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                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                          -----------------------------
                                   FORM 10-KSB

      [x]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
           EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2004


                        COMMISSION FILE NUMBER 000-28485

                            VIASTAR MEDIA CORPORATION
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


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


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


                                 (480) 894-0311
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


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


   Title of each class               Name of each exchange on which registered
--------------------------------------------------------------------------------
 Common Stock, $.001 par                 Over the counter - Bulletin Board
      value per share


         Securities registered under Section 12(g) 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 | |


                                       1
<PAGE>

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

State Registrant's revenues for fiscal year ended June 30, 2004: $ 3,026,978

State the aggregate market value of the voting stock held by  non-affiliates  of
the  Registrant:  $4,693,573 at June 30, 2004 based on the average bid and asked
prices on that date.


Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock, as of June 30, 2004: Common stock, $0.001 par value - 52,541,642

     Transitional Small Business Disclosure Format

                                Yes | | No | X |

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<PAGE>

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                                TABLE OF CONTENTS


                                     PART I


Item                                                                      Page
----                                                                      ----
1.   Business ............................................................  4

2.   Properties .......................................................... 14

3.   Legal Proceedings ................................................... 14

4.   Submission of Matters to a Vote of Security Holders ................. 14

                                     PART II


5. Market for the Company's Common Equity and Related
     Stockholder Matters ................................................. 17

6. Management's Discussion and Analysis of Financial Condition
     and Results of Operations ........................................... 18

7.   Financial Statements ................................................ 22

8. Changes in and Disagreements with Accountants on Accounting
    and Financial Disclosure ............................................. 22

                                    PART III


9. Directors, Executive Officers, Promoters and Control
     Persons; Compliance with Section 16 (a) of the Exchange Act ......... 23

10.  Executive Compensation .............................................. 25

11.  Security Ownership of Certain Beneficial Owners and Management ...... 28

12.  Certain Relationships and Related Transactions ...................... 29

13.  Exhibits, List and Reports on Form 8-K .............................. 30

14.  Controls and Procedures ............................................. 30

SIGNATURES ............................................................... 31
                                       3
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                                     PART I

Item 1. Business.


Note Regarding Forward-Looking Statements

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


General

Business  Organization.  ViaStar Media  Corporation (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 May 7, 2003  entered  into an agreement to
acquire the assets and liabilities of Moving Pictures  International through the
issuance of Common Stock and the payment of debt associated with the purchase of
the business  assets.  The Company  completed  the  purchase of Moving  Pictures
International  subsequent to June 30, 2003. The Company on July 18, 2003 entered
into an agreement and plan of merger with Level X Media Corporation  ("Level X")
to acquire all of the issued and outstanding  shares for a combination of shares
of common stock and  preferred  stock of the Company.  On January 23, 2004,  the
State of Nevada approved an increase of authorized capital to 100,000,000 common
shares and 10,000,000 Series A preferred shares . On January 5, 2004 The Company
changed its name to ViaStar Media  Corporation  to better  reflect the change in
its  business  model and  focus on  content  and  distribution  of  intellectual
properties.  On March  31,2004 the Company  entered into an agreement to acquire
all of the assets and liabilities of Masterdisk Corporation through the issuance
of Common  Stock and  assumption  of debt  associated  with the  purchase of the
business  assets.  The  surviving  entity  continued  to exist as ViaStar  Media
Corporation or the Company.

As of June 30,  2004,  the date of this  report,  the Company had one  operating
subsidiary;  Masterdisk  Corporation.  A  significant  portion  of the  business
operations of the Company will be conducted by the former business operations of


                                       4
<PAGE>

Item 1. Business. - continued

Level X and its  distribution  division as described  throughout this transition
report filed on Form 10-KSB. The financial  statements included herewith are the
consolidated  financial  statements  of the Company and its core  operation  and
subsidiary as of June 30, 2004.


Operations

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

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


Products and Services

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

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

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

As part of the service package to vendor labels and retail accounts,  VDG offers
marketing  services such as radio  support,  touring  campaigns,  publicity with


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<PAGE>

Item 1. Business. - continued

retail  point of  purchase  ("P.O.P.")  programs.  These  initiatives  brand the
artist, the label and VDG.

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

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

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

Artists marketed by Viastar Media  Corporation  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 , Jaryd Burton,  Booty Boys, Peter Cetera,  Peter
Murphy, Hadley, and Robbie Nevel.

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

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

                                       6
<PAGE>

Item 1. Business. - continued

Media Mastering. MasterDisk Corporation, a wholly own subsidiary of ViaStar, was
established in 1973 as a part of PolyGram  Records,  MasterDisk has since been a
part of more than 13,000 releases. The Company has been an industry leader in CD
and DVD  preparation,  authoring and mastering for over 31 years and features an
experienced,  world-class  staff of  engineers  and  media  professionals  which
includes Howie Weinberg, Tony Dawsey, Andy VanDette, Roger Lian and Dave Kutch.

The staffs' long list of credentials span every possible music genre and include
such platinum  artists as Sheryl Crow, U2, Mariah Carey,  The Ramones,  Outkast,
Smashing Pumpkins,  Aretha Franklin,  Roberta Flack,  Whitney Houston, Kid Rock,
P.J. Harvey, Rush, Korn, The Cult, The Cure, Creed, Def Lepard, Garbage, Helmet,
Moby,  Prince, The Redhot Chili Peppers,  Santana,  Soundgarden,  Madonna,  DMX,
Jay-Z, Foxy Brown, Al Green, KRS-One,  Miami Sound Machine, Nine Inch Nails, The
Rolling  Stones,  Queen  Latifa,  Deep Purple,  The Beastie  Boys,  David Bowie,
Richard Marx,  Toni Braxton,  Britney  Spears,  Blues  Travelers,  Led Zeppelin,
Nirvana,  R.E.M, Bruce Spingsteen,  Faith Hill, Slayer, LL Cool J, Eminem,  Limp
Bisket,  Christina Aguilera,  Everlast,  Faith Evans,  Monster Magnet, Ben Folds
Five and Cheap Trick to name a few.

Based near the heart of Times Square,  MasterDisk's  15,000 square foot facility
includes  seven  of the  world's  finest  mastering  suites,  including  two 5.1
surround  rooms,  four vinyl cutting  lathes,  full DVD authoring,  encoding and
quality control and a complete graphic and animation department.  MasterDisk has
long been a pioneer in the  entertainment  industry offering its customers state
of the art  technologies  such as DVD  authoring,  multi-channel  5.1 mastering,
Web-enabled  DVD as well as being the first  mastering  facility  in the  United
States to offer a fully integrated digital console.  MasterDisk is a World Class
facility, producing hundreds of gold and platinum albums, which have resulted in
countless Grammy and TEC Awards.


The MasterDisk/ViaStar Advantage

The Advantage.  MasterDisk  Corporation is a well-established  name brand in the
field of audio mastering  services.  A reputation spanning over 31 years for the
majors and  independent  labels.  Major  industry  companies  such as Sony Music
Group,  Universal  Music  Group,  BMG,  Warner  Music  Group,  EMI and a host of
independents,  engineers  and  producers  have  relied  upon  MasterDisk,  as  a
stand-alone  vendor,  to provide  state-of-the-art,  top-quality audio and video
mastering  services.  Since inception (circa 1973, a division  PolyGram Records)
MasterDisk has been a significant part of more than 13,000 releases.

Mastering is an important step in the  preparation of any audio or video product
prior to mass  duplication.  Mastering is the art of  fine-tuning  audio content
through the process of EQ, compression,  encoding, editing and sequencing.  This
process prepares the audio or video content for mass  duplication.  Mastering is
truly an art form.  MasterDisk  has been the home to some of the finest,  highly
regarded and intensely  sought after  mastering  engineers in history  including
Howie Weinberg, Tony Dawsey, Andy VanDette, Roger Lian and Dave Kutch. Mastering
is a complex process requiring acoustically accurate environments and the finest
audio and video processing equipment available.  The right mastering service and
engineer is believed by most in the  industry to help make the record a success.
MasterDisk credentials span every possible music genre and include such platinum
artists as Sheryl  Crow,  U2,  Mariah  Carey,  The  Ramones,  Outkast,  Smashing
Pumpkins,  Aretha  Franklin,  Roberta Flack,  Whitney  Houston,  Kid Rock,  P.J.
Harvey,  Rush,  Korn, The Cult, The Cure,  Creed, Def Lepard,  Garbage,  Helmet,
Moby,  Prince, The Redhot Chili Peppers,  Santana,  Soundgarden,  Madonna,  DMX,
Jay-Z, Foxy Brown, Al Green, KRS-One,  Miami Sound Machine, Nine Inch Nails, The


                                       7
<PAGE>

Item 1. Business. - continued

Rolling  Stones,  Queen  Latifa,  Deep Purple,  The Beastie  Boys,  David Bowie,
Richard Marx,  Toni Braxton,  Britney  Spears,  Blues  Travelers,  Led Zeppelin,
Nirvana,  R.E.M, Bruce Spingsteen,  Faith Hill, Slayer, LL Cool J, Eminem,  Limp
Bisket,  Christina Aguilera,  Everlast,  Faith Evans,  Monster Magnet, Ben Folds
Five and Cheap Trick.

