UNITED STATES 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 (FEE REQUIRED)

For the fiscal year ended                June 30, 2000
                          ------------------------------------------------------

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

For the transition period from             to
                               -----------    -----------

Commission File number      0-30927
                       ------------------

                               VANSTAR FILMS, INC,
              ----------------------------------------------------
               (Exact name of registrant as specified in charter)

                   Nevada                                  98-0209053
--------------------------------------------       --------------------------
State or other jurisdiction of incorporation       (I.R.S. Employer I.D. No.)
or organization

3rd Floor 1622 West 7th Ave., Vancouver,  BC Canada         V6J IS5
---------------------------------------------------    ------------------
(Address of principal executive offices)                  (Zip Code)

Issuer's telephone number, including area code      1-604-731-1191
                                               --------------------------

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

Title of each class                    Name of each exchange on which registered


       None                                             None
-------------------                   ------------------------------------------


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

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

Check whether the Issuer (1 ) filed all reports  required to be filed by section
13 or 15 (d) of the  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.

   (1) Yes [ ] No [ x ]                    (2) Yes [x] No [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the best of the  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. [ ]


                                       -1-

<PAGE>



State issuer's revenues for its most recent fiscal year:  $    0
                                                           ----------

State the aggregate  market value of the voting stock held by non  affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold,  or the average bid and asked  prices of such
stock,  as of a specified  date within the past 60 days.  At June 30, 2000,  the
aggregate   market  value  of  the  voting  stock  held  by  non  affiliates  is
undeterminable  and is  considered  to be 0. During the past two years there has
been no trading on an exchange  however there has been  over-counter-trading  in
small  quantities  and therefore the  Registrant  has  arbitrarily  valued these
shares with no value.

     (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

                                 Not applicable

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

As of June 30, 2000, the registrant had 4,951,500  shares of common stock issued
and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the part
of the form 10- KSB (e.g.,  part I, part II,  etc.) into which the  document  is
incorporated:  (1) Any annual report to security holders; (2) any proxy or other
information statement;  and (3) Any prospectus filed pursuant to rule 424 (b) or
(c) under the Securities Act of 1933: None



                                       -2-

<PAGE>

<TABLE>
<CAPTION>



                                                 TABLE OF CONTENTS
-------------------------------------------------------------------------------------------------------------------
<S>           <C>                                                                                        <C>

PART I
                                                                                                          Page

ITEM 1.        DESCRIPTION OF BUSINESS                                                                      4

ITEM 2.        DESCRIPTION OF PROPERTIES                                                                    4

ITEM 3.        LEGAL PROCEEDINGS                                                                            4

ITEM 4.        SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS                                            4


PART II

ITEM 5.        MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                     4


ITEM 6.        MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                    5

ITEM 7.        FINANCIAL STATEMENTS                                                                         7

ITEM 8.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
               AND FINANCIAL DISCLOSURE                                                                     7


PART III

ITEM 9.        DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
               COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT                                           7

ITEM 10.       EXECUTIVE COMPENSATION                                                                       9

ITEM 11.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                               10

ITEM 12.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                               10


ITEM 13.       EXHIBITS AND REPORTS ON FORM 8-K                                                             11
</TABLE>

                                       -3-

<PAGE>



--------------------------------------------------------------------------------
                         ITEM 1. DESCRIPTION OF BUSINESS
--------------------------------------------------------------------------------


History and Organization

Vanstar Films, Inc. (the  "Registrant" or the "Company") was incorporated  under
the laws of the State of Nevada on July 8, 1997 with authorized  common stock of
50,000,000 shares at $.001 par value and 10,000,000 shares of preferred stock at
$.001 par value.  The preferred stock will have rights and preferences as may be
determined by the Board of Directors when issued.

The Registrant was organized for the purpose of conducting business in the field
of the production of films for theater and television and related services.

--------------------------------------------------------------------------------
                        ITEM 2. DESCRIPTION OF PROPERTIES
--------------------------------------------------------------------------------


The Registrant's administrative offices are rented and located at 3rd Floor 1622
West 7th Avenue, Vancouver, BC Canada, V6J IS5.

