed
management's time and management was unable to focus on sustaining the business,
which has  resulted  in  significantly  lower  revenue for the period as well as
management's focus of ongoing discussions with Roxxy Corporation for the sale of
its distribution  division,  Viastar Distribution Group, Inc. and the refocus of
its  business  operations  on the final  stages of  negotiations  to acquire the
rights to a new proprietary  portable data storage technology which is currently
under development. As well management's discussions with SBC Operations, Inc., a
subsidiary of SBC  Communications,  Inc., to license and exhibit upto 12 premier
movie features per year.

Pop3's management under the  recommendation of legal counsel and its independent
registered  accountant also wrote off its capitalized software after the Supreme
Court  Decision on the Case No.  04-480,  MGM Studios,  Inc.,  et al v Grokster,
Ltd., et al on June 27, 2005.


                                       21
<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations - continued

Liquidity and Capital Resources

During the twelve months ended June 30, 2005, the Company used $607,758 from its
operations and received $50,000 from the sale of 1,000,000 of its common shares,
$500,000 from the proceeds of a debenture and $135,257 from loan  proceeds.  The
use of cash from operations was primarily  caused from a decrease of $491,934 in
receivables and an increase of $295,777 in outstanding liabilities.

The Company  financed the majority of its $607,758 loss from operations with the
issuance of  20,228,186  shares for services  valued at  $428,775.  The services
provided  were  comprised  of  $120,000  in  software  development,  $106,875 in
employee  bonuses,  $80,000 in legal fees,  and $121,900 in business  consulting
fees.

Interest  expense of $10,250 was paid with the  issuance  of 400,000  restricted
shares.

At June 30, 2005 the Company had ($557) of cash and working  capital  deficit of
$728,858.

The ability to fund working  capital needs,  planned  capital  expenditures  and
scheduled debt payments,  implement expansion plans, and refinance  indebtedness
depends on future operating performance,  cash flows from operations and raising
money,  which in turn are  subject  to  prevailing  economic  conditions  and to
financial,  business and other factors,  some of which are beyond control of the
Company.  These  factors  along with many others may  preclude  the Company from
emerging as a going concern status anytime soon.

The increased  level of debt may make it difficult to borrow funds in the future
and for that fact has made it difficult  to seek normal  financing on terms that
are reasonable. Based on our current level of operations and anticipated growth,
we believe  that cash flows from  operations,  together  with future  borrowings
under the Company's credit facilities,  may not be sufficient over the next year
to meet the liquidity requirements, which includes debt service, working capital
needs and capital  expenditures.  The  Company  may be required to obtain  other
sources of financing in order to continue.

On December 22, 2004 the Company  entered into an agreement with Cornell Capital
Partners,   LP  to  obtain  $500,000  bridge  financing  through  the  issue  of
convertible debentures and equity financing up to $5,000,000 through the sale of
common stock to Cornell.  The debentures  carry a 7% per year interest rate with
the  entire  principle  and  interest  due August  30,  2005.  The Holder of the
debenture can convert the principle and interest into the Company's common stock
at an amount equal to 120% of the closing bid price of the common  shares on the
date of conversion.

The Company also has the right to redeem the principle and accumulated  interest
of any  outstanding  debentures  into  Common  Stock  at a price  of 120% of the
closing bid price.  Should the company exercise its right to redeem,  the holder
is entitled to receive a  three-year  warrant to purchase  50,000  shares of the
Company's common stock for every $100,000 principle and interest  redeemed.  The
warrant can be exercised on a "cash basis" with an exercise price of 120% of the
closing bid price on the date the debenture is redeemed.

                                       22
<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations - continued

The Company issued  4,486,940  common shares,  valued at $150,000 to obtain this
equity financing.


Capital Expenditures

The Company incurs capital expenditures for the purposes of:

     o    Purchasing new technology and constructing  leasehold improvements for
          our warehouse;

     o    Acquiring existing studio and mastering facilities;

     o    Upgrading existing technology to increase volume and/or quality; and

     o    Replacing less advanced technology.

On July 18, 2003 the company entered into a stock purchase  agreement with Level
X Media Corporation wherein the company obtained all of the assets,  liabilities
and  outstanding  shares of stock of Level X in exchange for a purchase price of
$10,650,000.  The  agreement was revised so that  1,904,100  shares of preferred
stock valued at $3,809,918  (convertible  to 38,082,000  shares of common stock)
and  15,164,671  common shares  valued at  $6,840,082  were issued for the total
purchase  price  of  $10,650,000.   The  acquired  approximately  $4,500,000  in
furniture,  fixtures and equipment along with the intangible  assets and assumed
debt.

On March 31, 2004, the Company issued  10,000,000  shares of its common stock to
the shareholders of Masterdisk in exchange for all of the issued and outstanding
shares of Masterdisk.  As a result of the share  exchange,  Masterdisk  became a
wholly owned  subsidiary  of the Company.  At June 30,  2004,  Masterdisk  owned
approximately  $375,000 in studio  equipment and long term debt of approximately
$350,000. It also had $106,247 of cash and working capital of $253,261.

Capital  expenditures  may  increase  significantly  during the next fiscal year
ending  June 30,  2006.  The  Company  may or may not incur  these  expenditures
through acquisition or merger activities.

The Company may in the future again evaluate acquisition opportunities, and from
time to time enter into  non-binding  letters of intent.  As of the date of this
report  there are no  definitive  agreements  or binding  letters of intent with
respect  to  any  acquisitions,   nor  is  the  Company  actively  pursuing  any
acquisitions.


Item 7. Financial Statements.

The financial statements required to be filed pursuant to Item 7 are included in
this Transition Report on Form 10-KSB. A list of the financial  statements filed
herewith is found at "Item 13. Exhibits, List, and Reports on Form 8-K."


                                       23
<PAGE>

Item 7a. Critical Accounting Issues

Our financial  statements and accompanying notes are prepared in accordance with
generally  accepted  accounting  principals  in  the  United  States.  Preparing
financial  statements requires management to make estimates and assumptions that
affect the reported amount of assets,  liabilities,  revenue and expenses. These
estimates  and  assumptions   are  affected  by  managements'   applications  of
accounting policies. The critical accounting policies for us are the recognition
of revenue and the accounting for the purchase of subsidiaries.


Revenue Recognition

Revenue for music is generated  when the product is scanned at the point of sale
("POS").  The  period of time from  initial  order to  shipment  of the  product
typically  ranges from thirty to forty five days.  Revenue for  replication  and
authoring is generated  when the  mastering  process is completed the process is
generally  completed  within 8-24 hours of  commencement  and is billed upon the
completion of the work.  Replication and authoring  revenues are recognized on a
project-by-project basis.


Purchase Price Allocation of Subsidiaries

When  subsidiaries are purchased,  purchase method accounting as defined by FSAB
No. 141 is followed.


Item  8.  Changes  In And  Disagreements  With  Accountants  On  Accounting  And
          Financial Disclosure

On October 5, 2004, we dismissed our  independent  auditing firm Armando  Ibarra
CPA, APC without  changes or  disagreement  and  retained  the auditing  firm of
Shelley  International,  C.P.A.  We have had no  changes or  disagreements  with
Shelley International, C.P.A.


Item 8a. Controls And Procedures

As of  the  end of  the  period  covered  by  this  Report,  we  carried  out an
evaluation,  under the supervision and with the participation of our management,
including  our Chief  Executive  Officer  and Chief  Financial  Officer,  of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures,  as defined in Rules  13a-15(e) and 15d-15(e)  under the  Securities
Exchange Act of 1934, as amended. Based on this evaluation,  the Chief Executive
Officer  and  Chief  Financial  Officer,  concluded  that as of the date of that
evaluation  our  disclosure  controls  and  procedures  are  effective in timely
alerting  them to material  information  required to be included in our periodic
SEC  reports.  It should be noted that the design of any  systems of controls is
based in part upon certain  assumptions  about the  likelihood of future events,
and there can be no  assurance  that any design will  succeed in  achieving  its
stated goals under all potential future conditions, regardless of how remote.

There have been no  significant  changes in our  internal  controls  or in other
factors that could significantly affect internal controls subsequent to the date
we carried out this evaluation.

________________________________________________________________________________

                                       24
<PAGE>

                                    PART III


Item 9. Directors, Executive Officers, Promoters And Control Persons; Compliance
        With Section 16(A) Of The Exchange Act


Directors

The following table sets forth certain  information with respect to our officers
and directors as of June 30, 2004.

            Name        Age  Position
--------------------  ------ ---------------------------------------------------
John Aquilino           39   President, Chief Executive Officer, Chairman of the
                             Board and Director
--------------------  ------ ---------------------------------------------------
Sam Messina             26   Chief Financial Officer
--------------------  ------ ---------------------------------------------------
William A. Grazier      39   Chief Information Officer
--------------------  ------ ---------------------------------------------------

John D. Aquilino - President, Chief Executive Officer, Chairman of the Board and
Director

Mr.  Aquilino  brings  twenty years of direct  music  industry  experience  that
includes performance,  production,  engineering, and technology development. Mr.
Aquilino has been a featured speaker,  lecturer,  and key round-table  member at
music  industry  functions  around  the world  with  regard to  digital  content
security and standards in recording quality. He is considered one of the leading
authorities on CD audio copy protection,  and is a popular guest on business and
technology television & cable news shows and online industry-related functions.