The  Location.  Based near the heart of Times  Square,  MasterDisk is one of the
world's  leading  audio  mastering  facilities.  Its 15,000 square foot facility
includes  seven  of the  world's  finest  mastering  suites,  including  two 5.1
surround  rooms,  four vinyl cutting  lathes,  full DVD authoring,  encoding and
quality control and a complete graphics and animation department. MasterDisk has
long been a pioneer in the  entertainment  industry offering its customers state
of the art  technologies  such as DVD  authoring,  multi-channel  5.1 mastering,
Web-enabled DVD as well as being the first in the United States to offer a fully
integrated  digital  console  to  its  services.  MasterDisk  is  a  world-class
facility, producing hundreds of gold and platinum albums, resulting in countless
Grammy and TEC Awards.

Independent  Artist  Services.  The  next  generation  MasterDisk,  will see the
MasterDisk embark on an aggressive campaign in order to attract more independent
labels  and   recording   artists   for   "one-stop"   production   by  offering
retail-marketing solutions. Special packages will be offered for these no frills
services. Through the Company's distribution group, MasterDisk will provide full
service  marketing and  international  mainstream  distribution  to its enormous
client  base by  offering  direct  retail  distribution  to over  22,000  retail
locations  worldwide including  Wal-Mart,  Target, Best Buy, Tower Records,  Sam
Goodie, Kmart, Virgin Mega-Stores,  Transworld,  Wherehouse, and Musicland among
others. MasterDisk will, for the first time in its history, have the opportunity
to participate in the long-term  revenue potential of the titles and artist they
provide services for. As part of the program to qualified  labels,  clients will
be able to get  professionally  mastered  product  at reduced  rates.  Marketing
services are centered on retail  advertising,  Internet marketing and convention
presence that cater to the independent performing artist.

In  addition to  providing a  distribution  pipeline  MasterDisk  will enter the
content  and  distribution   business  with  a  unique  business  model,   which
capitalizes  on its three decades of quality  client  relationships.  MasterDisk
shall license existing content and leverage the Company's creative and packaging
expertise  in  exchange  for a  significant  portion of the royalty  stream.  In
joining ViaStar, the division expects to provide countless opportunities,  which
shall ultimately increase the financial strength of the Company's shareholders.

Replication;  Audio  Manufacturing.  As an extension of the  Independent  Artist
Services, MasterDisk will offer short run CD replication. This work will be done
in-house.  MasterDisk  is able to burn in  excess  of  1,000,000  CDs  providing
4-color printing and graphics  encapsulating the CD. The margins in the business
are  profitable  for  MasterDisk.  Normally a  replicator  must  produce a glass
master, an expensive  process.  MasterDisk  eliminates this with its burners and
CD-recordable medium. Quality and price wrapped in one.

DVD Services.  DVD Authoring;  services  include  compression,  audio  encoding,
graphics creation, project development and providing DLT master for replication.
Current clients include Lion's Gate Entertainment,  Koch  International,  Arista
Records,  BMG Special  Products and Universal  Records to name a few. As the DVD
industry is growing  rapidly,  the Company expects several growth  opportunities
that MasterDisk will exploit. DVDs have many non-entertainment applications, and
as the  market is still in its  infant  stages,  dramatic  growth is  predicted.
Education,  training,  product  promotion  and  corporate  information  will  be


                                       8
<PAGE>

Item 1. Business. - continued

increasingly  delivered in this robust format. As DVD continues to penetrate the
marketplace. This bodes well for the DVD services division.

MasterDisk/ViaStar  DVD One Stop Services. In November 2003 MasterDisk commenced
its "One Stop Services" business, which include complete DVD authoring,  package
design, printing and replication. The program has met with a positive reception.
The package of services saves time and expenses for the many independent clients
already served by MasterDisk. Collectively the company is generating high volume
on behalf of its  clients,  resulting in an  attractive  pricing  structure  and
allowing for significant margins.  This model is currently will be rolled out to
the corporate  environment,  as well as the independent  label and artist for CD
production.

In addition to  production  services,  the Company  will offer  warehousing  and
fulfillment  services.  Our warehouse facility is a steel door secured fireproof
concrete vault. The space is on-site and secure in the MasterDisk building. This
will  generate  both  warehouse  and  handling  charges.  The vault can store an
estimated 200,000 DVDs.  Fulfillment  services will provide for both cartons and
pick and pack.

MasterDisk/ViaStar  Leadership.  Douglas Levine - MasterDisk Corporation - Chief
Executive  Officer and President  from July 1976 through to date. Mr. Levine has
been  instrumental  in  transitioning  MasterDisk  from a no frills record label
(PolyGram) mastering facility which primarily worked on its' own labels artists,
to a  world-class  brand  name in the  recording  industry.  Under Mr.  Levine's
leadership the Company has been a  trailblazer.  MasterDisk is now a multi media
company  offering  such  services  as  audio  mastering,   DVD  authoring,   ECD
programming, interactive kiosks, etc. Prior to becoming President of MasterDisk,
Mr. Levine was Senior Vice President of Investor  Relations for OCG  Technology,
Inc.  ("OCG"),  the parent  company of MasterDisk  at the time.  During 1986 Mr.
Levine acquired  MasterDisk  through a leveraged  buyout from OCG. While at OCG,
Mr. Levine was responsible for SEC compliance;  in addition to handling investor
correspondence  and  medical  trade  show  marketing.  A  graduate  of New  York
University,  Mr. Levine received a degree in both Accounting and Economics.  Mr.
Levine's experience is a great asset for the Company and MasterDisk.


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.

                                       9
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Item 1. Business. - continued

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

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

     *    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


                                       10
<PAGE>

Item 1. Business. - continued

one in the industry is currently  offering artists the royalty  opportunity that
The Company can offer,  and artists  already  recognized  this and are coming to
work with us.

Due to the  increasing  abundance of  established  artist looking to release new
content the company  feels that there is no lack of  potential  artists to sign.
The Company  believes its business model  represents the best  opportunity  such
artists have to achieve  their goal of  profiting  from a new release in today's
demanding marketplace.


Employees

As of June 30, 2004,  the Company had forty-one  (41)  employees,  See "Item 10.
Executive Compensation."

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

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


Necessary Capital

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

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


Common Stock Eligible For Public Sale

Future sales of shares of common stock,  $0.001 par value (the "Common  Stock"),
by existing holders of the Company's Common Stock or by holders of the Series A,
Preferred  Convertible  stock, upon the exercise thereof,  under Rule 144 of the
Securities Act or otherwise, could have a negative impact on the market price of


                                       11
<PAGE>

Item 1. Business. - continued

the  Company's  Common  Stock.  The Company is unable to estimate  the number of
shares  that may be sold  under  Rule 144 since  this will  depend on the market
price for the Common Stock of the Company,  the  personal  circumstances  of the
sellers and numerous  other factors.  Any sale of substantial  amounts of Common
Stock of the Company in the open market may adversely affect the market price of
the  Company's  Common Stock and may adversely  affect the Company's  ability to
obtain  future  financing  in the capital  markets as well as create a potential
market overhang.


Significant Control Over The Company

The Company's  directors,  officers and principal  stockholders,  and certain of
their affiliates,  beneficially own over 50% of the outstanding shares of Common
Stock on a fully  diluted  as-converted  to basis  at June  30,  2004,  and such
stockholders  have  significant  influence  over  the  outcome  of  all  matters
submitted to the stockholders for approval,  including the election of directors
of the Company and other corporate actions. In addition, such influence by these
affiliates could have the effect of discouraging  others from attempting to take
over the Company thereby  increasing the likelihood that the market price of the
Common Stock will not reflect a premium for control.