--------------------------------------------------------------------------------
                            ITEM 3. LEGAL PROCEEDINGS
--------------------------------------------------------------------------------

                                      None

--------------------------------------------------------------------------------
          ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
--------------------------------------------------------------------------------

                                      None
--------------------------------------------------------------------------------
ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------


During the year  through  June 30,  2000 there has been no  established  trading
market for the shares of the Registrant's  common stock over an exchange however
the stock has been trading  over-the-counter  in small  quantities.  The trading
amounts for a share of stock for the year are listed below by quarter:
                                 2000                             1999
                             Low      High                    Low      High
     First                   .55     .88
     Second                  .51     .70
     Third                                                    .28       .78
     Fourth                                                   .65      1.01

                                       -4-

<PAGE>



During the last fiscal year the  Registrant  issued  66,000 common shares of its
capital  stock at $.21 to $1.49 per share under the  Regulation D exemption  for
cash. Since its inception,  the Company has not paid any dividends on its common
stock,  and the Company does not  anticipate  that it will pay  dividends in the
foreseeable   future.  At  June  30,  2000  the  Company  had  approximately  49
shareholders.

--------------------------------------------------------------------------------
        ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
--------------------------------------------------------------------------------


Overview

The Registrant was organized for the purpose of conducting business in the field
of the production of films for theater and television and related services.

(a) Company  intends to develop a number of products and services that will take
advantage  of the  growing  demands  of  British  Columbia's  maturing  film and
television industry.  Initially,  the Company intends to focus on three areas of
growth: (i) a strong co-production environment,  where the Company might benefit
from strategic  partnerships in film production,  with both domestic and foreign
producers - the Company has an  understanding  with Lonewolf  Productions of Los
Angeles, California, on a best efforts basis, to produce three feature films all
in the cost  range of ten  million  ($10,000,000)  U.S.  per  feature;  (ii) the
development  of  a  series  of  nature  videos  in  cooperation   and  with  the
distribution  assistance of a nature  magazine;  and (iii) the  development of a
series of  television  half-hour  programs  that are oriented to niche  markets,
where the shows are infomercial structured and the company retains both creative
rights and has a percentage of marketing income.

Distribution  for  the  Company's  products  have  been  identified,  as well as
potential  users of its  services.  The Company will attempt to have a marketing
and sales presence in as many of the traditional  entertainment industry outlets
as may be possible, with the goal of creating a strong demand for the full range
of the company's  products.  The Company  intends to focus on trade shows,  film
festivals,  industry  periodicals,  Company generated  promotional  material and
direct  sales  both by  telemarketing  as well as  through a  comprehensive  and
ongoing series of face to face meetings with industry leaders.

 (b) Film Production and Production Services. Vancouver, British Columbia is one
of the fastest growing film and television  production  centers in North America
outside of Hollywood,  California. With a cosmopolitan,  multi-ethnic population
that is  nearing  two  million,  Vancouver,  British  Columbia  has  become  the
production  center  of  choice  for  some of the  most  recognized  names in the
entertainment  industry.  In the year 1996, 101 productions were completed for a
total dollar benefit to the  province's  film industry of more than five hundred
million dollars  ($500,000,000  CDN). This included 33 feature films and sixteen
TV series.  Direct  employment,  according to the government of British Columbia
surveys,  is now in excess of 6,500 people and indirect employment totals nearly
25,000 people.

The factors that make Vancouver an attractive center for the production of films
and  television  in the  Company's  estimation  are: (i) the highly  competitive
Canadian  dollar;  (ii) the majestic  and  versatile  scenery,  both natural and
urban;  (iii) the more than ten thousand  highly  skilled  professional  actors,
technicians  and support  staff;  (iv) liberal tax credits from both federal and
provincial governments; (v) state-of-the-art post

                                       -5-

<PAGE>



production  services;  and,  (vi) a highly  developed  and skilled  intellectual
properties sector of accredited and highly skilled writers.