Prior to his departure in 2001, Mr. Aquilino was a founding partner of SunnComm,
Inc.  a  publicly  traded  technology  company  (OTC:  SUNX)  - one of  the  top
developers of digital security technologies - and served as Chairman and Chief

Technology Officer where he designed,  developed, and deployed the company's key
digital  security  products.  Prior to SunnComm  Inc.,  Mr.  Aquilino  enjoyed a
variety of positions within the music industry  including Artists Production and
Development  for  Capitol  Records,  EMI  Records,  and  Atlantic  Records.  Mr.
Aquilino's affiliations include: Capitol Records, EMI International, Universal

Music  Group,  Universal  Music  Publishing  AOL/Time  Warner,  BMG,  Sonopress,
SunnComm Inc., Microsoft, Macrovision Corporation, America West Airlines, Litton
Electron  Devices ST Micro,  DCA, and Eclipse Data  Technologies.  He has worked
directly with name Artists who include: Frank Sinatra, Gladys Knight, Stevie

Wonder,  Billy Squire, and Quiet Riot. In addition,  Mr. Aquilino was a founding
member of Capitol  Recording  Artists  "Icon",  a group  that  enjoyed a 10-year
career, where he wrote, recorded, and toured the world.


Sam Messina - Chief Financial Officer

Mr.  Messina joined Pop3 in July 2004 and served as the company  Controller.  He
was initially promoted to interim CFO and then later CFO following the departure
of former CFO, Mr. Kenneth Yonika.

Prior to joining the Pop3 team Mr.  Messina was an  assistant  CFO with  Candice
Company, Inc., a residential  construction and property management firm, located
in  Riverside,  Illinois.  While at Candice  Company,  Mr.  Messina  oversaw all


                                       25
<PAGE>

Item 9. Directors, Executive Officers, Promoters And Control Persons; Compliance
        With Section 16(A) Of The Exchange Act - continued

aspects of the  Accounting  Department and assisted in the day to day operations
of the privately held firm.

Mr. Messina graduated "Cum Laude" from Loyola  University-Chicago in 2001 with a
degree in finance.


William A. Grazier-Chief Information Officer

Mr. Grazier brings over sixteen years of complex systems engineering and project
management  experience to the Viastar team. For over ten years,  Mr. Grazier has
served in executive level  positions where he managed  engineering and technical
teams in large-scale system design and implementation projects. Mr. Grazier most
recently  served as VP of Operations  for SunnComm,  Inc.  (OTC:  STEH) where he
played  an  instrumental  role  in the  development  and  implementation  of the
company's digital security and content enhancement products. Prior to joining

SunnComm,   Mr.   Grazier   served  as  Director  of  Technology  for  Racklogic
Technologies,   Inc.,  a  global  leader  in  the  design  and   manufacture  of
ultra-high-performance  and ultra-high-density  server solutions for audio/video
streaming,   massively  parallel   super-computing  and  enterprise  data-center
environments.  As Director of Technology, Mr. Grazier guided the company and its
many customers in the design,  planning,  implementation and relocation of their
diverse technology and infrastructure resources. Prior to Racklogic, Mr. Grazier
served  as  Chief  Information  Officer  for  GFI  Group,  Inc.,  a Wall  Street
Inter-Dealer  Brokerage firm with offices  spanning four continents and numerous
equity,  fixed income,  derivative  and exotic  financial  markets.  At GFI, Mr.
Grazier was directly responsible for the design,  development and implementation
of  mission-critical  financial  transaction  software  and data  communications
systems,  which served as the trading backbone for the company. Prior to joining
GFI, Mr.  Grazier  served for six years as System Design  Engineer for Fellenzer
Engineering  where  he  gained  extensive  experience  in the  design,  costing,
scheduling and coordination of large-scale control and construction  engineering
projects. Mr. Grazier received his Bachelor of Science in Electrical Engineering
from the University of Rochester in 1988.


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

Section  16(a) of the Exchange Act of 1934  requires our directors and executive
officers,  and  persons  who own more than ten  percent of a class of our equity
securities,  to file with the SEC initial  reports of  ownership  and reports of
changes in ownership of our common stock and other equity securities.  Officers,
directors  and  greater  than  ten  percent  stockholders  are  required  by SEC
regulation to furnish us with copies of all Section 16(a) forms they file.


Item 10. Executive Compensation

Summary Compensation

The following table sets forth compensation information for services rendered to
us by our executive  officers and directors in all capacities  during the fiscal
year ending June 30, 2005 and the past two fiscal years. Other than as set forth
below, no executive  officer's salary and bonus exceeded  $100,000 in any of the
applicable years or period ended. The following  information includes the dollar
value of base salaries,  draws, bonus awards, and the number of stock options or


                                       26
<PAGE>

Item 10. Executive Compensation - continued

warrants granted and other compensation whether paid or deferred.  Reimbursement
of out-of-pocket expenses is not included.


<TABLE>
<CAPTION>

                                            SUMMARY COMPENSATION TABLE
            Position         Year       Salary ($)     Bonus/Severance ($)       Securities Underlying           All Other
                                                                                    Options / SARs            Compensation ($)
------------------------- ----------    -----------    ---------------------    ------------------------    ---------------------
<S>                          <C>         <C>                    <C>                        <C>                       <C>
John D, Aquilino             2005        250,000               -0-                        -0-                       -0-
Chief Executive Officer      2004        225,000               -0-                        -0-                       -0-
Chairman & Director          2003        175,000               -0-                        -0-                       -0-

Sam Messina                  2005         85,000               -0-                        -0-                       -0-
Chief Financial Officer      2004          -0-                 -0-                        -0-                       -0-
                             2003          -0-                 -0-                        -0-                       -0-

William Grazier, III         2005        110,000               -0-                        -0-                       -0-
Chief Information Officer    2004          -0-                 -0-                        -0-                       -0-
                             2003          -0-                 -0-                        -0-                       -0-
</TABLE>



(1)  The Company accrues  officer's salary (prior to June 30, 2005) at an annual
     rate of  $250,000  per  year.  Mr.  John  Aquilino  is in the  middle  of a
     five-year employment contract signed on February 1, 2003 which calls for an
     annual increase in salary every February.



Option and Warrant Grants and Exercises

The following  table sets forth the options and warrants  granted to the persons
named in the Summary  Compensation  Table during the fiscal year ending June 30,
2005:

                 WARRANT AND OPTION GRANTS IN TRANSITION PERIOD
                       JUNE 30,2004 THROUGH JUNE 30, 2005
<TABLE>
<CAPTION>

                                                  Number of Securities       % of Total
                                                       Underlying         Warrants/Options    Exercise
                                                    Warrants/Options    Granted to Employees    Price   Expiration
Name and Job Title                                      Granted          in Fiscal Year (1)    ($/sh)    Date (2)
------------------------------------------------ --------------------- ---------------------- --------- -----------
<S>                                                        <C>                 <C>               <C>          <C>
John D. Aquilino, President and Chief                      -                    - %              $ -        -
Executive Officer

Sam Messina, III, Chief Financial Officer                  -                    - %              $ -        -

William Grazier, III, Chief Information Officer            -                    - %              $ -        -
</TABLE>

                                       27
<PAGE>

Item 10. Executive Compensation - continued

(1)  There  were no option  grants  during the period  ending  June 30,  2005 or
     subsequent to year-end.  On January 7, 2004,  the Company its First Amended
     2003  Employees/Consultants  Common  Stock  Compensation  Plan  whereby the
     Company is  authorized  issue  8,000,000  common  shares par value .001 for
     consideration of services  rendered and/or to be rendered and payments made
     under the 2003 Employees/Consultants Common Stock Compensation Plan.

No Executive Officer of the Company exercised any options or warrants during the
fiscal year ended June 30,  2005.  The  following  table sets forth  information
concerning the value of all exercisable and  unexercisable  options and warrants
held by those persons  listed in the Summary  Compensation  Table as of June 30,
2005.


                                           FISCAL YEAR-END OPTIONS AND WARRANTS
                                                    AS OF JUNE 30, 2005
<TABLE>
<CAPTION>

                                                       Number of Securities Underlying           Value of Unexercised
                                                           Unexercised Warrants and           In-the-Money Warrants and
                                                                 Options (#)                       Options ($) (1)
Name and Job Title                                     Exercisable      Unexercisable      Exercisable      Unexercisable
---------------------------------------------------    -------------    ----------------   -------------    ----------------
<S>                                                         <C>              <C>               <C>               <C>
John D. Aquilino, President and Chief
Executive Officer

Sam Messina, III, Chief Financial Officer

William Grazier, III, Chief Information Officer
</TABLE>

(1) There were no options being held by any Named Executive Officer.


Compensation of Directors

We expect that each of our directors who are not an employee of the Company will
receive  annual  compensation  in the  form of cash  fees  to be  determined  by
disinterested members of the Board of Directors.



                                       28
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management.