Volatility and Declines In Market Price


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

     *    Operating results;

     *    analysts' or investor reports;

     *    market conditions in the industry;

     *    changes in governmental regulations; and

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

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

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

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

                                       12
<PAGE>

Item 1. Business. - continued

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


Common Stock Dilution

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

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


"Penny Stock" Regulation

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

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


                                       13
<PAGE>

Item 1. Business. - continued

Competitive Industry

Significant  factors in determining  whether the Company will be able to compete
successfully include:

     *    consultative, creative and design capabilities;

     *    reputation for on-time and quality performance;

     *    expertise and experience in the distribution of products;

     *    the scope of service offerings;

     *    strength in various geographic markets;

     *    the price and availability of services;

     *    the  ability  to  acquire,  process,  analyze  and  report  data  in a
          time-saving and accurate manner;

     *    the  ability  to manage  large-scale  distribution  of  products  both
          domestically and internationally; and

     *    the Company's size.

If our products or services are not competitive based on these or other factors,
the Company's  business,  financial  condition and results of operations will be
materially harmed.


Item 2. Properties.

The Company  leases  approximately  8,000 square feet of office space located in
Mesa,  Arizona.  This lease expires June 2008 and provides for a fixed base rent
of approximately $5,200 per month with an annual inflation increase.

In addition, the Company, through its subsidiary Masterdisk,  leases a two floor
15,000 square foot  facility near the heart of Times Square.  This lease expires
December  2007 and provides for a fixed base rent of  approximately  $18,950 per
month with annual inflation increases.

The Company's web sites are http://www.viastarcorp.com.

http://www.viastarrecords.com


Item 3. Legal Proceedings.

None


                                       14
<PAGE>

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

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

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


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

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

     o    Reflect current developments in Nevada law;

     o    Provide for the exculpation of directors;

     o    Address interested party transactions;

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

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

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

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

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

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


                                       15
<PAGE>

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

approved  and  adopted by the Company  and the  resultant  issuance of shares of
Common Stock and preferred stock.

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

The elimination of the need for a special meeting of shareholders to approve the
Amended and  Restated  Articles  of  Incorporation  is made  possible by Section
78.320 of the Nevada  Revised  Statutes  (the "NRS"),  which  provides  that the
written consent of the holders of outstanding shares of voting stock, having not
less than the minimum  number of votes which would be  necessary to authorize or
take such action at a meeting at which all shares  entitled to vote thereon were
present and voted,  may be substituted for such a special  meeting.  Pursuant to
Section 78.320 of the NRS, a majority of the outstanding  shares of voting stock
entitled to vote thereon is required in order to amend the Company's Articles of
Incorporation.  In order to eliminate  the costs and time  involved in holding a
special  meeting  and in order to effect the Amended  and  Restated  Articles as
early  as  possible  in order to  accomplish  the  purposes  of the  Company  as
hereafter described,  the Board of Directors of the Company voted to utilize the
written consent of the holders of a majority interest of the voting stock of the
Company. On January 5, 2004, there were 24,572,916  outstanding shares of Common
Stock and  approximately  65 holders of record of Common Stock.  The approval of
the Amended and  Restated  Articles  and Amended  Bylaws,  requires  the written
consent of the holders of a majority of the outstanding  shares of Common Stock,
and each  share of Common  Stock was  entitled  to one vote with  respect to the
approval of the Amended and Restated Articles and the Amended Bylaws. By written
consent in lieu of a meeting,  holders of 14,650,820 shares of our Common Stock,
representing approximately 59.62% of our outstanding voting power, have approved
the above listed corporate actions.

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

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

                                       16
<PAGE>

                                     PART II

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

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

The following  table sets forth the high and low bid  quotations  for the Common
Stock as  reported  on the OTCBB for each of the  quarters  ended March 31, 2001
through June 30, 2004.  Such quotations  reflect  inter-dealer  prices,  without
retail   mark-up,   markdown  or  commission   and  may  not  represent   actual
transactions.


Quarter Ended                                                  Common Stock
-----------------------                                      ------------------
                                                               High        Low
                                                             ------------------
September 30, 2003                                            1.19        0.32

December 31, 2003                                             0.85        0.14

March 31, 2004                                                0.76        0.23

June 30, 2004                                                 0.40        0.11

Common Stock The authorized capital stock of the Company consists of 100,000,000
shares  of common  stock,  par value  $0.001 of which  52,451,642  shares of the
Company's  Common Stock were issued and  outstanding.  As of June 30, 2004,  the
number of  holders  of record of the  Common  Stock was 110 and the  approximate
number of beneficial holders of the Common Stock was approximately 2,000

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

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


                                       17
<PAGE>

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

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

General:

On July 18, 2003 the Company entered into a stock purchase  agreement with Level
X Media  Corporation  ("Level  X")  whereby a change in  control  occurred.  The
company obtained all of the assets,  liabilities and outstanding shares of stock
of Level X in  exchange  for a  purchase  price  of  $10,650,000.  The  original
agreement  was for the  exchange  of ViaStar  common  stock  valued at $1.00 per
share.  However,  the stock was actually  trading at the time between  $0.20 and
$0.26 per share. The agreement was revised so that 1,904,100 shares of preferred
stock valued at $3,809,918  (convertible  to 38,082,000  shares of common stock)
and  15,164,671  common shares  valued at  $6,840,082  were issued for the total
purchase  price  of  $10,659,000.   The  Company  recognized  goodwill  for  its
distribution  agreements  in the  amount of  $7,389,750  and  accounted  for the
acquisition under the purchase method of accounting.

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

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

                                       18
<PAGE>

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

On  September  26,  2003,  the Company  entered into an agreement to sell an 80%
controlling  interest  of Moving  Pictures  International  Ltd "MPI" and relieve
itself of the debt.. The Company had originally entered into a note payable with
the related  party of the MPI seller 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 sale required the
related party of the MPI seller to purchase an 80% controlling  interest in MPI.
The purchase price required the related party of the MPI seller to return to the
Company, seven million (7,000,000) shares of common stock previously 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 MPI and the
new  issuance of two million  (2,000,000)  shares of common  stock.  The Company
recognized a loss of $240,000 on the sale of MPI.

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

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

Results of Operations

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

The Company generated $3,026,978 in revenues against $1,425,946 in cost of sales
resulting in a gross profit of  $1,601,032  during the year ended June 30, 2004,
compared to no operational  activity for the comparative  period ending June 30,
2003.

Revenue from replication was $ 2,467,359 comprising 82% of the Company's revenue
whereas  $504,613  comprising 17% of total revenue was from the  distribution of
music CD's. The remaining  $55,006 or 2% of the revenue was from advertising and
rebates.  The  $440,670  of gross  profit from  distribution  generated a higher
profit  margin than the  replication  gross  profit of  $1,125,339,  because the
authoring and replication  business is designed to be an adjunct selling feature


                                       19
<PAGE>

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

to the distribution business. Both divisions could be profitable with sufficient
volume;  however,  the  distribution  business  would  require less volume to be
profitable.

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

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

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

The total loss of  $3,986,724  for the year ended June 30,  2004 was a result of
corporate  restructuring  and its new  operations  commencing.  The  loss is not
comparable  to the twelve months ended June 30, 2003 when the Company was in the
development stage and seeking to establish different business lines.


Liquidity and Capital Resources

The principal uses of our liquidity are to finance capital expenditures and fund
our operations. The Company operates 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.
The discontinuance of various operations will eliminate a large need for capital
and allow the Company to fund  operations  with  projects  that should turn into
revenue production in a short period of time.

The primary sources of liquidity to fund operations and capital expenditures and
satisfy  obligations  are cash  advances  from  officers  and  directors  of the
Company,  issuing shares for services to certain  vendors and cash proceeds from
private placements.

At June 30,  2004,  the Company had  $116,628  in cash with  working  capital of
$422,166.

During the year ended June 30, 2004,  net cash used by operating  activities was
$86,281  resulting  primarily  from an  increase  in  receivables.  The  Company
financed  $1,032,142  inventory purchases with an increase in its trade payables
and issued shares for services valued at $2,693,339.  Net cash used by investing


                                       20
<PAGE>

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

activities  was  $37,066  which was used  primarily  for the  purchase  of small
equipment.  The Company  raised  $401,508 from private  placements and paid down
outstanding debt balances of $501,533.

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

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

The Company  continues to fund working  capital  needs from sales of product and
the use of short-term payables.  The Company believes with the assistance of its
current  financial  advisor,   Bond  Capital   Management,   and  other  finance
professionals  that it will be successful  in securing  capital of $2,500,000 to
$5,000,000 in a registration statement.