Co-production  and  Service  Production  are the  backbone  of the  industry  in
Vancouver,  having experienced years of strong growth,  culminating at this time
with  projections  for  Vancouver's  fiscal  1999,  total  dollars  for film and
television production, of near one billion dollars ($1,000,000,000 CDN).

Service  Production  is the  management,  for  foreign  producers,  of single or
multiple film projects and or television movies or series. The Company,  in this
area of the industry,  would supply the staff  required to manage these projects
on behalf of  foreign  producers,  on a fee for  services  basis.  As well,  the
Company   intends   to  lease  or   purchase  a   facility   from  a   Vancouver
contractor-developer.

The  Company,  with the creation of its own staff to manage  in-house  projects,
such as its projected video series and infomercial programming, will endeavor to
utilize this same staff to service  production  for foreign  producers,  thereby
establishing new sources of revenue for the Company. This will create an ongoing
demand for the Company's products and services.

(c)  Animation.  The  company  has  letters of intent  with two local  groups to
develop a claymation  project  (Babblebrook)  and a computer  animation  project
(Motorworld)  Babblebrook is aimed at 3-6 year olds and comes with a ten song CD
Motorworld  is aimed at 6-12 year old boys.  Both projects need a 1/2 hour pilot
to be completed  for  marketing  purposes and to develop into possible TV series
shows.  These  will  enable  the  company  to obtain  penetration  in the retail
marketing  area.  The  company's  limited  focus will be on the  development  of
Babblebrook.

(d) Feature Films Co-Production.  The Company has a "deal memo" outstanding with
Entertech  Media of Los Angeles,  California for the  development of an animated
film (Gunga Din) with an  estimated  cost of  $2,000,000cdn.  A local  animation
house has agreed to produce this film within the above budget figure.

(e) Nature  Video  Production.  The Company has  identified  the field of nature
videos,  specifically  those featuring wild animals associated with the Canadian
Tundra:  wolf, grizzly,  orca and others as having a unique potential for a wide
market  distribution.  To create an environment  where  production  costs can be
properly  managed,  as well as to insure  the  quality  of  production,  assured
distribution and to give the project its best chance at success,  the Company is
currently  negotiating  to bring  one or more  national  nature  periodicals  to
partner this project. The Company currently has a letter of intent from Canadian
Geographic Magazine for such participation.

(f) Infomercial Television Production and Merchandising.  The Company intends to
seek out  regional  and  national  manufacturers  and or  suppliers  of uniquely
priced,  one of a kind  products  that would  benefit  from a focused  marketing
program as is  understood  in the  infomercial  format.  The Company  intends to
negotiate the revenue  accrues to the Company,  and profits are generated by the
Company's  share of the new and or increased  sales volume for the product.  One
such program is currently in negotiation with a regional travel service supplier
and a national travel product supplier.

(g)  Film  library  and  Distribution.   The  Company,   which  will  require  a
distribution  arm to  maximize  the sales of its own  products;  nature  videos,
infomercial  television and feature  films,  will seek out  under-utilized  film
libraries,  whose  marketability  is known  but may have  remained  dormant  for
whatever  reason.  The area that the Company has identified  for  accumulating a
substantial inventory of distributable product focuses on one

                                       -6-

<PAGE>



large  family-owned  film library and several  smaller  institutionally  managed
inventories. No negotiations are presently ongoing in this area.

Results of Operations

The Company has not started operations on the date of this report.

--------------------------------------------------------------------------------
                          ITEM 7. FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


The financial statements of the Company are included  immediately  following the
signature page to this form 10-KSB.

--------------------------------------------------------------------------------
            ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                       ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------


The Company has had no disagreements  with its certified public accountants with
respect to accounting practices or procedures of financial disclosure.

--------------------------------------------------------------------------------
        ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
           PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
--------------------------------------------------------------------------------


The following table as of June 30, 2000, includes the name, age, and position of
each  executive  officer and director and the term of office of each director of
the Company.

