SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-QSB
 
 [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the quarterly period ended March 31, 2003
 
 [ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the transition period from _______________ to _______________.
 
 
 Commission file number: 000-49943
 
 
 Star E Media Corp.
 (Exact name of registrant as specified in its charter)
 
 Nevada
(State or other jurisdiction of
incorporation or organization)
91-2038162
(I.R.S. Employer
Identification No.)27171 Burbank Road
Lake Forest, CA
(Address of principal executive offices)
92610
(Zip Code) 
 Registrant's telephone number, including area code (949) 581-9477
 
 
 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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  No X .
 
 Applicable only to issuers involved in bankruptcy proceedings during the preceding five years
 
 Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
 Yes  No  .
 
 Applicable only to corporate issuers
 
 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. As of May 12, 2003, there were 13,580,000 shares of common stock issued and outstanding.
 
 Transitional Small Business Disclosure Format
 (check one):
 
 Yes _____ No X .
  STAR E MEDIA CORP.
 
 
 TABLE OF CONTENTS
 
 
 PART I
 
 Item 1   Financial Statements
 
 Item 2   Management's Discussion and Analysis or Plan of Operations
 
 PART II
 
 Item 1   Legal Proceedings
 
 Item 2   Changes in Securities and Use of Proceeds
 
 Item 3   Defaults Upon Senior Securities
 
 Item 4   Submission of Matters to a Vote of Security Holders
 
 Item 5   Other Information
 
 Item 6   Exhibits and Reports on Form 8-K
 
 2 PART I
 
 
 This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the "Exchange Act"). These statements are based on management's beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading "Management's Discussion and Analysis of Financial Condition or Plan of Operation." Forward-looking statements also include statements in which words such as "expect," "anticipate," "intend," "plan," "believe," "estimate," "consider" or similar expressions are used.
 
 Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Company's future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.
 
 ITEM 1  Financial Statements
 
 3 
 STAR E MEDIA CORPORATION
 
 BALANCE SHEET
 (Unaudited)
 
 As of March 31, 2003 and December 31, 2002
 
 
 ASSETSMarch 31,


December 31,2003


2002CURRENT ASSETSCash

$
-

$
83,403Inventory


42,576


42,737Total Current Assets


42,576


126,140EQUIPMENT, net


39,945


39,926OTHER ASSETSRoyalty Advances


52,039


69,385Investment in ESP


30,000Capitalized Production Costs net


165,589


180,643Total Other Assets


247,628


250,028TOTAL ASSETS

$
330,149

$
416,094The accompanying notes are an integral part of these statements 
 
 4 STAR E MEDIA CORPORATION
 
 BALANCE SHEET
 (Unaudited)
 
 As of March 31, 2003 and December 31, 2002
 
 
 LIABILITIES AND STOCKHOLDERS' EQUITYMarch 31,


December 31,2003


2002CURRENT LIABILITIESBank Overdraft

$
55,984Payables and Accrued Expenses


241,740

$
119,962Notes Payable


579,906


485,433Total Current Liabilities


877,630


605,395STOCKHOLDERS' EQUITYCommon Stock, authorized100,000,000 shares of stock,13,030,000 shares issued atMarch 31, 2003 andDecember 31, 2002,par value $0.001 per share


13,030


13,030Additional Paid in Capital


1,626,463


1,626,463Stock Subscribed


0Retained Earnings (Deficit)


(2,186,974
)

(1,828,794
)Total Stockholders' Equity


(547,481
)

(189,301
)TOTAL LIABILITIES ANDSTOCKHOLDERS' EQUITY

$
330,149

$
416,094The accompanying notes are an integral part of these statements 
 5
 
 
 STAR E MEDIA CORPORATION
 Statement of Stockholders' Equity
 (Unaudited)
 from March 8, 2000 (inception) to March 31, 2003
 
 
  Common Stock





Additional


Stock


Accumulated


TotalShares


Amount


Paid in


Subscribed


Deficit


EquityCapitalInitial Capitalization, March 8, 2000


8,373,748

$
8,374

$
276

$
-

$
-

$
8,650Conversion of Debt to Stock


126,252


126


226,150








226,276Deficit for Year














(186,806
)