A significant portion of our capital stock is owned by the shareholders of Level
X Media  Corporation  as a group  in the  form of  Common  Stock  and  Series  A
preferred stock. The following table sets forth  information with respect to the
ownership of the $0.001 par value,  common stock and Series A preferred stock as
of June 30, 2005 by:

     o    each person known to own beneficially more than 5% of the common stock
          and Series A preferred stock,

     o    each of our directors,

     o    each of the executive officers named in the summary compensation table
          above, and

     o    all of our executive officers and directors as a group.

The Series A preferred stock and Common Stock vote together as a single class.

Notwithstanding the beneficial  ownership of Series A preferred stock and Common
Stock  presented  below,  the  stockholders'  agreement with Level X governs the
stockholders'  exercise  of their  voting  rights  with  respect to  election of
directors and certain other material  events.  The parties to the  stockholders'
agreement  have agreed to vote their  shares to elect the board of  directors as
set forth therein.

The amounts and  percentages  of shares  beneficially  owned are reported on the
basis of SEC regulations  governing the determination of beneficial ownership of
securities.  Under SEC rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares  voting power or investment  power,  which
includes the power to dispose of or to direct the  disposition of such security.
A person is also deemed to be a beneficial owner of any securities of which that
person has a right to acquire  beneficial  ownership within 60 days.  Securities
that can be so acquired are deemed to be  outstanding  for purposes of computing
such person's ownership percentage,  but not for purposes of computing any other
person's percentage. Under these rules, more than one person may be deemed to be
a  beneficial  owner of the same  securities  and a person may be deemed to be a
beneficial owner of securities as to which such person has no economic interest.

Except as otherwise indicated in these footnotes,  each of the beneficial owners
listed has, to our knowledge,  sole voting and investment  power with respect to
the indicated shares of common stock. The amounts set forth below do not include
common  stock to be issued  under  yet to be  determined  agreements.  The total
number of shares on a fully diluted basis is 106,384,978.


                                       29
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and
         Management - continued
________________________________________________________________________________

                               Number of shares of
                              Common Stock beneficially
Name of beneficial owner                owned                 Percent of Class
____________________________ ______________________________  ___________________
John Aquilino                         1,000,000 (Common)                  1.40%
Richard Brooks, Esq.                  7,506,000 (Common)                 10.80%
Kenneth Yonika (2)                    7,200,815 (Common)                 10.30%
Cornell Capital                       4,187,811 (Common)                  6.00%
Peter Trimarco                        4,527,580 (Common)                  6.50%
All directors and executive
  officers as a group                24,422,206 (Common)                 35.23%
________________________________________________________________________________

________________________________________________________________________________

                                 Number of Shares of
                               Series A Preferred Stock
Name of beneficial owner          beneficially owned          Percent of Class
____________________________ ______________________________  ___________________
John Aquilino (1)                       1,854,100                   100%
All directors and executive
   officers as a group                  1,854,100                   100%
________________________________________________________________________________

(1)  Mr.  Aquilino owns 1,854,100  preferred  shares which have voting rights of
     100  votes  for  each  share  held.  All  1,854,100  preferred  shares  are
     convertible  into  common  shares  at a ratio of 20 common  shares  for one
     preferred  share.  In  the  event  Mr.  Aquilino  converted  all  1,854,100
     preferred shares he would receive 37,082,000 common shares which would give
     him an approximate beneficial ownership of 41.4 % of all outstanding common
     shares. Mr. Aquilino has a non-dilution agreement with the Company expiring
     on April  30,  2008  entitling  him to hold 52% of all  outstanding  common
     shares of the  Company.  On May 31, 2004,  Mr.  Aquilino  converted  50,000
     shares of his Series A Preferred Stock into 1,000,000  shares of restricted
     common stock.

(2)  Mr. Yonika gift transferred  approximately 6 million of the total 7,200,815
     common shares to various  entities or  individuals  in which the shares are
     beneficially attributed to him.



Item 12. Certain Relationships and Related Transactions.

The  following transactions occurred during the year between the Company and its
     officers, directors or certain security holders:

         None.


                                       30
<PAGE>

Item 13. Exhibits, List, and Reports on Form 8-K.

(a)  Exhibits.  The following exhibits required by Item 601 to be filed herewith
     are incorporated by reference to previously filed documents:

  Exhibit         Description and Method of Filing No.
_____________  _________________________________________________________________

   3.1         Amended and Restated Articles of Incorporation and By-laws (1)

  16.1         Letter  on  Change  in  Certifying  Accountant   incorporated  by
               reference on Form 8-K filed October 20, 2004

  21.1         Subsidiaries of the Company

  23.1         Consent of Armando C. Ibarra, Certified Public Accountants

  31.1         Certification of Chief Executive  Officer Pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002 and Rules 13(a)-14 and 15(d)-14
               under the Securities Exchange Act of 1934

  31.2         Certification of Chief Financial  Officer Pursuant to Section 302
               of  the  Sarbanes-Oxley  Act  of  2002  and  Rules  13(a)-14  and
               15(d)-14under the Securities Exchange Act of 1934

  32.1         Certification  of Chief Executive  Officer  Pursuant to 18 U.S.C.
               Section 1350.

  32.2         Certification  of Chief Financial  Officer  Pursuant to 18 U.S.C.
               Section 1350.

     (1)  Incorporated  by reference to the Company's  Form 10-SB12G  filed with
          the Securities and Exchange Commission on December 13, 1999


(b) Reports on Form 8-K.

The Company filed the following reports on Form 8-K:

     (1)  Form 8-K filed  September 14, 2004 on Item 5.02 regarding  resignation
          of Kenneth J. Yonika as Chief Financial Officer.

     (2)  Form 8-K  filed  October  20,  2004 on Item 4.01  regarding  change in
          Registrant's certifying accountant.

     (3)  Form 8-K filed November 16, 2004 on Item 5.02 regarding appointment of
          Sam Messina as Chief Financial Officer.

     (4)  Form 8-K filed on January 4, 2005 on Item 1.01 regarding  entry into a
          material  definitive  agreement  and item 3.02  unregistered  sales of
          equity securities.

     (5)  Form  8-K  filed  on  November  2,  2005 on Item  5.02  regarding  the
          resignation  of  John D.  Aquilino  as  Chief  Executive  Officer  and
          President and the appointment of Ari Bass as Chief Executive  Officer,
          President, and Director.


                                       31
<PAGE>

Item 14. Controls and Procedures

As of the end of the period covered by this Transition Report, we carried out an
evaluation,  under the supervision and with the participation of our management,
including  our Chief  Executive  Officer  and Chief  Financial  Officer,  of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures,  as defined in Rules  13a-15(e) and 15d-15(e)  under the  Securities
Exchange Act of 1934, as amended. Based on this evaluation,  the Chief Executive
Officer  and  Chief  Financial  Officer,  concluded  that as of the date of that
evaluation  our  disclosure  controls  and  procedures  are  effective in timely
alerting  them to material  information  required to be included in our periodic
SEC  reports.  It should be noted that the design of any  systems of controls is
based in part upon certain  assumptions  about the  likelihood of future events,
and there can be no  assurance  that any design will  succeed in  achieving  its
stated goals under all potential future conditions, regardless of how remote.

There have been no  significant  changes in our  internal  controls  or in other
factors that could significantly affect internal controls subsequent to the date
we carried out this evaluation.


SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned,  thereunto duly authorized this 16th day of November,
2005.


                                                        Pop3 Media Corp.

                                                         /s/ Ari Bass
                                                         -----------------------
                                                         By: Ari Bass
                                                         Chief Executive Officer



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


Signature           Title                                               Dat
__________________  _______________________________________________  ___________
/s/ Ari Bass        President & Chief Executive Officer               11/16/2005
---------------       (principal executive officer)
    Ari Bass

/s/ Sam Messina     Chief Financial Officer                           11/16/2005
---------------        (principal financial and accounting officer)
    Sam Messina
________________________________________________________________________________


                                       32
<PAGE>


                          INDEX TO FINANCIAL STATEMENTS




1. Financial Statements:

Independent Auditor's Report ............................................. 34

Balance Sheet June 30, 2005 ........................................... 35-36

Statements of Operations Years ended June 30, 2004 and June 30, 2005 ......37

Statements of Cash Flows Years ended June 30, 2004 and June 30, 2005 ..... 38

Statement of Stockholders' Equity Years Ended December 31, 2002 and
  June 30, 2004 and 2005. ................................................ 39

Notes to Financial Statements............................................. 40



2. Schedules None

________________________________________________________________________________

                                       33
<PAGE>


         REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
         -------------------------------------------------------

To the Board of Directors
Pop3 Media, Inc.

We have audited the  accompanying  balance sheet of Pop3 Media,  Inc. as of June
30, 2005 and 2004 and the related statement of operations, stockholders' equity,
and cash  flows  for each of the  years  ended  June 30,  2005 and  2004.  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 audit.