Name               Age     Position                        Director and/or
----               ---     --------                         Officer Since
                                                            -------------
Louis Tardif       52      President  and Director            July 2000

Marvin Wideen      65      Vice President and Director        July 2000

Grant Curran       42      Secretary and  Director            July 2000


Each  director  of the  Company  serves  for a term of one  year and  until  his
successor  is elected  at the  Company's  annual  shareholders'  meeting  and is
qualified,  subject to  removal  by the  Company's  shareholders.  Each  officer
serves,  at the pleasure of the board of  directors,  for a term of one year and
until his  successor is elected at the annual  meeting of the board of directors
and is qualified.

Included  below  is  certain  biographical  information  regarding  each  of the
Company's executive officers and directors.



                                       -7-

<PAGE>

Louis Tardif
-------------

President  and Director is an  entrepreneur,  small  business  lecturer and past
member of the Creative Property  Management  writing team, Mr. Tardif resides at
4087 S.W. Marine Drive, Vancouver, British Columbia.

Marvin Wideen
-------------

Vice  President  and  Director,  Professor  emeritus and private  consultant  in
educational  programs.  Mr. Wideen  resides at 833 Seymour Dr.  Coquitlam,  B.C.
Canada V3J 6V8

Grant Curran
------------

Secretary and Director,  Partner of Cawley & Associates,  a Vancouver  chartered
accountancy  firm, Mr. Curran resides at 1501 Jubilee  Court,  North  Vancouver,
British Columbia.

Except as indicated below, to the knowledge of management,  during the past five
years, no present or former director,  executive  officer or person nominated to
become a director or an executive officer of the Company:

(1) filed a petition under the federal  bankruptcy laws or any state  insolvency
law, nor had a receiver,  fiscal agent or similar  officer  appointed by a court
for the business or property of such person,  or any partnership in which he was
a general partner at or within two years before the time of such filing;

(2) was  convicted  in a  criminal  proceeding  or named  subject  of a  pending
criminal proceeding (excluding traffic violations and other minor offenses);

(3) was the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated,  of any court of competent  jurisdiction,  permanently  or
temporarily enjoining him from or otherwise limiting, the following activities:

              (i) acting as a futures commission  merchant,  introducing broker,
              commodity trading advisor,  commodity pool operator, floor broker,
              leverage  transaction  merchant,  associated  person of any of the
              foregoing,  or as an investment  advisor,  underwriter,  broker or
              dealer in  securities,  or as an  affiliate  person,  director  or
              employee of any investment  company,  or engaging in or continuing
              any conduct or practice in connection with such activity;

              (ii)  engaging in any type of business practice; or

              (iii) engaging in any activity in connection  with the purchase or
              sale of any  security  or  commodity  or in  connection  with  any
              violation  of  federal  or  state   securities   laws  or  federal
              commodities laws;

(4)  was the  subject  of any  order,  judgment,  or  decree,  not  subsequently
reversed,  suspended,  or vacated,  of any federal or state  authority  barring,
suspending or otherwise  limiting for more than 60 days the right of such person
to engage in any activity  described  above under this Item, or to be associated
with persons engaged in any such activity;

(5) was found by a court of competent  jurisdiction  in a civil action or by the
Securities  and  Exchange  Commission  to have  violated  any  federal  or state
securities  law,  and the  judgment  in such  civil  action  or  finding  by the
Securities  and  Exchange   Commission  has  not  been  subsequently   reversed,
suspended, or vacated.

(6) was found by a court of competent  jurisdiction  in a civil action or by the
Commodity  Futures Trading  Commission to have violated any federal  commodities
law, and the judgement in such civil action or finding by the Commodity  Futures
Trading Commission has not been subsequently reversed, suspended or vacated.

                Compliance with Section 16(a) of the Exchange Act

The Company  knows of no person,  who at any time during the  subsequent  fiscal
years, was a director, officer, beneficial owner of more than ten percent of any
class of equity securities of the registrant  registered  pursuant to Section 12
("Reporting Person"), that failed to file on a timely basis any reports required
to be furnished pursuant to Section 16 (a).

                                       -8-

<PAGE>

Based  upon a review of Forms 3 and 4  furnished  to the  registrant  under Rule
16a-3(d)  during its most recent fiscal year,  other than disclosed  below,  the
registrant knows of no Reporting Person that failed to file the required reports
during the most recent fiscal year or prior years.

