Edgar Filing: Joystar Inc

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB

[X] ANNUAL REPORT PUSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

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

FOR THE TRANSITION PERIOD FROM __________________ TO ________________________

Commission File Number: 000-25973

JOYSTAR, INC.
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(Name of Small Business Issuer in its Charter)

California 68-0406331
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

95 Argonaut St. First Floor, Aliso Viejo, CA 92656
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(Address of Principle Executive Offices)

(949) 837-8101
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(Issuer's Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Exchange Act:

None

Securities Registered Pursuant to Section 12(g) of the Exchange Act:

Common Stock, $0.001 Par Value

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 registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X ]No [ ]

Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

The registrant's revenues for its most recent fiscal year were
$1,943,000 .

The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 15, 2006 was $20,551,665 based upon the market
price of the registrant's Common Stock of $1.18 as of March 15, 2006.

The number of the Company's shares of Common Stock outstanding as of March 15,
2006 was 41,069,249. The registrant has no outstanding non-voting common equity.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

JOYSTAR, INC.
FORM 10-KSB ANNUAL REPORT
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2005
TABLE OF CONTENTS

Forward-Looking Statements

PART 1
Item 1. Description of Business 4
Item 2. Description of Property 18
Item 3. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 18

PART II

Item 5. Market for Common Equity, Related Stockholder Matters and
Small Business Issuer Purchases of Equity Securities 19
Item 6. Management's Discussion and Analysis or Plan of Operation 22
Item 7. Financial Statements 24
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 25
Item 8A. Controls and Procedures 25
Item 8B. Other Information 25
PART III

Item 9. Directors and Executive Officers of the Registrant 25
Item 10. Executive Compensation 27
Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 28
Item 12. Certain Relationships and Related Transactions 29
Item 13. Exhibits 29
Item 14. Principal Accountant Fees and Services 29

Signatures

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-KSB contains forward-looking statements about the business,
financial condition and prospects of the Company that reflect assumptions made
by management and management's beliefs based on information currently available
to it. We can give no assurance that the expectations indicated by such
forward-looking statements will be realized. If any of management's assumptions
should prove incorrect, or if any of the risks and uncertainties underlying such
expectations should materialize, the Company's actual results may differ
materially from those indicated by the forward-looking statements.

The key factors that are not within the Company's control and that may have
a direct bearing on operating results include, but are not limited to, the
acceptance by customers of the Company's products and services, the Company's
ability to develop new products and services cost-effectively, the ability of
the Company to raise capital in the future, the development by competitors of
products or services using improved or alternative technology, the retention of
key employees and general economic conditions.

There may be other risks and circumstances that management is unable to
predict. When used in this Form 10-KSB, words such as, "believes," "expects,"
"intends," "plans," "anticipates" "estimates" and similar expressions are
intended to identify forward-looking statements, although there may be certain
forward-looking statements not accompanied by such expressions. All
forward-looking statements are intended to be covered by the safe harbor created
by Section 21E of the Securities Exchange Act of 1934.

PART I

Item 1. DESCRIPTION OF BUSINESS
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Overview

Joystar, Inc., a California corporation ("Joystar", "Company" or "we") is one of
the fastest growing leisure travel networks. We specialize in selling complex
travel products including cruises, vacation packages and group travel through
our national sales force of cruise and vacation specialists. Our comprehensive
business opportunity combines innovative technology, marketing programs and
expert support services to entrepreneurial travel agents giving them the
competitive advantage they need to succeed. With Joystar, travel agents can
concentrate on promoting travel and creating client loyalty without the
administrative and financial burden of owning and operating a traditional
storefront travel agency. We are proving to be the hands-down choice for serious
travel professionals who want to flourish in this changing and exciting time in
the industry.

The Company maintains its corporate offices at 95 Argonaut St. First Floor,
Aliso Viejo, CA 92656. The Company's telephone number is (949) 837-8101.
Our Florida office is located at 2875 NE 191st Street, Suite 305, Aventura, FL
33180. The telephone number is 305-933-0663.

Business of the Company

Joystar specializes in selling complex travel products including cruises,
vacation packages and group travel through its national sales force of of cruise
and vacation specialists.

TRAVEL AGENCY MODEL

When selling travel, Joystar acts as either an intermediary or a merchant. When
we transact travel bookings acting as an intermediary, we pass a customer's
reservation to the travel supplier (hotel, cruise line, tour operator, car
rental, etc.). In the intermediary transaction, the supplier sets the retail
price paid by the customer, and the supplier is the merchant of record for the
transaction. We receive a commission from the travel supplier after the travel
has been completed.

In a merchant transaction, we receive access to consolidator fares (wholesale
airline seats and hotel rooms) from suppliers at negotiated net rates. We
determine the "mark-up" and process the transaction as the merchant of record.
Acting as a merchant enables us to achieve a higher level of gross profit than
in the agency model.

HOST AGENCY MODEL

Joystar provides syndicated technology, hosting, and support services to a
growing network of both part-time and full-time independent cruise and vacation
agents. We provide our independent agents with the technology, tools, training
and back office support to facilitate the operation of a successful and
rewarding business.

Joystar benefits from membership fees, a share of the commission generated by
the travel agent, overrides and annual bonuses from the supplier community.
Additionally, the value of the members' total bookings allows us to negotiate
higher commissions, marketing dollars and co-op support from the supplier
community.

EXPERIENCED TRAVEL AGENTS

A large number of experienced travel agents and agency owners are closing their
"bricks-n-mortar" agencies in an effort to control costs. We have developed
three programs which address the unique needs of the travel agent community.

The benefits of our programs include private label and co-branded consumer
websites, 24/7 access to "myJoystar" - our popular "agents only" extranet, sales
and product training, email marketing programs, the latest booking tools, weekly
e-newsletter, daily conference calls, access to the Joystar Community and CEO
Blog, and unlimited access to our always friendly toll-free agent support staff.

WE ARE CREATING THE NEW BREED OF TRAVEL SELLERS

According to the Department of Labor statistics over 13 million people currently
operate a home-based business and over 1,500 new home-based businesses are
opened every day. Technology advances within the travel industry have made it
very easy for someone without travel agency experience to succeed as a
home-based agent.

The benefits of "owning a travel agency" for as little as $500 per year appeal
to small business owners, home-based and internet entrepreneurs, stay-at-home
moms, affluent travelers, web masters and super-affiliates, churches, little
league teams, schools and other non-profit organizations. The potential market
for this model is in the millions of home-based travel agents and online
affiliates.

In order to ensure the success of new agents, improve the income of our
experienced agents, and reduce the potential customer service burden, we are
developing a "mentor" program. Each new agent will be assigned to a qualifying
experienced agent that will provide guidance during the training period. The
commission generated during this mentorship will be shared between the trainee
and the mentor.

Revenues from commissions and transaction fees generated by the agents through
booking travel with their clients are shared between Joystar and the agent. We
aim to develop a membership base of 50,000 agents and online affiliates over the
next 5 years. We believe that with the tools, technology, marketing resources
and superior support we provide our agents, they will produce an average of
$10,000 per year in leisure bookings.

OUR STRATEGY

As professional travel agents are adapting to a changing industry, a new
business model has emerged - home-based travel agent hosting and IT outsourcing.
There are approximately 21,000 "bricks-n-mortar" agencies in the United States
with sales between $1 million and $10 million dollars. And, of the estimated
120,000 travel agents in America, it is estimated that 20,000-25,000 agents have
already moved to home-based operations (Credit Suisse Report). This number is
expected to grow to approximately 50,000 agents by the year 2010 (Credit Suisse
Report).

Independent agents and agency owners are looking for ways to increase revenues,
reduce costs, and streamline operations. They are also becoming more and more
reliant on both technology and the Internet. We answer the call by relieving
travel agents and agency owners of non-revenue producing tasks, providing
instant technology solutions, marketing programs, and unlimited support -
empowering them to do what they do best - sell travel.

We are proving to be the hands-down choice for serious travel professionals who
want to flourish in this changing and exciting time in the industry. Since the
launch of our hosting program in August of 2004, we have signed up over 3,000
agents making us the largest and fastest growing agency in the industry.

Our short-term goal is to be hosting 5,000 professional home based travel agents
by the end of June 2006. To reach that goal, we have implemented an aggressive
marketing campaign targeting both home-based agents and traditional agents
contemplating the move home.

We believe that the hosting models for professional home-based agents will
complement our program targeted to the over 13 million Americans who are
currently operating home-based businesses. In this model, the Company aims to
enroll 50,000 members by 2010. Our strategy for reaching this massive group of
home-based entrepreneurs covers multiple channels including marketing websites,
search engine optimization, email marketing and print advertising.

TARGET MARKET

Consumers planning and purchasing a trip generally engage in a predictable
process that begins with considering destinations, dates and budgets, and
progresses to a series of purchase decisions involving transportation,
accommodations and destination activities. Historically, this planning and
purchasing process has been inefficient because consumers have to spend a
significant amount of time piecing together the information from a variety of
sources. Consumers frequently consulted many different media and people, such as
guidebooks, magazines, travel agents, friends, co-workers and individual travel
suppliers. The supply side of the travel industry can be equally inefficient.
The supplier community includes hundreds of airlines, thousands of hotels,
dozens of car rental companies, numerous vacation packagers and cruise lines and
hundreds of thousands of destination services merchants such as restaurants,
attractions, and local transportation and tour providers. These suppliers spend
substantial amounts of money to reach and attract potential purchasers. The
fragmental nature of the global consumer travel market makes it difficult and
inefficient for suppliers to effectively target those consumers who are
currently engaged in the travel planning process.

Consumers and suppliers rely on travel agents as intermediaries to provide
information on their travel choices and help them purchase their trips. Joystar
travel agents have access to comprehensive information on the availability and
pricing of airline seats through global distribution systems. We make it
possible for our travel agents to provide consumers reliable, comprehensive
travel information.

We have been able to combat the inefficiency and fragmentation of the industry
with technology. We use technology to make the process of planning and
purchasing travel easier for their agents and customers.

GEOGRAPHIC AREA OF SERVICES.

The Company plans to offer travel planning services in the United Sates, the
United Kingdom, Canada, Puerto Rico, and China. Joystar products are planned to
include direct-to- consumer travel planning services sold via the Internet, call
centers, and our co-branded private label website solutions.