(186,806
)Balance, December 31, 2000


8,500,000


8,500


226,426





(186,806
)

48,120Sales of Stock


1,303,500


1,303


515,697








517,000Reverse Merger with Quick & Easy


2,400,000


2,400


9,667








12,067Stock Issued for Services


4,000


4


3,996








4,000Conversion of Debt


157,500


158


148,042








148,200Stock Subscription


35,000


35


34,965


(35,000
)




-Service Contributed by Officers








288,000








288,000Deficit for Year














(580,807
)

(580,807
)Balance, December 31, 2001


12,400,000


12,400


1,226,793


(35,000
)

(767,613
)

436,580Payment of Stock Subscribed











35,000





35,000Sales of Stock


150,000


150


149,850








150,000Sales of Stock


480,000


480


114,720








115,200Service Contributed by Officers








135,100








135,100Deficit for Year














(1,061,181
)

(1,061,181
)Balance, December 31, 2002


13,030,000

$
13,030

$
1,626,463

$
-

$
(1,828,794
)
$
(189,301
)Deficit for Period














(358,180
)

(358,180
)Balance, March 31, 2003


13,030,000


13,030


1,626,463


-


(2,186,974
)

(547,481
)The accompanying notes are an integral part of these statements
 6
 
  STAR E MEDIA CORPORATION
 STATEMENT OF OPERATIONS
 (Unaudited)
 For the three months ending
 March 31, 2003 and March 31, 2002
 
 ThreeMonths


ThreeMonthsEnded March, 31


Ended March, 312003


2002INCOMESales

$
324

$
-Total Revenue


324


-COST OF SALESCosts of Goods Sold


161


-Total Cost of Sales


161Gross Profit


163


-EXPENSESSales and Marketing


15,796


2,020General and Administrative


274,840


56,201Research and Development


-


14,723Interest


65,239


-Depreciation Expense


2,468


1,087Total Expense


358,343


74,031Loss before Provision forIncome Taxes


(358,180
)

(74,031
)Provision for Income Taxes


0


0NET INCOME (LOSS)

$
(358,180
)
$
(74,031
)Basic and Diluted Earnings(Loss) per Common Share

$
(0.03
)
$
(0.01
)Basic and Diluted Weighted AverageNumber of Common Shares


12,547,849


11,593,562The accompanying notes are an integral part of these statements 
 7 STAR E MEDIA CORPORATION
 
 STATEMENT OF CASH FLOWS
 (Unaudited)
 For the three months ending March 31, 2002 and 2003
 
 
 ThreeMonths


ThreeMonthsEnded


EndedMarch 31, 2003


March 31, 2002Cash Flows fromOperating ActivitiesNet Loss

$
(358,180
)
$
(74,031
)Bank Overdraft


55,984Inventory and Capitalized Costs


15,215


(67,976
)Prepaid Royalties


17,346


(10,000
)Accounts Payable, Accrued Interest


138,151


(9,294
)Depreciation Expense


2,468


1,087Stock for services


0Contributed Services





-Net Cash Provided by Operations


(129,016
)

(160,214
)Cash Flows Usedin Investing ActivitiesInvestment in ESP


30,000Fixed Asset Purchase


2,487


5,732Net Cash Used for Investing


32,487


5,732Cash Flows from FinancingNote Payable


78,100


-Note Payable


-


-Original Issue Discount on Note





-Stock Subscription


-


-Stock Sales for Cash


-


127,500Stock Sales for Cash with debt





-Stock Sales for Debt





-Merger with Quick & Easy





-Cash Flows from Financing


78,100


127,500Net Increase (Decrease) in Cash


(83,403
)

(38,446
)Cash, Beginning of Period


83,403


71,317Cash, End of Period

$
-

$
32,871 
 8 STAR E MEDIA CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 
 NOTE 1.  OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES
 
 Star E Media Corporation (the Company) was formed on March 8, 2000 in the State of Nevada. We develop and produce children's educational products in a multi-lingual format, focusing on the CD technology. We are positioning our Company to be a gateway for interactive educational technology, initially for the Arabic and Spanish languages and later for other languages. We have established a relationship and have royalty agreements with three major US producers of educational software and one Australian company. Our agreements allow us to utilize proven and successful titles and add an additional language. These agreements allow us to bypass the ramp-up time for releasing a title free from computer bugs.
 