The following table as of June 30, 2000,  includes the name and position of each
Reporting  Person  that failed to file on a timely  basis any  reports  required
pursuant to Section 16(a) during the most recent fiscal year or prior years.

Name                         Position                         Report to be Filed

Louis Tardif                 President  and Director                 Form 3
Marvin Wideen                Vice President and Director              Form 3
Grant Curran                 Secretary and Director                   Form 3


--------------------------------------------------------------------------------
                         ITEM 10. EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------


Cash Compensation

Remuneration   has  been  paid  to  two  of  the  officers  and   directors  and
reimbursement  has been made for expenses for  activities  on the  registrants's
behalf.  For the fiscal year ended June 30, 1998 the registrant  paid $37,099 in
remuneration  and for the year ended June 30,  1999 $1,059 and none for the year
ended June 30, 2000.

Bonuses and Deferred Compensation

None.

Compensation Pursuant to Plans

None.

Pension Table

None.

Other Compensation

None

Compensation of Directors

None.

Termination of Employment and Change of Control Arrangement

                                       -9-

<PAGE>



There  are no  compensatory  plans or  arrangements,  including  payments  to be
received from the Company, with respect to any person named in Cash Compensation
set out above  which  would in any way  result in  payments  to any such  person
because of his resignation,  retirement,  or other  termination of such person's
employment with the Company or its subsidiaries, or any change in control of the
Company,  or a change in the person's  responsibilities  following a changing in
control of the Company.

--------------------------------------------------------------------------------
     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------------------------


The following  table as of June 30, 2000,  includes the name and address and the
number of shares of the Company's Common Stock, par value $0.001 per share, held
of record or beneficially by each person who held of record, or was known by the
Company  to  own  beneficially,  more  than  5%  of  the  4,951,500  issued  and
outstanding  shares  of the  Company's  Common  Stock,  and the name  and  share
holdings of each director and of all officers and directors as a group.
<TABLE>
<CAPTION>

                                   Nature of                 Number of
Name of Person or Group            Ownership (1)             Shares Owned             Percent
-----------------------            --------------            ------------             -------
<S>                              <C>                         <C>                    <C>
Officers and Directors and
  Principal Shareholders:

Louis Tardif                        Direct                     1,500,000                30
Marvin Wideen                       Direct                        40,000                 -
Grant Curran                        Direct                        15,000                 -

All Officers and Directors
  as a Group (3 persons)            Direct                     1,545,000                31

(1)  All shares owned directly are owned  beneficially  and of record,  and such
     shareholder  has sole voting,  investment,  and dispositive  power,  unless
     otherwise noted.
</TABLE>

--------------------------------------------------------------------------------
             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------


Transactions with Management and Others

Except as indicated below, and for the periods indicated, there were no material
transactions,  or series of similar  transactions,  since the  beginning  of the
Company's last fiscal year, or any currently proposed transactions, or series of
similar  transactions,  to which the Company was or is to be party, in which the
amount involved exceeds $60,000, and in which any director or executive officer,
or any  security  holder  who  is  known  by the  Company  to own of  record  or
beneficially  more than 5% of any class of the Company's  common  stock,  or any
member of the immediate family of any of the foregoing persons, has an interest.

Indebtedness of Management

There were no material  transactions,  or series of similar transactions,  since
the  beginning of the  Company's  last fiscal year,  or any  currently  proposed
transactions,  or series of similar transactions, to which the Company was or is
to be a party,  in which the amount  involved  exceeds  $60,000 and in which any
director or executive officer, or any security

                                      -10-

<PAGE>



holder who is known to the Company to own of record or beneficially more than 5%
of any class of the  Company's  common  stock,  or any  member of the  immediate
family of any of the foregoing persons, has an interest.

Transactions with Promoters

The  Company  was  organized  more than five  years ago  therefore  transactions
between the Company and its promoters or founders are not deemed to be material.