INDUSTRY

According to a recent report by Credit Suisse/First Boston, there are
approximately 20,000 professional travel agents working from their homes. That
number is expected to grow to nearly 50,000 by 2010. This emerging group
represents an estimated $7.6 billion annually in travel sales. While online
travel continues to grow, travel agents are the dominant force in travel
distribution, especially in the complex, high-grossing products including
vacations, cruises, and group travel. A recent study conducted by the Cruise
Line Industry, concluded that 90% of the 10 million people who went on a cruise
last year, booked through a travel agent.

Typical of traditional travel agencies in America, the competitive landscape in
the Host Travel Agency space is highly fragmented. The American Society of
Travel Agents reported recently that there are approximately 21,000 "Mom & Pop"
travel agencies, each hosting between one and five home-based agents. And while
there are several "mid-tier" host agencies with sales ranging from $50 million
to $100 million, no dominant player exists. We aim to be the dominant
participant in the industry.

GOVERNMENT REGULATION
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TRAVEL INDUSTRY REGULATION

We must comply with laws and regulations relating to the travel industry and the
sale of travel services. These include registering with various states and
countries as a seller of travel, complying with certain disclosure requirements
and participating in state restitution funds. Both the Federal Trade Commission
and the Department of Transportation take the position that their regulations
prohibiting unfair and deceptive advertising practices apply to our business.

REGULATIONS OF THE INTERNET

Currently, few laws and regulations apply directly to the Internet and
commercial online services and, to the extent such laws exist or apply to us, we
believe we are in compliance with all of them. The following summary does not
purport to be complete discussion of all enacted or pending regulations and
policies that may affect our business. This summary focuses primarily on the
enacted federal, state and international legislation specific to businesses that
operate as we do. For further information concerning the nature and extent of
federal, state and international regulation of online businesses, you should
review public notices and rulings of the U.S. Congress, state and local
legislature and international bodies.

Due to the growth of the Internet and online commerce, coupled with publicity
regarding Internet fraud, new laws and regulations are continually being
considered (at the federal, state and international levels) regarding property
ownership, sales and other taxes, pricing and content, advertising, intellectual
property rights, libel, user privacy, and information security. New laws or
different applications of existing laws would likely impose additional burdens
on companies conducting business online and may decrease the growth of the
Internet or commercial online services. In turn, this could decrease the demand
for our products and services or increase our cost of doing business. We cannot
predict whether any of the proposed privacy legislation currently pending will
be enacted and what effect, if any, it would have on our company.

TAXES. Federal regulation imposing limitations on the ability of states to
impose taxes on Internet-based sales was enacted in 1998 and extended in 2001.
The Internet Tax Non-Disclosure Act, as this legislation is known, exempts
certain types of sales transactions conducted over the Internet from multiple or
discriminatory state and local taxation through November 1, 2003. It is possible
this legislation will not be renewed when it terminates. Failure to renew this
legislation could allow state and local governments to impose taxes on
Internet-based sales, and these taxes could decrease the demand for our products
or services or increase our cost of operations.

PRIVACY. As an online business, customers provide us with personally
identifiable information (PII) that has been specifically and voluntarily given.
PII includes information that can identify a customer as a specific individual,
such as name, phone number, or e-mail address. This information is used only for
the purpose of responding to and fulfilling customer requests for our travel
products and services. We will only share customer PII with our authorized
travel service providers, and only as necessary in order to complete a
transaction that customers specifically request. We do not sell or rent PII to
anyone. We provide customers with choice and control over the collection and use
of their PII, as well as a means of updating, correcting, or removing any PII
stored in their customer profile. Customers are provided the opportunity to
specifically choose the promotional marketing communications they wish to
receive from our company. If they choose to opt-out any of the promotional
e-mail services that we provide, then we will only send e-mail that relates to a
specific travel purchase they have made through us.

CURRENT US FEDERAL PRIVACY REGULATION. Increasing concern over consumer privacy,
including regulations related to the use of the Internet for conducting
transactions and electronic commerce, has led to the introduction of proposed
legislation at the federal level. The most far-reaching of these current laws
are focused on financial institutions, health care providers, and companies that
voluntarily solicit information form children. For businesses that operate
online such as Joystar, the Unsolicited Electronic Mail Act of 1999 has been
enacted to protect individuals, families, and internet service providers form
unsolicited and unwanted electronic mail, commonly referred to as spamming.
Additionally, the Federal Trade Commission has a role in consumer privacy
protection and is involved with related enforcement activities.

CURRENT STATE PRIVACY REGULATION. Most states have enacted legislation to
regulate the protection of consumer's information on the Internet. Much of this
legislation is focused on financial institutions and health care providers. The
legislation that has become state law is a small percentage of the number still
pending, and is similar to what has been enacted at the federal level. The
Company cannot predict whether any of the proposed state privacy legislation
currently pending review will be enacted and what effect, if any, it would have
on our Company.

SPECIAL RISK FACTORS

Prospective investors should carefully consider the risks of an investment in
any speculative start-up business and the risks and the speculative factors
inherent to and affecting the Company's business described below.

Factors that may cause Joystar to fail are the following:

- - Our prospects must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by
companies in their early stages of development.

- - Our inability to obtain new customers at reasonable cost, retain
existing customers or encourage repeat purchases.

- - Decreases in the number of visitors to our websites or our inability
to convert visitors to our websites into customers.

- - Our inability to adequately maintain, upgrade and develop our
websites, the systems that we use to process customers' orders and payments
or our computer network.

- - Our inability to retain existing airlines, hotels, rental car
companies and other suppliers of travel services ("travel suppliers") or to
obtain new travel suppliers .

- - Our inability to obtain travel products on satisfactory terms from
our travel suppliers.

- - The ability of our competitors to offer new or enhanced websites,
services or products.

- - Fluctuating gross margins due to a changing mix of revenues.

- - The termination of existing relationships with key service providers
or failure to develop new ones.

- - The amount and timing of operating costs relating to expansion of
our operations.

- - Economic conditions specific to the Internet, online commerce and
the travel industry

- - Attract additional travel suppliers and consumers to our service.

- - Maintain and enhance our brand.

- - Expand our service offerings.

- - Operate, expand and develop our operations and systems efficiently.

- - Maintain adequate control of our expense

- - Respond to technological changes.

- - Respond to competitive market conditions

- - We may not be successful in accomplishing these objectives and our
failure to do so may have a material adverse effect on our business,
operating results and financial condition.

- - We depend on our relationships with travel suppliers, licensees and
computer reservation systems; our business could be harmed by adverse
changes in these relationships.

- - Our business model relies on relationships with travel suppliers,
and it would be negatively affected by adverse changes in these
relationships. We depend on travel suppliers to enable us to offer our
customers comprehensive access to travel services and products. Consistent
with industry practices, we currently have few agreements with our travel
suppliers obligating them to sell services or products through our
websites. It is possible that travel suppliers may choose not to make their
inventory of services and products available through online distribution.
Travel suppliers could elect to sell exclusively through other sales and
distribution channels or to restrict our access to their inventory, either
of which could significantly decrease the amount or breadth of our
inventory of available travel offerings. We will also depend on travel
suppliers for advertising revenues.

- - In addition to our relationships with travel suppliers, our business
model relies on our relationships with licensees and computer reservations
systems. Our license revenues are generated through new and existing travel
agents.

- - Adverse changes in any of these relationships could have a material
adverse effect on our business, operating results and financial condition.

- - A decline in commission rates or the elimination of commissions
could hurt our business.

- - A substantial majority of our online revenues depends on the
commissions paid by travel suppliers for bookings made through our online
travel service. Generally, we do not have written commission agreements
with our suppliers. As is standard practice in the travel industry, we rely
on informal arrangements for the payment of commissions. Travel suppliers
are not obligated to pay any specified commission rate for bookings made
through our websites. We cannot assure you that airlines, hotel chains or
other travel suppliers will not reduce current industry commission rates or
eliminate commissions entirely, either of which could have a material
adverse effect on our business, operating results and financial condition.

For example, in 1995, most of the major airlines placed a cap on per-ticket
commissions payable to all travel agencies for domestic airline travel. In
September 1997, the major United States airlines 9 reduced the commission
rate payable to traditional travel agencies from 10% to 8%. In 1997, the
major United States airlines reduced the commission rate payable for online
reservations from 8% to 5%. In addition, since 1998, many airlines have
implemented a zero commission of for domestic round trip ticket sales.

- - Consumers, travel suppliers and advertisers may not accept our
website as a valuable commercial tool which would harm our business.

- - For us to achieve significant growth, travel agents, consumers,
travel suppliers, and advertisers must accept our website as a valuable
commercial tool. Consumers who have historically purchased travel products
using traditional commercial channels, such as local travel agents and
calling airlines directly must instead purchase these products through our
website.

- - Similarly, travel suppliers and advertisers will also need to accept
or expand their use of our website. Travel suppliers will need to view our
websites as an efficient and profitable channel of distribution for their
travel products. Advertisers will need to view our website as effective
ways to reach their potential customers.

- - In order to achieve the acceptance of consumers, travel suppliers
and advertisers contemplated by our business plan, we will need to continue
to make substantial investments in our technology and brand. We cannot at
this time determine how much of an investment it will take nor, be assured
that we will be able to secure the funds required. We do not have specific
plans or budget at this time. Our failure to make progress in these areas
may harm our business.

- - Intense competition could reduce our market share and harm our
financial performance.

- - The markets for the products and services offered by us are
intensely competitive. We compete with other online travel reservation
services, traditional travel agencies, and travel suppliers offering their
services. We also compete with many of the same parties and others in the
licensing of technology to home based travel agents and corporate travel
agencies.

- - We compete with a variety of companies with respect to each product
or service we offer. These competitors include: Internet travel agencies
such as Expedia, Orbitz, and Travelocity; local, regional, and national and
international traditional travel agencies;consolidators and wholesalers of
airline tickets and other travel products, including online consolidators
such as Cheaptickets.com, Hotwire and Priceline.com.; individual airlines,
hotels, rental car companies, cruise operators and other travel service
providers, some of which are suppliers to our websites; operators of travel
industry reservation databases.

In addition to the traditional travel agency channel, many travel suppliers,
including many suppliers with which we will do business, also offer their travel
services as well as third- party travel services directly through their own
websites. Suppliers also sell their own services directly to consumers,
predominantly by telephone. As the market for online travel services grows, we
believe that the companies involved in the travel services industry, including
travel suppliers, traditional travel agencies and travel industry information
providers, will increase their efforts to develop services that compete with our
services by selling inventory from a wide variety of suppliers. We cannot assure
you that our online operations will compete successfully with any current or
future competitors.