 Basis of Presentation and Going Concern
 
 The accompanying statements have been prepared following accounting standards generally accepted in the United States of America. As reflected in the accompanying financial statements, the Company had negative cash flow from operations and incurred a net loss during the previous three years. The number of sales have been minimal. The Company has established strategic relationships with two distributors who will carry their products. None of these relationships have materialized to date. The statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to achieve sufficient cash flow from operations or secure adequate future financing and be therefore unable to continue as a going concern.
 
 Product Development
 
 We have licensing agreements with four companies, Scholastic, School Zone Interactive, Knowledge Adventure and Lizard Ltd. for a total of 68 titles (previously produced children's educational games and activities). These agreements allow us to add either Spanish, Arabic or both to the titles. We are also allowed to market these products in specifically identified countries. We have world wide licensing agreements for the Lizard titles except New Zealand and Australia. The licensing agreements are generally for 3 years. Of the 68 titles, 14 Spanish/English titles have been completed, 16 Arabic/English titles have been completed and 9 titles have been received from Lizard that are in English and are ready for manufacturing for the near future.
  
 Marketing Strategy
 
 Future operating results will depend on the Company's ability to attract new customers to generate sufficient volume to fund operations. We are principally attempting to establish relationships with established wholesalers.
 
 Revenue Recognition
 
 We sell to end-users, retailers and to wholesale distributors. For both of these types of sales we recognize revenue upon shipment. All products are sold FOB shipping point. We offer no right of return for either type of sale on our product. We do offer a limited warranty that our CD is not defective. The warranty policy on CD's is explained under Warranties below.
 
 We do not offer any additional elements with our products such as upgrades or services.
  Research and Development
 
 All costs incurred to establish the technological feasibility of a computer software product to be sold are research and development costs. Those costs are charged to expense when incurred as required by FASB Statement No. 2, Accounting for Research and Development Costs . Costs incurred in this manner and expensed as prescribed were $140,256 in 2000, $164,888 in 2001, $34,637 in 2002, and $0 for the period ending March 31, 2003.
 
 Advertising
 
 Advertising and marketing costs are expensed as incurred. Advertising expenses were $0 for the year ended December 31, 2000, $3,800 for year ended December 31, 2001, $0 for the year ended December 31, 2002, and $0 for the period ended March 31, 2003.
 
 Production Costs of Localization of Computer Software
 
 Costs of producing product masters incurred subsequent to establishing technological feasibility are capitalized and amortized as prescribed by FASB No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased , or Otherwise Marketed . Those costs include coding and testing performed subsequent to establishing technological feasibility. For each title it takes approximately six months to complete the language conversion. Capitalized software costs are amortized on a product-by-product basis annually. The annual amortization is the greater of the amount computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or the straight-line method over the remaining estimated economic life of the product including the period being reported on. Amortization starts when the product is available for sale. At each balance sheet date, the unamortized capitalized costs of computer software production shall be compared to the net realized value of that product. The amount by which the unamortized capitalized costs of a computer software product exceed the net realizable value of that asset is written off.
 
 The economic lives of these titles are estimated by management to be either a specific number of sales or three years, whichever comes first. The royalty agreements are normally for three years. The economic lives in sales ranges from 10,000 discs per title to 27,500 units per title.
 
 Inventory Costs
 
 The costs incurred for duplicating the computer software and for physically packaging the product for distribution are capitalized as inventory on a unit-specific basis and charged to costs of sales when revenue from the sale of those units is recognized. We had no inventory at 12/31/00. The detail of the inventory as of 3/31/03 and 12/31/02 is shown below.
 
   42,576 42,737
 
 9 Equipment
 
 Equipment is depreciated using the straight-line method over its estimated useful lives, which range from five to seven years.
 
