SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 8-K

                             CURRENT REPORT PURSUANT
                          TO SECTION 13 OR 15(D) OF THE
                       SECURITIES AND EXCHANGE ACT OF 1934


        Date of report (date of earliest event reported) February 3, 2000



                               NewStar Media Inc.
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             (Exact name of registrant as specified in its charter)



                                   California
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                 (State or other jurisdiction of incorporation)



        0-24984                                           95-4015834
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(Commission File Number)                       (IRS Employer Identification No.)


8955 Beverly Boulevard, Los Angeles, CA                       90048
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(Address of Principal Executive Offices)                    (Zip Code)


                                  310/786-1600
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              (Registrant's Telephone Number, Including Area Code)



Item 5.  Other Events

On March 3, 2000, NewStar Media Inc. (the "Company") issued a press release, the
text of which is as follows:


              NEWSTAR MEDIA APPOINTS JOHN HUNT PRESIDENT AND CEO OF
                    NEWSTAR PUBLISHING AND INTERNET SERVICES

                   --LISA HUNT NAMED EXECUTIVE VICE PRESIDENT
                         OF MARKETING AND OPERATIONS--

LOS ANGELES, MARCH 3, 2000 - NewStar Media Inc. (Nasdaq:NWST), a diversified
media and entertainment company, today announced the appointment of John Hunt as
President and Chief Executive Officer of NewStar Publishing and Internet
Services. Lisa Hunt was named Executive Vice President of Marketing and
Operations.

         The Hunts have been involved with NewStar since June 1999, when NewStar
acquired Audio Literature, a company founded by the Hunts in 1987.

         "John's and Lisa's contribution to the recent success of both the Audio
Literature and Dove Audio lines while at NewStar makes them the perfect
candidates to lead NewStar Publishing and Internet Services," said Terrence A.
Elkes, Chairman and Chief Executive Officer of NewStar Media Inc. "Their wealth
of experience, knowledge of the industry, and relationship with publishers,
authors and readers, is the exact combination that we have been looking for in
leaders to take the publishing division to the next level."

         John Hunt stated: "I am excited about the opportunity to build on
NewStar's position as the leading independent audiobook publisher. I look
forward to working directly with the Board to leverage our assets into
respectable margins and substantial sales growth. I am confident that we can
restore publishing profits by focusing on the traditional markets with careful
title selection and effective promotional support for each title. We will
continue to aggressively explore every possible path to profits from our
established internet site (http://www.AudioUniverse.com) and in the new
downloading technologies."

         Former NewStar Publishing CEO Peter Engel has resigned to pursue other
interests.

         In a separate development, the company announced that three pending
lawsuits against the company have been or are about to be settled. Final
preparations are being made to settle Herrick v. NewStar Media Inc. et al. for
an undisclosed amount, with payments to be covered under the company's insurance
policy. The Leider and Mattken Corp. matters have been settled for an
undisclosed amount to be paid by NewStar. The payment will be less than the
amount of the attachment that the court previously provided in the litigation.



         Steven J. Rosenwasser, NewStar's Vice President of Legal Affairs said,
"The company seems to be turning a corner in resolving its litigation and we are
pleased to have these protracted matters behind us."

         In other unrelated developments, the company appeared before a Nasdaq
hearing panel February 3, 2000, concerning the continued listing of the
company's common stock on the Nasdaq SmallCap Market. The company is awaiting
the panel's decision.

         The company also announced that it is continuing discussions with a
number of groups concerning possible investment or the sale of certain of its
business segments.

         NewStar is a diversified entertainment company engaged in the
publication of audio and printed books and the production and distribution of
television programming.

THIS RELEASE CONTAINS STATEMENTS RELATING TO FUTURE RESULTS OF THE COMPANY
(INCLUDING CERTAIN PROJECTIONS AND BUSINESS TRENDS) THAT ARE "FORWARD-LOOKING
STATEMENTS" AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED AS A RESULT OF CERTAIN
RISKS AND UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO, CHANGES IN POLITICAL AND
ECONOMIC CONDITIONS, DEMAND FOR AND MARKET ACCEPTANCE OF NEW AND EXISTING
PRODUCTS, AS WELL AS OTHER RISKS AND UNCERTAINTIES DETAILED FROM TIME TO TIME IN
THE FILINGS OF THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION.