Many of our competitors have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing and
other resources than we have and may enter into strategic or commercial
relationships with larger, more established and better-financed companies. Some
of our competitors may be able to secure services and products from travel
suppliers on more favorable terms, devote greater resources to marketing and
promotional campaigns and commit more resources to website and systems
development than we are able to devote. In addition, the introduction of new
technologies and the expansion of existing technologies may increase competitive
pressures. Increased competition may result in reduced operating margins, as
well as loss of market share and brand recognition. We cannot assure you that we
will be able to compete successfully against current and future competitors.
Competitive pressures faced by us could have a material adverse effect on our
business, operating results and financial condition.

We believe that establishing, maintaining and enhancing the Joystar brand will
be a critical aspect of our efforts to attract and expand our online traffic.
The number of Internet sites that offer competing services, many of which
already have well-established brands in online services or the travel industry
generally, increases the importance of establishing and maintaining brand
recognition. Promotion of the Joystar brand will depend largely on our success
in providing a high-quality online experience supported by a high level of
customer service. In addition, to attract and retain online users and to respond
to competitive pressures, we intend to increase our spending substantially on
marketing and advertising with the intention of expanding our brand recognition.
However, we cannot assure you that these expenditures will be effective to
promote our brand or that our marketing efforts generally will achieve our
goals.

If we are unable to provide high-quality online services or customer support, if
we fail to promote and maintain our brand or if we incur excessive expenses in
these efforts, our business, operating results and financial condition would be
materially adversely affected. If we are unable to introduce and sell new
products and services, our business may be harmed.

We need to broaden the range of travel products and services and increase the
availability of products and services that we offer in order to enhance our
service. We will incur substantial expenses and use significant resources trying
to expand the range of products and services that we offer. However, we may not
be able to attract sufficient travel suppliers and other participants to provide
desired products and services to our consumers. In addition, consumers may find
that delivery through our service is less attractive than other alternatives. If
we launch new products and services and they are not favorably received by
consumers, our reputation and the value of the Joystar brand could be damaged.

Our relationships with consumers and travel suppliers are mutually dependent
since consumers will not use a service that does not offer a broad range of
travel services. Similarly, travel suppliers will not use a service unless
consumers actively make travel purchases through it. We cannot predict whether
we will be successful in expanding the range of products and services that we
offer. If we are unable to expand successfully, our business, operating results
and financial condition may be materially adversely affected. We may be unable
to plan and manage our operations and growth effectively.

- - Growth and our anticipated future operations will continue to place,
a significant strain on our management, systems and resources. We will
continue to increase the scope of our operations and the size of our
workforce. In addition to needing to train and manage our workforce, we
will need to continue to improve and develop our financial and managerial
controls and our reporting systems and procedures. A failure to plan,
implement and integrate these systems successfully could adversely affect
our business.

- - Our growth may increase our expense levels and the difficulties we
face in managing our operations.

- - Declines or disruptions in the travel industry, such as those caused
by terrorism or general economic downturns, could reduce our revenues.

- - We rely on the health and growth of the travel industry. Travel is
highly sensitive to travel safety concerns, and thus declines may occur
after acts of terrorism that affect the safety of travelers. The terrorist
attacks of September 11, 2001 on the World Trade Center in New York City
and the Pentagon in northern Virginia using hijacked commercial airliners
resulted in bookings industry wide. The long-term effects of these events
could include, among other things, a protracted decrease in demand for air
travel due to fears regarding additional acts of terrorism, military
responses to acts of terrorism and increased costs and reduced operations
by airlines due, in part, to new security directives adopted by the Federal
Aviation Administration. These effects, depending on their scope and
duration which we cannot predict at this time together with any future
terrorist attacks, could significantly impact our long-term results of
operations or financial condition.

- - In addition, travel is sensitive to business and personal
discretionary spending levels and tends to decline during general economic
downturns, which could also reduce our revenues. Other adverse trends or
events that tend to reduce travel are likely to hurt our business. These
may include:

o Price escalation in the airline industry or other travel-related
industries.

o Increased occurrence of travel-related accidents.

o Airline or other travel-related strikes.

o Political instability.

o Regional hostilities and terrorism.

o Bad weather

o Interruptions in service from third parties could hurt our business.

- - We rely on third-party computer systems and third-party service
providers, including the computerized central reservation systems of the
airline, hotel and car rental industries to make airline ticket, hotel room
and car rental reservations and credit card verifications and
confirmations. Any interruption in these third-party services or
deterioration in their performance could hurt our business. If our
arrangement with any of these third parties is terminated, we may not find
an alternate source of systems support on a timely basis or on commercially
reasonable terms.

- - Our success depends on maintaining the integrity of our systems and
infrastructure.

- - As our operations grow in both size and scope, domestically and
later internationally, we will need to improve and upgrade our systems and
infrastructure to offer an increasing number of travel agents, customers
and travel suppliers enhanced products, services, features and
functionality. The expansion of our systems and infrastructure will require
us to commit substantial financial, operational and technical resources
before the volume of business increases, with no assurance that the volume
of business will increase. Travel agents, consumers and suppliers will not
tolerate a service hampered by slow delivery times, unreliable service
levels or insufficient capacity, any of which could have a material adverse
effect on our business, operating results and financial condition.

- - In this regard, our operations face the risk of systems failures.
Our systems and operations are vulnerable to damage or interruption from
fire, flood, power loss, telecommunications failure, break-ins, earthquake
and similar events. Business interruption insurance may not adequately
compensate us for losses that may occur. The occurrence of a natural
disaster or unanticipated problems at our leased facilities could cause
interruptions or delays in our business, loss of data or render us unable
to process reservations. In addition, the failure of our computer and
communications systems to provide the data communications capacity required
by us, as a result of human error, natural disaster or other operational
disruption could result in interruption of our service. The occurrence of
any or all of these events could adversely affect our reputation, brand and
business.

- - Rapid technological changes may render our technology obsolete or
decrease the competitiveness of our services.

- - To remain competitive, we must continue to enhance and improve the
functionality and features of our website. The Internet and the online
commerce industry are rapidly changing. If competitors introduce new
services embodying new technologies, or if new industry standards and
practices emerge, our existing website and proprietary technology and
systems may become obsolete. Our future success will depend on our ability
to do the following:

o Enhance our existing services.

o Develop and license new services and technologies that address
the increasingly sophisticated and varied needs of our prospective
customers and suppliers.

o Respond to technological advances and emerging industry standards
and practices on a cost-effective and timely basis

Developing our website and other proprietary technology entails significant
technical and business risks. We may use new technologies ineffectively or we
may fail to adapt our websites, transaction-processing systems and network
infrastructure to customer requirements or emerging industry standards. If we
face material delays in introducing new services, products and enhancements, our
customers and suppliers may forego the use of our services and use those of our
competitors.

The success of our business will depend on continued growth of online commerce
and the Internet.

Our future revenues and profits depend upon the widespread acceptance and use of
the Internet and online services as a medium for commerce. Rapid growth in the
use of the Internet and online services is a recent phenomenon. This growth may
not continue. A sufficiently broad base of consumers may not accept, or continue
to use, the Internet as a medium of commerce. Demand for and market acceptance
of recently introduced products and services over the Internet are subject to a
high level of uncertainty.

The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. Our success
will depend upon the development and maintenance of the Internet's
infrastructure to cope with this increased traffic. This will require a reliable
network backbone with the necessary speed, data capacity and security and the
timely development of complementary products for providing reliable Internet
access and services. Major online service providers and the Internet itself have
experienced outages and other delays as a result of software and hardware
failures and could face such outages and delays in the future. Outages and
delays are likely to affect the level of Internet usage and the processing of
transactions on our websites. In addition, the Internet could lose its viability
because of delays in the development or adoption of new standards to handle
increased levels of activity or of increased government regulation. The adoption
of new standards or government regulation may require us to incur substantial
compliance costs.

- - Our business is exposed to risks associated with online commerce
security and credit card fraud.

Consumer concerns over the security of transactions conducted on the Internet or
the privacy of users may inhibit the growth of the Internet and online commerce.
To transmit confidential information such as customer credit card numbers
securely, we rely on encryption and authentication technology. Unanticipated
events or developments could result in a compromise or breach of the systems we
use to protect customer transaction data. Furthermore, our servers may also be
vulnerable to viruses transmitted via the Internet. While we proactively check
for intrusions into our infrastructure, a new and undetected virus could cause a
service disruption.

Under current credit card practices, we may be held liable for fraudulent credit
card transactions and other payment disputes with customers. A failure to
control fraudulent credit card transactions adequately would adversely affect
our business.

- - Our planned international operations will involve risks.

At some time in the future, we plan to operate in the United Kingdom, Germany,
Canada, France, the Netherlands and Italy and may expand our operations to other
countries. In order to achieve widespread acceptance in each country we enter,
we believe that we must tailor our services to the unique customs and cultures
of that country. Learning the customs and cultures of various countries,
particularly with respect to travel patterns and practices, is a difficult task
and our failure to do so could slow our growth in those countries. We will be
subject to the normal risks of doing business internationally, as well as risks
specific to Internet-based companies in foreign markets. These risks include:

o Delays in the development of the Internet as a broadcast,
advertising and commerce medium in international markets.

o Difficulties in managing operations due to distance, language and
cultural differences, including issues associated with establishing
management systems infrastructures in individual foreign markets.

o Unexpected changes in regulatory requirements.

o Export and import restrictions.

o Tariffs and trade barriers and limitations on fund transfers.

o Difficulties in staffing and managing foreign operations.

o Potential adverse tax consequences.

o Exchange rate fluctuations.

- - Increased risk of piracy and limits on our ability to enforce our
intellectual property rights.

Any of these factors could harm our business. We may not elect to hedge our
foreign currency exposures.

We may be found to have infringed on intellectual property rights of others
which could expose us to substantial damages and restrict our operations.

We could be subject to claims that we have infringed the patents, copyrights or
other intellectual property rights of others. In addition, we may be required to
indemnify travel suppliers for claims made against them. Any claims against us
could require us to spend significant time and money in litigation, delay the
release of new products or services, pay damages, develop new intellectual
property or acquire licenses to intellectual property that is the subject of the
infringement claims. These licenses, if required, may not be available on
acceptable terms or at all. As a result, intellectual property claims against us
could have a material adverse effect on our business, operating results and
financial condition.

- - Because our market is seasonal, our quarterly results will fluctuate.