 3/31/03  12/31/02
 
 Equipment 51393  48,906
 
 Less: Accumulated depreciation  (11,449)  (8,980)
 
 Net Equipment 39,945 39,926
 
 Use of Estimates
 
 The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
 Earnings per Share
 
 The basic earnings (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. The diluted earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as of the first of the year for any potentially dilutive debt or equity.
 
 The Company has no potentially dilutive securities outstanding at the end of the statement periods. Therefore, the basic and diluted earnings (loss) per share are presented on the face of the statement of operations as the same number.
 
 On December 27, 2002, as part of a loan and stock sale we issued 23,000 warrants to purchase common stock at $0.50 per share, good for four years. These warrants are out of the money and as such are anti-dilutive and do not affect the earnings per share calculation.
 
 Stock Based Compensation to Employees and Directors
 
 The Company accounts for its stock based compensation based upon provisions in SFAS No. 123, Accounting for Stock-Based Compensation . In this statement stock based compensation is divided into two general categories, based upon who the stock receiver is, namely, employees/directors and non-employees/directors. The employees/directors category is further divided based upon the particular stock issuance plan, namely compensatory and non-compensatory. The employee/directors non-compensatory securities are recorded when the stock is sold at the sales price. The compensatory stock may be recorded in one of two different methods. Compensation is calculated and recorded either at the securities' fair value or intrinsic value. The Company has selected to utilize the fair value method for the valuation of its securities given as compensation to employees.
 
 10 Securities Based Compensation to Non-Employees
 
 SFAS 123 provides that stock compensation paid to non employees be recorded with a value which is based upon the fair value of the services rendered or the stock given, whichever is more reliable. The common stock paid to non-employees was valued at the value of the services rendered.
 
 Warranty
 
 We warrant our CD's for workmanship of production only for thirty days after receipt of the goods. The warranty is only for a replacement CD. Notwithstanding our limited sales to date, we have estimated one half of one percent (.5%) defect rate for the CD's.
 
 11 NOTE 2.  MERGER
 
 On August 15, 2001 Star E Media Corporation merged with the Nevada corporation Quick & Easy Software, Inc. This merger was effected to improve the ability of Star E Media to raise capital. Quick & Easy Software, Inc. had no operations, 2,400,000 shares of common stock outstanding and could be considered a "shell" company. Quick & Easy issued an additional 10,000,000 shares of common stock in exchange for all of Star E Media's common stock outstanding, which were also 10,000,000. The surviving legal entity was Quick & Easy which then changed its name to Star E Media Corporation. This merger was accounted for as a reverse acquisition and is shown on the statement of stockholders' equity. Quick & Easy's balance sheet on August 15, 2001 was the following.
 
 Cash 12,067
 Debt 0
 Equity 12,067
 
 
 NOTE 3.  NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS:
 
 We had no long-term debt or obligations as of December 31, 2001.
 
 On March 27 and March 31, 2003 we borrowed $3,000 and $6,000 respectfully from a shareholder on a demand note without interest.
 
 In 2002 we borrowed $360,000 from a shareholder. This is a demand note and carries a 6% annual interest rate. On March 7, 2003 we borrowed and additional $21,500 from the same shareholder and increased the note to $381,500.
 
 On December 27, 2002 we borrowed $230,000 from a private individual. This note is due June 27, 2003 and carries an interest rate of 6% annual interest. If this note is not paid off on the maturity date then the interest rate becomes retroactively 35%. This note is secured by all of the assets of the Company. 480,000 shares of common stock and 23,000 warrants were issued with this note.
 
 Demand note, no interest $9,000
 
 Note $381,500   381,500
 Demand note, 6% annual interest
 
 Note $230,000   230,000
 Amortized original issue discount (56,967)
 Net Note   173,033
 
 Notes  before accrued interest 563,533
 Accrued Interest  16,373
 Total Notes Payable  579,906
 
 
 NOTE 4.  STOCKHOLDERS' EQUITY
 
 Authorized Capital Stock
 
 We have a total authorized capital of 100,000,000 shares of common stock at $.001 par value per share. Shareholders have all the rights afforded them by Nevada law.
 12
  Year 2000 Equity Transactions
 
 Year 2000 Conversion of Debt
 
 The debt of $226,276 which was converted related to rent and other overhead items paid for by Star E Media's related party company Western Global. These amount due were converted to 126,252 shares of common stock at the end of the year at an average price of $1.79 per share.
 
