SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB



[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, FOR THE QUARTER ENDED SEPTEMBER 30, 2003

COMMISSION FILE NUMBER 000-28485



VIASTAR HOLDINGS, INC.



|Nevada(State or Other Jurisdiction of
Incorporation or Organization)                                                                                                                                                                                                                                                                   |  | 88-0380343(I.R.S. Employer
Identification No.)                            
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                       |  |                                                                           
|2451 W. BIRCHWOOD AVENUE, SUITE 105, MESA, ARIZONA(Address of Principal Executive Offices)                                                                                                                                                                                                                                             |  | 85202(Zip Code)                                                           
|                                                                                                                                                                                                                                                                                                                                       |  |                                                                           
|(480) 894-0311(Registrant's Telephone Number, Including Area Code)                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                       |  |                                                                           
|Securities registered pursuant to Section 12(g) of the Act:                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                       |  |                                                                           
|Title of each classCommon Stock, $.001 par
value per share                                                                                                                                                                                                                                                                             |  | Name of each exchange on which registeredOver the counter - Bulletin Board
|                                                                                                                                                                                                                                                                                                                                       |  |                                                                           
|Securities registered under Section 12(b) of the Exchange Act:None                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                       |  |                                                                           
|Check whether the Registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[  ]
|                                                                                                                                                                                                                                                                                                                                      
|Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock, as of November 17, 2003: Common stock, $0.001 par value - 24,486,646                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                      
|Transitional Small Business Disclosure Format Yes |X| No |  |                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                      



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TABLE OF CONTENTS





|PART I - FINANCIAL INFORMATION
|------------------------------
|                              
|Item                          
|                              
|1.                            
|                              
|.                             
|                              
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|                              
|                              
|                              
|                              
|                              
|2.                            
|                              
|3.                            
|                              
|4.                            
|                              
|PART II - OTHER INFORMATION   
|                              
|1.                            
|                              
|2.                            
|                              
|3.                            
|                              
|4.                            
|                              
|5.                            
|                              
|6.                            
|                              
|6.                            
|                              
|SIGNATURES                    
|                              
|EXHIBIT INDEX                 
|                              

2

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PART I



Item 1.Financial Statements



Note Regarding Forward-Looking Statements

This Form 10-QSB 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," "should," "estimates," "projects," or similar terms, variations of such terms or the negative of such terms, or by discussion of strategies or trends. 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-QSB 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 within, or incorporated by reference into this Form 10-QSB. You are encouraged to refer to the Company's Form 10-KSB's filed for the year ended December 31, 2002 and the transition period ended June 30, 2003 for a detailed discussion of these factors.

3

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VIASTAR HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS





|                                                                                                                        |                                                                                                                                                                                | As of                           |           
|----------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------- | ----------
|                                                                                                                        |                                                                                                                                                                                | September 30, 2003 
(unaudited) |           
|ASSETS                                                                                                                  |                                                                                                                                                                               
|Current assets:                                                                                                         |                                                                                                                                                                                |                                 |           
|                                                                                                                        | Cash                                                                                                                                                                           |                                 | $         
|                                                                                                                        | Employee advances                                                                                                                                                              |                                 |           
|                                                                                                                        | Accounts receivable, net                                                                                                                                                       |                                 |           
|                                                                                                                        | Due from Moving Pictures International                                                                                                                                         |                                 |           
|                                                                                                                        | Note receivable                                                                                                                                                                |                                 |           
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Total current assets                                                                                                    |                                                                                                                                                                                |                                 | 277,867   
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Inventory                                                                                                               |                                                                                                                                                                                |                                 | 1,070,179 
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Property and equipment, net of accumulated depreciation of $375,260 and none as of September 30, 2003 and June 30, 2003 |                                                                                                                                                                                |                                 | 7,129,933 
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Organization costs                                                                                                      |                                                                                                                                                                                |                                 | 2,000     
|Screenplay rights, at cost                                                                                              |                                                                                                                                                                                |                                 | 100,000   
|Artist agreements, net                                                                                                  |                                                                                                                                                                                |                                 | 782,250   
|Retail distribution rights, net                                                                                         |                                                                                                                                                                                |                                 | 1,136,850 
|Goodwill                                                                                                                |                                                                                                                                                                                |                                 | 1,011,750 
|Investment in Moving Pictures International                                                                             |                                                                                                                                                                                |                                 | 642,233   
|Deposits and other                                                                                                      |                                                                                                                                                                                |                                 | 6,000     
|Notes receivable                                                                                                        |                                                                                                                                                                                |                                 | -         
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Total assets                                                                                                            |                                                                                                                                                                                | $                               | 12,159,062
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                    |                                                                                                                                                                               
|Current liabilities:                                                                                                    |                                                                                                                                                                                |                                 |           
|                                                                                                                        | Accounts payable and accrued liabilities                                                                                                                                       |                                 | $         
|                                                                                                                        | Amounts due officers and directors, including salaries                                                                                                                         |                                 |           
|                                                                                                                        | Related party advances                                                                                                                                                         |                                 |           
|                                                                                                                        | Notes payable                                                                                                                                                                  |                                 |           
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Total current liabilities                                                                                               |                                                                                                                                                                                |                                 | 407,844   
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Deferred income program rights                                                                                          |                                                                                                                                                                                |                                 | 735,000   
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Total liabilities                                                                                                       |                                                                                                                                                                                |                                 | 1,142,844 
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Stockholders' equity:                                                                                                   |                                                                                                                                                                                |                                 |           
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|                                                                                                                        | Common stock, $0.001 par value; (50,000,000 shares authorized; shares issued and outstanding- 23,328,096 and 10,646,846 at September 30, 2003 and June 30, 2003, respectively) |                                 |           
|                                                                                                                        | Additional paid-in capital                                                                                                                                                     |                                 |           
|                                                                                                                        | Encumbrances (No shares and 2,000,000 shares, $0.001 par value common stock at September 30, 2003 and June 30, 2003, respectively)                                             |                                 |           
|                                                                                                                        | Deficit accumulated post development stage                                                                                                                                     |                                 |           
|                                                                                                                        | Deficit accumulated during development stage                                                                                                                                   |                                 |           
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Total stockholders' equity                                                                                              |                                                                                                                                                                                |                                 | 11,016,218
|                                                                                                                        |                                                                                                                                                                                |                                 |           
|Total liabilities and stockholders' equity                                                                              |                                                                                                                                                                                | $                               | 12,159,062
|                                                                                                                        |                                                                                                                                                                                |                                 |           

See accompanying notes to consolidated financial statements.