As stated in the press release, final preparations are being made to settle the
Herrick v. NewStar Media Inc. lawsuit. In connection with that settlement, the
Company intends to make a filing with the Securities and Exchange Commission
under Rule 424b. The filing contains the following Risk Factors:


                                  RISK FACTORS

WE HAVE INCURRED LOSSES AND MAY BE UNABLE TO ACHIEVE PROFITABILITY. WE ALSO HAVE
EXPERIENCED SIGNIFICANT NEGATIVE CASH FLOWS.

         We had a net loss of $4,936,000 for the fiscal year ended December 31,
1998, a net loss of $16,570,000 for the fiscal year ended December 31, 1997 and
a net loss of $6,673,000 for the fiscal year ended December 31, 1996. Our
expenses can be expected to increase. Accordingly, for us to be profitable,
there must be at least corresponding increases in revenues from operations. We
cannot assure you that we will achieve revenue growth or that our operations
will be profitable.

         On November 12, 1997, we entered into an agreement with The Chase
Manhattan Bank ("Chase Bank") providing us with an $8,000,000 loan facility for
working capital purposes. In May 1998, the loan facility was increased to
$10,000,000 with the other terms of the original agreement remaining
substantially the same. The loan facility is secured by substantially all of our
assets. The loan facility runs for three years until November 4, 2000.

         We were not in compliance with certain of the financial compliance
tests at December 31, 1998, March 31, 1999 and June 30, 1999 and requested
waivers from Chase Bank. As of August 16, 1999, we received such waivers and we
entered into amendments and waivers to the loan facility with Chase Bank.

         As a result of such amendments and waivers, we were in compliance with
the aforementioned financial compliance tests. On January 28, 1999, Chase Bank
and we were notified by one of the guarantors that there would be no approvals
for guarantees of further extensions of credit under the Chase Loan. In
connection with the drafting of certain amendments and waivers to the Chase
Loan, we reached agreement with the guarantor for an extension and modification
of the guarantee agreement to provide for a revised guarantee of $2,000,000.

         At September 30, 1999, we had borrowed $8,300,000 against the facility
and had $1,7000,000 of available funds for borrowing. In addition, Chase Bank
had provided a letter of credit for $287,000 in respect of certain litigation.

         We have experienced significant negative cash flows from operations,
including $10,659,000 and $8,691,000 for the years ended December 31, 1998 and
December 31, 1997, respectively, and $5,844,000 for the nine months ended
September 30, 1999. These negative cash flows have resulted from, among other
things, losses from operations, use of working capital for expansion of audio
and printed book publishing, development of our http://www.AudioUniverse.com
website, development of television programming and the acquisition of theatrical
motion picture product. The Company currently is experiencing a severe shortage
of working capital. In the event that additional funding is not obtained in the
near future, the Company may not be able to continue operations.



         To the extent we obtain financing through sales of equity securities,
any such issuance of equity securities would result in dilution to the interests
of our shareholders. Additionally, to the extent that we incur indebtedness or
issue debt securities in connection with any acquisition or otherwise, we will
be subject to risks associated with incurring substantial indebtedness,
including the risks that interest rates may fluctuate and cash flow may be
insufficient to pay principal and interest on any such indebtedness. If we
receive funding through a sale or sales of assets, those assets will no longer
be available to the Company and its shareholders. Any proceeds from a sale of
assets would be used to pay down the Company's loan facility. There is no
assurance that the Company would be able to reborrow such funds.

FROM TIME TO TIME, WE MUST FUND OUR TELEVISION PRODUCTION ACTIVITIES AND
PUBLISHING AND TELEVISION OPERATIONS IN ADVANCE OF RECEIPT OF REVENUES.