 Stock for Services
 Consulting was paid for with 8,373,748 shares of common stock valued at $8,650. This consulting is shown as the initial capitalization of the Company. The services rendered were that of formation of the Company, meetings to do promotional activities, to gauge the viability of the Company and promotional networking. The value of these services was listed at par value, which is $0.001 per share.
 
 Year 2001 Equity Transactions
 
 Year 2001 Conversion of Debt
 
 The debt of $148,200 which was converted related to rent and other overhead items paid for by Star E Media's related party company Western Global. This amount due was converted to 157,500 shares of common stock at the end of the year at an average price of $0.94 per share.
 
 Stock for Services
 
 Consulting was paid for with 4,000 shares of stock and valued at $4,000 for an average price of $1.00 per share. This was paid in 2002.
 
 Stock Subscription
 
 A current Company shareholder also purchased 35,000 shares of restricted common stock on subscription at $1.00 per share. This was paid in year 2002.
 
 Sales of Common Stock
 
 Periodically because of cash flow needs, the Company would issue restricted shares of common stock through private placement. These private placements were negotiated individually and had different pricing. For the year 2001 1,303,500 shares of restricted common stock were sold through private placement at an average sales price of $0.40 per share for a total value of $517,000.
 
 Merger
 
 The merger with Quick & Easy Software effectively increased our common stock by 2,400,000 shares. See Note 2 for the details on this merger.
 
 Services Contributed to the Company
 
 Three officers donated services to the Company during the year 2001. The value of these services has been estimated by the Company at $288,000. This amount has been recorded in the Statement of Operations and Stockholders' Equity.
 
 Stock sales in year 2002
 
 In the year 2002 we sold two sales of restricted common stock. The first was 150,000 shares of restricted common stock for $150,000. We also sold 480,000 shares of common stock for a net value of $115,200. This second sale of stock was in conjunction with a loan with a face value of $230,000.
 13
 
 In conjunction with this same loan, 23,000 warrants were issued at $0.50 per share and good for four years. At this price these warrants are out of the money and carry no intrinsic value. Calculating the value using an acceptable method also produced no value.
 
 Services Contributed to the Company
 
 Three officers donated services to the Company during the year 2002. The value of these services has been estimated by the Company at $135,100. This amount has been recorded in the Statement of Operations and Stockholders' Equity.
 
 
 NOTE 5  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 when these differences are expected to reverse.
 
 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 $309,066, which is calculated by multiplying a 22% estimated tax rate by the cumulative NOL of $1,404,844. The total valuation allowance is a comparable $309,066.
 
 The provision for income taxes is comprised of the net change in deferred taxes less the valuation account plus the current taxes payable as shown in the chart below.
 
 2002


2001


2000Net change in deferred taxes by year


203,552


64,418


41,096Valuation account by year


(203,552
)

(64,418
)

(41,096
)Current taxes payable


0


0


0Provision for Income Taxes


0


0


0 
 Below is a chart showing the estimated federal net operating losses and the years in which they will expire.
 
 Year  Amount  Expiration
    
 Total NOL 1,404,844
 
 NOTE 6.  LEASES AND OTHER COMMITMENTS:
 
 
 We are renting an office and part of a warehouse from a Company owned by an officer on a month to month basis under a verbal agreement. We have no long-term lease commitments.
 14
 
 Other Contingencies
 
 Economic Impact of Increased Security Measures
 
 Since the terrorist attack of September 11, 2001 we have reviewed our Company for any impact that this might have brought our business. Our analysis is that our sales may have been reduced because of people's lack of buying during for the slowdown or actual stoppage of mails for some corporations. We have found it more difficult to do business with the Arabic speaking communities. According to the FASB guidelines for this economic impact we have not quantified the negative impact.
 