4

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VIASTAR HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS





|                                                   |                                                                    | For the Three Months Ended September 30, |           
|-------------------------------------------------- | ------------------------------------------------------------------ | ---------------------------------------- | ----------
|                                                   |                                                                    | 2003                                     |           
|                                                   |                                                                    |                                          |           
|Revenues:                                          |                                                                    |                                          |           
|                                                   | Magazine advertising revenue                                       |                                          | $         
|                                                   | Music publishing revenue                                           |                                          |           
|                                                   |                                                                    |                                          |           
|Total revenue                                      |                                                                    |                                          | 141,481   
|                                                   |                                                                    |                                          |           
|Cost of goods sold:                                |                                                                    |                                          |           
|                                                   | Magazine advertising                                               |                                          |           
|                                                   | Music publishing                                                   |                                          |           
|                                                   |                                                                    |                                          |           
|Total cost of goods sold                           |                                                                    |                                          | 65,271    
|                                                   |                                                                    |                                          |           
|Gross margin                                       |                                                                    |                                          | 76,210    
|                                                   |                                                                    |                                          |           
|                                                   |                                                                    |                                          |           
|Selling, general and administrative expenses:      |                                                                    |                                          |           
|                                                   | Compensation expense                                               |                                          |           
|                                                   | Professional and consulting fees                                   |                                          |           
|                                                   | Depreciation and amortization                                      |                                          |           
|                                                   | Administrative overhead expense                                    |                                          |           
|                                                   |                                                                    |                                          |           
|                                                   |                                                                    |                                          |           
|Total selling, general and administrative expenses |                                                                    |                                          | 927,898   
|                                                   |                                                                    |                                          |           
|                                                   |                                                                    |                                          |           
|Loss from operations                               |                                                                    |                                          | (851,688  
|                                                   |                                                                    |                                          |           
|Other income and (expense):                        |                                                                    |                                          |           
|                                                   | Interest expense, net of interest income of none and $16,079       |                                          |           
|                                                   | Loss on sale of majority interest in Moving Pictures International |                                          |           
|                                                   |                                                                    |                                          |           
|Total other income and (expense)                   |                                                                    |                                          | (256,599  
|                                                   |                                                                    |                                          |           
|                                                   |                                                                    |                                          |           
|Loss before income taxes                           |                                                                    |                                          | (1,108,277
|                                                   |                                                                    |                                          |           
|                                                   | Income taxes                                                       |                                          |           
|                                                   |                                                                    |                                          |           
|Net loss                                           |                                                                    | $                                        | (1,109,277
|                                                   |                                                                    |                                          |           
|Earnings (loss) per common share:                  |                                                                    |                                          |           
|Basic and fully diluted                            |                                                                    | $                                        | (0.06     
|                                                   |                                                                    |                                          |           
|Weighted average number of shares                  |                                                                    |                                          | 19,369,659
|                                                   |                                                                    |                                          |           

See accompanying notes to consolidated financial statements.

5

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VIASTAR HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                         |                                                      | For the Three Months Ended September 30,
|---------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------
|                                                                                         |                                                      | 2003                                    
|Operating activities:                                                                    |                                                      |                                         
|Net loss                                                                                 |                                                      | $                                       
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                      |                                         
|                                                                                         | Depreciation expense                                 |                                         
|                                                                                         | Loss on sale of non-affiliate                        |                                         
|                                                                                         | Common stock issued for services                     |                                         
|Changes in operating assets and liabilities                                              |                                                      |                                         
|                                                                                         | Interest receivable                                  |                                         
|                                                                                         | Accounts receivable                                  |                                         
|                                                                                         | Due from Moving Pictures International               |                                         
|                                                                                         | Deposits                                             |                                         
|                                                                                         | Employee advances                                    |                                         
|                                                                                         | Accounts payable                                     |                                         
|                                                                                         | Due to officers and directors                        |                                         
|                                                                                         |                                                      |                                         
|Net cash used in operating activities                                                    |                                                      |                                         
|                                                                                         |                                                      |                                         
|Investing activities:                                                                    |                                                      |                                         
|Purchase of furniture and equipment                                                      |                                                      |                                         
|Organization and development costs                                                       |                                                      |                                         
|                                                                                         |                                                      |                                         
|Net cash used in investing activities                                                    |                                                      |                                         
|                                                                                         |                                                      |                                         
|Financing activities:                                                                    |                                                      |                                         
|Related party advances                                                                   |                                                      |                                         
|Proceeds from the issuance of common stock                                               |                                                      |                                         
|                                                                                         |                                                      |                                         
|Net cash provided by financing activities                                                |                                                      |                                         
|                                                                                         |                                                      |                                         
|Net increase (decrease) in cash                                                          |                                                      |                                         
|Cash, beginning of period                                                                |                                                      |                                         
|                                                                                         |                                                      |                                         
|Cash, end of period                                                                      |                                                      | $                                       
|                                                                                         |                                                      |                                         
|                                                                                         |                                                      |                                         
|                                                                                         |                                                      |                                         
|Supplemental disclosure of cash flow information:                                        |                                                      |                                         
|Income taxes                                                                             |                                                      | $                                       
|Interest                                                                                 |                                                      | $                                       
|Supplemental disclosure of non-cash investing and financing activities:                  |                                                      |                                         
|                                                                                         | Investment in Moving Pictures International          |                                         
|                                                                                         | Note receivable settlement                           |                                         
|                                                                                         | Accrued salary settlement and other officer expenses |                                         
|                                                                                         | Assets acquired in merger agreement                  |                                         
|                                                                                         | Debt relief through the issuance of stock            |                                         



See accompanying notes to consolidated financial statements.

6

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VIASTAR HOLDINGS, INC. AND SUBSIDIARIES



1. Summary of Significant Accounting Policies

Organization

ViaStar Holdings, Inc. (the "Company" or "ViaStar") 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 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. The surviving entity continued to exist as ViaStar Holdings, Inc. or the Company and the business operations and management of the Company were transferred and moved to Phoenix, Arizona.

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 September 30, 2003 and June 30, 2003, and the consolidated results of operations for the three-month periods ended September 30, 2003 and 2002 and the consolidated cash flows for the three-month periods ended September 30, 2003 and 2002. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year.

Certain notes and other information have been condensed or omitted from these interim financial statements. These statements, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the 2002 Annual Report and 2003 Transition Report, which have been incorporated by reference, as well as the Form 8-K filed on July 17, 2003 indicating the merger between Level X and the Company. Certain information in the financial statements and notes has been reclassified to conform to current period presentation.

Principles of consolidation

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

Cash and cash equivalents

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

Accounts receivable

The Company sells entertainment media products to various national retail chains through distributors, primarily located throughout the United States, during the normal course of business. The Company receives most if its sales receipts within a 90-day term. Total sales are determined when the retailer scans the product at point of purchase.

Concentration of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk principally consists of cash, cash equivalents and trade receivables. The Company invests available cash in money market securities of high-credit-quality financial institutions. The Company had approximately $22,000 in cash or cash equivalents as of September 30, 2003 and none as of June 30, 2003.

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 initial adoption of SFAS 142 and annually thereafter. The Company performed its initial impairment review in January 2002 and will annually perform its impairment review in the fourth quarter of every year. Other intangibles with finite lives will be amortized over their estimated useful lives.

Prior to the adoption of SFAS 142, goodwill was to be amortized on a straight-line basis over 15 years while other intangibles were to be amortized over their estimated useful lives that usually ranged from two to fifteen years.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market.  Inventory costs include any material,

7

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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. It is at least reasonably possible that the Company's estimates of lives and recoverability will change.

Long-lived assets

Long-lived assets are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability test is performed at the lowest level at which net cash flows can be directly attributable to long-lived assets. For any assets identified as impaired, the Company measures the impairment as the amount by which the carrying value of the asset exceeds the fair value of the asset. In estimating the fair value of the asset, management utilizes a valuation technique based on the present value of expected future cash flows.

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 and related taxes, and sales and use 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.

Revenue recognition

Revenue from product sales is generated when the product is scanned by the retailer or when advertisements are placed with the Company. The period of time from initial order to final shipment of the product typically ranges from thirty to forty five days.  Revenue is recognized when the retailer scans the product at the point of purchase.