- - Our limited operating history and anticipated rapid growth will make
it difficult for us to assess the impact of seasonal factors on our
business. Nevertheless, we expect our business to be subject to seasonal
fluctuations, reflecting seasonal trends for the products and services
offered by our websites. For example, demand for travel bookings may
increase in anticipation of summer vacations and holiday periods, but
online travel bookings may decline with reduced Internet usage during the
summer months. These factors could cause our revenues to fluctuate from
quarter to quarter. Our results may also be affected by seasonal
fluctuations in the inventory made available to our service by travel
suppliers. Airlines, for example, typically enjoy high demand for tickets
through traditional distribution channels for travel during holiday
periods. As a result, during these periods, airlines may either have fewer
inventories to offer through our service or available tickets may be less
competitively priced. These same factors are expected to affect rental
cars, hotels and other travel products and services.

- - Our success depends in large part on the continuing efforts of a few
individuals and our ability to continue to attract, retain and motivate
highly skilled employees.

- - We will depend substantially on the continued services and
performance of our senior management, particularly William M. Alverson, our
Chief Executive Officer and President. The loss of the services of any
executive officers or other key employees could hurt our business.

- - Our website will rely on intellectual property, and we cannot be
sure that this intellectual property will be protected from copy or use by
others, including potential competitors.

- - We regard some of our content and technology as proprietary and will
try to protect our proprietary technology by relying on trademarks,
copyrights, trade secret laws and confidentiality agreements with
consultants. In connection with our license agreements with third parties,
we seek to control access to and distribution of our technology,
documentation and other proprietary information. Even with all of these
precautions, it is possible for someone else to copy or otherwise obtain
and use our proprietary technology without our authorization or to develop
similar technology independently. Effective trademark, copyright and trade
secret protection may not be available in every country in which our
services are made available through the Internet, and policing unauthorized
use of our proprietary information is difficult and expensive. We cannot be
sure that the steps we will take will prevent misappropriation of our
proprietary information. This misappropriation could have a material
adverse effect on our business. In the future, we may need to go to court
to enforce our intellectual property rights, to protect our trade secrets
or to determine the validity and scope of the proprietary rights of others.
This litigation might result in substantial costs and diversion of
resources and management attention.

- - We plan to license from third parties, certain technologies
incorporated into our website. As we introduce new services that
incorporate new technologies, we may be required to license additional
technology from third parties. We cannot be sure that these third-party
technology licenses will continue to be available on commercially
reasonable terms, if at all.

- - Critical Accounting Policies and Estimates

a) Revenue Recognition

We recognize agency revenues on hotel, cruise and car rental reservations at the
earlier of notification of the amount of the commission from a commission
clearinghouse or a supplier or on receipt of the commissions from an individual
supplier. Override commissions are recognized each period based upon our
projected and actual attainment of predetermined target sales levels. Where
historical financial data is not available to project the target sales levels,
we record the override commission upon receipt of the commission from the
supplier.

Our merchant revenues are derived from transactions where we are the merchant of
record and determine the price. We have agreements with suppliers for blocks of
inventory that we sell and these sales generate the majority of our total
merchant revenues. We do not have purchase obligations for unsold inventory.
Recognition of merchant revenue occurs on the date the traveler uses the
inventory, such as the date of airline departure or hotel stay.

b) Reserves

Accounting estimates are an integral part of the financial statements prepared
by management and are based on management's current judgments. Those judgments
are normally based on knowledge and experience about past and current events and
on assumptions about future events.

We are potentially subject to a concentration of credit risk from our accounts
receivable. Also, we record a reserve against the use of fraudulent credit cards
on our Web sites and customer service related chargebacks.

- - We are subject to other risks and uncertainties common to growing
technology-based companies, including rapid technological change, growth
and commercial acceptance of the Internet, dependence on third-party
technology, challenges to patents, new service introductions and other
activities of competitors, dependence on key personnel, international
expansion, and limited operating history. In addition, we are subject to
uncertainty caused by economic, political and transportation climates and
events, such as the September 11, 2001 terrorist activities, which may
impact future demand for the products and services that we sell.

Regulatory and legal uncertainties could harm our business.

The laws and regulations applicable to the travel industry affect us and our
travel suppliers. We are subject to laws and regulations relating to the sale of
travel services, including those prohibiting unfair and deceptive practices and
those requiring us to register as a seller of travel, comply with disclosure
requirements and participate in state restitution funds. In addition, many of
our travel suppliers and computer reservation systems providers are heavily
regulated by the United States and other governments. Our services are
indirectly affected by regulatory and legal uncertainties affecting the
businesses of our travel suppliers and computer reservation systems providers.

We are also subject to laws and regulations applicable to businesses generally
and online commerce. Currently, few laws and regulations directly apply to the
Internet and commercial online services. Moreover, there is currently great
uncertainty about whether or how existing laws governing issues such as property
ownership, sales and other taxes, libel and personal privacy apply to the
Internet and commercial online services. It is possible that laws and
regulations may be adopted to address these and other issues. Further, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws. New laws or different applications of
existing laws would likely impose additional burdens on companies conducting
business online and may decrease the growth of the Internet or commercial online
services. In turn, this could decrease the demand for our products and services
increase our cost of operations or otherwise hurt our business.

The market price for our common stock is likely to be highly volatile and
subject to wide fluctuations in response to factors including the following:

o Actual or anticipated variations in our quarterly operating results.

o Announcements of technological innovations or new services by us or
our competitors.

o Changes in financial estimates by securities analysts.

o Conditions or trends in the Internet or online commerce industries.

o Changes in the economic performance or market valuations of other
Internet, online commerce or travel companies.

o Announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments.

o Additions or departures of key personnel.

o Release of lock-up or other transfer restrictions on our outstanding
shares of common stock or sales of additional shares of common stock.

o Potential litigation

The market prices of the securities of Internet-related and online commerce
companies have been especially volatile. Broad market and industry factors may
adversely affect the market price of our common stock, regardless of our actual
operating performance. In the past, following periods of volatility in the
market price of their stock, many companies have been the subject of securities
class action litigation. If we were sued in a securities class action, it could
result in substantial costs and a diversion of management's attention and
resources and would adversely affect our stock price.

Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. Sales of substantial amounts of our
common stock in the public market after the restrictions lapse could adversely
affect the prevailing market price and impair our ability to raise equity
capital in the future.

We will need to raise additional capital in order to remain competitive in the
online travel services industry. This capital may not be available on acceptable
terms, if at all.

We will not be able to fund our growth if we lack adequate resources. If we
raise additional funds by issuing equity or convertible debt securities, the
percentage ownership of our stockholders will be diluted. Any securities could
have rights, preferences and privileges senior to those of the common stock.

Item 2. DESCRIPTION OF PROPERTY
-----------------------

The Company maintains its corporate offices in Aliso Viejo, California. The
Company occupies approximately 6,135 square feet pursuant to the lease agreement
entered on February 15, 2005. The Company pays $1.80 per square foot for the
first 0-12 months, full service gross; $1.85 per square foot, full service gross
for the next 13-24 months, and $1.90 per square, full service gross for the next
25-36 months. The lease agreement is for a term of 36 months with an option to
extend for a period of three years.

Rental expense for this location was $120,400 and $70,860 for the years ended
December 31, 2005 and 2004, respectively.

The Company occupies approximately 2,884 square feet (Net Rentable Area)
pursuant to the lease agreement entered on October 15, 2005. The premises are
located in Aventura, Florida. The Company pays annually in the amount of $29.00
times the Net Rentable Area of the premises for the first 0-12 months. For the
next 13-24 months, the Company pays annually in the amount of $30.00 itmes the
Net Rentable Area of the premises. For the months 25-36, the Company has agreed
to pay the amount of $31.00 times the Net Rentable Area of the premises. The
lease agreement is for a term of 36 months.

We believe that our existing facilities are adequate to meet our current needs
and that suitable additional or alternative space will be available in the
future on commercially reasonable terms, although we have no assurance that
future terms would be as favorable as our current terms.

The Company has not invested in any real property at this time nor does the
Company intend to do so. The Company has no formal policy with respect to
investments in real estate or investments with persons primarily engaged in real
estate activities.

Item 3. LEGAL PROCEEDINGS
-----------------

We are not a party to any material legal proceedings.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------

No matter was submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the fourth quarter of the fiscal year ended
December 31, 2005.

PART II

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

PUBLIC MARKET

Joystar's common stock trades under the symbol JYSR on the NASD Over The Counter
Bulletin Board (OTCBB). There were 146 shareholders of record as of March 15,
2006. The closing market price of the Company's common stock as of March 15,
2006 was $1.18.

The company's high and low closing bid and close information for the fiscal
years ended December 31, 2005 and 2004, is listed below as provided by the NASD
OTC Bulletin Board. Quotations reflect inter-dealer prices, without retail
mark-up, markdown, or commission and may not represent actual transactions.

-------------- ------------ ------------ ------------ ------------
DATE OPEN HIGH LOW CLOSE*
-------------- ------------ ------------ ------------ ------------
JAN-05 0.70 0.70 0.56 0.70
-------------- ------------ ------------ ------------ ------------
FEB-05 0.75 0.80 0.43 0.45
-------------- ------------ ------------ ------------ ------------
MAR-05 0.44 0.89 0.39 0.60
-------------- ------------ ------------ ------------ ------------
APR-05 0.55 0.56 0.30 0.46
-------------- ------------ ------------ ------------ ------------
MAY-05 0.49 0.57 0.35 0.44
-------------- ------------ ------------ ------------ ------------
JUN-05 0.43 0.62 0.37 0.45
-------------- ------------ ------------ ------------ ------------
JUL-05 0.45 0.62 0.38 0.38
-------------- ------------ ------------ ------------ ------------
AUG-05 0.40 0.54 0.34 0.40
-------------- ------------ ------------ ------------ ------------
SEP-05 0.40 0.43 0.37 0.28
-------------- ------------ ------------ ------------ ------------
OCT-05 0.28 0.39 0.26 0.27
-------------- ------------ ------------ ------------ ------------
NOV-05 0.28 0.32 0.21 0.28
-------------- ------------ ------------ ------------ ------------
DEC-05 0.28 0.33 0.22 0.33
-------------- ------------ ------------ ------------ ------------
JAN-04 2.45 2.95 2.41 2.79
-------------- ------------ ------------ ------------ ------------
FEB-04 2.65 3.00 2.05 2.25
-------------- ------------ ------------ ------------ ------------
MAR-04 2.25 3.00 0.84 1.95
-------------- ------------ ------------ ------------ ------------
APR-04 1.65 2.17 1.18 1.40
-------------- ------------ ------------ ------------ ------------
MAY-04 1.35 2.10 1.05 2.00
-------------- ------------ ------------ ------------ ------------
JUN-04 1.85 2.15 0.44 1.12
-------------- ------------ ------------ ------------ ------------
JUL-04 1.30 1.30 0.51 0.95
-------------- ------------ ------------ ------------ ------------
AUG-04 0.93 1.09 0.45 0.68
-------------- ------------ ------------ ------------ ------------
SEP-04 0.67 1.98 0.67 1.40
-------------- ------------ ------------ ------------ ------------
OCT-04 1.30 1.80 1.03 1.03
-------------- ------------ ------------ ------------ ------------
NOV-04 1.03 1.59 0.90 0.96
-------------- ------------ ------------ ------------ ------------
DEC-04 1.01 1.05 0.55 0.73
-------------- ------------ ------------ ------------ ------------
* Historical data provided by Commodity Systems, Inc.