 
 NOTE 7.  GOING CONCERN
 
 The accompanying financial statements have been prepared assuming that we will continue as a going concern. As of the balance sheet date we had no established sources of revenue. This
 factor raised doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
 
 Since the end of the year we have restructured our marketing efforts and have continued to seek investment funding. We have decided to focus our efforts on two languages, Spanish and Arabic.
 
 We feel that this will add sales to our Company in the current and future years.
 
 Management expects these plans to allow the Company to become profitable in one of the latter quarters of the upcoming fiscal year. No assurance can be made however that these plans will be successful.
 
 
 NOTE 8.  THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
 Below is a listing of the most recent accounting standards SFAS 141-147 and their effect on the Company.
 
 SFAS 143  Accounting for Asset Retirement Obligations
 
 This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of leases. This Statement amends SFAS 19. The effective date for this Statement is June 15, 2002.
 
 SFAS 144  Accounting for the Impairment or Disposal of Long-Lived Assets
 
 This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS 121, the accounting and reporting provisions of APB 30 and amends ARB 51. The effective date of this Statement is December 15, 2001.
 
 SFAS 145  Extra-ordinary item classification, sale-lease-back classification
 
 This statement rescinds SFAS 4, 44 and 64 and reinstates APB 30 as the standard for the classification of gains and losses of the extinguishment of debt as extra-ordinary items. This standard also amends SFAS 13 in that it requires that capital leases that are modified so that the resulting lease agreement is classified as an operating lease be accounted for under the sale-lease-back provisions of SFAS 98. The effective date of this statement is May 15, 2002.
 15
 
 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.
 
 The adoption of these new Statements is not expected to have a material effect on the Company's financial position, results or operations, or cash flows.
 
 
 NOTE 9.  RELATED PARTY
 
 We rent our offices and part of a warehouse from a company which has the same officers as we have. The rent is a verbal contract on a month to month basis and is approximately $8,000 per month.
 
 During 2002 we borrowed $360,000 from a current shareholder. See notes payable for more detail.
 
 During 2003 we borrowed and additional $30,500 form the same shareholder. See notes payable for more detail.
 
 
 NOTE 10.  ADVANCED ROYALTIES AND ROYALTY AGREEMENTS
 
 We have licensing and prepaid royalty agreements with three companies, Scholastic, School Zone Interactive and Knowledge Adventure for a total of 59 titles. These agreements allow us to localize the English version into either Spanish or Arabic or both. We are also licensed to market these products in most Spanish and /or Arabic speaking countries. None of the agreements allow us to sell in the US. Our licensor will procure localized product from us and sell within the United States. The licensing agreements are generally for 3 years and renewable. Of the 59 titles, 30 have progressed through the development stage and are ready for production. Prepaid royalties on future sales are required to be paid at certain points along the development process. As we sell units we are required to remit to the licensor royalty payments on a per unit sold basis. In addition, we have agreed to sell our finished products to these companies at a
 discounted rate. On a quarterly basis we assess the recoverability of the remaining Royalty Advances. This assessment is based upon our estimation of future sales, the economic life (3 years) of the title and the specific terms of each royalty agreement. When future estimated sales or economic life are less than the remaining royalty advance or when the agreement has expired the associated royalty advance is charged off.
 
 16 For the year ended December 31, 2002, our schedule of Royalty Advances is as follows.
 
 
 Scholastic


School Zone


Vivendi


TotalBalance 12/31/01


91,915


10,000


14,000


115,915Additions


10,000


10,000


0


20,000Expired Advances


(63,601
)

(6,275
)

(14,000
)

(83,876
)Sales


0


0


0


0Balance 3/31/03


38,314


13,725


0


52,039 
 
 NOTE 11.  SEGMENT INFORMATION
 
 Segment information is presented in accordance with SFAS 131, Disclosures about Segments of an Enterprise and Related Information . This standard is based on a management approach, which requires segmentation based upon the Company's internal organization and disclosure of revenue based upon internal accounting methods. Currently management divides revenue into two categories, sales of Arabic discs and sales of Spanish discs. All sales for the year 2002 were Arabic language sales.
 