--------------------------------------------------------------------------------
                    ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------------


(a)(1) Financial  Statements.  The following financial statements are included
       in this report:

Title of Document                                                           Page

Report of Andersen, Andersen & Strong, Certified Public Accountants           13

Balance Sheet as of June 30, 2000                                             14

Statements of Operations for years ended June 30, 2000 and 1999               15
    and from inception

Statements of Stockholders' Equity for the period July 8, to June 30, 2000    16

Statements of Cash Flows for the years ended June 30, 2000 and 1999           17
   and from inception

Notes to Financial Statements                                                 18


(a)(2)  Financial  Statement   Schedules.   The  following  financial  statement
     schedules are included as part of this report: None

(a)(3)  Exhibits.

 None














                                      -11-

<PAGE>



--------------------------------------------------------------------------------
                                   SIGNATURES
--------------------------------------------------------------------------------


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


                                           VANSTAR  FILMS,  INC.


Date: October 12, 2000              By  /s/ Louis Tardif
                                    --------------------------------------------
                                    Louis  Tardif,  President and Director


Date: October 12, 2000              By  /s/ Grant Curran
                                     -------------------------------------------
                                     Grant Curran, Secretary and Director










                                      -12-

<PAGE>



ANDERSEN ANDERSEN & STRONG, L.C.
Certified Public Accountants and Business Consultants

                                                  941 East 3300 South, Suite 202
                                                      Salt Lake City, Utah 84106
                                                          Telephone 801 486-0096
                                                                Fax 801 486-0098


Board of Directors
Vanstar Films, Inc.
Vancouver, B.C.

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We  have  audited  the  accompanying  balance  sheets  of  Vanstar  Films,  Inc.
(development stage company) at June 30, 2000 , and the statements of operations,
stockholders'  equity, and cash flows for the years ended June 30, 2000 and 1999
and the  period  July 8,  1997  (date  of  inception)  to June 30,  2000.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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  balance  sheet  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Vanstar Films, Inc. at June 30,
2000, and the results of operations, and cash flows for the years ended June 30,
2000 and 1999 and the period July 8, 1997 (date of  inception) to June 30, 2000,
in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  The Company has suffered  recurring
losses from operations since its inception and does not have sufficient  working
capital for its  planned  activity,  which  raises  substantial  doubt about its
ability to continue as a going  concern.  Management's  plans in regard to these
matters are described in Note 4. These  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.

                                                      Andersen Andersen & Strong

Salt Lake City, Utah
September 15, 2000

                                      -13-

<PAGE>



                               VANSTAR FILMS, INC.
                          ( Development Stage Company)
                                  BALANCE SHEET
                                  June 30, 2000
--------------------------------------------------------------------------------



ASSETS

CURRENT ASSETS

   Cash                                                              $   1,009
                                                                       -------
   Total Current Assets                                              $   1,009
                                                                        ======



LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

    Accounts payable - related parties                               $  5,032
   Accounts payable                                                      3,495
                                                                        ------
       Total Current Liabilities                                         8,527
                                                                        ------

STOCKHOLDERS' EQUITY

    Preferred Stock
       10,000,000 shares authorized at $0.001 par
       value; none issued and outstanding                                 -

   Common stock
        50,000,000 shares authorized  at $0.001 par value;
        4,951,500 shares issued and outstanding                          4,952

   Capital in excess of par value                                      155,799

    Deficit accumulated during the development stage                  (168,269)
                                                                      --------

       Total Stockholders' Deficiency                                   (7,518)
                                                                     ---------

                                                                    $    1,009

              The accompanying notes are an integral part of these
                             financial statements.

                                      -14-

<PAGE>

<TABLE>
<CAPTION>


                                                       VANSTAR FILMS INC.
                                                  ( Development Stage Company)
                                                    STATEMENTS OF OPERATIONS
                                          For the Years  Ended June 30,  2000 and 1999
                               and the  Period  July 8,  1997  (Date of Inception) to June 30, 2000
---------------------------------------------------------------------------------------------------------------------------------

                                                                                                               July 8, 1997
                                                                         June 30          June 30         (Date of Inception) to
                                                                          2000             1999              June  30, 2000
                                                                        --------          -------            ---------------
<S>                                                               <C>                  <C>                 <C>

REVENUES                                                            $       -           $       -             $         136