Income taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the three months in which those temporary differences are expected to be recovered or settled. Income tax expense (benefit) is comprised of the tax payable (receivable) for the period and the change in deferred income tax assets and liabilities during the period. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Earnings per share

SFAS No. 128, "Earnings per Share," requires the presentation of basic earnings per share and diluted earnings per share. Basic earnings per common share are calculated by dividing the net income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is calculated by dividing net income by the weighted average number of shares of common stock outstanding, adjusted for the effect of potentially dilutive securities using the treasury stock method.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Comprehensive income

For the three months ended September 30, 2003 and 2002, the Company did not have any reportable components of other comprehensive income as defined in Statement of Financial Accounting Standards No. 130. Therefore, statements of comprehensive income have not been presented for the periods presented.

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 subsidiaries into one reportable segment. The Company recognized income from its publishing operations during the entire period the Company had a majority ownership in Moving Pictures International ("MPI"). Pursuant to negotiations and settlement with the encumbered note holder the Company negotiated the sale of an 80% controlling interest in MPI on September 26, 2003.

8

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Fair value of financial instruments

The carrying value of cash and cash equivalents, patient receivables, accounts payable and accrued expenses approximate their fair value based on the short-term nature of these accounts. Long-term debt and capital lease obligations bear interest at fixed rates, and their fair value was estimated using a discounted cash flow analysis based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The estimated fair value of the Company's long-term debt and capital lease obligations approximated fair value at September 30, 2003 and June 30, 2003.

2. Inventories

Inventories at September 30, 2003 and June 30, 2003 are summarized as follows:



|               
|---------------
|               
|               
|Raw materials  
|Work-in-process
|Finished goods 
|               
|Inventory      
|               

3. Property and Equipment

Property and equipment at September 30, 2003 and June 30, 2003 are summarized as follows:



|                             
|-----------------------------
|                             
|                             
|Equipment and furniture      
|Studio equipment             
|Leasehold improvements       
|                             
|                             
|Less accumulated depreciation
|                             
|Property and equipment, net  
|                             

Depreciation expense was $375,260 and none for the three months ended September 30, 2003 and 2002, respectively.

4. Screenplay Rights

The Company transferred its rights to the screenplay "The Misadventures of Charlie Chance" to its wholly owned subsidiary All4 Entertainment, Inc. ("All4") in exchange for 100% of its issued and outstanding common stock.  The Company plans to market and promote the screenplay and ancillary products through All4.

5. Artist Agreements

The Company received the rights to several artist agreements in its merger with Level X. The artist agreements have an approximate fair value of $56,250 each based on industry standards. The Company plans to market and promote the artists and music through its distribution channels (see Note 6-Retail Distribution Rights).

6. Retail Distribution Rights

The Company received the rights to a national distribution agreement with the former Electric Kingdom Distribution group in its merger with Level X. The distribution agreement allows the Company to distribute its media and entertainment products on the shelves of approximately 20,000 retail stores worldwide. The Company plans to utilize this distribution network for its music products as well as various other media and entertainment products.

9

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7. Goodwill and Intangible Assets

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. The Company complies with the periodic impairment test procedures required as outlined in SFAS 142. Goodwill as of September 30, 2003 approximates $1,011,750, the difference between the price paid for Level X in its merger and the fair value of the net assets acquired in the transaction. The Company does not believe that any impairment of goodwill or other intangibles is necessary at this time.

8. Investment and Sale of Majority Interest

The Company on April 23, 2003 acquired the rights to purchase Moving Pictures International Ltd, ("MPI") a leading entertainment news magazine. The Company issued 3,500,000 shares of common stock, par value $0.001 in connection with the purchase. The Company completed the acquisition during July 2003. The acquisition of MPI was accounted for under the purchase method of accounting. Total investment into MPI by the Company including the assumption of liabilities was approximately $1,200,000. The transaction was denominated in the English pound (₤) converted to the US dollar ($). No foreign currency translation adjustment was necessary. The Company on September 26, 2003 sold an 80% controlling interest in MPI to Rhiannon Holdings, Inc.  The purchase price paid by the buyer was the assumption of a $700,000 note payable, the return of seven million (7,000,000) shares of common stock of the Company pledged as collateral on this note, and the new issuance of two million (2,000,000) shares of common stock of the Company with a stated value of $340,000, with the Company retaining a 20% dilutive ownership interest in MPI. In addition to retaining a 20% interest in MPI the Company also receives the right to collect 20% of the net revenues of MPI.

9. Notes Receivable

The Company during the year ended December 31, 2001 issued 3,000,000 shares of common stock to an affiliate of a former officer and director and 500,000 shares of common stock to an officer and director of the Company secured recourse note receivables in the amount of $300,000 and $50,000, accruing interest at 4.5% per annum, respectively. Prior to June 30, 2003 the Company settled the $50,000 note receivable and accrued interest to an officer and director of the Company recognizing payment of accrued salary to the officer and director. Prior to September 30, 2003 the Company settled the $300,000 note receivable and accrued interest to an affiliate of a former officer and director recognizing payment on accounts payable and accrued salary in excess of $330,000 (see Note 10 - Amounts Due Officers and Directors). The Company additionally through its merger with Level X as of September 30, 2003 had a short-term note receivable with a distributor of its music products in the amount of $78,000.

10. Amounts Due Officers and Directors

The Company records for various costs and expenses, which have been paid for in the normal course of business by its officers and directors. The Company accordingly requires the submission of approved expense reports or documentation of monies forwarded or advanced to the Company on a timely basis. The Company also records the accrual of officer's salaries and related taxes, which are included in the total amounts due officers and directors. Additionally, various other expenses paid by officers and directors are accrued from time to time based on the estimated costs of goods or services paid. Amounts due to officers and directors include, none and $411,000 of accrued officers salary as of September 30, 2003 and June 30, 2003, respectively.   The Company through the negotiations and settlement retired approximately $400,000 in amounts due to officers and directors (see Note 9 - Notes Receivable).

11. Related Party Advances

Related party advances as of September 30 and June 30, 2003 consisted of the following:



|                                                                                                                                                                                                                                                                                            
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|Related party payable to a family trust of an officer of the Company, post September 30, 2003 converted into a note payable, secured by common stock of the Company, due September 30, 2005, with interest rate of 10.0%, payable in monthly installments of $6,000, principal and interest.
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            

10

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The Company through the sale of an 80% ownership interest in MPI was able to remove approximately $700,000 in debt and the return of pledged shares that approximated $1,490,000 in value. Management believes the sale of the controlling interest in MPI was on terms and conditions favorable to the Company.

12. Capital Structure

ViaStar on April 6, 1999 amended its Articles of Incorporation to effect a change in its capital structure. The Amended Articles of Incorporation authorized an increase from 25,000,000 to 50,000,000 shares of capital stock consisting of 50,000,000 shares of common stock, par value $0.001. There were no other classes of stock authorized.

Subsequent to June 30, 2003, the Company's Board of Directors resolved to create a new class of equity - "Series A" Convertible Preferred, par value $0.001, convertible into 1 share of common stock, par value $0.001.  The Series A preferred stock was to be issued in completion of the terms of the merger with Level X. As of September 30, 2003 the Board of Directors resolved to modify the terms of the merger agreement with Level X and issued 9,150,000 shares of common stock of the Company as part of the purchase pursuant to the terms of the merger. The preferred stock's stipulated value pursuant to the terms of the merger was to approximate $9,150,000; the Company's Board of Directors as of September 30, 2003 has not resolved the issue as to total value of capital issued as stated within the merger agreement.