DIVIDENDS

The Company does not expect to pay any dividends at this time. The payment of
dividends, if any, will be contingent upon the Company's revenues and earnings,
if any, capital requirements, and general financial condition. The payment of
any dividends will be within the discretion of the Company's Board of Directors
and may be subject to restrictions under the terms of any debt or other
financing arrangements that the Company may enter into in the future. The
Company presently intends to retain all earnings, if any, for use in the
Company's business operations and accordingly, the Board does not anticipate
declaring any dividends in the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

As of July 18, 2005, Joystar, Inc. sold in its private placement of up to
$1,100,000, a total of 2,082,143 shares of its common stock, no par value per
share, at a purchase price of $0.35 per share to institutional and accredited
investors. Additionally, William M. Alverson, the Company's CEO and one other
officer and director converted their respective loans to the Company totaling
$575,000 to equity under the same terms. In addition to common stock shares,
each subscriber received one warrant to purchase the Company's common stock for
each two shares purchased. The warrants have the exercise price of $0.50 per
share and expire in five years from the date of issuance. The warrants are
subject to call provisions as described in the warrant agreement. The
subscribers have certain registration rights to register the shares and the
warrants purchased in the placement. The Company paid 10% commission payable in
cash and broker warrants to First Montauk Securities Corp. of Red Bank, New
Jersey, member NASD, who acted as a selling agent for the financing. The Company
received a total net proceeds of $728,750, after deducting the legal fees and
commissions, and eliminated the existing shareholders' loans in the total amount
of $575,000. The net proceeds were used by the Company for working capital
purposes.

As of January 27, 2006, the Company sold $1,650,000 of the units consisting of a
total of 4,000,000 shares of its common stock, no par value per share, at a
purchase price of $0.35 per and share and warrants to purchase two shares of
common stock at $0.50 exercise price to accredited investors. The warrants
expire in two years from the date of issuance. The subscribers do not have any
registration rights to register the shares and the warrants purchased in the
private placement. The Company received total net proceeds of approximately
$1,650,000, since no commissions were paid in cash. The net proceeds are to be
used by the Company for working capital purposes. The units were sold to
accredited investors only, including an officer of the Company.

The shares and warrants were offered and sold by the Company to investors whom
the Company had reasonable grounds to believe were "accredited investors" within
the meaning of Rule 501 of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"). The investors were provided access to business
and financial about the Company and had such knowledge and experience in
business and financial matters that it was able to evaluate the risks and merits
of an investment in the Company. Each certificate evidencing securities issued
to the investors included a legend to the effect that the securities were not
registered under the Securities Act and could not be resold absent registration
or the availability of an applicable exemption from registration. No general
solicitation or advertising was used in connection with the transaction. The
issuance of the shares and warrants was exempt from the registration
requirements of the Securities Act by reason of Section 4(2) of the Securities
Act and the rules and regulations, including Regulation D thereunder, as
transactions by an issuer not involving a public offering.

During the year ended December 31, 2005, the Company issued a total of 4,664,213
shares of common stock in a private placement for a total sales price of
$1,748,632 an average sales price of $0.37 per share.

During the year ended December 31, 2005 the Company issued 4,731,577 shares of
common stock for services valued at the fair market value price of the Company's
stock on the dates issued $1,485,131 an average of $0.31 a share. The Company
issued 742,411 shares of common stock for a note payable to stockholder
($259,834) and 571,429 shares of common stock for accrued payroll liability
($200,000). The Company issued 27,546 shares of of common stock for interest
($9,641) and 137,500 shares of common stock for assets (70,125).

The shares issued in the private placements set forth above were issued in
reliance upon the exemption from registration set forth in Section 4(2) of the
Securities Act and Regulation D (Rules 505 and/or 506) promulgated under the
Securities Act. The shares were offered and sold to investors who were
"accredited investors" as defined in the Securities Act.

During the year ended December 31, 2004, the Company issued 642,223 shares of
common stock in a private placement for a total sales price of $692,185 an
average sales price of $1.08 per share. During 2003 and 2004 the Company has
received subscriptions to purchase 537,333 shares of common stock for $704,800
and authorized 150,000 shares subscribed for additional officers compensation
$90,000 at December 31, 2004. Such 150,000 shares have not been issued yet.

During the year ended December 31, 2004 the Company issued 1,475,133 shares of
common stock for services valued at the fair market value price of the Company's
stock on the dates issued $1,507,942 an average of $1.02 a share.

Loans payable to shareholder at December 31, 2003, $83,295 were converted to
60,000 shares of common stock during the year ended December 31, 2004.

As of November 8, 2004, the Company commenced its private placement offering of
up to $1,000,000 of units consisting of four shares of common stock and one
warrant to purchase a share of common stock at an exercise price of $1.25 per
share. Each unit is being sold at $2.00 purchase price. The units are offered by
the Company to accredited investors only in reliance on Section 505/506 of the
Regulation D of the Securities Act of 1933. The Company issued 100,000 units
(400,000 shares, $200,000) that were subscribed as of December 31, 2004 in
February and March 2005.

The Company acquired all of the issued and outstanding common stock of Joystar,
Inc., a Nevada corporation ("Joystar") in exchange for the issuance by the
Company of a total of 13,880,599 newly issued restricted shares of common voting
stock dated as of June 10, 2003.

The Company issued 215,000 shares of common stock in payment of invoices for
professional services of $15,000 in June, 2003.

The Company issued the 400,000 shares as of November 14, 2003 and recorded
compensation expense of $63,000 for the year ended December 31, 2004 and $25,750
for period ended December 31, 2003.

Pursuant to an employment agreement for a Vice President of Business
Development, the Company issued the 2,000,000 shares on November 14, 2003 and
recorded compensation expense of $210,000 for the year ended December 31, 2004
and $87,500 for period ended December 31, 2003.

On November 11, 2003 the Company issued 28,571 common shares of restricted stock
for services valued at the market price of the Company's stock on that date of
$1.80, $51,428.

During the quarter ended September 30, 2003, the Company sold in its private
placement a total of 316,267 shares of its common stock at a purchase price of
$1.50 per share, for the total purchase price of $474,400. During the quarter
ended June 30, 2003, the Company sold 60,000 shares of its common stock at a
purchase price of $1.50 in its private placement.

The shares of the Company's common stock were issued and sold in reliance upon
the exemption provided by Section 4(2) and Section 506 of Regulation D of the
Securities Act of 1933. The offers and sales in the Company's private placement
were made to accredited investors only.

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

The information contained in this section has been derived from our consolidated
financial statements and should be read together with our consolidated financial
statements and related notes included elsewhere in this annual report. The
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those expressed or
implied in these forward-looking statements as a result of various factors,
including those set forth at the end of this section under "Factors That May
Impact Our Results of Operations".

Overview

Joystar specializes in selling complex travel products including cruises,
vacation packages and group travel through its national sales force of
independent travel agents. The effect of having such a massive and growing
network of independent and home-based travel retailers all booking under the
Joystar Agency umbrella is significantly increasing our sales and revenue, and
building strong brand recognition.

Tens of thousands of travel agents who are closing their storefront agencies and
moving to a home-based operation are creating a value migration in the rapidly
emerging host travel agency model.

Because of our added value proposition, we have been very successful in
attracting profession travel agents and at the same time, eroding our
competitors' market share. Since going to market with our hosting programs in
August 2004, Joystar has signed up over 3,000 travel agents making it one of the
fastest growing and largest leisure travel network in the industry.

Throughout 2005, Joystar's commission levels with our preferred suppliers
increased substantially. With the acquisition of the Miami Cruise Center, the
enhanced commission levels that Joystar offers independent travel agents are
some of the highest in the industry.

According to a recent report issued by Credit Suisse/First Boston, there are
currently 20,000 professional, home-based agents. This number is expected to
grow to approximately 50,000 agents by 2010. In the management's opinion,
Joystar is on track to have an approximate twenty percent market share by year
end 2006 and aims to increase that to thirty percent market share by the end of
2007. No assurances can be made that such results will be achieved.

In order to fund the Company's growth, we have engaged an NASD member firm to
provide investment banking services. The Company raised approximately three
million dollars in 2005 and intends to raise approximately 5 million dollars in
2006. We intend to apply for a listing on either the American Stock Exchange or
NASDAQ in the fourth quarter. There are no assurances that this will occur.

Our business is dependent on the health and growth of the travel industry.
Travel is highly sensitive to traveler safety concerns, and thus declines after
acts of terrorism that affect the safety of travelers. The terrorist attacks of
September 11, 2001, resulted in a decrease in new travel bookings worldwide and
may reduce our revenues in future quarters. The long-term effects of these
events could include, among other things, a protracted decrease in demand for
air travel due to fears regarding additional acts of terrorism, military
responses to acts of terrorism and increased costs and reduced operations by
airlines due, in part, to new security directives adopted by the Federal
Aviation Administration. These effects, depending on their scope and directives,
which we cannot predict at this time, together with any future terrorist
attacks, could significantly impact our long-term results of operations or
financial condition.

RESULTS OF OPERATIONS

Gross travel bookings and revenues increased by more than 20% for the fifth
sequential quarter. Gross bookings for 2005 were $16,542,137.94.

Revenues for the year ended December 31, 2005 were $1,943,000 compared to
$69,000 for the year ended December 31, 2004. The increase of $1,874,000 is due
to the substantial increase in professional agent membership, increase in
commission levels from our preferred suppliers, and the Company's comprehensive
agent recruitment and branding efforts.