We conducted our audit in accordance  with the auditing  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
audit provides 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 Pop3 Media, Inc. as of June 30,
2005 and 2004 and the  results  of its  operations  and cash flows for the years
ended June 30, 2005 and 2004 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  discussed  in the notes to the
financial  statements,  the Company's  recurring losses raises substantial doubt
about its ability to continue as a going  concern.  The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


/s/ Shelley International CPA
-----------------------------
Mesa, AZ
November 12, 2005


                                       34
<PAGE>


                                Pop3 Media Corp.
                           CONSOLIDATED BALANCE SHEET
                     AS OF JUNE 30, 2005 AND JUNE 30, 2004

                                     ASSETS
                                     -------
<TABLE>
<CAPTION>

                                                               June 30,        June 30,
                                                                2005            2004
                                                            ------------    ------------
<S>                                                              <C>             <C>
CURRENT ASSETS
        Cash                                                $       --      $    116,628
        Accounts Receivable - Net                                143,861         635,795
        Prepaid Expense                                             --              --
        Other Receivables                                           --            18,108
        Inventory                                                815,657       1,032,142
                                                            ------------    ------------

        Total Current Assets                                     959,518       1,802,673
                                                            ------------    ------------

LONG TERM ASSETS

        Capitalized Software, Net                                   --           870,750
        Property and Equipment, Net                              919,816       4,892,396
        Goodwill and other intangible Assets, Net                922,890       7,936,431
        Investments                                                 --            13,736
        Business Development                                      20,000            --
        Deferred Income Tax Benefit                                 --           279,430
        Artist Advances                                          196,246         114,647
        Other Assets                                              30,750          13,420
        Notes Receivable                                          92,013          92,013
                                                            ------------    ------------
        Total Long Term Assets                                 2,181,715      14,212,823
                                                            ------------    ------------

TOTAL ASSETS                                                $  3,141,233    $ 16,015,496
                                                            ============    ============

                                       35
<PAGE>



                                Pop3 Media Corp.
                           CONSOLIDATED BALANCE SHEET
                     AS OF JUNE 30, 2005 AND JUNE 30, 2004


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------


                                                               June 30,        June 30,
                                                                2005            2004
                                                            ------------    ------------
LIABILITIES
Current Liabilities
     Bank Overdraft                                         $        557    $       --
     Accounts Payable and Accrued Expenses                  $  1,187,819    $  1,146,291
     Related Party Liabilities and Advances                         --            19,716
     Debenture Payable, net                                      418,250            --
     Notes Payable - Current Portion                             135,257            --
     Other Current Liabilities                                     4,763            --
     Credit Line - Financial Institution                            --           214,500
                                                            ------------    ------------

     Total Current Liabilities                                 1,746,646       1,380,507

Non-Current Liabilities

     Other liabilities                                              --           322,352
                                                            ------------    ------------
     Total Non-Current Liabilities                                  --           322,352
                                                            ------------    ------------
TOTAL LIABILITIES                                              1,746,646       1,702,859
                                                            ------------    ------------

STOCKHOLDERS' EQUITY

     Preferred Stock authorized
     10,000,000 shares, $0.01 par value
     Issued and outstanding June 30, 2005:
     1,854,100 shares of Class A Convertible
     and 1,854,100 at June 30, 2004                               18,541          18,541

     Common Stock, authorized 490,000,000 shares,
     $0.001 par value; Issued and outstanding June 30,
     2005; 69,302,978 shares and June 30, 2004
     52,451,642 shares                                            69,303          52,453

     Paid in Capital                                          20,409,353      19,892,278

     Retained Earnings/(Deficit)                             (19,102,610)     (5,650,635)
                                                            ------------    ------------

     Total Stockholders' Equity/(Deficit)                      1,394,587      14,312,637
                                                            ------------    ------------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                                        $  3,141,233    $ 16,015,496
                                                            ============    ============
</TABLE>


The accompanying notes are an integral part of these statements

                                       36
<PAGE>


                                Pop3 Media Corp.
                         CONSOLIDATED INCOME STATEMENT
          FOR THE TWELVE MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2004
<TABLE>
<CAPTION>
                                                                 Twelve Months Ended
                                                           ------------------------------
                                                           June 30, 2005    June 30, 2004
                                                           -------------    -------------
<S>                                                              <C>             <C>
INCOME

      Revenues                                             $     452,066    $   3,026,978
      Other Income                                                   180             --
                                                           -------------    -------------

      Gross Income                                               452,246        3,026,978

COST OF GOODS SOLD                                               152,483        1,425,946
                                                           -------------    -------------

      Gross Profit / (Loss)                                      299,763        1,601,032
                                                           -------------    -------------

EXPENSES
      Compensation                                               694,085        1,366,825
      Professional and Consulting Fees                           366,322        1,301,927
      General and Administrative                                 649,614        1,507,026
      Depreciation                                               754,252           46,323
      Loss on sale of majority interest in subsidiary               --            595,000
      Write-Down Obsolete Inventory                              209,854             --
      Loss on sale on Sale of Obsolete Equipment                    --            600,000
      Charge off on Fixed Assets                                    --            150,000
      Write Down of Goodwill and Other Intangible Assets       6,466,860             --
      Write Down on Capitalized Software                         870,750             --
      Interest Expense                                           100,513           19,855
                                                           -------------    -------------

      Total Expense                                           10,112,250        5,586,956
                                                           -------------    -------------

(LOSS) BEFORE INCOME TAXES                                    (9,812,487)      (3,985,924)
                                                           -------------    -------------

(LOSS) FROM CONTINUING OPERATIONS                             (9,812,487)            --
                                                           -------------    -------------

EXTRAORDINARY ITEMS
      (LOSS) FROM DISCONTINUED OPERATIONS                       (288,146)            --
      (LOSS) FROM SALE OF  SUBSIDIARY                         (3,351,342)            --
                                                           -------------    -------------

TOTAL (LOSS) FROM EXTRAORDINARY ITEMS                         (3,639,488)            --
                                                           -------------    -------------

(LOSS) AFTER EXTRAORDINARY ITEMS                             (13,451,975)            --
                                                           -------------    -------------


      Provision for Income Taxes                                    --                800
                                                           -------------    -------------

NET (LOSS)                                                 $ (13,451,975)   $  (3,986,724)
                                                           =============    =============

NET (LOSS) PER COMMON SHARE

      Basic                                                $       (0.20)   $       (0.09)

      Diluted                                              $       (0.13)   $       (0.05)

Weighted average number of Shares
      Basic                                                   65,625,464       41,984,626
      Diluted                                                102,707,464       79,066,626
</TABLE>

The accompanying notes are an integral part of these statements

                                       37
<PAGE>

                                Pop3 Media Corp.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
          FOR THE TWELVE MONTHS ENDING JUNE 30, 2005 and JUNE 30, 2005

                                                  Twelve Months  Twelve Months
                                                       Ended          Ended
                                                  June 30, 2005   June 30, 2004
                                                  ------------    ------------
Operating Activities

       Net (Loss)                                 $(13,451,975)   $ (3,986,724)

       Significant Non-Cash Transactions

            Original Issue Discount                    (81,750)           --
            Common Stock for Services                  483,925       2,693,339
            Business Development                       (20,000)           --
            Write off of Obsolete Inventory            216,485            --
            Assets sold in sale of subsidiary        3,491,678            --
            Write off of intangibiles                7,013,541            --
            Investment Charge Off                         --           595,000
            Write off of Capitalized Software          870,750            --
            Depreciation Expense                       754,252         796,323
       Changes in assets and liabilities
            Receivables                                491,934        (164,486)
            Other Assets                               (17,330)        (13,420)
            Increase in Artist Advances                (81,599)       (114,647)
            Decrease in Inventory                         --        (1,032,142)
            Due from related parties                   (19,716)           --
            Decrease in Other Liabilities             (317,589)           --
            Other Receivables                           18,108            --
            Decrease/(Increase) in Accounts
                  Payable                               41,528       1,140,476
                                                  ------------    ------------

Net Cash (Used) by Operating Activities               (607,758)        (86,281)
                                                  ------------    ------------

Investing Activities

            Investment                                    --           (13,736)
            Purchase of Equipment                       19,816         (23,330)
                                                  ------------    ------------

Net Cash (Used) by Investing Activities                 19,816         (37,066)
                                                  ------------    ------------

Financing Activities
       Proceeds from Debentures                        500,000            --
       Payments on line of credit and debt            (214,500)           --
       Proceeds from loans                             135,257        (501,533)
       Encumberances                                      --           340,000
       Proceeds from sale of Common Stock               50,000         401,508
                                                  ------------    ------------

Cash Provided by Financing Activities                  470,757         239,975
                                                  ------------    ------------

Net Increase/(Decrease) in Cash                       (117,185)        116,628


Cash, Beginning of Period                              116,628            --
                                                  ------------    ------------

Cash, End of Period                               $       (557)   $    116,628
                                                  ============    ============

Significant Non-Cash Transactions
    See Note pertaining to Stockholders' Equity

Supplemental Information:
       Period Interest                            $    122,385    $      2,151
       Income Taxes Paid                                 3,510            --