 
 NOTE 12.  SUBSEQUENT EVENTS
 
 On April 30, 2003, the Company entered into a Reorganization and Stock Purchase Agreement (the "Agreement") with ESP International Ltd., a Nevada corporation ("ESP Nevada") and its shareholders. ESP Nevada is a specialized educational/entertainment software marketing company. The acquisition was for the purpose of acquiring one of its main distribution channels. The $30,000 listed on the balance sheet under other assets was a prepayment on this purchase.
 
 
 17
 
 
   ITEM 2  Management's Discussion and Analysis or Plan of Operation
 
 The following discussion contains certain forward-looking statements that are subject to business and economic risks and uncertainties, and our actual results could differ materially from those forward-looking statements. The following discussion regarding our financial statements should be read in conjunction with the financial statements and notes thereto.
 
 Qualified Report of Independent Certified Public Accountants
 
 Our independent accountant has qualified his report. He states that the audited financial statements of Star E Media Corp. for the period from March 8, 2000 (inception) to December 31, 2000, and for the fiscal years ending December 31, 2001 and December 31, 2002, have been prepared assuming the company will continue as a going concern. He notes that our lack of established sources of revenue raises substantial doubt about our ability to continue in business.
 
 Critical Accounting Policies
 
 The Company's financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's applications of accounting policies. The critical accounting policy for the Company is the capitalization and amortization of development (translation) costs.
 
 One of the components of inventory is the capitalized development (translation) costs. Capitalized development costs are the translation costs that can be identified with a particular product. The Company maintains its capitalized development (translation) costs on a per-title and a per-language basis. At the end of the development (translation) of a title, the Company's management estimates the total number of expected units to be sold and a per-unit-sold amortization is established.
 
 Three Months Ended March 31, 2003
 
 Revenues
 
 The Company's total revenue for the three-month period ended March 31, 2003 was $324. The cost of sales for this period was $161, resulting in gross profit of $163 for the three-month period. The Company reported no revenues for the same period in 2002.
 
 Expenses
 
 Total expenses for the three months ended March 31, 2003 was $358,343, consisting of sales and marketing expenses of $15,796 (4% of total expenses), general and administrative expenses of $274,840 (77% of total expenses), interest expense of $65,239 (18% of total expenses), and depreciation expense of $2,468 (1% of total expenses). There were no research and development expenses for this three-month period. For the three months ended March 31, 2002, total expenses were $74,031, consisting of sales and marketing expenses of $2,020 (3% of total expenses), general and administrative expenses of $56,201 (76% of total expenses), research and development expenses of $14,723 (20% of total expenses), and depreciation expense of $1,087 (1% of total expenses). Overall expenses for the quarter ended March 31, 2003 were about five times higher than the overall expenses for the same quarter in the previous year and the breakdown of those expenses has changed. General and administrative expenses increased from $56,201 to $274,840 reflecting the increased costs associated with operating the business while attempting to increase revenues. Interest expense increased from zero to $65,239 for the period ended March 31, 2003 due to the Company's increase in notes payables. This interest expense consists of $8,272 in interest on notes payable and $56,967 on the original issue discount on a note payable.
 18
 
 Net Losses
 
 Net losses for the three-month period ended March 31, 2003 were $358,180 as compared to $74,031 for the three-month period ended March 31, 2002. The higher net loss figure for the three-months ended March 31, 2003 as compared to the same period last year is primarily a result of the increase in general and administrative expenses and the addition of an interest expense for the three months ended March 31, 2003.
 
 The loss per share for the quarter, based on a weighted average number of shares of 12,547,849 was $0.03 per share, compared with the loss per share of $0.01 based on a weighted average number of shares of 11,593,849 for the quarter ended March 31, 2002.
 
 Liquidity and Capital Requirements
 
 The Company had cash of $0 and inventory of $42,576 for total current assets of $42,576 as of March 31, 2003. This represents a decrease in total current assets of $83,564 as compared to December 31, 2002. This decrease in total current assets since December 31, 2002 is primarily due to expenditure of cash for regular business activities, and the inventory consisted primarily of boxed software titles ready for distribution. The Company had other assets of $247,628 as of March 31, 2003, these consisted of royalty advances of $52,039, investment in ESP of $30,000, and net capitalized production costs of $165,589. This was compared to other assets of $250,028 for the same period a year ago, which consisted of royalty advances of $69,385 and net capitalized production costs of $180,643. The Company's net capitalized production costs are a result of the Company increasing production in anticipation of additional future sales.
 