Capital Expenditures

The Company incurs capital expenditures for the purposes of:

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

     o    Acquiring existing studio and mastering facilities;

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

     o    Replacing less advanced technology.

     o    Development of proprietary software applications

During the year ended June 30, 2004, the Company  incurred  $870,750.00  for the
development  of  proprietary  software  design to reengage  the  consumer in the
retail  buying  experience  of music.  The Company  expects this  initiative  to
dramatically  increase its marketing and distribution  capabilities of its music
products  through the release of these  proprietary  applications  and  increase
retail sales of its products significantly.  The Company expects this initiative
to be a key factor in the growth of its revenues going forward.

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


                                       21
<PAGE>

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

purchase  price  of  $10,659,000.   The  acquired  approximately  $4,500,000  in
furniture,  fixtures and equipment along with the intangible  assets and assumed
debt.

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

Capital  expenditures  may  increase  significantly  during the next fiscal year
ending  June 30,  2005.  The  Company  may or may not incur  these  expenditures
through acquisition or merger activities.

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


Item 7. Financial Statements.

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


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

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


Item 8a. Controls And Procedures

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

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

                                       22
<PAGE>
                                    Part III


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


Directors

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


Name                     Age  Position
----------------------- ---- ---------------------------------------------------
John Aquilino                President, Chief Executive Officer, Chairman of the
                         38    Board and Director

Kenneth Yonika           41  Former Chief Financial Officer, Treasurer, Director

Richard Brooks           46  Former Exec. Vice President, General Counsel,
                               Secretary, Director

William A. Grazier       39  Chief Information Officer


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

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

Prior to his departure in 2001, Mr. Aquilino was a founding partner of SunnComm,
Inc.  a  publicly  traded  technology  company  (OTC:  SUNX)  - one of  the  top
developers of digital  security  technologies - and served as Chairman and Chief
Technology Officer where he designed,  developed, and deployed the company's key
digital  security  products.  Prior to SunnComm  Inc.,  Mr.  Aquilino  enjoyed a
variety of positions within the music industry  including Artists Production and
Development  for  Capitol  Records,  EMI  Records,  and  Atlantic  Records.  Mr.
Aquilino's affiliations include:  Capitol Records, EMI International,  Universal
Music  Group,  Universal  Music  Publishing  AOL/Time  Warner,  BMG,  Sonopress,
SunnComm Inc., Microsoft, Macrovision Corporation, America West Airlines, Litton
Electron  Devices ST Micro,  DCA, and Eclipse Data  Technologies.  He has worked
directly with name Artists who include:  Frank Sinatra,  Gladys  Knight,  Stevie
Wonder,  Billy Squire, and Quiet Riot. In addition,  Mr. Aquilino was a founding
member of Capitol  Recording  Artists  "Icon",  a group  that  enjoyed a 10-year
career, where he wrote, recorded, and toured the world.

Richard  L.  Brooks,  Esq.  - Former  Exec.  Vice  President,  General  Counsel,
Secretary and Director

Mr. Brooks brings to Viastar more than twenty-five years of sophisticated  legal
experience,  acquired  largely  in the  representation  of  private  and  public
corporations  in both state and federal trial and appellate  courts.  Mr. Brooks
graduated  cum laude  from  Franklin  &  Marshall  College,  and from  Villanova


                                       23
<PAGE>

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

University  School of Law where he  served  as an Editor of the Law  Review.  He
subsequently  served as a trial attorney with the National Labor Relations Board
in the Eastern District of New York; as both a trial and appellate attorney with
the Office of the Board's  General  Counsel in  Washington,  D.C.;  and as a law
clerk to a distinguished U.S. District Court Judge in Houston, Texas. Mr. Brooks
subsequently spent several years representing  corporations,  including Safeway,
Inc.,  Standard  Brands,  Sears  Roebuck,  and  United  Parcel  Service,  with a
distinguished  Dallas,  Texas law firm.  He  thereafter  represented  public and
private  corporations  with law  firms in  Chicago,  Illinois  and  Minneapolis,
Minnesota.  Since  relocating  to Arizona in 1986,  Mr.  Brooks has  represented
public and private  corporations  in trials and appeals  involving  the gamut of
substantive  legal issues  facing public and private  corporations.  He has also
served as a Judge Pro Tempore on the Arizona  Court of Appeals;  the  management
member of the  Phoenix  Employment  Relations  Board;  a Director of the Arizona
branch of the National  Conference  of Christians  and Jews;  and a Director and
General Counsel of the Greater Phoenix Urban League.

Kenneth J. Yonika CPA - Former Chief Financial Officer, Treasurer and Director

Mr.  Yonika,  a certified  public  accountant,  brings  Viastar over 15 years of
experience in business and management  with executive  management  participation
and a background in direct corporate and "Big Six" public accounting. Throughout
the his  career  he has  worked  with  numerous  public  companies  as  either a
consultant,  Chief  Financial  Officer  and/or  as a  member  of  the  Board  of
Directors.  As of  January  2004 Mr.  Yonika  became a member of  management  as
ViaStar's Chief Financial Officer.

Mr.  Yonika has in-depth  experience  in finance,  mergers/acquisitions,  public
offerings,  capital  formation,  and business  valuation and has managed in high
growth   positions   requiring   strong   "outside   skills"  for  liaison  with
underwriters,  auditors,  regulatory bodies,  investors and venture capitalists.
Prior to his accepting the position with ViaStar, Mr. Yonika founded and managed
a full service  accounting,  reporting and  financial  services firm that worked
with emerging  businesses  within the publicly  traded market system and private
sector.  Additionally,  Mr. Yonika held the position of Chief Financial  Officer
with a distributor of nutritional  supplements and related health  products,  in
over  15,0000  retail  outlets  nationwide  with an  ancillary  Direct  Response
campaign.  Upon leaving  public  accounting  back in 1996,  Mr.  Yonika held the
positions  of Vice  President  of Finance and Chief  Financial  Officer  with an
international  distributor  and  manufacturer  of  nutritional  supplements  and
related health products, with annual sales of $50+ million and 50 employees.

Mr.  Yonika has  participated  in several  IPO's  throughout  his career in both
capacities as  accounting  and  management  professional  and as an  independent
Certified  Public  Accountant  were he held  various  positions  in both tax and
audits with regional,  national and "Big Six" public  accounting firms including
positions as Audit Manager with HARLAN &  BOETTGER-CPAs,  Senior Tax Advisor for
RSM McGladrey  -CPA's,  Tax Consultant and Public  Accounting  expert for ROBERT
McKay &  ASSOCIATES-CPAs  and Senior Auditor for KPMG PEAT MARWICK CPA's were he
was Senior  Auditor on several  Fortune 100 clients at that time.  Additionally,
Mr.  Yonika is a licensed  Certified  Public  Accountant  and is a member of the
American  Institute of Certified  Public  Accountants  as well as the California
Society for Certified Public Accountants.

                                       24
<PAGE>

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

William A. Grazier-Chief Information Officer

Mr. Grazier brings over sixteen years of complex systems engineering and project
management  experience to the Viastar team. For over ten years,  Mr. Grazier has
served in executive level  positions where he managed  engineering and technical
teams in large-scale system design and implementation projects. Mr. Grazier most
recently  served as VP of Operations  for SunnComm,  Inc.  (OTC:  STEH) where he
played  an  instrumental  role  in the  development  and  implementation  of the
company's digital security and content  enhancement  products.  Prior to joining
SunnComm,   Mr.   Grazier   served  as  Director  of  Technology  for  Racklogic
Technologies,   Inc.,  a  global  leader  in  the  design  and   manufacture  of
ultra-high-performance  and ultra-high-density  server solutions for audio/video
streaming,   massively  parallel   super-computing  and  enterprise  data-center
environments.  As Director of Technology, Mr. Grazier guided the company and its
many customers in the design,  planning,  implementation and relocation of their
diverse technology and infrastructure resources. Prior to Racklogic, Mr. Grazier
served  as  Chief  Information  Officer  for  GFI  Group,  Inc.,  a Wall  Street
Inter-Dealer  Brokerage firm with offices  spanning four continents and numerous
equity,  fixed income,  derivative  and exotic  financial  markets.  At GFI, Mr.
Grazier was directly responsible for the design,  development and implementation
of  mission-critical  financial  transaction  software  and data  communications
systems,  which served as the trading backbone for the company. Prior to joining
GFI, Mr.  Grazier  served for six years as System Design  Engineer for Fellenzer
Engineering  where  he  gained  extensive  experience  in the  design,  costing,
scheduling and coordination of large-scale control and construction  engineering
projects. Mr. Grazier received his Bachelor of Science in Electrical Engineering
from the University of Rochester in 1988.