In the quarter ended December 31, 2005 our leisure travel network increased by
566 members for a total year end of 3,466 independent travel agents.

Selling and Marketing

Selling and marketing expenses relate to direct advertising and distribution
expense, including traffic generation from Internet, search engines, private
label and affiliate programs. The remainder of the expense relates to personnel
costs, including staffing in our Agent Support Services and Preferred Supplier
relations to enhance supplier commission levels.

Marketing and sales expenses for the year ended December 31, 2005 were
$1,853,000 compared to $1,453,000 for the year ended December 31, 2004. The
increase of $400,000 was due to the increased advertising spending.

General and Administrative

General and Administrative expenses for the year ended December 31, 2005 were
$3,688,000 compared to $1,987,000 for the year ended December 31, 2004. The
increase of $1,701,000 was due to increased business activities, as well as
increases in management team and support staff. We expect absolute amounts spent
on corporate personnel and professional service to increase over time as we add
headcount and continue incurring incremental costs as a public company.

Technology and Content

Technology and content expense includes product development expenses such as
payroll and related expenses and depreciation of website development costs.

Technology and content expenses for the year ended December 31, 2005 were
$277,185 as we increased our software development and engineering teams, and
increased our level of site innovation. Given the increasing complexity of our
business, geographic expansion, increased supplier integration, service-oriented
architecture improvements and other initiatives, we expect absolute amounts
spent in technology and content to increase over time.

Interest expense for the year ended December 31, 2005 was $9,641 compared to $0
in the year ended December 31, 2004 due to the interest on loans from two
officers which were converted to shares.

Net loss for the year ended December 31, 2005 was $3,885,000 compared to a net
loss of $3,372,000 for the year ended December 31, 2004. The increase in net
loss $513,000 was due to the additional general and administrative expenses.

The Company left development stage as of January 1, 2005 when it started to make
substantially more sales.

LIQUIDITY AND CAPITAL RESOURCES

The Company had a cash balance of $218,948 at December 31, 2005 as compared to
$283,869 at December 31, 2004. The Company had negative working capital at
December 31, 2005. The Company has been able to raise sufficient capital to
continue operations by its securities. The Company has funded certain expenses
by issuing shares for compensation and services. During the year ended December
31, 2005 the Company issued $1,750,000 in shares for services and $1,802,000 in
2004.

Item 7. FINANCIAL STATEMENTS
--------------------

The consolidated financial statements of the Company required to be included in
Item 7 are listed in this index, and follow this page:

Report of Independent Certified Public Accountant F-1

Financial Statements
Balance Sheets F-2
Statements of Operations F-3
Statement of Shareholders' Equity F-4
Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6

REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

Board of Directors and Stockholders
Joystar, Inc.

We have audited the accompanying consolidated balance sheets of Joystar, Inc.
(the Company) as of December 31, 2005 and 2004, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Joystar, Inc. as of
December 31, 2005 and 2004, and the results of its operations and cash flows for
the years then ended in conformity with accounting principles generally accepted
in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed further in Note
3, the Company continues to incur significant losses. The Company's viability is
dependent upon its ability to obtain future financing and the success of its
future operations. These factors raise substantial doubt as to the Company's
ability to continue as a going concern. Management's plan in regard to these
matters is also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Mendoza Berger & Company, LLP

Irvine, California
March 17, 2006

F-1

JOYSTAR, INC.
CONSOLIDATED BALANCE SHEETS

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

December 31, December 31,
2005 2004
----------- -----------
ASSETS

Current assets:
Cash $ 218,948 $ 283,869
Other receivables 398,827 100
Prepaid expenses 48,572 16,265
----------- -----------
Total current assets 666,347 300,234

Property and equipment, net 138,723 37,327

Intangible asset 54,205 --

----------- -----------
Total assets $ 859,275 $ 337,561
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable $ 198,814 $ 144,416
Accounts payable-merchants 321,643 --
Accrued salaries 46,786 172,038
Accrued expenses 128,865 --
Accrued payroll taxes 412,258 203,970
Accrued rent 35,000 35,000
Loans from shareholder 472 259,834
----------- -----------
Total current liabilities 1,143,838 815,258

Commitments and contingency -- --

Stockholders' equity:
Preferred stock, no par value, 10,000,000
shares authorized; none issued -- --
Common stock, no par value, 50,000,000
shares authorized; 34,103,309 and
23,228,633 shares issued and outstanding
at December 31, 2005 and 2004,
respectively 7,952,026 4,178,663
Stock issued for deferred compensation (356,000) (621,250)
Stock subscribed not issued, 2,584,476
Shares and 887,333 shares at December
31, 2005 and 2004, respectively 834,800 794,800
Accumulated Deficit (8,715,389) (4,829,910)
----------- -----------
Total stockholders' (deficit) (284,563) (477,697)

----------- -----------
Total liabilities and stockholders'
equity $ 859,275 $ 337,561
=========== ===========

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

F-2

JOYSTAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

For the year For the year
ended ended
December 31, December 31,
2005 2004
------------ ------------

Revenue $ 1,942,526 $ 68,995

Operating loss:
Selling and marketing 1,853,353 1,453,223
General and administrative 3,687,826 1,987,475
Technology and content 277,185 --
------------ ------------
Total Operating Expenses 5,818,364 3,440,698

Operating loss (3,875,838) (3,371,703)

Other expense
Interest expense 9,641 --
------------ ------------

Loss before income taxes (3,885,479) (3,371,703)
Income tax provision -- --

Net loss $ (3,885,479) $ (3,371,703)
============ ============

Loss per share-basic and
diluted $ (0.14) $ (0.15)
============ ============

Weighted average number of common shares
outstanding-basic and diluted 27,579,406 21,863,227
============ ============

The accompanying notes are an integral part of these financial statements

F-3

JOYSTAR, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

COMMON STOCK
-------------------------- Stock issued Stock Total
for Subscribed Stockholders'
Number of Deferred not Accumulated Equity
Shares Amount Compensation Issued (Deficit) (Deficit)
----------- ----------- ----------- ----------- ----------- -----------

Balance at December 31, 2003 21,051,277 $ 1,895,241 $ (894,250) $ 176,800 $(1,458,207) $ (280,416)

Stock issued for services 1,475,133 1,507,942 -- -- -- 1,507,942
Stock issued for cash 642,223 692,185 -- -- -- 692,185
Stock issued for note payable 60,000 83,295 -- -- -- 83,295
Deferred compensation earned -- -- 273,000 -- -- 273,000
Stock subscribed not issued 768,666 shares -- -- -- 618,000 -- 618,000
Net loss -- -- -- -- (3,371,703) (3,371,703)

Balance at December 31, 2004 23,228,633 4,178,663 (621,250) 794,800 (4,829,910) (477,697)

Stock issued for services 4,731,577 1,485,131 -- -- -- 1,485,131
Stock issued for cash 4,664,213 1,748,632 -- (590,000) -- 1,158,632
Stock issued for note payable to shareholder 742,411 259,834 -- -- -- 259,834
Stock issued for accrued payroll 571,429 200,000 -- -- -- 200,000
Stock issued for interest 27,546 9,641 -- -- -- 9,641
Stock issued for assets 137,500 70,125 -- -- -- 70,125
Subscribed stock not issued to officers
(1,500,000 shares) -- -- -- 330,000 -- 330,000
Subscribed stock not issued (857,143 shares) -- -- -- 300,000 -- 300,000
Deferred compensation earned -- -- 265,250 -- -- 265,250
Net loss -- -- -- -- (3,885,479) (3,885,479)
----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 2005 34,103,309 $ 7,952,026 $ (356,000) $ 834,800 $(8,715,389) $ (284,563)
=========== =========== =========== =========== =========== ===========

The accompanying notes are an integral part of these financial statements

F-4

JOYSTAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------

For the year For the year
ended December ended December
31, 2005 31, 2004
----------- -----------

Cash flows from operating activities:
Net loss $(3,885,479) $(3,371,703)

Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 18,522 8,765
Stock issued for services 1,750,381 1,780,942
Stock issued for interest 9,641 --
Stock subscribed for compensation 330,000 --
Changes in assets and liabilities:
Increase in prepaid expenses (35,572) (8,223)
(Increase) Decrease in other receivables (395,462) 1,900
Increase in accounts payable 376,041 12,218
Increase in accrued expenses 128,865 --
Increase in accrued salaries and
payroll taxes 283,036 177,534

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

Net cash used by operations (1,420,027) (1,398,567)
----------- -----------

Cash flows from investing activities:
Acquisition of property and equipment (103,078) (23,402)
----------- -----------

Net cash used by investing activities (103,078) (23,402)
----------- -----------

Cash flows from financing activities:
Loans from shareholders 472 259,334
Issuance of common stock 1,158,632 692,185
Stock subscribed not issued 300,000 618,000
----------- -----------

Net cash provided by financing activities 1,459,104 1,569,519
----------- -----------

(Decrease) Increase in cash (64,921) 147,550
Cash at the beginning of the year 283,869 136,319
----------- -----------

Cash at the end of year $ 218,948 $ 283,869
=========== ===========

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of stock for services $ 1,750,381 $ 1,802,692
Income taxes paid $ -- $ 2,585
Shares issued for shareholder loan $ 259,834 $ 83,295
Shares issued for interest $ 9,641 $ --
Shares issued for fixed assets and customer list $ 70,125 $ --
Subscribed shares issued $ 590,000 $ --
Subscribed shares issued to officers $ 330,000 $ --

The accompanying notes are an integral part of these financial statements

F-5

JOYSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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

1. BASIS OF PRESENTATION
---------------------

Joystar, Inc. a California corporation (" the Company") was incorporated on
February 5, 1998. The Company specializes in selling complex travel products
including cruises, vacation packages and group travel through its national sales
force of independent travel agents.

Until December 31, 2004 the Company was in the development stage.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------

PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements include the accounts of the
Company, and its wholly owned subsidiary Joystar, Inc.. All material
inter-company balances and transactions have been eliminated in
consolidation.

REVENUE RECOGNITION
--------------------
The Company passes reservations booked by customers to the relevant
travel supplier and receives a commission or ticketing fee from the
travel supplier for its services. The supplier sets the price to be
paid by the consumer and the travel supplier appears as merchant of
record for the transactions. The revenues are typically recognized at
the time the reservation is booked. Revenues derived in the future from
annual memberships or other activities where a time factor is involved
will be deferred over the appropriate period and recognized as earned.

PROPERTY AND EQUIPMENT
----------------------
Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful life of the assets,
which is seven years for furniture and equipment and three years for
computer equipment.