EXPENSES                                                                  36,697           34,036                   166,450
                                                                         -------          -------                 ---------

NET LOSS                                                                 (36,697)         (34,036)                 (166,314)

COMPREHENSIVE LOSS

   Loss from foreign currency translation                                   (417)            (403)                   (1,955)
                                                                        --------         --------                 ---------

NET COMPREHENSIVE LOSS                                               $   (37,114)       $ (34,439)            $    (168,269)
                                                                        ========         ========                 =========


NET LOSS PER COMMON
   SHARE

       Basic                                                         $      (.01)       $    (.01)
                                                                        --------         --------




AVERAGE OUTSTANDING
   SHARES


         Basic                                                         4,918,500        4,885,500
                                                                       ---------        ---------

</TABLE>











              The accompanying notes are an integral part of these
                             financial statements.

                                      -15-

<PAGE>

<TABLE>
<CAPTION>
                                                  VANSTAR  FILMS,  INC.
                                               ( Development Stage Company)
                                       STATEMENT OF CHANGES  IN STOCKHOLDERS' EQUITY
                                          Period from July 8, 1997 (Date of Inception)
                                                   to June 30, 2000
-------------------------------------------------------------------------------------------------------------------
                                                                                       Capital in
                                                            Common Stock                Excess of        Accumulated
                                                      Shares            Amount          Par Value          Deficit
                                                      ------            ------         -----------      ------------
<S>                                               <C>                <C>              <C>              <C>
Balance July 8,  1997 (date of inception)                -            $       -        $        -      $       -

Issuance of common stock for cash at                 2,315,000             2,315            19,900             -
    $.0088 - July 10, 1997

Issuance of common stock for cash at
    $.0089 - Sept 18, 1997                           2,301,000             2,301            19,900             -

Issuance of common stock for cash at
    $.001 - Sept 30, 1997                               86,000                86               -               -

Issuance of common stock for cash at
    $.27 - Jan 2, 1998                                 107,500               108            31,392             -

Issuance of common stock for cash at
   $.37 - April 20, 1998                                50,000                50            19,950             -

Net operating loss  for the year ended
    June 30, 1998                                       -                     -                -              (96,716)

Issuance of common stock for cash at                    70,000                70            20,930              -
   $.31 - Sept 15, 1998

Cancellation of common stock -
    December  9, 1998                                  (44,000)              (44)              -

Contributions to capital by officers - expenses             -                 -              9,655              -

Net operating loss for the year
   ended  June 30, 1999                                     -                 -                -             (34,439)

Balance June 30, 1999                                4,885,500             4,886           121,727          (131,155)

Issuance of common stock for cash at $1.49 -
   September and October 1999                           16,000                16            23,812              -

Issuance of common stock for cash at $.21 -
   March 9, 2000                                        50,000                50            10,260              -

Net operating loss for the year ended
   June 30, 2000                                            -                 -                -             (37,114)

Balance June 30, 2000                                4,951,500        $    4,952       $   155,799      $   (168,269)
                                                     =========           =======          ========         ==========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                                              -16-

<PAGE>


<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
                                         ( Development Stage Company)
                                            STATEMENT OF CASH FLOWS
                              For the Years  Ended June 30,  2000 and 1999
                  and  the   Period   July  8,  1997   (Date  of  Inception) to June 30, 2000
------------------------------------------------------------------------------------------------------


                                                                                      July 8, 1997
                                                         June 30        June 30    (Date of Inception)
                                                          2000            1999      to June 30, 2000
                                                        ---------      ---------   -------------------
<S>                                                   <C>             <C>          <C>
CASH FLOWS FROM
   OPERATING ACTIVITIES

   Net loss                                            $  (36,697)    $  (34,036)    $     (166,314)

   Adjustments to reconcile net loss to
       net cash provided by operating
       activities

          Changes  in accounts payable                      3,002          3,275              8,527
          Conributions to capital - expenses                  -            9,655              9,655
            Foreign currency translations                    (417)          (403)            (1,955)


          Net Decrease in Cash From Operations            (34,112)       (21,509)          (150,087)
                                                        ---------      ---------     --------------