 ITEM 3  Controls and Procedures
 
 The Company's Chief Executive Officer and Chief Financial Officer (or those persons performing similar functions), after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) as of a date within 90 days of the filing of this quarterly report (the "Evaluation Date"), have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were effective to ensure the timely collection, evaluation and disclosure of information relating to the Company that would potentially be subject to disclosure under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. There were no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the Evaluation Date.
 19 PART II
 
 ITEM 1  Legal Proceedings
 
 In the ordinary course of business, the Company is from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon the financial condition and/or results of operations of the Company. However, in the opinion of the Company's management, matters currently pending or threatened against the Company are not expected to have a material adverse effect on the financial position or results of operations of the Company.
 
 ITEM 2  Changes in Securities and Use of Proceeds
 
 There have been no events which are required to be reported under this Item.
 
 ITEM 3  Defaults Upon Senior Securities
 
 There have been no events which are required to be reported under this Item.
 
 ITEM 4  Submission of Matters to a Vote of Security Holders
 
 There have been no events which are required to be reported under this Item.
 
 ITEM 5  Other Information
 
 On April 30, 2003, the Company entered into a Reorganization and Stock Purchase Agreement (the "Agreement") with ESP International Ltd., a Nevada corporation ("ESP Nevada") and its shareholders. ESP Nevada is a specialized educational/entertainment software marketing company.
 
 Under the terms of the Agreement, the sole shareholder of ESP Nevada, Mike Gaunt, agreed to sell, and the Company agreed to purchase, all of ESP Nevada's outstanding shares in exchange for 350,000 shares of the Company's common stock. In addition, and as part of the consideration, the Company acquired all rights under eight (8) existing and all future licensing representative agreements to which ESP Nevada, Mr. Gaunt, and his affiliated companies are a party. The consideration paid was determined by arms length negotiations.
 
 A prior agreement by and between Star E Media Corp and Educational Software Promotions International, a corporation controlled by Mr. Gaunt, dated June 21, 2002 was terminated in connection with this transaction.
 
 ITEM 6  Exhibits and Reports on Form 8-K
 
 (a)  Exhibits
 
 99.1  Certification Pursuant to 18 U.S.C., Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002
 
 99.2  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (b)  Reports on Form 8-K
 
 None.
 20
  SIGNATURES
 
 In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 Star E Media Corp.
 
 
 /s/ E.G. Abbadessa
   21 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
 
 
 I, Ghaby ("Gabriel") Nassar, Chief Executive Officer of the registrant, certify that:
 
 1.  I have reviewed this quarterly report on Form 10-QSB of Star E Media Corp.;
 
 2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
 3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
 
 4.  The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-14 and 15d-14) for the registrant and have:
 
 a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
 b)  evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
 
 c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
 5.  The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons fulfilling the equivalent functions):
 
 (i)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
 
 (ii)  any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal controls; and
 
 22 6.  The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
 
 Dated:  May 20, 2003
 /s/ Gabriel Nassar
 Ghaby ("Gabriel") Nassar
 Chief Executive Officer
 
 
 23 CERTIFICATION OF CHIEF FINANCIAL OFFICER
 
 
 I, Joseph Bevacqua, Chief Financial Officer of the registrant, certify that:
 
 1.  I have reviewed this quarterly report on Form 10-QSB of Star E Media Corp.;
 
 2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
 3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
 
 4.  The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-14 and 15d-14) for the registrant and have:
 
 a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
 b)  evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
 
 c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
 5.  The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons fulfilling the equivalent functions):
 
 (i)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
 
 (ii)  any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal controls; and
 
 24 6.  The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
 
 Dated:  May 20, 2003
 
 /s/ Joseph Bevacqua
 Joseph Bevacqua