INTANGIBLE ASSET
---------------
The Company acquired a client list for $55,125 in order to promote
sales. The Company believes that the client list has a minimal useful
life of five years and is amortizing it over that time. If it should
lose value prior to the five years the Company will write it off
earlier. The amortization for the year ended December 31, 2005 was
$920.

Management reviews, on an annual basis, the carrying value of its
intangible asset in order to determine whether impairment has occurred.
Impairment is based on several factors including the Company's
projection of future discounted operating cash flows. If an impairment
of the carrying value were to be indicated by this review, the Company
would perform the second step of the impairment test in order to
determine the amount of impairment, if any. There was no impairment
charge during the years ended December 31, 2005 and 2004.

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

F-6

EXPENSE RECLASSIFICATIONS
--------------------------
The Company has reclassified certain expense amount relating to prior
year December 31, 2004 results to conform to our December 31, 2005
results. The reclassifications did not affect our financial position,
cash flows, revenue, operating loss or net loss of the prior year.

INCOME TAXES
------------
Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.

NET LOSS PER SHARE
------------------
In February 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 128 "Earnings Per Share" which requires the Company to
present basic and diluted earnings per share, for all periods
presented. The computation of loss per common share (basic and diluted)
is based on the weighted average number of shares actually outstanding
during the period. The Company has no common stock equivalents, which
would dilute earnings per share.

FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Financial instruments consist principally of cash and various current
liabilities. The estimated fair value of these instruments approximates
their carrying value.

RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
The Company has reviewed recent accounting pronouncements that have
been adopted and have concluded that they will not have any material
impact on its financial statements.

3. GOING CONCERN
------------

The accompanying financial statements, which have been prepared in
conformity with accounting principles generally accepted in the United
States of America, contemplates the continuation of the Company as a
going concern. The Company has sustained significant losses and has
used capital raised through the issuance of stock and debt to fund
activities. Continuation of the Company as a going concern is
contingent upon establishing and achieving profitable operations. Such
operations will require management to secure additional financing for
the Company in the form of debt or equity.

Management believes that actions currently being taken to revise the
Company's funding requirements will allow the Company to continue.
However, there is no assurance that the necessary funds will be
realized by securing debt or through stock offerings.

F-7

4. PROPERTY AND EQUIPMENT
----------------------

Property and equipment consist of the following:

DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------

Office furniture $ 77,010 $ 24,511
Computers 62,303 24,189
Booking engine software 28,385 --
--------------- ---------------

167,698 48,700
Less: accumulated depreciation 28,975 11,373
--------------- ---------------

$ 138,723 $ 37,327
=============== ===============

5. CAPITAL STOCK
-------------
COMMON STOCK
------------

On July 30, 2003 the Company entered into a two and three year
employment Agreements with two employees. The agreement provided for
100,000 and 300,000 Shares of restricted common stock to be issued. The
value of the compensation was based on the stock price on the agreement
date of $0.42, a total $168,000. The Company issued the 400,000 shares
November 14, 2003 and recorded compensation expense of $63,000 for the
year ended December 31, 2004. During the year ended December 31, 2005
the Company recorded $55,750 in expense. The deferred compensation was
$23,500 at December 31, 2005.

On July 30, 2003 the Company entered into a four-year employment
agreement for a Vice President of Business Development. The agreement
provides for 2,000,000 shares of restricted Common stock to be issued.
The value of the compensation was based on the stock price on the
agreement date of $0.42, a total of $840,000. The Company issued the
2,000,000 shares November 14, 2003 and recorded compensation expense of
$210,000 for the year ended December 31, 2004. During the year ended
December 31, 2005 the Company recorded $210,000 in expense. The
deferred compensation was $332,500 at December 31, 2005.

During the year ended December 31, 2004, the Company issued 642,223
shares of common stock in a private placement for a total sales price
of $692,185 an average sales price of $1.08 per share. During 2003 and
2004 the Company has received subscriptions to purchase 537,333 shares
of common stock for $704,800 and authorized 150,000 shares subscribed
for additional officers compensation $90,000 at December 31, 2004.

During the year ended December 31, 2004 the Company issued 1,475,133
shares of common stock for services valued at the fair market value
price of the Company's stock on the dates issued $1,507,942 an average
of $1.02 a share.

Loans payable to shareholder at December 31, 2003, $83,295 were
converted to 60,000 shares of common stock during the year ended
December 31, 2004.

As of November 8, 2004, the Company commenced its private placement
offering of up to $1,000,000 of units consisting of four shares of
common stock and one warrant to purchase a share of common stock at an
exercise price of $1.25 per share. Each unit is being sold at $2.00
purchase price. The units are offered by the Company to accredited
investors only in reliance on Section 505 of the Regulation D of the
Securities Act of 1933. 100,000 units have been subscribed as of
December 31, 2004.

During the year ended December 31, 2005, the Company issued 4,664,213
shares of common stock in a private placement for a total sales price
of $1,748,632 an average sales price of $0.37 per share.

During the year ended December 31, 2005 the Company issued 4,731,577
shares of common stock for services valued at the fair market value
price of the Company's stock on the dates issued $1,485,313 an average
of $0.31 a share. The Company issued 742,411 shares of common stock for
a note payable to stockholder of $259,834 and 571,425 shares of common
stock for accrued payroll liability $200,000). The Company issued
27,546 shares of of common stock for interest ($9,641) and 137,500
shares of common stock for assets (70,125).

During the year ended December 31, 2005 the Company issued $590,000 of
common stock subscribed in prior years. An additional $300,000 of
common stock was subscribed during 2005.

F-8

6. STOCK OPTIONS
-------------

The Board of Directors has approved in April, 2003 a Company stock
option plan, which was amended by the Company in July, 2003. All the
shares (480,000 shares) under 2002 Equity and Stock Option Plan were
issued in June, 2003. In July, 2003, the Company approved 2003 Equity
Compensation Plan which provides for the grant to directors, officers,
employees and consultants of the Company of stock based awards and
options to purchase up to an aggregate of 2,500,000 shares of Common
Stock.

On August 27, 2004 the Company agreed to grant options to purchase
150,000 share of common stock under the Company's 2003 Equity
Compensation Plan at $0.66 per share, 110% of the market price on that
date. The options had not been issued at December 31, 2005 and 2004.

On December 13, 2005, the Company authorized for two of its officers to
receive 1,500,000 shares of common stock. The shares were valued at
$330,000 or $0.22 per share. The shares are considered subscribed and
not issued at December 31, 2005. The Company has charged $330,000 to
compensation expense during the year ended December 31, 2005.

7. INCOME TAXES
------------

The components of the deferred tax asset is as follows:

DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------
Deferred tax assets:
Net operating loss carry-forward $ 3,471,000 $ 1,665,000

Less: valuation allowance (3,471,000) (1,665,000)
--------------- --------------

Net deferred tax assets $ -- $ --
=============== ==============

The Company's operations are headquartered in the State of California
and are subject to California state income taxes. The Company had
available approximately $8,715,000 and $4,170,000 of unused Federal and
State net operating loss carry-forwards at December 31, 2005 and
December 31, 2004, respectively that may be applied against future
taxable income. These net operating loss carry-forwards expire through
2024 for Federal purposes. There is no assurance that the Company will
realize the benefit of the net operating loss carry-forwards.

SFAS No. 109 requires a valuation allowance to be recorded when it is
more likely that some or all of the deferred tax assets will not be
realized. At December 31, 2005 and 2004, valuations for the full amount
of the net deferred tax asset were established due to the uncertainties
as to the amount of the taxable income that would be generated in
future years.

F-9

Reconciliation of the differences between the statutory tax rate and
the effective income tax rate is as follows:

DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------

Statutory federal tax (benefit) rate (34.00)% (34.00)%
Statutory state tax (benefit) rate (5.83)% (5.83)%
----------------- -----------------

Effective tax rate (39.83)% (39.83)%

Valuation allowance 39.83% 39.83%
----------------- -----------------

Effective income tax rate 0.00% 0.00%
================= =================

8. COMMITMENTS AND CONTINGENCIES
-----------------------------

OPERATING LEASE
---------------

The Company acquired office space in February 2005. The lease was for
36 months with an option to renew for 36 months. The Company entered
into an office lease in October, 2005. The lease is for 36 months and
there is no renewal option on the lease.

Future payments on the operating lease are as follows:

2006 $ 219,220
2007 $ 222,901
2008 $ 86,040

Rental expense was $120,400 and $70,860 for the years ended December
31, 2005 and 2004, respectively.

9. OFFICERS LOAN PAYABLE
----------------------

During the year ended December 31, 2005 the loans payable to officers
of $259,834 was converted to shares of common stock of 742,411 shares.

10. SUBSEQUENT EVENT
-----------------

Subsequent to December 31, 2005 the Company issued 6,740,485 shares of
common stock for cash of $2,325,170 at $0.35 per share and issued
245,455 shares of common stock for services $160,091 at the fair
market value of the stock on the date issued.

F-10

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL MATTERS
-----------------

There have been no change in auditors nor disagreements on accounting
and financial matters with the auditors and accountants.

Item 8-A. CONTROLS AND PROCEDURES
-----------------------

Our Chief Executive Officer and Chief Financial Officer (our principal
executive officer and principal financial officer, respectively) have concluded,
based on their evaluation as of December 31, 2005, that the design and operation
of our "disclosure controls and procedures" (as defined in Rule 13a-15(e) under
the Securities Exchange Act of 1934, as amended ("Exchange Act")) are effective
to ensure that information required to be disclosed by us in the reports filed
or submitted by us under the Exchange Act is accumulated, recorded, processed,
summarized and reported to our management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding
whether or not disclosure is required.

During the quarter ended December 31, 2005, there were no changes in
our internal controls over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) that have materially affected, or are reasonably likely
to materially affect, our internal controls over financial reporting.

Item 8B. OTHER INFORMATION
-----------------
None

PART III

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

The Directors and Executive Officers of the Company, and their ages, are as
follows:

Name Age Position
---- --- --------

William Alverson 41 Director, Chief Executive Officer and
Chief Financial Officer

Katherine West 36 Director and Executive Vice President

William Fawcett 51 Director

William M. Alverson, Chief Executive Officer, Chief Financial Officer and
Director. Mr. Alverson has been an officer and director of the Company since its
inception. Mr. Alverson has spent the last fifteen years working in the
financial and travel services industries. He began his career as a financial
advisor at American Express. He also served as Chairman and Chief Executive
Officer at a financial services firm where he guided private companies through
their first rounds of financing and public listings. In 1995, Mr. Alverson
founded and served as Chairman and CEO of Travelmax, Inc. Under his leadership,
that company grew from seven to 220 employees handling the back office support
to over 44,000 travel agents nationwide. Since then he has been active in
financing and consulting to both private and public companies including Baby
Genius, Inc. and FreeRealTime.com. He is married to Katherine West, the
co-founder of the Company.