13. Encumbrances and Related Party Transactions

During the three month period ended September 30, 2003, the Company encumbered 7,000,000 shares of common stock (stated value of $1,490,000) with a related party payable of $700,000 (see Note 11 - Related Party Advances). The funds were advanced from an affiliate of a former officer and director of the Company to settle outstanding obligations of MPI in the amount of $600,000 and a direct loan to the Company in the amount of $100,000. The affiliate advanced these monies with the condition (1) that the short-term advances are secured by the issuance of 2,000,000 shares of common stock of the Company (which occurred prior to June 30, 2003) and the issuance of 5,000,000 shares of common stock of the Company (which occurred prior to September 30, 2003), (2) in the event the Company could not repay the monies advanced the affiliate would take free and clear title to the common stock. Prior to the sale of the 80% ownership interest in MPI the Company negotiated the following, (1) the Company had the right to pay the entire balance prior to 24 months and the affiliate would return 50% of the shares issued, and (2) in the event the Company failed to pay the entire balance, the shares would be returned on a pro-rata basis based upon dollar value. The following was an approximation of the deferred interest costs, of which the Company was able to avoid by the sale of the controlling interest in MPI:



|                     
|---------------------
|                     
|                     
|Payment prior to term
|                     

Prior to September 30, 2003 the advances and rights associated with the advances were transferred to and assumed by the Company's former Chairman of the Board, Mr. Genarro Buonocore. The Company entered into a note payable with Mr. Buonocore in the amount of $700,000, with interest payments of $6,000 per month for a period of 24 months, with the remaining principal and interest due and payable on the 24th month. The pledged shares continued to be owned by the affiliate with the obligation pass-thru to Mr. Buonocore. On September 26, 2003 the affiliate entered into an agreement whereby Rhiannon Holdings, Inc. (the affiliate) would purchase a controlling interest in MPI of 80%. The purchase price was as follows, the affiliate would return to the Company, seven million (7,000,000) shares of common stock received as collateral for the advances/note payable, the assumption of all liabilities associated with MPI, the assumption of the $700,000 note payable to Mr. Buonocore 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 believes the transaction entered into with the affiliate and the former Chairman of the Board to have been negotiated in an arms length transaction.

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14. Going Concern

As shown in the accompanying consolidated financial statements, the Company has incurred approximately $2,773,000 in losses since inception. This, as well as the risks associated with raising capital through the issuance of equity and/or debt securities, creates uncertainty as to the Company's ability to continue as a going concern.

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



|* | Expanding or increasing its distribution of products and services through its newly acquired subsidiaries;                                                                                              
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Expanding market presence through selective acquisitions or the merger of, with established media and entertainment companies;                                                                          
|* | Raising capital through the sale of debt and/or equity securities; and,                                                                                                                                 
|* | 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.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

Certain matters discussed in this Form 10-QSB 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. 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, cancellations of projects, and other factors, including general economic conditions, 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.

Change in Fiscal Year

On August 21, 2003, the Company changed its fiscal year end from December 31st to June 30th. The Company filed the appropriate documents with the Internal Revenue Service to change its year for tax purposes.

Results and Plan of Operations

The Company has financed operations through the sale of Common Stock and through loans from its officers and directors. It is anticipated that the Company film financing will be entirely through outside sources through various financial arrangements. As discussed elsewhere in this report the Company merged with Level X Media Corporation, which the business operations became the operations of the Company. Level X ceased to exist after the merger, which occurred on July 18, 2003. The business of Level X and the acquisition and subsequent disposition of MPI are discussed throughout this report. Managements' discussion and analysis however is the results of operations of the "post-merger" operations for post June 30, 2003 activities and "pre-merger" operations of ViaStar Holdings, Inc. and its subsidiaries prior to June 30, 2003. The "pre-merger" operations were limited to the identification of merger and acquisition opportunities. Management conducted limited activities with respect to other business ventures however without success. The "post-merger" activity of Level X qualifies the Company to cease its development stage designation.

The Company's capital requirements will depend on numerous factors, including the profitability of our media products and our ability to control costs. We cannot predict when and if any additional capital may be needed and we may need to seek one or more substantial investments from financial institutions or groups of investors. New investors could cause substantial dilution to our existing stockholders.

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Three months ended September 30, 2003 compared to the three months ended September 30, 2002

The following management changes occurred during the three months ended September 30, 2003.



|* | Mr. Gennaro Buonocore resigned from the Company as a member of the Board of Directors and Chairman of the Board. Mr. Buonocore will continue to assist the Company in his capacity as an interested shareholder of the Company.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Mr. George Malasek assumed the role of Chief Financial Officer.                                                                                                                                                                

The Company generated $141,481 in revenues from music and publishing operations during the three months ended September 30, 2003, compared to none for the comparative period ending September 30, 2002. The business operations of Moving Pictures International where included in the consolidated financial statements of the Company for the time period that the Company held a controlling interest. The Company incurred $65,271 in cost of goods sold on revenues generated during the three months ended September 30, 2003, compared to none for the comparative period ending September 30, 2002. The Company recognized a gross profit of $76,210 during the three months ended September 30, 2003, compared to none for the comparative period ending September 30, 2002. The Company believes that the revenues and costs of goods sold will increase significantly as the Company enters into new markets and releases new music products from various new artists under management.

The Company's capital is still very limited. The Company operational costs have continued to be limited even with the operational business acquired through its merger with Level Xs.

Selling, general and administrative expenses were $927,898 for the three months ended September 30, 2003, representing an increase of $802,459, or 640%, as compared to selling, general and administrative expenses of $125,439 for the three months ended September 30, 2002. Compensation expense was $50,804 for the three months ended September 30, 2003; representing a decrease of $24,196, or 32% as compared to compensation expense of $75,000 for the three months ended June 30, 2002. Compensation expense has decreased with new management and consideration rendered pursuant to employment agreements. Professional and consulting fees were $458,822 for the three months ended September 30, 2003 an increase of  $436,322, or 1,939%, as compared to professional and consulting fees of $22,500 for the three months ended September 30, 2002. The Company incurred a one time fee of approximately $170,000 in directors compensation due to the issuance of restricted common stock of the Company to a director agreed to and entered into with prior management, $160,000 in marketing costs associated with public and investor relation services of the Company and its music business, and approximately $128,000 in professional legal fees in association with the Company's defense against Mr. Dadon and other individuals alleging obligations due to them and authorized by prior management. The Company has accrued a significant portion of the legal services received from law firm associated with the former shareholders of Level X and therefore to date has not incurred the substantial and enormous cash outlay associated with a proper legal defense.  The legal fees and professional time incurred in the defense of the Company and its former management and some members of its current management are estimated to be in excess of $500,000 through to date. Prior management of the Company unfortunately misrepresented material facts about the Company's financial condition and other contingencies that have placed the ability of the Company and its management to conduct business in grave harm. The Company and its current management intend to limit the use of outside consultants, marketing professionals and legal professionals in hopes of conserving capital and further dilution to the shareholders.

Depreciation expense was $375,260 for the three months ended September 30, 2003, as compared to none for the three months ended September 30, 2002. Depreciation expense is recognized on the fair value of the assets that were obtained in the merger with Level X. The Company uses the straight-line method of depreciation.

Interest expense, net of interest income was $16,599 for the three months ended September 30, 2003 as compared to interest income of $16,079 for the three months ended September 30, 2002. The Company during the three-month period ended September 30, 2002 recognized interest income of $16,079 on the notes receivable totaling $350,000 in principal in the aggregate. The Company recognized a loss on sale of majority interest in Moving Pictures International of $240,000 for the three months ended September 30, 2003. The Company believes the sale of a controlling interest in MPI was in the best interest of its shareholders and the Company's business operations as to the potential and apparent conflict in hours of operations due to time zones, the economic and business environment in which Moving Pictures International operates and the general management beliefs of MPI.