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

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


Item 10. Executive Compensation

Summary Compensation

The following table sets forth compensation information for services rendered to
us by our executive  officers and directors in all capacities  during the fiscal
year ending June 30, 2004 and the past two fiscal years. Other than as set forth
below, no executive  officer's salary and bonus exceeded  $100,000 in any of the
applicable years or period ended. The following  information includes the dollar
value of base salaries,  draws, bonus awards, and the number of stock options or
warrants granted and other compensation whether paid or deferred.  Reimbursement
of out-of-pocket expenses is not included.


                                       25
<PAGE>

Item 10. Executive Compensation - continued

                           SUMMARY COMPENSATION TABLE

                                     SUMMARY
                               COMPENSATION TABLE
<table>
<caption>
                                                                                           Long Term
                                                            Annual Compensation           Comp. Awards
                                                            -------------------                 ------
                      (a)                        (b)          (c)         (d)        (e)           (g)           (i)
                                                                                           Securities
                                                                                           Underying
                                                              ($)  ($)         ($)        Options and      All Other
Name and Principal Position            Year   Ending       Salary       Bonus      Other  Warrants (#)       ($) (1)
---------------------------            -------------       ------       -----      -----  -------------      -------
<S>                                        <C>              <C>          <C>        <C>          <C>           <C>
John D. Aquilino, President and            6/30/2004     $225,000           -          -             -             -
Chief Executive Officer (2)

Kenneth Yonika, Former Chief
Financial Officer (1) (4)                  6/30/2004      $75,000           -          -             -             -

Richard Brooks, Former General
Counsel (1) (3)                            6/30/2004     $110,000           -          -             -             -
</table>



(1) The Company  reimburses  its officers for expenses paid for on the behalf of
the Company submitted with the proper  documentation and form in compliance with
IRS guidelines.  The Company has reimbursed Mr. Yonika  approximately $9,400 and
Mr. Brooks approximately $4,600 each during the year ending June 30, 2004.

(2) The Company accrues  officer's  salary (prior to June 30, 2004) at an annual
rate of $225,000  per year.  Mr.  John  Aquilino is in the middle of a five-year
employment  contract  signed  on  February  1,  2003  which  calls for an annual
increase in salary every February.  Mr. Aquilino received  approximately $36,000
in cash compensation for the current fiscal year.

(3) The Company accrues  officer's  salary (prior to June 30, 2004) at an annual
rate of $110,000 per year, Mr. Richard Brooks was terminated on June 30, 2004.

(4) The Company accrues  officer's  salary (prior to June 30, 2004) at an annual
rate of $75,000 per year for Mr.  Yonika.  Mr. Yonika was employed under at-will
agreements  with the Company.  Mr. Yonika  voluntarily  resigned his position as
Chief Financial Officer on Friday, September 3, 2004.


Option and Warrant Grants and Exercises

The following  table sets forth the options and warrants  granted to the persons
named in the Summary  Compensation  Table during the fiscal year ending June 30,
2004:

                                       26
<PAGE>

Item 10. Executive Compensation - continued


                 WARRANT AND OPTION GRANTS IN TRANSITION PERIOD

                       JUNE 30, 2003 THROUGH JUNE 30, 2004

<table>
<caption>
                  (a)                                 (b)              (c)           (d)           (e)
                                                    Number of
                                                   Securities      % Of Total
                                                   Underlying      Granted to
                                                    Warrants/       Employees
                                                     Options        In Fiscal      Exercise     Expiration
Name and Job Title                                   Granted        Year (1)        Price        Date (2)
-------------------                                  -------        --------        -----        --------
<S>                                                    <C>             <C>              <C>        <C>
John D. Aquilino, President and Chief  Executive
Officer                                                 -              -%             $   -         -

Kenith J Yonika,  Former Chief Financial Officer
Richard L. Brooks, Fomer General Counsel                -              -%             $   -         -
</table>

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

No Executive Officer of the Company exercised any options or warrants during the
fiscal year ended June 30, 2004. The following table sets forth information
concerning the value of all exercisable and unexercisable options and warrants
held by those persons listed in the Summary Compensation Table as of June 30,
2004.


                       FISCAL YEAR-END OPTION AND WARRANTS
                               AS OF JUNE 30, 2004

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

Kennith J. Yonika, former Chief Financial Officer

Richard L. Brooks, former General Counsel                                                               -
</table>

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

                                       27
<PAGE>

Item 10. Executive Compensation - continued

Compensation of Directors

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


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

A significant portion of our capital stock is owned by the shareholders of Level
X Media  Corporation  as a group  in the  form of  Common  Stock  and  Series  A
preferred stock. The following table sets forth  information with respect to the
ownership of the $0.001 par value,  common stock and Series A preferred stock as
of June 30, 2004 by:

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

     *    each of our directors,

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

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

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

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

Except as otherwise indicated in these footnotes,  each of the beneficial owners
listed has, to our knowledge,  sole voting and investment  power with respect to
the indicated shares of common stock. The amounts set forth below do not include
common  stock to be issued  under  yet to be  determined  agreements.  The total
number of shares on a fully diluted basis is 89,553,642.


                                       28
<PAGE>

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

--------------------------------------------------------------------------------
                                               Number of shares
                                              of Common Stock           Percent
Name of beneficial owner                     beneficially owned        of class

--------------------------------------------------------------------------------

John Aquilino                                1,000,000 (Common)          1.91 %

Richard Brooks, Esq.                         7,506,000 (Common)         14.31 %

Kenneth Yonika (2)                           7,200,815 (Common)         13.73 %

Douglas Levine                               7,500,000 (Common)        14.30. %


All directors and executive officers
  as a group                                23,206,815                  44.25 %

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

                                              Number of shares
                                                 of Series A
                                              Preferred Stock           Percent
Name of beneficial owner                     beneficially owned        of class
--------------------------------------------------------------------------------

John Aquilino (1)                                1,854,100                100 %

All directors and executive officers
  as a group                                     1,854,100                100 %
--------------------------------------------------------------------------------

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

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


Item 12. Certain Relationships and Related Transactions.

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

None.

                                       29
<PAGE>


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

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

Exhibit       Description and Method of Filing
  No.
--------    --------------------------------------------------------------------

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


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

21.1      Subsidiaries of the Company


23.1      Consent of Armando C. Ibarra, Certified Public Accountants

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

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

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

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

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


(b)  Reports on Form 8-K.


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

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

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

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


Item 14. Controls and Procedures

As of the end of the period covered by this Transition Report, we carried out an
evaluation,  under the supervision and with the participation of our management,
including  our Chief  Executive  Officer  and Chief  Financial  Officer,  of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures,  as defined in Rules  13a-15(e) and 15d-15(e)  under the  Securities


                                       30
<PAGE>

Item 14. Controls and Procedures - continued

Exchange Act of 1934, as amended. Based on this evaluation,  the Chief Executive
Officer  and  Chief  Financial  Officer,  concluded  that as of the date of that
evaluation  our  disclosure  controls  and  procedures  are  effective in timely
alerting  them to material  information  required to be included in our periodic
SEC  reports.  It should be noted that the design of any  systems of controls is
based in part upon certain  assumptions  about the  likelihood of future events,
and there can be no  assurance  that any design will  succeed in  achieving  its
stated goals under all potential future conditions, regardless of how remote.

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


SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned,  thereunto duly authorized this 16th day of November,
2004.


                                                       VIASTAR MEDIA CORPORATION

                                                        /s/ JOHN D. AQUILINO
                                                       -------------------------
                                                        By: John D. Aquilino
                                                        Chief Executive Officer

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


    Signature                         Title                          Date
---------------------------------- ------------------------------ ------------

  /s/ JOHN D. AQUILINO             President and Chief              11/16/2004
 ---------------------------------   Executive Officer
      John D. Aquilino             (principal executive officer)

  /s/ SAM MESSINA                  Interim Chief Financial Officer  11/16/2004
 ---------------------------------   (principal financial and
       Sam Messina                    accounting officer)

                                       31
<PAGE>

 INDEX TO FINANCIAL STATEMENTS
1. Financial Statements:
     Independent Auditor's Report .......................................... 33
     Independent Auditor's Report .......................................... 34
     Independent Auditor's Report .......................................... 35
     Balance Sheet June 30, 2004 ........................................... 36
     Statements of Operations Years ended December 31, 2002 and June 30, 2004
         and six months ended June 30, 2003 ................................ 37
     Statement of Stockholders' Equity Years Ended December 31,
           2002 and June 30, 2003 and 2004.................................. 38
     Statements of Cash Flows Years ended December 31, 2002 and June 30, 2004
       and six months ended June 30, 2003 .................................. 39
     Notes to Financial Statements.......................................... 40
2.  Schedules
     None


                                       32
<PAGE>



             Report of Independent Registered Public Accounting Firm


To the Board of Directors and Audit Committee
VIASTAR MEDIA CORPORATION

I have audited the accompanying balance sheets of ViaStar Media Corporation,  as
of June 30, 2004 and the related statements of operations, stockholders' equity,
and cash flows for the year ended June 30, 2004. These financial  statements are
the responsibility of the Company's management.  My responsibility is to express
an opinion  on these  financial  statements  based on my audit.  Other  auditors
audited the financial statements of ViaStar Media Corporation for the six months
ended June 30, 2003 and the year ended  December  31, 2002 and their audit dated
October 17, 2003 expressed an unqualified opinion on those statements.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects,  the financial  position of ViaStar Media Corporation,  as of
June 30, 2004 and the results of its  operations and its cash flows for the year
then ended in conformity with accounting  principles  generally  accepted in the
United States.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going  concern.  The Company has had a net loss since
inception,  January 6, 1993. This raises  substantial  doubt about the Company's
ability to continue as a going concern.  The financial statements do not include
any adjustments that might result from this uncertainty.