The accompanying notes are an integral part of these statements

                                       38
<PAGE>


                                Pop3 Media Corp.
       CONSOLIDATED STATEMENT OF RETAINED EARNINGS THROUGH JUNE 30, 2005
<TABLE>
<CAPTION>

                                         Preferred Stock           Common Stock                                         Total
                                   ------------------------  -------------------------     Paid in    Accumulated     Shareholders'
                                       Shares      Amount      Shares        Amount        Capital       (Loss)     Equity/(Deficit)
                                   ------------  ----------  ------------  ------------  ------------  ------------  --------------
<S>                                      <C>         <C>          <C>           <C>           <C>          <C>             <C>
Balance June 30, 2003                      --          --      10,646,846        10,647     2,207,778  (1,663,911)    $     554,514

Common shares issued for merger                                15,164,671        15,165     3,794,753                     3,809,918
Preferred convertible shares
      issued for merger               1,904,100      19,041                                 6,821,041                     6,840,082
Preferred shares converted              (50,000)       (500)    1,000,000         1,000                                        (500)
Remove Encumberance on Shares
Common shares issued for acqusition                            10,000,000        10,000     3,990,000                     4,000,000
Common shares issued for cash                                   1,601,250         1,601       234,649                       236,250
Common shares issued for debt                                     112,500           113       112,387                       112,500
Common shares issued for service                               13,398,795        13,399     2,679,940                     2,693,339
Common shares issued for exercise
     of options through subscriptions
     receivable                                                   527,580           528        52,230                        52,758

Net (Loss) for year ended
     June 30, 2004                                                                                       (3,986,724)     (3,986,724)
                                   ------------  ----------  ------------  ------------  ------------  ------------  --------------

Balance June 30, 2004                 1,854,100      18,541    52,451,642        52,452    19,892,278    (5,650,635)     14,312,636

Common shares issued for service                               11,173,026        11,173       312,702                       323,875
Common shares issued for payment
     of debt and interest                                       2,900,000         2,900        57,350                        60,250
Common shares issued for cash                                   1,000,000         1,000        49,000                        50,000
Common shares issued to obtain
     financing                                                  4,986,940         4,987       172,013                       177,199
Offering Costs
Treasury Shares reacquired from
  Subsidiary
Subscriptions Receivable                                        6,791,370         6,791        93,209                       100,000
Adjustments from subsidiary sale                              -10,000,000       (10,000)     (167,199)                     (177,199)

Net (Loss) for period ended
    March 31, 2005                                                                                      (13,451,975)    (13,451,975)
                                   ------------  ----------  ------------  ------------  ------------  ------------  --------------

Balance June 30, 2005                 1,854,100  $   18,541    69,302,978  $     69,303  $ 20,409,353  $(19,102,610)   $  1,394,587
                                   ============  ==========  ============  ============  ============  ============  ==============
</TABLE>

                                       39
<PAGE>


                            Pop3 Media Corp.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 2005 and 2004


Note 1. OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES

Nature of Business
------------------

PoP3 Media Corp (the "Company" or "PoP3") was organized  January 6, 1993,  under
the laws of the State of Nevada,  as Lotus  Enterprises,  Inc. On April 6, 1999,
the State of Nevada  approved an increase of  authorized  capital to  50,000,000
common shares and changed its name to ClubCharlie.com,  Inc. On January 22, 2001
the  Company  changed  its name to ViaStar  Holdings,  Inc. On July 18, 2003 the
Company entered into a stock purchase  agreement with Level X Media  Corporation
("Level X")  wherein the Company  issued  10,650,000  restricted  common  shares
valued at $1.00 per share (prior historical market price) to purchase all of the
assets,  liabilities and outstanding  shares of Level X. On January 5, 2004, the
minority  shareholders  brought in by the Level X  purchase,  requested  Company
management  and the  majority  shareholders  to  reconsider  its July  18,  2003
purchase  agreement of Level X. This action was  precipitated  by the  Company's
inability to maintain its $1.00 market price per share. The resultant  amendment
dated January 5, 2004 authorized the Company to maintain the same purchase price
of  $10,650,000  but reduce the value of shares  issued  from $1.00 to $0.20 per
share.  Therefore,  in January 2004 the Company issued  additional shares to the
appropriate shareholders bring the total shares issued for the purchase of Level
X to 1,904,100 preferred shares (convertible to 38,082,000 common shares) valued
at $3,809,918  and 15,164,671  common shares valued at  $6,840,082,  for a total
value of $10,650,000. As a result, the revised agreement resulted in a change of
majority control.

While the  parties had not  intended  this  result,  the  accounting  literature
indicates  that such a result  requires the  Company's  financial  statements to
reflect the original cost basis of the assets  contributed to the transaction by
Level X (the new acquirer as a result of the reverse  acquisition) and to value,
at fair  value,  the  assets  of  ViaStar  owned  at the  time  of the  original
acquisition.

In June 2005, upon the recommendation of its independent  registered  accountant
and legal  counsel,  the Company made  substantial  adjustments to its financial
statements  involving the  impairment of goodwill  license  assets to reduce the
balances to reflect the original basis of the assets contributed by Level X (the
new acquirer as a result of the reverse  acquisition) and to value at fair value
the assets of ViaStar owned at the time of the original acquisition.

The Company impaired its retail distribution agreements which were acquired from
Level X during 2003, and originally  accounted for under the purchase accounting
method. The Company has impaired the distribution agreement to the original cost
basis of Level X of $920,890,  which would have been the amount recorded had the
Company  accounted for the Level X acquisition as a reverse merger. On March 31,
2004,  the  Company  acquired  all of the  issued  and  outstanding  capital  of
MasterDisk Corporation  ("MasterDisk"),  a New York corporation,  which became a
wholly  owned  subsidiary  of the Company.  On December  29,  2004,  the Company
changed its name to PoP3 Media Corp and the State of Nevada approved an increase
of authorized capital to 490,000,000 common and 10,000,000 preferred shares.

                                       40
<PAGE>

Note 1. OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES - continued

On March 31, 2005, the company entered into an agreement to sell its subsidiary,
Masterdisk Corporation back to its original owners in exchange for the return of
the  10,000,000  shares of common  stock with a par value of .001.  Management's
decision  to  sell  Masterdisk  back  to the  original  owners  was  based  upon
management's determination that Masterdisk could not reach profitability for the
following  reasons:  (1) It is management's  belief that a large number of major
record labels have  recently  begun  turning to in-house  mastering  services as
opposed to outsourcing  mastering services to companies like Masterdisk in order
to cut  costs;  and (2) there has been a  significant  decrease  in the  overall
number  of  titles  being  released  by the major  record  labels;  consequently
decreasing the number of projects open for bid.  Additionally,  certain disputes
and  disagreements  between the parties arose which prevented all of the parties
to the  Acquisition  and Exchange  Agreement  from obtaining the benefits of the
Acquisition and Exchange  Agreement to their complete  satisfaction  and all the
parties  agreed  that it was in the  best  interest  of all  concerned  that the
transaction be unwound.


Basis of presentation
---------------------

The  financial  statements  included  in this  report  reflect  all  normal  and
recurring  adjustments which, in the opinion of management,  are necessary for a
fair presentation of the Company's  consolidated  financial position at June 30,
2005 and 2004, and the consolidated results of operations and cash flows for the
year ended June 30, 2005 and June 30, 2004.  Company changed its fiscal year end
to June 30 on August  6, 2003 and  completed  a short  period  audit for the six
months ended June 30, 2003 on October 17, 2003.


Principles of consolidation
---------------------------

The  accompanying  condensed  consolidated  financial  statements of the Company
include the  assets,  liabilities,  revenues  and  expenses of its wholly  owned
subsidiary.   The  consolidated  financial  statements  have  been  prepared  in
accordance with accounting principles generally accepted in the United States of
America.

Cash and Cash Equivalents
-------------------------

For  financial  statement  presentation  purposes,  the  Company  considers  all
short-term  investments  with a maturity date of three months or less to be cash
equivalents.


Revenue recognition
-------------------

Revenue for music is generated  when the product is scanned at the point of sale
("POS").  The  period of time from  initial  order to  shipment  of the  product
typicallyranges  from  thirty to forty five days.  Revenue for  replication  and
authoring is generated  when the mastering  process is completed and the process
is generally  completed within 8-24 hours of commencement and is billed upon the
completion of the work.  Replication and authoring  revenues are recognized on a
project-by-project basis. Revenue generated from product sales was $452,246.

                                       41
<PAGE>

Note 1. OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES - continued

Merchandise Inventory
---------------------

Inventories  are stated at the lower of cost  (first-in,  first-out)  or market.
Inventory costs include any material,  labor and manufacturing overhead incurred
by the Company.


Property and Equipment
----------------------

Property  and  equipment  is  stated  at  cost,   and   depreciated   using  the
straight-line  method over the estimated useful lives of the assets, which range
from three to five years.  Assets under capital  leases are  depreciated  by the
straight-line  method over the shorter of the lease term or the useful  lives of
the  assets.  The  Company's  policy  is to  evaluate  the  remaining  lives and
recoverability in light of current conditions.