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As a result of the foregoing factors, we incurred a net loss of $1,109,277 for the three months ended September 30, 2003, as compared to a net loss of $109,360 for the three months ended September 30, 2002. This represents an increase in net loss of $999,917 or 914%. The Company incurred substantial costs in its efforts to clean up the operational problems and corporate practices that were conducted in a manner not conducive to normal business practices. In order to mitigate legal fees and the possibility for future litigation the Company and its management may need to take steps to eliminate certain obstacles that have been placed in the path of the Company.

Liquidity and Capital Resources



|                                          | For the Three MonthsEnded September 30, 2003
|----------------------------------------- | --------------------------------------------
|Net cash used in operating activities     | $                                           
|Net cash used in investing activities     | $                                           
|Net cash provided by financing activities | $                                           

The principal uses of our liquidity are to finance capital expenditures and fund our operations. We operate in a capital-intensive, high cost industry that requires significant amounts of working capital to fund operations, particularly the start-up and development expenses related to media projects.

Our primary sources of liquidity to fund our operations and capital expenditures and satisfy our obligations are borrowings from officers and directors of the Company, and limited equity proceeds.

Net cash used in operating activities was $94,340 for the three months ended September 30, 2003, representing an increase in the use of cash of $93,762 from $578 for the three months ended September 30, 2002.

Net cash used in investing activities was $8,722 for the three months ended September 30, 2003, representing an increase in use of cash of $8,722 from none for the three months ended September 30, 2002. The Company purchased some equipment in order to enhance its business.

Net cash provided by operating activities was $125,000 for the three months ended September 30, 2003, representing an increase in the provision of cash of $119,196 from $5,804 for the three months ended September 30, 2002. The Company borrowed $100,000 from a former officer and director of the Company in order to pay the obligations of the Company and received $25,000 in proceeds from the sale of restricted securities.

Critical Accounting Policies, Estimates and Risks

Financial Reporting Release No. 60, which was recently released by the Securities and Exchange Commission, requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The notes to the consolidated financial statements include a summary of significant accounting policies and methods used in the preparation of the Company's Consolidated Financial Statements. The following is a brief discussion of the more significant accounting policies and methods used by the Company.

In addition, Financial Reporting Release No. 61 was recently released by the SEC to require all companies to include a discussion to address, among other things, liquidity, off-balance sheet arrangements, contractual obligations and commercial commitments.

The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible and intangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported period.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements:

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

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

Concentration of credit risk. Financial instruments that potentially subject the Company to a concentration of credit risk principally consists of cash, cash equivalents and trade receivables. The Company invests available cash in money market securities of high-credit-quality financial institutions. The Company had approximately $22,000 in cash or cash equivalents as of September 30, 2003 and none as of June 30, 2003.

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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 initial adoption of SFAS 142 and annually thereafter. The Company performed its initial impairment review in January 2002 and annually performs its impairment review in the fourth quarter of every year. Other intangibles with finite lives will in the future be amortized over their estimated useful lives.

Prior to the adoption of SFAS 142, goodwill was to be amortized on a straight-line basis over 15 years while other intangibles were to be amortized over their estimated useful lives that usually ranged from two to fifteen years.

Long-lived assets. Long-lived assets are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability test is performed at the lowest level at which net cash flows can be directly attributable to long-lived assets. For any assets identified as impaired, the Company measures the impairment as the amount by which the carrying value of the asset exceeds the fair value of the asset. In estimating the fair value of the asset, management utilizes a valuation technique based on the present value of expected future cash flows.

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 and related taxes, and sales and use 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.

Income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the three months in which those temporary differences are expected to be recovered or settled. Income tax expense (benefit) is comprised of the tax payable (receivable) for the period and the change in deferred income tax assets and liabilities during the period. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Earnings per share. SFAS No. 128, "Earnings per Share," requires the presentation of basic earnings per share and diluted earnings per share. Basic earnings per common share are calculated by dividing the net income available to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the period. Diluted earnings per common share is calculated by dividing net income by the weighted average number of shares of Common Stock outstanding, adjusted for the effect of potentially dilutive securities using the treasury stock method.

Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Comprehensive income. For the three months ended September 30, 2003 and 2002, the Company did not have any components of other comprehensive income as defined in Statement of Financial Accounting Standards No. 130. Therefore, statements of comprehensive income have not been presented.

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 subsidiaries into one reportable segment.

Fair value of financial instruments. The carrying value of cash and cash equivalents, patient receivables, accounts payable and accrued expenses approximate their fair value based on the short-term nature of these accounts. Long-term debt and capital lease obligations bear interest at fixed rates, and their fair value was estimated using a discounted cash flow analysis based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The estimated fair value of the Company's long-term debt and capital lease obligations approximated fair value at September 30, 2003 and June 30, 2003.

Going concern. As discussed in the accompanying consolidated financial statements and results of operations contained in the management's discussion and analysis section, the Company and its subsidiaries have incurred approximately $2,773,000 in losses since inception. This, as well as the risks associated with raising capital through the issuance of equity and/or debt securities, creates uncertainty as to the Company's ability to continue as a going concern.

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



|* | Expanding or increasing its distribution of products and services through its newly acquired subsidiaries;                                                                                              
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Expanding market presence through selective acquisitions or the merger of, with established media and entertainment companies;                                                                          
|* | Raising capital through the sale of debt and/or equity securities; and,                                                                                                                                 
|* | 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.

Currency Risk

One of the Company's former business operations is denominated in foreign currency. The Company believes that any adverse fluctuation in the foreign currency markets relating to these operations will not result in any material adverse effect on the Company's financial condition or results of operations.

General

Business Organization. ViaStar Holdings, Inc. (the "Company" or "ViaStar") 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 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. The surviving entity continued to exist as ViaStar Holdings, Inc. or the Company.

As of September 30, 2003, the date of the quarterly report, the Company had two operating subsidiaries; All4Entertainment, Inc. and Picture Perfect Releasing, Inc. As of the date of this report, the Company had three operating subsidiaries; All4Entertainment, Inc., Picture Perfect Releasing, Inc, and Moving Pictures International. A significant portion of the business operations of the Company will be conducted by the former business operations of Level X and its Electric Kingdom Distribution division as described throughout this quarterly report filed on Form 10-QSB. The financial statements included herewith are the consolidated financial statements of the Company and its two subsidiaries as of September 30, 2003.

Level X 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.

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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.

Subsidiaries

Moving Pictures International ("MPI"). Acquired subsequent to June 30, 2003, and a controlling interest sold on September 26, 2003 (see notes to financial statements), British movie trade publisher, MPI, is a leading entertainment news magazine established circa 1990. MPI operates in the film business-to-business publishing sector, specializing in daily publishing at film festivals and markets. Moving Pictures, the magazine, is an established brand within the film industry. The magazine has industry recognition for its strong news quotient and incisive features, delivered with an independent voice, setting it apart from other trade magazines. The Company believes MPI is poised to become a market leader, currently publishing dailies and previews of the Berlin Film Festival, the American Film Market, the Cannes Film Festival, the Moscow Film Festival, the London Film Festival and the Milan Film Festival, as well as television festivals such as Mipcom and MipTV. MPI also publishes a special summer issue, festival guide, and annual film finance guide.

The Company (during the period it owned a controlling interest in MPI) through MPI established and opened a Los Angeles office in order to penetrate the US market. This included the hiring of a seasoned Advertising Director and an Editor for the American market, which strengthened efforts in the United States ("US") and increased revenue for the near term.