/s/Shelley International, CPA
--------------------------------
November 11, 2004

Mesa, Arizona

                                       33
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders of
ViaStar Holdings, Inc. and Subsidiaries:


     We have audited the  accompanying  consolidated  balance  sheets of ViaStar
Holdings, Inc. and subsidiaries ("the Company") as of June 30, 2003 and December
31, 2002, and the related consolidated statements of operations,  cash flows and
stockholders'  equity for the six months  ended  June 30,  2003 and 2002.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an opinion on the  consolidated
financial statements based on our audits.

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

     In our opinion,  such consolidated  financial statements present fairly, in
all material  respects,  the financial  position of ViaStar  Holdings,  Inc. and
subsidiaries as of June 30, 2003 and December 31, 2002, and the results of their
operations and their cash flows for the six months ended June 30, 2003 and 2002,
in conformity with accounting principles generally accepted in the United States
of America.

     As  discussed  in Note 14 to the  consolidated  financial  statements,  the
accompanying  consolidated  financial statements have been prepared assuming the
Company will continue as a going concern.  The Company's  losses from operations
raise  substantial  doubt as to its ability to continue as a going concern.  The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.

/s/Armando Ibarra, CPA - APC
------------------------------
Armando C. Ibarra, CPA - APC
Chula Vista, California
October 17, 2003

                                       34
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

We have audited the  accompanying  balance sheet of Viastar  Holdings,  Inc. and
subsidiaries  as of December 31, 2002 and the related  statements of operations,
changes in  stockholders'  equity and cash flows for the year then ended.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Viastar Holdings,
Inc.  and  subsidiaries  as of  December  31,  2002  and the  results  of  their
operations  and their cash flows for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States of America.



/s/ Armando C. Ibarra
---------------------------
Armando C. Ibarra, CPA-APC

April 12, 2003
Chula Vista, California


                                       35
<PAGE>


                            Viastar Media Corporation
                           CONSOLIDATED BALANCE SHEETS
                               June 2004 and 2003

                                     ASSETS
                                    --------
                                                   June 30,        June 30,
                                                     2004            2003
                                            --------------- ---------------
CURRENT ASSETS
     Cash                                    $      116,628  $            -
     Accounts Receivable - Net                      635,795               -
     Other Receivables                               18,108               -
     Inventory                                    1,032,142               -
                                            --------------- ---------------
     Total Current Assets                         1,802,673               -

EQUIPMENT, net                                    4,892,396
OTHER ASSETS
     Capitalized Software, Net                      870,750               -
     Trade Name and Distribution Rights           7,936,431         102,000
     Investments                                     13,736         595,000
     Deferred Income Tax Benefit                    279,430
     Artist Advances                                114,647
     Other Assets                                    13,420
     Notes Receivable                                92,013         581,430
     Total Long Term Assets                       9,320,427       1,278,430
                                            --------------- ---------------
TOTAL ASSETS                                 $   16,015,496  $    1,278,430
                                            =============== ===============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                     --------------------------------------
LIABILITIES
Current Liabilities
     Accounts Payable and Accrued Expenses   $    1,146,291  $      328,167
     Related Party Liabilities and Advances          19,716         735,749
     Credit Line - Financial Institution            214,500               -
                                            --------------- ---------------
     Total Current Liabilities                    1,380,507       1,063,916
Non-Current Liabilities

     Notes Payable - Non-current Portion                                  -
     Deferred Compensation                                                -
     Other liabilities                              322,352               -
                                            --------------- ---------------
     Total Non-Current Liabilities                  322,352               -
                                            --------------- ---------------
TOTAL LIABILITIES                                 1,702,859       1,063,916
                                            --------------- ---------------
STOCKHOLDERS' EQUITY
     Preferred Stock authorized
     10,000,000 shares, $0.01 par value.
     Issued and outstanding June 30, 2004:
     1,854,100 shares of Class A Convertible
     and none at June 30, 2003.                      18,541
     Common Stock, authorized
     100,000,000 shares, $0.001 par value;
     Issued and outstanding June 30, 2004,
     52,451,642 shares; June 30, 2003
     10,646,846 shares.                              52,453          10,647
     Paid in Capital                             19,892,278       2,207,778
     Enucumbrances/Subscriptions Receivable                        (340,000)
     Retained Earnings/(Deficit)                 (5,650,635)     (1,663,911)
                                            --------------- ---------------
     Total Stockholders' Equity/(Deficit)        14,312,637         214,514
                                            --------------- ---------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                         $   16,015,496  $    1,278,430
                                            =============== ===============

     The accompanying notes are an integral part of these statements

                                       36
<PAGE>

                            Viastar Media Corporation
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                       Year
                                          Year       Six Months       Ended
                                         Ended         Ended       December 31,
                                     June 30, 2004  June 30, 2003      2002
                                     -------------- -------------- ------------

INCOME

      Revenues                        $   3,026,978  $           -  $         -
      Other Income                                -         13,416            -
                                     -------------- -------------- ------------

      Gross Income                         3,026,978        13,416            -

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

      Gross Profit / (Loss)               1,601,032         13,416            -
                                     -------------- -------------- ------------

EXPENSES
      Compensation                        1,366,825        150,000
      Professional and Consulting Fees    1,301,927         32,580
      General and Administrative          1,507,026         20,158      531,554
      Depreciation                           46,323
      Fixed Asset Charge Off                150,000
      Loss on Obsolete Equipment            600,000
      Loss on Investment                    595,000
      Interest Expense                       19,855                           -
                                     -------------- -------------- ------------

      Total Expense                       5,586,956        202,738      531,554
                                     -------------- -------------- ------------

(LOSS) BEFORE INCOME TAXES               (3,985,924)      (189,322)    (531,554)

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

NET (LOSS)                            $  (3,986,724) $    (190,122) $  (532,354)
                                     ============== ============== ============

BASIC AND DILUTED
Net (Loss) per Common Share                   (0.21)         (0.03)       (0.10)
                                     -------------- -------------- ------------

Weighted Average Number of
      Common Shares Outstanding          18,966,667      7,230,179    5,146,846
                                     ============== ============== ============

        The accompanying notes are an integral part of these statements

                                       37
<PAGE>



                            ViaStar Media Corporation
            CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY/(DEFICIT)
                       December 31, 1999 to June 30, 2004


<table>
<caption>
                                      Preferred Stock     Common Stock                  Encumberances/                  Total
                                  ----------- -----------------------------   Paid in    Subscription  Accumulated    Shareholder's
                                     Shares    Amount    Shares     Amount    Capital      Receivable       (Loss)  Equity/(Deficit)
                                  -------------------- -------------------- ------------ ------------- ------------ ---------------
<S>                                    <C>      <C>        <C>       <C>         <C>           <C>          <C>            <C>

          Balance December 31, 2001         -        -   5,146,846    5,147    1,280,713             -     (941,435)        344,425
            Net (Loss) for the year                                                                        (532,354)       (532,354)
                                  -------------------- -------------------- ------------ ------------- ------------ ---------------
         Balance, December 31, 2002         -        -   5,146,846    5,147    1,280,713             -   (1,473,789)       (187,929)
           Common shares issued for

             purchase of subsidiary                      3,500,000    3,500      591,500                                    595,000

     Common shares issued to secure
                      notes payable                      2,000,000    2,000      338,000                                    340,000