Intangible assets and goodwill
------------------------------

In January 2002, the Company  adopted  Statement of Financial  Standards No. 142
("SFAS 142"),  which requires the discontinuance of amortization of goodwill and
certain  intangible  assets with indefinite useful lives. SFAS 142 requires that
goodwill and intangible assets deemed to have an indefinite life be reviewed for
impairment  upon the adoption of SFAS 142 and annually  thereafter.  The Company
performed its initial impairment review upon adoption and will perform an annual
impairment review.  Other intangibles with finite lives are amortized over their
estimated useful lives.


Accrued expenses
----------------

The Company  routinely  accrues for various  costs and expenses for which it has
received goods or services,  but for which it has not been invoiced.  Typically,
accrued expenses include such items as salaries,  employee benefits,  litigation
costs,  and taxes for which  amounts are readily  determinable  and  significant
estimates are not  necessary.  Various  other  expenses are accrued from time to
time based on the estimated costs of those goods or services performed.


Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make  estimates  and  assumptions  that  affect  the  reported  amounts  and the
disclosure of contingent amounts in the Company's  financial  statements and the
accompanying notes. Actual results could differ from those estimates.


                                       42
<PAGE>

Note 1. OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES - continued

Loss Per Share
--------------

The basic (loss) per share is  calculated  by dividing the  Company's net income
available to common shareholders by the weighted average number of common shares
during the year.

On June 30, 2005 the Company has potentially dilutive securities  outstanding in
the form of 1,854,100  shares of preferred  stock that can each be exchanged for
20 shares of common stock.  These shares are not considered in the  presentation
of loss per share as their inclusion would be antidultive.


Income Taxes
------------

The Company  provides for income taxes under  Statement of Financial  Accounting
Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and  liability  approach in accounting  for income taxes.  Deferred tax
assets  and  liabilities  are  recorded  based on the  differences  between  the
financial statement and tax bases of assets and liabilities and the tax rates in
effect currently.


Segment reporting
-----------------

Management  reviews the operating results of the Company's  subsidiaries for the
purpose of making operating  decisions and assessing  performance.  Based on the
aggregation criteria in Statement of Financial Accounting Standards No. 131, the
Company has  aggregated the results of all its operating  subsidiaries  into one
reportable segment.


Stock Based Compensation
------------------------

The Company accounts for its stock based  compensation  based upon provisions in
SFAS No. 123, Accounting for Stock-Based Compensation.

Accounts Receivable
-------------------

The Summary of Accounts Receivable is as follows:

                  Trades Receivable                           $150,541
                  Less: Allowance for Doubtful Accounts        ($6,680)
                  ----------------------------------------------------
                  Net Accounts Receivable                     $143,861

                                       43
<PAGE>

Note 2. GOING CONCERN

The  accompanying  financial  statements  have been  prepared  assuming that the
company  will  continue  as a going  concern.  The  Company  has  accumulated  a
$19,102,610 loss since inception of which a significant  portion of this loss is
due the decision of Pop3's management to write off the majority of the valuation
of its Distribution Agreement after consulting independent registered accountant
and legal  counsel as well as the loss  incurred  for the sale of it  subsidiary
Masterdisk. The total write off for the Distribution Agreement is $6,466,860 and
the total  write  off for the Sale of  Subsidiary  is  $3,351,342.  This  raises
substantial  doubt about the Company's  ability to continue as a going  concern.
The  Company's  ability to continue  as a going  concern is  dependent  upon its
success in developing additional capital.

Management believes that the above problems are being resolved and plans to
address its going-concern issue through the following:

     o    Expanding  or  increasing  its  distribution  of products and services
          through its subsidiaries

     o    Expanding market presence through selective acquisitions or the merger
          of, with  established  media and  entertainment  companies;

     o    Raising  capital  through the sale of debt and/or  equity  securities;
          and,

     o    Settling  outstanding  debts  and  accounts  payable,  when  possible,
          through the  reorganization  or  recapitalization  of obligations with
          either longer terms or the issuance of debt and/or equity securities

There can be no assurance  that the Company will be successful in its efforts to
increase  sales of its  products  or services  and to issue debt  and/or  equity
securities for cash or as payment for outstanding obligations.

Capital-raising efforts may be influenced by factors outside of the control of
the Company, including, but not limited to, capital market conditions. The
ability of the Company to continue as a going concern is dependent upon its
success in obtaining additional sources of capital, and attaining sufficient
growth in its customer base and services to enable it to achieve future
profitability. The accompanying financial statements do not include any
adjustments that might be necessary should the Company be unable to continue as
a going concern.


Note 3. TRADE NAME AND DISTRIBUTION RIGHTS

During July 2001, the Financial  Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible  Assets." SFAS 142 was effective  January 1, 2002
and required that goodwill and certain  intangible  assets remain on the balance
sheet and may not be amortizable for financial reporting purposes.  On an annual
basis,  or when there is reason to suspect that goodwill and certain  intangible
asset values have been  diminished or impaired,  these assets must be tested for
impairment,   and  write-downs  may  be  necessary.   In  June  2005,  upon  the
recommendation of its independent  registered  accountant and legal counsel, the
Company made substantial  adjustments to its financial  statements involving the
impairment  of  goodwill  license  assets to reduce the  balances to reflect the
original  basis of the  assets  contributed  by Level X (the new  acquirer  as a
result of the  reverse  acquisition)  and to value at fair  value the  assets of
ViaStar owned at the time of the original acquisition.  The Company impaired its
retail distribution agreements which were acquired from Level X during 2003, and


                                       44
<PAGE>

Note 3. TRADE NAME AND DISTRIBUTION RIGHTS - continued

originally  accounted for under the purchase  accounting method. The Company has
impaired the  distribution  agreement  to the original  cost basis of Level X of
$920,890,  which would have been the amount  recorded had the Company  accounted
for the Level X acquisition as a reverse merger.

Intangible assets at June 30, 2005:
                                                  June 30, 2005  June 30, 2004
                                                --------------- --------------
      Trade Name Purchased (MasterDisk)                   $   0    $   546,681
      Distribution Agreement                            920,890      7,389,750
                                                --------------- --------------
      Total Goodwill and Other Intangible Assets       $920,890     $7,936,431
                                                =============== ==============


Note 4. INVENTORY

Company  inventory at June 30, 2005 is $815,567 and $1,032,142 at June 30, 2004.
The change in inventory  includes cost of goods sold plus a $209,854  write-down
for  obsolete  inventory.  Inventory  costs  include  any  material,  labor  and
manufacturing  overhead  incurred by the Company in the production of inventory.
Inventory is primarily  music  compact discs and videos  purchased  from outside
manufacturers  then shipped to the retailer for sale.  Inventories are stated at
the lower of cost (first-in,  first-out) or market. The Company may from time to
time take into inventory consigned product for sale.

Note 5. CAPITALIZED SOFTWARE DEVELOPMENT COSTS

The  Company  capitalizes  internally  developed  software  costs  that  will be
amortized using the  straight-line  method over the estimated useful life of the
software,  not to exceed five years.  Capitalized  costs include external direct
costs of materials and services consumed in developing internal use software and
payroll  related  costs  for  employees  who are  directly  associated  with the
internal software development  project.  Capitalization of such costs will cease
no later than the point at which the project is substantially complete and ready
for its intended  purpose.  Capitalized  software  development costs at June 30,
2005 is $0 and June 30, 2004 is $870,750.

Pop3's management under the  recommendation of legal counsel and its independent
registered accountant wrote off its capitalized software after the Supreme Court
Decision on the Case No. 04-480, MGM Studios,  Inc., et al v Grokster,  Ltd., et
al on June 27, 2005.


Note 6. PROPERTY AND EQUIPMENT

On March 31, 2005, the company entered into an agreement to sell its subsidiary,
Masterdisk Corporation back to its original owners in exchange for the return of
the  10,000,000  shares of common  stock with a par value of .001.  Management's
decision  to  sell  Masterdisk  back  to the  original  owners  was  based  upon
management's determination that Masterdisk could not reach profitability for the
following  reasons:  (1) It is management's  belief that a large number of major
record labels have  recently  begun  turning to in-house  mastering  services as
opposed to outsourcing  mastering services to companies like Masterdisk in order
to cut  costs;  and (2) there has been a  significant  decrease  in the  overall
number  of  titles  being  released  by the major  record  labels;  consequently
decreasing the number of projects open for bid.  Additionally,  certain disputes
and  disagreements  between the parties arose which prevented all of the parties


                                       45
<PAGE>

Note 6. PROPERTY AND EQUIPMENT - continued

to the  Acquisition  and Exchange  Agreement  from obtaining the benefits of the
Acquisition and Exchange  Agreement to their complete  satisfaction  and all the
parties  agreed  that it was in the  best  interest  of all  concerned  that the
transaction be unwound.

The decrease in equipment is due the return of the assets  associated  with sale
of Masterdisk.