MPI's business plan is to create a monthly, core publication that is an authentic trade and consumer entertainment publication. This publication will be distributed to industry professionals, and through select newsstands worldwide. Thus US distribution will dramatically increase through these methods. The publication is expected to become the resource guide for industry insiders, film aficionados, and the affluent consumer.

All4 Entertainment, Inc. ("All4") All4 is an independent motion picture and television production company. The Company plans to produce and market films both domestically and internationally. All4 will solicit partners and license rights to private investors and/or distributors in order to finance and produce family oriented projects.

Through All4 the Company will produce innovative and original motion pictures (independent films or "Indies"). The Company believes that All4 may become an independent provider of made-for-TV movies, taking advantage of the need for "high-profile - low budget" children's classics and family filmproductions. The Company believes that through All4 this film genre should increase the prospects of profits, with low budgets and story lines built on name and story recognition.

Picture Perfect Releasing, Inc. ("PPR"). PPR was established to become a film distribution and finance business. PPR will initially begin with the distribution of All4 productions as well as certain other independent films that it may contract with. PPR is believed to be able to carve a small niche in domestic and foreign distribution by offering reasonable and fair profit participation of independent films. The Company believes that many independent producers in the near future will seek to distribute their films and gain exposure through this method of distribution. PPR will work in close partnership with All4 to finance various independent film productions. The Company believes this scan be accomplished through an exchange of equity in the film. Additionally PPR will seek government tax incentive assistance as well as co-production treaties that are favorable to the film genre.

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, Electric Kingdom Distribution ("EKD"), is to create demand for the Company's products and supply the product too. EKD is responsible for fulfillment of both physical and digital product. As an integral element, EKD facilitates all label credits, collection and cash flow. Globally EKD supports all the Company's music, video and electronic games, software, DVD, and media publishing products. EKD 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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EKD'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.

EKD'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, EKD 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 EKD.

EKD 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.

Artists marketed by Level X 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, The Elliots, Gardner Cole and Music from God.

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 StudioTM 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.

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.

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Film Distribution.  Motion picture distributors are dependent upon a constant source of quality films to distribute. Yearly, distributors are presented with hundreds of feature film projects, complete with screenplays, directors, and name stars, all as a package, ready to be produced. To enhance their supply of films, distributors pursue joint venture agreements with independent production companies. PPR intends to negotiate such agreements with producers by matching funds arrangements, very attractive to the independent producer. PPR will match dollar for dollar for the production of these packages.

The increased budget should improve both the quality of the film and the Company's chances of achieving a financially successful domestic theatrical production with increased box office revenues; (iv) the Company gains the distribution power of the distributor's network; and (v) the higher quality of films increase the value of the Company's filmlibrary, an asset that has allowed a number of the big studios to sell productions for attractive premiums.

The Company believes that most of its productions will be intended primarily for foreign and domestic video distribution. However, if a project tests positively with a research audience, the Company will seek third party prints and ads ("P &A") funds to release the picture theatrically. In such a situation, the third party P &A source would typically receive a first position lien against box office collection and television receipts, in addition to a priority position for video revenues.

The release of a picture theatrically would occur only in the event that such a release is realistically expected to result in income to the Company, or if the Company determines that such a release would probably result in a measurable increase in revenue from video, foreign distribution, television or interactive games.

The Company intends to utilize distribution agreements to maximize revenues and increase collections, minimizing cash outlay. The major areas of distribution that are cash and/or personnel intensive (i.e. domestic theatrical or domestic/foreign video) will be handled by well-established distributors.

Foreign Distribution, Video & Sales All4 will utilize open door sales agency distribution agreements with various entities ranging from major studios to independent foreign entities to get its products to the foreign and video markets.

The Company anticipates that its foreign distribution division will earn its compensation from distribution fees not to exceed 25% of gross sales. Foreign sales typically account for 50% of total sales collected within 90 days upon release of film, with the balance received within nine months. In the event of a financially successful theatrical project, overages generally will be collected within 18 months.

Television Sales. Income from television markets may also provide a potential source of revenue for the Company. Distribution using pay-per-view, including, but not limited to, local cable systems, hotels and hospitals typically occur three to five months after theatrical release, if any, but before video release. Traditional cable release (HBO, Showtime, Cinemax, The Movie Channel) typically occurs about 6 months following video release, with network/syndicated television income occurring approximately 3 to 5 years later.

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:



|* | the skill and creativity of its employees to expand and utilize its music catalog to create compilation packages;             
|- | ------------------------------------------------------------------------------------------------------------------------------
|* | its ability to build upon and maintain its reputation for producing, licensing, marketing and distributing high quality music.

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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 success in achieving these goals for the following reasons:



|* | The Company's executive team is experienced and entrenched in the entertainment industry with numerous important relationships with top industry executives and artists.                                                                                                                                                                                                                                                                                                                  
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The Company posses the ability to cross-pollinate our video, publishing, music and distribution capabilities within our target markets.                                                                                                                                                                                                                                                                                                                                                   
|* | 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.                                                                                                                                                                                                                                                            
|* | 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.                                                                                                                 
|* | 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.
|* | 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.

Film

The motion picture industry may be broadly divided into two major segments: production, which involves the development, financing and other activities associated with making of motion pictures; and distribution, which involves the promotion and exploitation of completed motion pictures in a variety of media.

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Historically, the largest companies, the so-called "Majors" and "Mini-Majors," have dominated the motion picture industry by both producing and distributing a majority of the motion pictures which generate significant theatrical box office receipts. Over the past 15 years "Independents" or smaller film production and/or distribution companies, such as the Company, have played an increasingly significant and sizable role in the production and distribution of motion pictures needed to fill the ever increasing worldwide demand for filmed entertainment product.

The Majors (and Mini-Majors) include: Vivendi-Universal Pictures (a division of Vivendi-Universal, Warner Bros. Pictures (a division of AOL-Time Warner), Metro-Goldwyn-Mayer Inc., Twentieth Century Fox Film Corporation (a division of News Corporation), Paramount Pictures Corporation (a division of Viacom), Sony Pictures Entertainment (including Columbia Pictures, Tri Star Pictures and Triumph Releasing; altogether divisions of Sony) and The Walt Disney Company (Buena Vista Pictures, Touchstone Pictures and Hollywood Pictures). Generally, the Majors own and operate private production studios (including lots, sound stages, production equipment and post-production facilities), have nationwide and/or worldwide distribution organizations, release pictures with direct production costs generally ranging from $25,000,000 to $100,000,000, and collectively provide a near continual source of motion pictures to film exhibitors.

The Majors also have divisions that are promoted as "independent" distributors of motion pictures, often referred to as the "Mini-Majors." These "independent" divisions of the Majors include Miramax Films (a division of The Walt Disney Company), Sony Classics (a division of Sony Pictures), Fox Searchlight (a division of News Corporation), and New Line (a division of AOL-Time Warner) and its Fine Line distribution label. Most of these divisions were formerly private production and/or distribution companies.

In addition to the Mini-Majors, there are private or publicly held production and/or distribution companies, such as the Company, (hereafter, collectively the "Independents") which engage primarily in the production and/or distribution of motion pictures produced by companies other than those held by the Majors and Mini-Majors. Such Independents include, among others, Trimark Holdings and Artisan Entertainment. The Independents typically do not own production studios nor do they employ as large a development and/or production staff as the Majors.