         Our television production activities can affect our capital needs in
that the revenues from the initial licensing of television programming may be
less than the associated production costs. Our ability to cover the production
costs of particular programming is dependent upon the availability, timing and
the amount of fees obtained from distributors and other third parties, including
revenues from foreign or ancillary markets where available. In any event, from
time to time we are required to fund at least a portion of our production costs,
pending receipt of programming revenues, out of our working capital. Although
our strategy generally is not to commence principal photography without first
obtaining commitments which cover all or substantially all of the budgeted
production costs, from time to time we may commence principal photography
without having obtained commitments equal to or in excess of such costs. In
these circumstances, we will be required to fund at least a portion of
production and distribution costs, pending receipt of anticipated future
revenues, from working capital, from additional debt or equity financings from
outside sources or from other financing arrangements, including bank financing.
We cannot assure you that any such additional financing will be available on
acceptable terms. If we are unable to obtain financing, we may be required to
reduce or curtail certain operations.

         In order to obtain rights to certain properties for our publishing and
television operations, we may be required to make advance cash payments to
sources of such properties, including book authors and publishers. While we
generally attempt to minimize the magnitude of such payments and to obtain
advance commitments to offset such payments, we are not always able to do so and
there is no assurance we will be able to do so in the future.

OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ SMALLCAP MARKET.

         Although our common stock currently trades on the Nasdaq SmallCap
Market, we cannot assure you that our common stock will continue to be traded on
that market. On October 13, 1998, we were notified by Nasdaq that our common
stock will continue to be listed on The Nasdaq SmallCap Market via an exception
from the net tangible assets requirement. Although we were not in compliance
with the net tangible assets requirement as of March 31, 1998, we were granted a
temporary exception from this standard subject to meeting certain conditions. In
addition to complying with all continued listing requirements, (1) on or before



November 16, 1998, we were required to make a public filing containing a
September 30, 1998 balance sheet, with pro forma adjustments for any significant
transactions or events occurring on or before the filing date, evidencing at
least $2,700,000 in net tangible assets; and (2) on or before January 11, 1999,
we were required to achieve a bid price for our common stock of at least $1.00
per share and maintain such a bid price for a minimum of ten consecutive trading
days. On December 7, 1998, Nasdaq notified us that we satisfied both conditions.

         On March 10, 1999, we were notified by Nasdaq that we failed to satisfy
Marketplace Rule 4310(c)(4) for continued listing of our common stock on the
Nasdaq SmallCap Market by failing to maintain a closing bid price greater than
or equal to $1.00. Nasdaq informed us that no delisting action with respect to
the bid price deficiency was to be initiated at the time of such notification.
Instead, Nasdaq provided us ninety calendar days from the date of the
notification in which to regain compliance with the minimum bid price
requirement. We were to be deemed in compliance if at anytime within ninety
calendar days from March 9, 1999, the shares of our stock had a closing bid
price of at least $1.00 or more for a minimum of ten consecutive trading days.
Our shares had a closing bid price of at least $1.00 for ten consecutive trading
days during that period.

         On April 19, 1999, Nasdaq informed us that Nasdaq had determined that
we were not in compliance with the net tangible assets/market capitalization/net
income requirements pursuant to NASD Marketplace Rule 4310(c)(2). Also on that
date, Nasdaq sent separate correspondence to us in which Nasdaq noted that we
had received a "going concern" opinion from our independent auditor, and
expressed concern that, in light thereof, we may not be able to sustain
compliance with Nasdaq's continued listing requirements. Nasdaq requested
information from us by May 5, 1999 about our proposal for achieving compliance
with Marketplace Rule 4310(c)(2) and a timeline for resolution of the items that
led to the "going concern" opinion. On May 5, 1999, we submitted our response to
Nasdaq. Nasdaq did not take any further action after May 5, 1999 with respect to
its April 19, 1999 notification.

         On September 23, 1999, Nasdaq informed us that our common stock failed
to maintain a minimum bid price greater than or equal to $1.00 over the last
thirty consecutive trading days, as required under Marketplace Rule 4310(c)(4).
We were provided ninety calendar days, or until December 23, 1999, to regain
compliance with the minimum bid price requirement of Rule 4310(c)(4). If at any
time before December 23, 1999, the bid price of the Company's shares was equal
to or greater than $1.00 for a minimum of ten consecutive trading days the staff
of Nasdaq would determine if compliance with the requirement had been achieved.
We were unable to demonstrate compliance with the requirement on or before
December 23, 1999, but requested a hearing before the Nasdaq panel. Pending the
hearing the delisting was stayed.