CASH FLOWS FROM INVESTING
   ACTIVITIES
                                                             -               -                  -
                                                        ---------      ---------     --------------

CASH FLOWS FROM FINANCING
   ACTIVITIES

            Proceeds from issuance of common stock         34,138         20,956            151,096
                                                        ---------      ---------     --------------

   Net Increase (Decrease)  in Cash                            26           (553)             1,009

   Cash at Beginning of Period                                983          1,536                -
                                                        ---------      ---------     --------------

   Cash at End of Period                                $   1,009      $     983     $        1,009
                                                        =========      =========     ==============


</TABLE>






              The accompanying notes are an integral part of these
                             financial statements.

                                      -17-

<PAGE>



                               VANSTAR FILMS, INC.
                          ( Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS

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


1. ORGANIZATION

The  Company was  incorporated  under the laws of the State of Nevada on July 8,
1997 with  authorized  common stock of 50,000,000  shares at $.001 par value and
10,000,000 shares of preferred stock at $.001 par value.

The preferred stock will have rights and preferences as may be determined by the
Board of Directors when issued.

The  Corporation  was organized  for the purpose of  conducting  business in the
field of the  production  of films for the  theater and  television  and related
services.

Since its inception the company completed offerings under rule 504 of Regulation
D of 4,799,500 shares of its common capital stock.

The Company has been in the development stage since inception.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Methods

The  Company  recognizes  income and  expenses  based on the  accrual  method of
accounting.

Dividend Policy

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

Income Taxes

On June 30,  2000,  the  Company  had a net  operating  loss carry  forward of $
166,769.  The tax benefit from the loss carry forward has been fully offset by a
valuation  reserve  because the use of the future tax benefit is  undeterminable
since the Company has no operations. The operating loss expires in 2021.

Basic and Diluted Net Income (Loss) Per Share

Basic net income  (loss) per share  amounts are  computed  based on the weighted
average  number of shares  actually  outstanding.  Diluted net income (loss) per
share amounts are computed  using the weighted  average  number of common shares
and common  equivalent  shares  outstanding  as if shares had been issued on the
exercise of the preferred share rights unless the exercise becomes  antidilutive
and then only the basic per share amounts are shown in the report.



                                      -18-

<PAGE>



                               VANSTAR FILMS, INC.
                          ( Development Stage Company)
                    NOTES TO FINANCIAL STATEMENTS (Continued)

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


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial Instruments

The  carrying  amounts of  financial  instruments,  including  cash and accounts
payable, are considered by management to be their estimated fair values.

Comprehensive Income

The Company  adopted  Statement of Financial  Accounting  Standards No. 130. The
adoption of this  standard  had no impact on the total  stockholder's  equity on
June 30, 2000.

Recent Accounting Pronouncements

The  Company  does not  expect  that the  adoption  of other  recent  accounting
pronouncements will have a material impact on its financial statements.

Foreign Currency Translation

The  transactions  of the Company were  completed in Canadian  currency which is
considered to be the  functional  currency.  For reporting  purposes the balance
sheet  accounts  have been  translated  to US currency at the  exchange  rate in
effect at the time,  and the  operating  accounts at the average rates in effect
during the year. The gain or loss is shown under the comprehensive loss.

Estimates and Assumptions

Management uses estimates and assumptions in preparing  financial  statements in
accordance with generally accepted  accounting  principles.  Those estimates and
assumptions  affect the  reported  amounts of the  assets and  liabilities,  the
disclosure of contingent  assets and liabilities,  and the reported revenues and
expenses.  Actual  results  could vary from the  estimates  that were assumed in
preparing these financial statements.

3.  RELATED PARTY TRANSACTIONS

Related parties own 50% of the outstanding stock of the Company.

4.  GOING CONCERN

Continuation  of the  Company as a going  concern is  dependent  upon  obtaining
sufficient  working  capital for its planned  activity and the management of the
Company has  developed  a  strategy,  which it  believes  will  accomplish  this
objective through additional equity funding, and long term financing, which will
enable the Company to operate for coming year.


                                      -19-