Motion Picture Production and Financing. The production of a motion picture requires the financing of the direct costs and indirect overhead costs of development, production and production related services. Direct production and production related service costs include film studio rental, cinematography, post-production costs and the compensation of creative, services and other production personnel. Distribution costs (including costs of advertising and release prints) are not included in direct production costs.

Majors generally have sufficient cash flow from their motion picture and related activities, or in some cases, from unrelated businesses (e.g., theme parks, publishing, electronics, and merchandising) to acquire new creative properties (e.g., screenplay and novels) and pay for the direct production costs of their motion pictures. Overhead costs are, in substantial part, the salaries and related costs of the production staff and physical facilities, which Majors maintain on a full-time basis. Majors often enter into contracts with writers, producers and other creative personnel for multiple projects or for fixed periods of time.

Independents generally avoid incurring substantial overhead costs by hiring creative, services and other production personnel, retaining only any essential elements, which will be required for pre-production, principal photography and post- production activities, on a project-by-project basis. Independents also typically finance their production activities from various sources, including bank loans, "pre-sales," equity offerings and joint ventures. Independents generally attempt to complete the financing of their motion picture production prior to commencement of principal photography, at which point substantial production costs begin to be incurred and require payment.

Pre-sales" are often used by Independents to finance all or a portion of the direct production costs of a motion picture. Pre-sales consist of fees or advances paid or guaranteed to the producer by third parties in return for the right to exhibit the completed motion picture in theaters and/or to distribute it in home video, television, international and/or other ancillary markets. Payment commitments for a pre-sale are typically subject to the approval of a number of pre-negotiated factors, including script, production budget, cast and director and to the delivery of the completed motion picture in the agreed upon format(s).

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Both Majors and Mini-Majors often acquire motion pictures for distribution through an arrangement known as a "negative pickup" under which the Major or Mini-Major agrees to acquire from another production company, often an Independent, some or all of the rights to a film upon its completion. The Independent often finances the production of a motion picture pursuant to financing arrangements it has made with banks or other lenders wherein the lender obtains a security interest in the film and in the Independent's rights under its distribution arrangement. When the Major or Mini-Major "picks up" the completed motion picture, it may assume some or all of the production financing indebtedness incurred by the production company in connection with the film. In addition, the Independent is often paid a production fee and is granted a participation in the profits from the distribution of the motion picture.

Majors, Mini-Majors and Independents often grant third-party participations in connection with the distribution and production of a motion picture. Participations are the contractual rights of actors, directors, screenwriters, producers, owners of rights and/or other creative and/or financial contributors entitling them to share in revenues or profits (as defined in their individual respective agreements) from a particular motion picture. Except for the most sought-after talent, participations are generally payable only after all distribution and marketing fees and costs; direct production costs (including overhead) and financing costs are recouped by the producer in full.

Financing the Major Motion Picture. Majors often produce motion pictures whose direct costs exceed $20,000,000. In order for an Independent, such as the Company, to produce projects that exceed their equity capabilities, they turn to various outside sources for funding. Some of those sources, which may be used in any combination, include: (1) foreign equity contributions, where a foreign company will exchange equity or the guarantee thereof for the rights to distribute a motion picture in its respective territory(s) and participation in the picture; (2) a guarantee or advance by a distributor or exhibitor for a particular right(s) in a particular territory(s); (3) a sales agent to garner contracts with actual exhibitors which state minimum guarantee(s) for particular or aggregate media; (4) a bank or lending institution will lend monies based on actual sales contract(s) which license exhibition rights; (5) a bank or lending institution which will lend monies based on its calculations of potential earnings revenue for the motion picture in question; (6) by having a third party investor fund a portion, usually from 10% to 50% of the production costs with a participation in the net profit of the motion picture as well as the recovery of costs and expenses; and/or (7) arrange for or with another Independent production facility to finance and produce the motion pictures. By combining (as necessary) the afore mentioned outside funding sources, the Independent can create motion pictures which meet and/or exceed the quality and scope of those created by the Major and Mini-Major at costs which would normally exceed the Independent's possible equity contribution.

Motion Picture Distribution. Distribution of a motion picture involves the domestic and international licensing of the picture for (i) theatrical exhibition, (ii) home video, (iii) presentation on television, including pay-per-view, video-on-demand, satellites, pay cable, network, basic cable and syndication, (iv) non-theatrical exhibition, which includes airlines, hotels, armed forces facilities and schools and (v) marketing of the other rights in the picture, which may include books, CD-ROMs, merchandising and soundtrack recordings.

Theatrical Distribution and Exhibition. Motion pictures are often exhibited first in theaters open to the public where an admission fee is charged. Theatrical distribution involves the manufacture of release prints, licensing of motion pictures to theatrical exhibitors, and promotion of the motion picture through advertising and promotional campaigns. The size and success of the promotional and advertising campaign may materially affect the revenues realized from its theatrical release, generally referred to as "box office gross."

Box Office Gross represents the total amounts paid by patrons at motion picture theaters for a particular film, as determined from reports furnished by exhibitors. The ability to exhibit films during summer and holiday periods, which are generally considered peak exhibition seasons, may affect the theatrical success of a film. Competition among distributors to obtain exhibition dates in theaters during these seasons is significant. In addition, the costs incurred in connection with the distribution of a motion picture can vary significantly depending on the number of screens on which the motion picture is to be exhibited and whether the motion picture is exhibited during peak exhibition season(s). Similarly, the ability to exhibit motion pictures in the most popular theaters in each area can affect theatrical revenues.

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Exhibition arrangements with theater operators for the first run of a film generally provide for the exhibitor to pay the greater of 90% of ticket sales in excess of fixed amounts relating to the theater's costs of operation and overhead, or a minimum percentage of ticket sales which varies from 40% to 70% for the first week of an engagement at a particular theater, decreasing each subsequent week to 25% to 30% for the final weeks of the engagement. The length of an engagement depends principally on exhibitors' evaluation of the audience's response to the film with respect to the current marketplace (e.g., the success of other films) as weighed against the opportunity cost of exhibiting a "new" release.

Films with theatrical releases (which generally may continue for several months domestically) typically are made available for release in other media as follows:

Home Video. The home video distribution business involves the promotion and sale of videocassettes, DVDs and videodiscs to video retailers (including video specialty stores, convenience stores, record stores "on-line" stores i.e., Amazon.com and other outlets, which then rent or sell the videocassettes and Videocassettes and DVDs of feature films are generally sold to domestic wholesalers on a unit basis. Unit-based sales typically involve the sales of individual videocassettes to wholesalers or actual retailers (e.g., Blockbuster) at $8.00 to $30.00 per unit and generally are rented by consumers for fees ranging from $1.00 to $5.00 per day (with all rental fees retained by the retailer). Wholesalers who meet certain sales and performance objectives may earn rebates; return credits and cooperative advertising allowances. Selected titles including certain made-for-video programs are priced significantly lower to encourage direct purchase by consumers. The market for direct sale to consumers is referred to as the "priced-for-sale" or "sell-through" market.

Pay-Per-View. Pay-per-view television allows cable and satellite television subscribers to purchase individual programs, primarily recently released theatrical motion pictures, sporting events and music concerts, on a "per use" basis. The fee a subscriber is charged is typically split among the program distributor, the pay- per-view operator and the cable operator.

Pay Cable. The domestic pay cable industry (as it pertains to motion pictures) currently consists primarily of HBO/Cinemax, Showtime/The Movie Channel, Encore/Starz and a number of regional pay services. Pay cable services are sold to cable system operators for a monthly license fee based on the number of subscribers receiving the service. Cable system operators in turn offer these pay programming services to subscribers for a monthly subscription fee. The pay television networks generally acquire their film programming by purchasing the distribution rights from motion picture distributors for a particular period of time, often called a "window".