Katherine West, Executive Vice President and Director. West has been the Officer
and Director of the Company since the inception of Joystar, Inc. Mrs. West
supervises the Vice President of Agent Services and Vice President of Travel
Services. Additionally, she is responsible for the day to day management and
supervision of customer service, human resources, accounting, budget, payroll
and contracts. Mrs. West began her management career in the travel industry in
1989 with Thrifty Car Rental where she was responsible for the franchise's
operations, reporting, forecasting, and accounting & tax preparation. From 1992
to 1996 she held the position of Senior Account Executive with Metromedia
Communications, Inc. During her career with the telecom giant, she consistently
exceeded revenue targets with a primary focus on small to mid-sized businesses
and trade associations. She is married to William M. Alverson, the founder of
the Company.

William Fawcett, was appointed by the Board of Directors of Joystar as the
director of the Company in November, 2004. Mr. Fawcett has an MBA from Harvard
Business School, is a graduate of Loyola Law School and also graduated with
honors from Boston College. Mr. Fawcett is on the Dean's Graduate School
Advisory Board for Concordia University and is a professor for Concordia's
Master of Business Administration (MBA) Entrepreneurial program. In addition to
being an outside Director for Joystar, he also serves on the Board of Directors
of Case Post, Inc. Fawcett has been the recipient of the Jordan Whitney Award
for Infomercial Excellence, the Aurora Award for the Best Infomercial in 1997,
Two Clios for production of direct-response TV commercials, a Cannes Film Award
for Best Sports Documentary and a Spanish Infomercial Telemundo Award Best in
Class. Other major accomplishments include writing with Peter Uberroth and Phil
Donohue, "Sober Graduation," the model for high schools; the
Nationally-acclaimed off-Broadway women's show "Breaking Free," and produced,
wrote and directed "Celebrity Salute to City of Hope" infomercial.

COMMITTEES

The Company does not currently have standing audit, nominating or compensation
committees of the Board of Directors, or committees performing similar
functions.

CODE OF BUSINESS CONDUCT AND ETHICS

Our code of business conduct and ethics, as approved by our board of
directors, is available in our SEC filings with the Commission. It will also be
available on our website at www.joystar.com.

We intend to satisfy the disclosure requirement under Item 10 of Form
8-K relating to amendments to or waivers from provisions of the code that relate
to one or more of the items set forth in Item 406(b) of Regulation S-B, by
describing on our Internet Website, within five business days following the date
of a waiver or a substantive amendment, the date of the waiver or amendment, the
nature of the amendment or waiver, and the name of the person to whom the waiver
was granted.

Information on our Internet website is not, and shall not be deemed to
be, a part of this report or incorporated into any other filings we make with
the Securities and Exchange Commission.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, or
the Exchange Act, requires our executive officers and directors, and persons who
beneficially own more than 10% of a registered class of our common stock, to
file initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission, or the SEC. These officers, directors and
stockholders are required by SEC regulations to furnish us with copies of all
such reports that they file.

Based solely upon a review of copies of such reports furnished to us
during the fiscal year ended December 31, 2005 and thereafter, or any written
representations received by us from reporting persons that no other reports were
required, we believe to the best of our knowledge, that, during our fiscal 2005,
all Section 16(a) filing requirements applicable to our reporting persons were
met, however, some of the filings may have been filed late.

Item 10. Executive Compensation
----------------------

The following table sets forth information concerning the annual and
long-term compensation for services rendered during the last three fiscal years
to our company in all capacities as an employee by our Chief Executive Officer
and our other executive officers whose aggregate cash compensation exceeded
$100,000 (collectively, the "named executive officers") during fiscal 2005 shown
below.

Summary Compensation Table

Awards
------
Annual Other
Name and Position Year Salary Bonus Compensation
--------------------------------------------------------------------------------

William Alverson 2005 180,000 $220,000 (1)
CEO and Director 2004 180,000 $60,000 (2)
2003 120,000

Katherine West 2005 120,000 $110,000 (1)
Executive VP and Director 2004 88,500 $30,000 (2)
2003 60,000

(1) On December 13, 2005, the Company's Board of Directors authorized 1,000,000
shares of common stock to be issued to Mr. Alverson and 500,000 shares of common
stock to be issued to Ms. West for services rendered in fiscal year ended
December 31, 2005 valued at $220,000 and $110,000, respectively pursuant to the
Company's 2003 Equity Compensation Plan. As of the date of this report, such
1,500,000 shares have not been issued yet.

(2) On August 27, 2004, the Company authorized 100,000 shares of common stock to
be issued to Mr. Alverson and 50,000 shares of common stock to be issued to Ms.
West for services rendered in fiscal year ended December 31, 2004 valued at
$60,000 and $30,000, respectively. As of the date of this report, such 150,000
shares have not been issued yet.

On August 27, 2004, the Company approved a grant of options to purchase 150,000
shares of common stock under the Company's 2003 Equity Compensation Plan at
$0.66 per share, 110% of the market price on that date to the Company's
executive officers (100,000 options to be issued to Mr. Alverson and 50,000
options to be issued to Ms. West)for services rendered in the fiscal year ended
December 31, 2004. The options had not been issued as of the date of this
report.

COMPENSATION OF DIRECTORS

The Company reimburses each Director for reasonable expenses (such as
travel and out-of-pocket expenses) in attending meetings of the Board of
Directors. Directors are not separately compensated for their services as
Directors.

EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

The Company has not yet finalized the new employment agreements with
the Company's Chief Executive Officer, William M. Alverson and Katherine T.
West, the Company's Executive Officer. The Company's Board of Directors approved
the major terms of such employment agreements which include an annual salary of
$180,000 for Mr. Alverson and the issuance of 600,000 shares of common stock and
an option to purchase 400,000 shares of the Company's common stock. Ms. West's
compensation includes an annual salary of $144,000, the issuance of 250,000
shares of common stock and an option to purchase 250,000 shares of the Company's
common stock. None of the above shares or options have been issued yet.

Item 11. Securities Ownership of Certain Beneficial Owners and Management
----------------------------------------------------------------

The following table sets forth certain information regarding the beneficial
ownership of the shares of Common Stock of the Company as of March 15, 2006, by
(i) each person who is known by the Company to be the beneficial owner of more
than five percent (5%) of the issued and outstanding shares of common stock,
(ii) each of the Company's directors and executive officers, and (iii) all
directors and executive officers as a group.

Percent of
Number of Outstanding
Name and Address Voting Shares Voting Shares
---------------- ------------- -------------

William M. Alverson 11,740,885 (1)(3) 34%
Director, President
CFO & Secretary
95 Argonaut St. First Floor
Aliso Viejo, CA 92656

Katherine T. West 11,740,885 (2)(3) 34%
Director, Ex.VP
95 Argonaut St. First Floor
Aliso Viejo, CA 92656

William Fawcett 0 0%
Director
95 Argonaut St. First Floor
Aliso Viejo, CA 92656

Jeffery Wu 4,500,000 11%
175 Route 51
Spring Valley
New York, NY 10977

Yip Yuk Hing 2,515,000 7%
C\O Shestack & Young, LLP
233 Broadway
New York, NY 10279

Lewis Wu 2,360,000 7%
C/O Joystar, Inc
95 Argonaut St. First Floor
Aliso Viejo, Ca. 92656

All directors and officers 11,810,885 34%
as a group (3 persons)

(1) Includes 2,142,340 shares of common stock held by Katherine T. West
with respect to which shares Mr. Alverson, her husband, disclaims
beneficial ownership.

(2) Includes 9,598,545 shares of common stock held by William Alverson with
respect to which shares Ms. West, his wife, disclaims beneficial
ownership.

(3) Does not include a total of 150,000 shares of common stock authorized
to be issued to Mr. Alverson (100,000 shares) and Ms. West (50,000
shares) and a total of 150,000 options to purchase common stock
authorized to be issued for services rendered in fiscal year 2004; does
not include a total of 1,500,000 shares of common stock authorized to
be issued to Mr. Alverson (1,000,000 shares) and Ms. West (500,000
shares) for services rendered in fiscal year 2005.

The Company had 41,069,249 shares of common stock issued and outstanding as of
March 15, 2006. The Company had 140 shareholders as of March 15, 2006.

Item 12. Certain Relationships and Related Transactions
----------------------------------------------
The Company has an unsecured loan dated December 15, 2004, payable to
William M.Alverson, its Chief Executive Officer in the amount of
$259,834, due on demand with interest at 6%.

In March, 2005, Katherine T. West, the Company's director and Executive
Vice President loaned the Company an amount equal to $105,997.

During the year ended December 31, 2005 the loans payable to officers
of $259,834 was converted to shares of common stock of 742,411 shares.

PART IV

Item 13. Exhibits
--------

Exhibit No. Description
----------- -----------

Exhibit 31 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT

Exhibit 32 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT

Item 14. Principal Fees and Services.
----------------------------

Set forth below are fees paid to the Company's independent accountants for the
past two years for the professional services performed for the Company.

Audit Fees: During 2005 and 2004 the Company paid Mendoza Berger & Company LLP a
total of $15,605 and $10,000 for professional services rendered in connection
with performance of our independent audits for the years ending December 31,
2004 and 2003, respectively.

All Other Fees: During 2005 and 2004 the Company paid Mendoza Berger & Company
LLP a total of $15,954 and $28,833 for professional services rendered in
connection with the reviews of the form 10-QSB's for the years ended December
31, 2005 and 2004, respectively.

Tax Fees: None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.

JOYSTAR, INC.

Dated: March 31, 2006 By: /s/ William M. Alverson
--------------------------------
William M. Alverson,
Chief Executive Officer, Chief Financial
Officer And Secretary

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

/s/ William M. Alverson Chief Executive Officer, Chief Date: 3/31/06
------------------------ Financial Officer and Director
William M. Alverson (principal executive and
financial officer)

/s/ Katherine T. West Director Date: 3/31/06
------------------------
Katherine T. West

/s/ William Fawcett Director Date: 3/31/06
------------------------
William Fawcett