Property  and  equipment  at June 30, 2005 and June 30, 2004 are  summarized  as
follows:

                                     June 30, 2005  June 30, 2004
                                      ------------    -----------
   Furniture and Fixtures              $   110,667    $   932,348
   Studio Facilities                     1,520,376      4,695,377
   Accumulated Depreciation               (711,227)      (735,691)
                                      ------------    -----------
   Property and Equipment, Net            $919,816     $4,892,396
                                      ============    ===========



Note 7. DEBENTURES AND NOTES PAYABLE

On December 22, 2004 the Company  entered into an agreement with Cornell Capital
Partners,   LP  to  obtain  $500,000  bridge  financing  through  the  issue  of
convertible debentures and equity financing up to $5,000,000 through the sale of
common stock to Cornell.  The debentures  carry a 7% per year interest rate with
the  entire  principle  and  interest  due August  30,  2005.  The Holder of the
debenture can convert the principle and interest into the Company's common stock
at an amount equal to 120% of the closing bid price of the common  shares on the
date of conversion.

The Company also has the right to redeem the principle and accumulated  interest
of any  outstanding  debentures  into  Common  Stock  at a price  of 120% of the
closing bid price.  Should the company exercise its right to redeem,  the holder
is entitled to receive a  three-year  warrant to purchase  50,000  shares of the
Company's common stock for every $100,000 principle and interest  redeemed.  The
warrant can be exercised on a "cash basis" with an exercise price of 120% of the
closing bid price on the date the debenture is redeemed.


     The Company issued  4,486,940  common shares,  valued at $150,000 to obtain
     this equity financing.

The Summary of Debentures Payable is as follows:

        Trades Receivable                          $500,000
        Less: Unamortized Issues Discount          ($81,750)
        ----------------------------------------------------
        Net Debenture Payable                      $418,250



                                       46
<PAGE>

Note 8. STOCKHOLDERS' EQUITY

PoP3 Media Corp (the "Company" or "PoP3") was organized  January 6, 1993,  under
the laws of the State of Nevada,  as Lotus  Enterprises,  Inc. On April 6, 1999,
the State of Nevada  approved an increase of  authorized  capital to  50,000,000
common shares and changed its name to ClubCharlie.com,  Inc. On January 22, 2001
the  Company  changed  its name to ViaStar  Holdings,  Inc. On July 18, 2003 the
Company entered into a stock purchase  agreement with Level X Media  Corporation
("Level X")  wherein the Company  issued  10,650,000  restricted  common  shares
valued at $1.00 per share (prior historical market price) to purchase all of the
assets,  liabilities and outstanding  shares of Level X. On January 5, 2004, the
minority  shareholders  brought in by the Level X  purchase,  requested  Company
management  and the  majority  shareholders  to  reconsider  its July  18,  2003
purchase  agreement of Level X. This action was  precipitated  by the  Company's
inability to maintain its $1.00 market price per share. The resultant  amendment
dated January 5, 2004 authorized the Company to maintain the same purchase price
of  $10,650,000  but reduce the value of shares  issued  from $1.00 to $0.20 per
share.  Therefore,  in January 2004 the Company issued  additional shares to the
appropriate shareholders bring the total shares issued for the purchase of Level
X to 1,904,100 preferred shares (convertible to 38,082,000 common shares) valued
at $3,809,918  and 15,164,671  common shares valued at  $6,840,082,  for a total
value of $10,650,000. As a result, the revised agreement resulted in a change of
majority control. .On January 23, 2004, the State of Nevada approved an increase
of authorized capital (100,000,000 common and 10,000,000  preferred) and changed
its name to PoP3 Media Corp. On March 31, 2004, the Company  acquired all of the
issued and outstanding capital of MasterDisk Corporation  ("MasterDisk"),  a New
York  corporation,  which became a wholly owned  subsidiary  of the Company.  On
December 29, 2004, the Company changed its name to PoP3 Media Corp and the State
of Nevada approved an increase of authorized  capital to 490,000,000  common and
10,000,000 preferred shares

The  Company,  on January 5, 2004 through a vote of the  shareholders  holding a
majority of control  approved an increase in the number of authorized  shares of
common stock, $0.001 par value to 100,000,000 and the creation of a new class of
equity,  authorizing  10,000,000  shares of  preferred  stock,  $0.01 par value.
Furthermore through the vote of the shareholders holding a majority control, the
Company   approved  the  issuance  of  Series  A  Convertible   Preferred  Stock
designation used in the completion of the amended merger with Level X.

On December  5, 2004,  the Company  through a majority  vote of its  controlling
shareholders  approved an increase in the number of authorized  shares of common
stock, $0.001 par value to 490,000,000 shares.

On March 31, 2005, the company entered into an agreement to sell its subsidiary,
Masterdisk Corporation back to its original owners in exchange for the return of
the  10,000,000  shares of common  stock with a par value of .001.  Management's
decision  to  sell  Masterdisk  back  to the  original  owners  was  based  upon
management's determination that Masterdisk could not reach profitability for the
following  reasons:  (1) It is management's  belief that a large number of major
record labels have  recently  begun  turning to in-house  mastering  services as
opposed to outsourcing  mastering services to companies like Masterdisk in order
to cut  costs;  and (2) there has been a  significant  decrease  in the  overall
number  of  titles  being  released  by the major  record  labels;  consequently
decreasing the number of projects open for bid.  Additionally,  certain disputes
and  disagreements  between the parties arose which prevented all of the parties
to the  Acquisition  and Exchange  Agreement  from obtaining the benefits of the
Acquisition and Exchange  Agreement to their complete  satisfaction  and all the
parties  agreed  that it was in the  best  interest  of all  concerned  that the
transaction be unwound.

                                       47
<PAGE>

Note 8. STOCKHOLDERS' EQUITY - continued

As of June 30,  2005 the company has issued and  outstanding  69,302,978  Common
Shares and 1,854,100 Series A convertible preferred shares.

Afterward,  the Company issued  57,371,850 common shares for the services valued
at $389,927.

Preferred Stock
---------------

The Company has 10,000,000 authorized shares of Preferred Stock with a par value
of $0.01 per share and has issued 1,904,100 Series A Convertible Preferred Stock
valued at $3,794,753  of which 50,000  shares have been  converted for 1,000,000
common  shares.  Each share of Series A  Preferred  Stock is  convertible  to 20
shares of common stock and carries voting rights of 100:1.

Investment in and Sale of Majority Interest
-------------------------------------------

On April 23, 2003 the Company  entered  into a  transaction  to purchase  Moving
Pictures  International  Ltd,  ("MPI") an  entertainment  magazine.  The Company
issued 3,500,000 shares of common stock, par value $0.001 in connection with the
purchase of MPI. The purchase of MPI was an elaborate  brokered  transaction  by
the  recipient of the shares.  The brokered  purchase of MPI was  accounted  for
under the purchase method of accounting. Total investment required in MPI by the
Company included the assumption of (undisclosed at the time of sale) substantial
liabilities  and the  payment of shares of the  Company's  common  stock,  which
approximated  $1,200,000.  The  purchase  of MPI was to be  solely  through  the
issuance  of shares of the  Company's  common  stock.  The  Company  through the
actions of a member of prior management and a related party of the seller became
obligated for payments on behalf of MPI. The  obligations  were never audited or
verified  for purposes of the Company and its  shareholders  as required by law.
The transaction was denominated in the English pounds ((pound))  converted to US
dollars ($) for financial  statement purposes.  No foreign currency  translation
adjustment was necessary. On September 26, 2003 The Company sold the controlling
interest in MPI of 80% to Rhiannon Holdings,  Inc. ("RH")(see  "Encumbrances and
Related Party  Transactions")  The purchase  price was as follows,  the RH would
return to the Company, seven million (7,000,000) shares of common stock received
as collateral  for the  advances/note  payable  between RH and the Company,  the
assumption  of all  liabilities  associated  with  MPI,  the  assumption  of the
$700,000 note payable to BFT and the issuance of two million  (2,000,000) shares
of common stock with a stated value of $340,000.  The Company  recognized a loss
of  $240,000 on the sale of the 80%  interest  in MPI.  The Company is no longer
liable for any MPI debt.


Encumbrances and Related Party Transactions
-------------------------------------------

On September 26, 2003 The Company sold the controlling interest in MPI of 80% to
Rhiannon   Holdings,   Inc.   ("RH")(see   "Encumbrances   and   Related   Party
Transactions")  The  purchase  price was as follows,  the RH would return to the
Company, seven million (7,000,000) shares of common stock received as collateral
for the advances/note  payable between RH and the Company, the assumption of all
liabilities  associated with MPI, the assumption of the $700,000 note payable to
BFT and the  issuance of two million  (2,000,000)  shares of common stock with a
stated value of $340,000.  The Company recognized a loss of $240,000 on the sale
of the 80% interest in MPI. The Company is no longer liable for any MPI debt.

                                       48
<PAGE>

Note 8. STOCKHOLDERS' EQUITY - continued

Merger
------

On July 18, 2003 the Company entered into a stock purchase  agreement with Level
X Media Corporation ("Level X") wherein the Company issued 10,650,000 restricted
common  shares  valued at $1.00 per share  (prior  historical  market  price) to
purchase all of the assets,  liabilities and  outstanding  shares of Level X. On
January 5, 2004, the minority  shareholders  brought in by the Level X purchase,
requested  Company  management and the majority  shareholders  to reconsider its
July 18, 2003 purchase agreement of Level X. This action was precipitated by the
Company's  inability to maintain its $1.00 market price per share. The resultant
amendment  dated  January 5, 2004  authorized  the Company to maintain  the same
purchase price of  $10,650,000  but reduce the value of shares issued from $1.00
to $0.20 per share.  Therefore,  in January 2004 the Company  issued  additional
shares to the  appropriate  shareholders  bring the total shares  issued for the
purchase of Level X to 1,904,100  preferred  shares  (convertible  to 38,082,000
common  shares)  valued at  $3,809,918  and  15,164,671  common shares valued at
$6,840,082, for a total value of $10,650,000. As a result, the revised agreement
resulted in a change of majority control.