Broadcast and Basic Cable Television. Broadcast television allows viewers to receive, without charge, programming broadcast over the air by affiliates of the major networks (ABC, CBS, NBC, and Fox), recently formed networks (UPN and WB Network), independent television stations and cable and satellite networks and stations. In certain areas, viewers may receive the same programming via cable transmission for which subscribers pay a basic cable television fee. Broadcasters or cable systems operators pay fees to distributors for the right to air programming a specified number of times.

Foreign Markets. In addition to their domestic distribution activities, some motion picture distributors generate revenue from the distribution of motion pictures in foreign theaters, home video, television and other foreign markets. There has been a dramatic increase in recent years in the world-wide demand for U.S. motion pictures, accented by the increase in the number of foreign television stations, the introduction of global direct broadcast satellite services, and increased home video and cable penetration world-wide.

Other Markets Revenues also may be derived from the distribution of motion pictures to airlines, schools, libraries, hospitals and the military; the licensing of rights to perform musical works and sound recordings embodied in a motion picture, and the licensing of rights to manufacture and distribute merchandise, clothing and similar commercial articles derived from characters or other elements of a particular motion picture.

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New Technologies New means of delivery of entertainment product are constantly being developed and offered to the consumer, including the Internet. The impact of emerging technologies such as direct broadcast satellites and the Internet, on the Company's operations cannot be determined at this time. However, as a holder of entertainment copyrights, the Company monitors these new media possibilities.

Non-Theatrical Exhibition. In addition to the distribution media described above, a number of sources of revenue exist for motion picture distribution through the exploitation of other rights, including the right to distribute films to airlines, schools, libraries, hotels, armed forces facilities and hospitals.

International Markets. The worldwide demand for motion pictures has expanded significantly as evidenced by the development of new international markets and media. This growth is primarily driven by the overseas privatization of television stations, introduction of direct broadcast satellite services, growth of home video and increased cable penetration.



Item 3.  Controls And Procedures

As of the end of the fiscal quarter to which this report relates (September 30, 2003), we carried out an evaluation, under the supervision and with the participation of 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 or financial reporting subsequent to the date we carried out this evaluation.

The Company's disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company's desired disclosure objectives and are effective in reaching that level of reasonable assurance.



Item 4. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

None.

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PART II



Item 1.  Legal Proceedings.

The Company is involved in litigation with Mr. David Dadon, a former director of the Company and affiliates of Mr. Dadon. These cases are pending with (1) the U.S. District Court, Phoenix, Arizona, whereby, an indefinite Preliminary Injunction against Mr. Dadon was issued on August 21, 2003, and (2) the Maricopa County Superior Court, where the Company seeks monetary damages against Mr. Dadon and/or affiliates for business interference, interference of contractual relationships, breach of fiduciary duties and the duty of loyalty. Mr. Dadon has filed a counter suit against the Company, its officers and directors, various other parties in the Los Angeles, California Superior Court. Motions to dismiss have been filed by the Company and its legal counsel on the grounds that Mr. Dadon's legal claims lack merit. The Company has been notified that the Court will hear Motions and related Motions during late November 2003. The Company believes the lawsuit by Mr. Dadon is without basis or merit and the Company believes that it will prevail.



Item 2.  Changes in Securities.

During the three months ended September 30, 2003 the Company made the following issuances and sales of securities in reliance upon the exemption provided by Section 4(2) of the Securities Act of 1933.

On July 17, 2003, the merger date between Level X Media Holdings, Inc. and ViaStar Holdings, Inc., pursuant to the merger agreement and a later Board resolution, 10,650,000 common shares were issued by the Company in exchange for all of the issued and outstanding common stock of Level X.

During the three months ended September 30, 2003, the Company issued 1,000,000 common shares as payment for director's services to a director of the Company.

The director is a sophisticated investor and had a pre-existing business relationship with the Company.  All of the shares were issued pursuant to Section 4(2) of the Securities Act of 1933 and all of the shares were issued without an underwriter.

During the three months ended September 30, 2003, the Company issued 2,000,000 common shares as payment towards the purchase of a controlling interest in its subsidiary to an affiliate of the Company.

During the three months ended September 30, 2003, the Company issued 112,500 common shares as payment on a note payable to two individuals

During the three months ended September 30, 2003, the Company issued 78,750 common shares pursuant to an investment in the Company by two individuals.

Each of the above persons is a sophisticated investor and each has a pre-existing business relationship with the Company.  All of the shares were issued pursuant to Section 4(2) of the Securities Act of 1933 and all of the shares were issued without an underwriter.

All of the transactions referred to above are exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof covering transactions not involving any public offering or involving no "offer" or "sale."

The Company also during the three months ended September 30, 2003 issued 750,000 common shares as payment for legal services and marketing services to three individuals. These shares were issued as S-8 shares registered pursuant to Form S-8 filed on during June 2003 by the Company.



Item 3.  Defaults in Senior Securities.

None.

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

On May 28, 2003 more than 2/3 of the shareholders of record with the Company (in accordance with Nevada Law) voted in the affirmative to remove Mr. Dadon from the Board of Directors.

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

Item 5.  Other Information.

None.

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Item 6.  Exhibits, List, and Reports on Form 8-K.

(a)  Exhibits.



|ExhibitNo. | Description of Exhibit                                                                                                         
|---------- | -------------------------------------------------------------------------------------------------------------------------------
|           |                                                                                                                                
|3          | Exhibits:                                                                                                                      
|           |                                                                                                                                
|3.1**      | Amended and Restated Certificate of Incorporation                                                                              
|3.2**      | Bylaws of ClubCharlie.com, Inc                                                                                                 
|4.1        | Stock Purchase Agreement Between Rhiannon Holdings and ViaStar Holdings, Inc.                                                  
|10.1**     | Original Screenplay Acquisition Agreement with Charlie Chance Productions, Inc.                                                
|10.3**     | Employment Agreement with Zee Batal                                                                                            
|10.4       | Employment Agreement with John Aquilino                                                                                        
|10.5       | Employment Agreement with Richard Brooks                                                                                       
|31.1       | Certification of John D. Aquilino, Chief Executive Officer                                                                     
|31.2       | Certification of George J. Malasek, Chief Financial Officer                                                                    
|32         | Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|          
|*          | Incorporated by reference to the Company's Financial Statements                                                                
|**         | Incorporated by reference to the Company's Form 10-SB12G filed with the Securities and Exchange Commission on December 13, 1999

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(b)  Reports on Form 8-K.

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

Current report, Item 5, July 3, 2003 
Current report, Item 5, August 6, 2003
Current report, Item 8, August 22, 2003
Current report, Item 5, October 6, 2003
Current report, Item 5, October 7, 2003

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 24th day of November 2003.





| | VIASTAR HOLDINGS, INC.
| | ----------------------
| |                       
| | By:                   
| |                       



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                                                                |  | Date             
|-------------------------------------- |  | -------------------------------------------------------------------- |  | -----------------
|                                       |  |                                                                      |  |                  
|/s/ JOHN D. AQUILINOJohn D. Aquilino   |  | President and Chief Executive Officer (principal executive officer)  |  | November 24, 2003
|                                       |  |                                                                      |  |                  
|/s/ GEORGE J. MALASEKGeorge J. Malasek |  | Chief Financial Officer (principal financial and accounting officer) |  | November 24, 2003

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