             Encumberance on shares                                                           (340,000)                    (340,000)

               Adjustment on issues                                               (2,435)                                    (2,435)

    Net (Loss) for six months ended
                      June 30, 2003                                                                        (190,122)       (190,122)
                                  -------------------- -------------------- ------------ ------------- ------------ ---------------
              Balance June 30, 2003         -        -  10,646,846   10,647    2,207,778      (340,000)  (1,663,911)        214,514

    Common shares issued for merger                     15,164,671   15,165    3,794,753                                  3,809,918
       Preferred convertible shares

                  issued for merger 1,904,100   19,041                         6,821,041                                  6,840,082

         Preferred shares converted   (50,000)   (500)   1,000,000    1,000         (500)                                         -

      Remove Encumberance on Shares                                                            340,000                      340,000

Common shares issued for acqusition                     10,000,000   10,000    3,990,000                                  4,000,000

      Common shares issued for cash                      1,601,250    1,601      234,649                                    236,250

      Common shares issued for debt                        112,500      113      112,387                                    112,500

   Common shares issued for service                     13,398,795   13,399    2,679,940                                  2,693,339

  Common shares issued for exercise
   of options through subscriptions
                         receivable                        527,580      528       52,230                                     52,758

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

         Balance June 30, 2004      1,854,100 $ 18,541  52,451,642 $ 52,453 $ 19,892,278 $           -  $(5,650,635) $   14,312,637
</table>
        The accompanying notes are an integral part of these statements


                                       38
<PAGE>



                            Viastar Media Corporation
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<table>
<caption>
                                                                                    Year
                                                        Year        Six Months      Ended
                                                       Ended          Ended      December 31,
                                                  June 30, 2004  June 30, 2003       2002
                                                ---------------- -------------- ----------------
<S>                                                     <C>             <C>             <C>
Operating Activities

  Net (Loss)                                     $    (3,986,724) $    (190,122) $      (532,354)
  Significant Non-Cash Transactions
       Preferred Stock issued for services                                    -
       Common Stock issued for Acqusitions                     -
       Common Stock for Services                       2,693,339
       Write-Off Subscriptions Receivable                                     -
       Depreciation Expense                              796,323
       Investment Charge Off                             595,000
  Changes in assets and liabilities
       Changes in Current Liabilities                                                    506,444
       Receivables                                      (164,486)        44,889          (23,086)
       Increase in Inventory                          (1,032,142)                              -
       Decrease/(Increase) in  Prepaid
             Expense                                                                           -
       Increase in Artist Advances                      (114,647)
       Other Assets                                      (13,420)
       Increase in Organization expenses                                                  (2,000)
       Decrease/(Increase) in Accounts
             Payable                                   1,140,476         51,466
       Adjustment                                                        (3,000)
       Due to Officer and directors                                      96,767
                                                ---------------- -------------- ----------------

Net Cash (Used) by Operating Activities                  (86,281)             -          (50,996)
                                                ---------------- -------------- ----------------
Investing Activities
       Investment                                        (13,736)      (253,233)
       Purchase of Equipment                             (23,330)             -                -
                                                ---------------- -------------- ----------------

Net Cash (Used) by Investing Activities                  (37,066)      (253,233)               -
                                                ---------------- -------------- ----------------

Financing Activities
       Proceeds Received from Stock Subscribed
          Receivable                                           -
       Proceeds from loans                              (501,533)                         51,002
       Adjustment of Bank Overdraft                                                           (6)
       Encumbrance                                       340,000
       Proceeds from sale of Common Stock                401,508        253,233                -
                                                ---------------- -------------- ----------------
Cash Provided by Financing Activities
                                                         239,975        253,233           50,996
                                                ---------------- -------------- ----------------

Net Increase/(Decrease) in Cash                          116,628              -                -

Cash, Beginning of Period                                      -              -                -
                                                ---------------- -------------- ----------------
Cash, End of Period
                                                 $       116,628  $           -  $             -
                                                ================ ============== ================
Significant Non-Cash Transactions
       See Note pertaining to Stocholders' Equity

Supplemental Information:
       Period Interest                           $         2,151  $           -  $             -
       Income Taxes Paid                                                      -                -
</table>
        The accompanying notes are an integral part of these statements

                                       39
<PAGE>

                            ViaStar Media Corporation

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 2004 and 2003


Note 1. OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES

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

ViaStar Media  Corporation (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 and  changed  its name to  ClubCharlie.com,  Inc.  On
January 22, 2001 the Company changed its name to ViaStar Holdings,  Inc. On July
18, 2003 the Company  entered into an agreement  and plan of merger with Level X
Media Corporation  ("Level X") whereby a change in control occurred.  On January
23,  2004,  the State of Nevada  approved  an  increase  of  authorized  capital
(100,000,000  common and  10,000,000  preferred) and changed its name to ViaStar
Media Corporation. On March 31, 2004, the Company acquired all of the issued and
outstanding  capital  of  MasterDisk  Corporation  ("MasterDisk"),  a  New  York
corporation, which became a wholly owned subsidiary of the Company.


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

The  financial  statements  included  in this  report  reflect  all  normal  and
recurring  adjustments which, in the opinion of management,  are necessary for a
fair presentation of the Company's  consolidated  financial position at June 30,
2004 and 2003, and the consolidated results of operations and cash flows for the
year ended June 30,  2004,  six  months  ended June 30,  2003 and the year ended
December 31, 2002.  Company  changed its fiscal year end to June 30 on August 6,
2003 and  completed a short  period audit for the six months ended June 30, 2003
on October 17, 2003.


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

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

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

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


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

Revenue for music is generated  when the product is scanned at the point of sale
("POS").  The  period of time from  initial  order to  shipment  of the  product
typically  ranges from thirty to forty five days.  Revenue for  replication  and
authoring  is  generated  when the  mastering  process  begins at the  mastering
facilities.   Replication   and   authoring   revenues  are   recognized   on  a
project-by-project basis.


                                       40
<PAGE>

Note 1. OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES - continued

Merchandise Inventory

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


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

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


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

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


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

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


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

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


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

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

                                       41
<PAGE>

Note 1. OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES - continued

On June 30, 2004 the Company has potentially dilutive securities  outstanding in
the form of 1,854,100  shares of preferred  stock that can each be exchanged for
20 shares of common stock.  These shares are not considered in the  presentation
of loss per share as their inclusion would be antidultive.


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

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


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

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


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

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


Note 2. GOING CONCERN

The  accompanying  financial  statements  have been  prepared  assuming that the
company  will  continue  as a going  concern.  The  Company  has  accumulated  a
$5,650,635  loss  since  inception.  This  raises  substantial  doubt  about the
Company's  ability to  continue as a going  concern.  The  Company's  ability to
continue  as a going  concern  is  dependent  upon  its  success  in  developing
additional capital.

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

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

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

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

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

                                       42
<PAGE>

Note 2. GOING CONCERN - continued

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

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


Note 3. TRADE NAME AND DISTRIBUTION RIGHTS

During July 2001, the Financial  Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible  Assets." SFAS 142 was effective  January 1, 2002
and required that goodwill and certain  intangible  assets remain on the balance
sheet and may not be amortizable for financial reporting purposes.  On an annual
basis,  or when there is reason to suspect that goodwill and certain  intangible
asset values have been  diminished or impaired,  these assets must be tested for
impairment,  and write-downs may be necessary. The Company does not believe that
any impairment of goodwill or other intangibles is necessary at this time.


Intangible assets at June 30, 2004:


                                                  June 30, 2004  June 30, 2003
                                                 --------------- --------------

   Trade Name Purchased (MasterDisk)              $      546,681   $       0.00


   Distribution Agreement                              7,389,750           0.00
                                                 --------------- --------------


   Trade Name and Distribution Rights             $    7,936,431   $       0.00
                                                 =============== ==============





Note 4. INVENTORY

Company  inventory  at June 30, 2004 is  $1,032,142  and none at June 30,  2003.
Inventory costs include any material,  labor and manufacturing overhead incurred
by the Company in the  production  of  inventory.  Inventory is primarily  music
compact discs and videos  purchased from outside  manufacturers  then shipped to
the retailer for sale.  Inventories  are stated at the lower of cost  (first-in,
first-out)  or market.  The  Company  may from time to time take into  inventory
consigned product for sale.


                                       43
<PAGE>

Note 5.  CAPITALIZED SOFTWARE DEVELOPMENT COSTS

The  Company  capitalizes  internally  developed  software  costs  that  will be
amortized using the  straight-line  method over the estimated useful life of the
software,  not to exceed five years.  Capitalized  costs include external direct
costs of materials and services consumed in developing internal use software and
payroll  related  costs  for  employees  who are  directly  associated  with the
internal software development project.