Acquisitions through Issue of Stock
-----------------------------------

On March 31, 2004, the Company issued  10,000,000  shares of its common stock to
the shareholders of MasterDisk in exchange for all of the issued and outstanding
shares of MasterDisk.  As a result of the share  exchange,  MasterDisk  became a
wholly owned subsidiary of the Company.

MasterDisk  headquartered  in New York City, is one of the leading audio,  video
and multimedia  mastering  facilities in the U.S. The Company through its wholly
owned subsidiary provides state of the art authoring for digital videodisks, and
multi-channel  5.1  mastering.  For over thirty  years  MasterDisk  has provided
quality media mastering through personal service, expertise and creativity.

The Company  recognized  purchase of MasterDisk trade name of $546,681 (see Note
3- Goodwill and Other  Intangible  Assets) related to the excess of the purchase
price over the net assets.  The acquisition was accounted for under the purchase
method of accounting.  Results of operation  since the date of acquisition  have
been included in the consolidated financial statements.


Sale of Subsidiary
-------------------

On March 31, 2005, the company entered into an agreement to sell its subsidiary,
Masterdisk Corporation back to its original owners in exchange for the return of
the  10,000,000  shares of common  stock with a par value of .001.  Management's
decision  to  sell  Masterdisk  back  to the  original  owners  was  based  upon
management's determination that Masterdisk could not reach profitability for the
following  reasons:  (1) It is management's  belief that a large number of major
record labels have  recently  begun  turning to in-house  mastering  services as
opposed to outsourcing  mastering services to companies like Masterdisk in order
to cut  costs;  and (2) there has been a  significant  decrease  in the  overall
number  of  titles  being  released  by the major  record  labels;  consequently
decreasing the number of projects open for bid.  Additionally,  certain disputes
and  disagreements  between the parties arose which prevented all of the parties
to the  Acquisition  and Exchange  Agreement  from obtaining the benefits of the


                                       49
<PAGE>

Note 8. STOCKHOLDERS' EQUITY - continued

Acquisition and Exchange  Agreement to their complete  satisfaction  and all the
parties  agreed  that it was in the  best  interest  of all  concerned  that the
transaction be unwound.


Stock Incentive Plan
--------------------

The  Company  adopted a Stock  Incentive  Plan which was  revised in its January
2004, S-8 Registration Statement. Under the plan, the Company can issue stock to
consultants, employees, directors and company officers in exchange for services.


Note 9. INCOME TAXES:

SFAS No. 109  requires  the  reduction  of  deferred  tax assets by a  valuation
allowance if, based on the weight of available evidence,  it is more likely than
not that some or all of the  deferred  tax assets will not be  realized.  In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is  $1,242,389,  which is  calculated  by  multiplying  a 22%
estimated tax rate by the cumulative  NOL of  $19,102,610.  The total  valuation
allowance is a comparable $1,242,389. Details for the last two years follow

                                     6/30/05            6/30/04
                               --------------  ----------------
    Deferred Tax Asset          $  4,202,574   $      1,242,389
    Current Taxes Payable               0.00               0.00
    Income Tax Expense          $       0.00   $           0.00
                                ============   ================
    Valuation Allowance           (4,202,574)        (1,242,389)


Below is a chart showing the estimated  corporate  federal net operating  losses
(NOL) and the years in which they expire.

Year                            Amount                Expiration
----                            --------              ----------
1999                         $   207,036                 2019
2000                             432,268                 2020
2001                             298,721                 2021
2002                             532,354                 2022
2003                             190,122                 2023
2004                           3,986,724                 2024
2005                          13,451,975                 2025
                             -----------
Total NOL                    $19,102,610
                             ===========



                                       50
<PAGE>

Note 10. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Below is a listing of the most  recent  accounting  standards  SFAS  145-150 and
their effect on the Company.

SFAS 146 Accounting for Costs Associated with Exit or Disposal Activities

This statement  requires  companies to recognize  costs  associated with exit or
disposal  activities,  other than SFAS 143 costs,  when they are incurred rather
than at the date of a commitment to an exit or disposal plan.  Examples of these
costs are lease  termination  costs,  employee  severance costs  associated with
restructuring,  discontinued operation, plant closing, or other exit or disposal
activity. This statement is effective after December 15, 2002.

SFAS 147 Acquisitions of Certain  Financial  Institutions - an amendment of FASB
Statement No. 72 and 144 and FASB Interpretation No. 9.

This statement  makes the acquisition of financial  institutions  come under the
statements 141 and 142 instead of statement 72, 144 and FASB  Interpretation No.
9. This statement is applicable for acquisition on or after October 1, 2002.


Note 10. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS - continued

SFAS 148 Accounting for Stock-Based Compensation - Transition and Disclosure

Amends FASB 123 to provide  alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation.

SFAS 149  Amendment  of  Statement  133 on  Derivative  Instruments  and Hedging
Activities

This  Statement  amends and  clarifies  financial  accounting  and reporting for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts  (collectively  referred  to as  derivatives)  and for  hedging
activities under FASB Statement No. 133,  Accounting for Derivative  Instruments
and Hedging Activities.

SFAS 150 Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity

This  statement  requires that such  instruments be classified as liabilities in
the balance sheet. SFAS 150 is effective for financial  instruments entered into
or modified after May 31, 2003.

Interpretation No. 46 (FIN 46)

Effective  January 31, 2003, The Financial  Accounting  Standards Board requires
certain variable interest entities to be consolidated by the primary beneficiary
of  the  entity  if  the  equity  investors  in  the  entity  do  not  have  the
characteristics  of a continuing  financial  interest or do not have  sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties. The Company has not invested
in any such entities, and does not expect to do so in the foreseeable future.

The adoption of these new  Statements is not expected to have a material  effect
on the Company's  current  financial  position,  results or operations,  or cash
flows.

                                       51
<PAGE>

Note 11. SUBSEQUENT EVENTS

On July 7, 2005, the Company issued 1,635,700 restricted common shares valued at
$24,535  for  consulting  services.  The  issuance  of the stock was exempt from
registration under Section 4(2) of the Securities Act.

On July 13, 2005, the Company issued 2,495,000  restricted  common shares valued
at $37,412 for  consulting  services.  The issuance of the stock was exempt from
registration under Section 4(2) of the Securities Act.

On July 19, 2005, the Company issued 6,552,000  restricted  common shares valued
at 78,622 for  consulting  services.  The  issuance of the stock was exempt from
registration under Section 4(2) of the Securities Act.

On July 19, 2005, the company issued 7,430,000  restricted  common shares valued
at $124,097 for consulting  services.  The issuance of the stock was exempt from
registration under Section 4(2) of the Securities Act.

On September 22, 2005, the Company issued  24,896,760  restricted  common shares
for consulting services valued at $253,947. The issuance of the stock was exempt
from registration under Section 4(2) of the Securities Act.

On September 27, 2005, Pop3 Media Corp.  ("Pop3) filed a complaint for breach of
contract against Peter Cetera ("Cetera"), one of its distributed artists, on the
master licensing agreement signed on September 24, 2004. The case was filed with
the Maricopa County Superior Court in Arizona, case caption, Pop3 Media Corp. v.
Peter Cetera, Case No.  CV2005-015197.  Management felt it was necessary to file
this lawsuit in order to preserve shareholder value after it was unable to reach
a  reasonable  solution  during  arbitration  held by the  American  Arbitration
Association in June 2005.

On September 28, 2005, the Company issued 500,000 restricted common shares to an
employee  as a  bonus.  Also  on the  same  date,  the  Company  issued  500,000
restricted  common shares to another  employee as a bonus as well.  Also, on the
same date the  company  issued  2,000,000  restricted  common  shares  for legal
services.  The issuance of the stock was exempt from registration  under Section
4(2) of the Securities Act.

On September 28, 2005, the Company issued  11,362,390  restricted  common shares
for consulting services valued at $102,261. The issuance of the stock was exempt
from registration under Section 4(2) of the Securities Act.

On October 31, 2005 the former Chief Executive  Officer (CEO), John D. Aquilino,
and  President  of the Company  resigned.  Ari Bass was hired as the new CEO and
President of Pop3 Media Corp.

As of the filing of this report, management is in ongoing discussions with Roxxy
Corporation for sale of its distribution division.

Additionally, management is in the process of negotiations to acquire the rights
to a new proprietary  portable data storage  technology which is currently under
development  as well  management's  discussions  with SBC  Operations,  Inc.,  a
subsidiary of SBC  Communications,  Inc., to license and exhibit upto 12 premier
movie features per year.


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