Capitalization  of such  costs  will  cease no later than the point at which the
project  is  substantially   complete  and  ready  for  its  intended   purpose.
Capitalized  software  development costs at June 30, 2004 and June 30, 2003 were
$870,750 and none, respectively.


Note 6. EQUIPMENT

Property  and  equipment  at June 30, 2004 and June 30, 2003 are  summarized  as
follows:


                                                   June 30, 2004  June 30, 2003
                                                 --------------- --------------
   Furniture and Fixtures                          $     932,348  $        0.00

   Studio Facilities                                   4,695,377           0.00

   Accumulated Depreciation                             (735,691)          0.00
                                                 --------------- --------------

   Equipment, Net                                  $   4,892,396  $        0.00
                                                 =============== ==============



Note 7. STOCKHOLDERS' EQUITY

ViaStar Media  Corporation (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 and  changed  its name to  ClubCharlie.com,  Inc.  On
January 22, 2001 the Company changed its name to ViaStar Holdings,  Inc. On July
18, 2003 the Company  entered into an agreement  and plan of merger with Level X
Media Corporation  ("Level X") whereby a change in control occurred.  On January
23,  2004,  the State of Nevada  approved  an  increase  of  authorized  capital
(100,000,000  common and  10,000,000  preferred) and changed its name to ViaStar
Media Corporation. On March 31, 2004, the Company acquired all of the issued and
outstanding  capital  of  MasterDisk  Corporation  ("MasterDisk"),  a  New  York
corporation, which became a wholly owned subsidiary of the Company.

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

As of June 30,  2003 the company has issued and  outstanding  10,646,846  Common
Shares.

                                       44
<PAGE>

Note 7. STOCKHOLDERS' EQUITY - continued

Afterward,  the Company issued 1,904,100  Series A convertible  preferred shares
and  15,164,671  common  shares for a merger  valued at  $10,650,000;  1,000,000
common shares for conversion of 50,000 Series A preferred shares valued at $500;
10,000,000 common shares for acquisition valued at $4,000,000;  1,601,250 common
shares for $289,008  cash;  112,500  common shares to settle  $112,500 debt; and
13,398,795 common shares for services valued at $2,693,339.

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

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

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

On April 23, 2003 the Company  entered  into a  transaction  to purchase  Moving
Pictures  International  Ltd,  ("MPI") an  entertainment  magazine.  The Company
issued 3,500,000 shares of common stock, par value $0.001 in connection with the
purchase of MPI. The purchase of MPI was an elaborate  brokered  transaction  by
the  recipient of the shares.  The brokered  purchase of MPI was  accounted  for
under the purchase method of accounting. Total investment required in MPI by the
Company included the assumption of (undisclosed at the time of sale) substantial
liabilities  and the  payment of shares of the  Company's  common  stock,  which
approximated  $1,200,000.  The  purchase  of MPI was to be  solely  through  the
issuance  of shares of the  Company's  common  stock.  The  Company  through the
actions of a member of prior management and a related party of the seller became
obligated for payments on behalf of MPI. The  obligations  were never audited or
verified  for purposes of the Company and its  shareholders  as required by law.
The transaction was denominated in the English pounds ((pound))  converted to US
dollars ($) for financial  statement purposes.  No foreign currency  translation
adjustment  was  necessary.  The Company on  September  26, 2003 entered into an
agreement to sell MPI and relieve itself of the debt.


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

During the nine month  period  ended  March 31,  2004,  the  Company  encumbered
7,000,000  shares of common stock  (stated value of  $1,490,000)  with a related
party of the MPI seller of $700,000.  The funds were  advanced  from the related
party of the MPI seller to settle  outstanding  obligations  (but undisclosed at
the time of sale) of MPI.  Monies were  advanced with the condition (1) that the
short-term  advances  would be 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
subsequent to June 30, 2003), (2) in the event the Company was not able to repay
the monies  advanced the affiliate would take free and clear title to the common
stock.

The advances and rights  associated  with the advances were  transferred  to and
assumed by the related party of the MPI seller.  The Company entered into a note
payable with the related party of the MPI seller 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. On September


                                       45
<PAGE>

Note 7. STOCKHOLDERS' EQUITY - continued

26, 2003 the affiliate  entered into a transaction  whereby the related party of
the MPI seller would purchase an 80%  controlling  interest in MPI. The purchase
price was as follows,  the related  party of the MPI seller  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 and the issuance of two million
(2,000,000) shares of common stock. The Company recognized a loss of $240,000 on
the sale of MPI..


Merger
------

On July 18, 2003 the company entered into a stock purchase  agreement with Level
X Media Corporation wherein the company obtained all of the assets,  liabilities
and  outstanding  shares of stock of Level X in exchange for a purchase price of
$10,650,000. The original agreement was for the exchange of ViaStar common stock
valued at $1.00 per share.  However,  the stock was actually trading at the time
between $0.20 and $0.26 per share.  The agreement was revised so that  1,904,100
shares of preferred stock valued at $3,809,918 (convertible to 38,082,000 shares
of common stock) and 15,164,671  common shares valued at $6,840,082  were issued
for the total purchase price of $10,659,000.


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

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

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

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


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

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


                                       46
<PAGE>

Note 8. INCOME TAXES:

SFAS No. 109  requires  the  reduction  of  deferred  tax assets by a  valuation
allowance if, based on the weight of available evidence,  it is more likely than
not that some or all of the  deferred  tax assets will not be  realized.  In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is  $1,242,389,  which is  calculated  by  multiplying  a 22%
estimated tax rate by the  cumulative  NOL of  $5,647,225.  The total  valuation
allowance is a comparable $1,242,389. Details for the last two years follow

                                          6/30/04        6/30/03
                                   -------------- --------------
         Deferred Tax Asset          $  1,242,389   $    365,310
         Valuation Allowance           (1,242,389)      (365,310)
         Current Taxes Payable               0.00           0.00
                                   -------------- --------------
         Income Tax Expense          $       0.00   $       0.00
                                   ============== ==============

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

         Year                            Amount                Expiration
         ----                            ------                ----------
         1999                         $   207,036                 2019
         2000                             432,268                 2020
         2001                             298,721                 2021
         2002                             532,354                 2022
         2003                             190,122                 2023
         2004                           3,986,724                 2024
                                      -----------

         Total NOL                     $5,647,225
                                      ===========



Note 9. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

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

SFAS 146 Accounting for Costs Associated with Exit or Disposal Activities

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

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

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

                                       47
<PAGE>

Note 9. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS - continued

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

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

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

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

SFAS 150 Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity

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

Interpretation No. 46 (FIN 46)

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

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



Note 9. SUBSEQUENT EVENTS

On September 8, 2004 the Chief Financial  Officer (CFO) of the Company resigned.
A temporary  consultant was hired as a assist the Company with its financial and
accounting paperwork until a full time officer could be hired.

On July 1, 2004, the Company issued 1,000,000 restricted common shares valued at
$146,000  for  legal  services.  The  issuance  of the  stock  was  exempt  from
registration under Section 4(2) of the Securities Act.

On July 26, 2004, the Company issued 36,281  registered  common shares valued at
$3,000 and on August 30, 2004 the Company issued 45,000 registered common shares
valued at $3,000 under the Company's  First  Amended 2003  Employees/Consultants
Common Stock Compensation Plan for consulting services.

On July 30, 2004, the Company issued 4,527,580  restricted  common shares to two
employees  as  compensation  valued at  $100,000.  The issuance of the stock was
exempt from registration under Section 4(2) of the Securities Act.



                                       48
<PAGE>

Note 9. SUBSEQUENT EVENTS - continued

On August 31, 2004, the Company issued 3,000,000  restricted  common shares to a
consultant  for business  development  valued at  $216,000.  The issuance of the
stock was exempt from registration under Section 4(2) of the Securities Act.

On September 15, 2004, the Company issued 500,000  restricted common shares to a
company as a finder fee valued at  $27,000.  Also on the same date,  the Company
issued  1,000,000  restricted  common  shares  in a private  placement  to eight
accredited  individuals  for $25,000.  The issuance of the stock was exempt from
registration  under  Section  4(2) of the  Securities  Act. No  underwriter  was
involved in the offer of sale of the shares.

On September 30, 2004, the Company issued 100,000  restricted  common shares for
$4,500 of interest owed to an  individual.  The issuance of the stock was exempt
from registration under Section 4(2) of the Securities Act.

                                       49
<PAGE>