         Subsequently, we received another notification from Nasdaq that we were
not in compliance with the net tangible assets/market capitalization/net income
requirements pursuant to NASD Market Place Rule 4310(c)(2).

         On February 3, 2000 we appeared at a hearing before the Nasdaq panel.
We are awaiting the response from Nasdaq. Since then, we have had further
conversations with Nasdaq and are providing additional information requested by
the panel. We have not received a decision.

         If at some future date our securities should cease to be listed on the
Nasdaq SmallCap Market, they may continue to be traded on the OTC - Bulletin
Board. If our common stock is delisted from the Nasdaq SmallCap Market, it would
likely be more difficult to buy or sell the common stock or to obtain timely and
accurate quotations to buy or sell. In addition, the delisting process could
result in a decline in the trading market for our common stock which could
depress stock price, among other consequences. We cannot assure you that at any
time we will be able to satisfy all of the conditions for continued listing on
the Nasdaq SmallCap Market.

OUR TELEVISION OPERATIONS ENTAIL SIGNIFICANT RISKS.

         We fund operating expenses of our television operations, even at the
development stage. Television programming in development may not be produced or
sold. In addition, series programming ordered by a network or syndicator may be
canceled. Also, there is a substantial risk that our television projects will
not be successful, resulting in costs not being recouped and anticipated profits
not being realized.

THE PUBLISHING, TELEVISION AND FILM INDUSTRIES ARE HIGHLY SPECULATIVE AND
INVOLVE A SUBSTANTIAL DEGREE OF RISK.

         The markets for our products are subject to rapidly changing consumer
preferences, resulting in short product life cycles and frequent introduction of
new products, many of which are unsuccessful. We fund the development of our
television and publishing projects. If there is no or low demand for a
television project, audio or published book or film, we may expend significant
funds to develop such product without corresponding revenues. That could
adversely affect our future operations. Our success will be largely dependent on
our ability to anticipate and respond to factors affecting the entertainment
industry, including the introduction of new market entrants, demographic trends,
general economic conditions, particularly as they affect available discretionary
income levels, and discount pricing and promotion strategies by competitors. We
may not be able to anticipate and respond to changing consumer tastes and
preferences. There is a substantial risk that our projects will not be
successful, resulting in costs not being recouped and anticipated profits not
being realized.



WE ARE DEPENDENT ON A LIMITED NUMBER OF PROJECTS.

         Our business is dependent on our ability to acquire or develop rights
to exploit new audio, book, television and film properties that will have broad
market appeal. The majority of our revenues have come from a small percentage of
our projects. The loss of a major project in any period or the failure or
less-than-expected performance of a major product in any period could have an
adverse effect on our results of operation and financial condition.

THE RETURNS WE EXPERIENCE AND THE PRICE CONCESSIONS AND ALLOWANCES WE GRANT IN
OUR PUBLISHING BUSINESS COULD ADVERSELY AFFECT OUR BUSINESS.

         In accordance with industry practice, substantially all of our sales of
audio and printed book products are and will continue to be subject to return by
distributors and retailers if not resold to the public. We have experienced
significant returns. These returns have been much greater than the average in
the book or audio book industry. We may experience returns of our audio and
printed book products in excess of our historical returns. Although we make
allowances and reserves for returned products, significant increases in return
rates could materially and adversely impact our results of operations or
financial condition. In addition, we make price concessions or allowances or
grant credits to distributors or retailers in order to minimize returns, and
such concessions and allowances may adversely affect our operating results.
Certain of our revenues are derived from sales at discount prices of excess
inventory of books, including returned book products, effected through
warehouse, outlet and other stores. Revenues from these sales typically have not
exceeded our per-unit costs. The availability of product at discount prices also
may have the effect of reducing sales of full-price books, and, therefore, could
adversely affect our results of operation and financial condition.

POTENTIAL CLAIMS FOR DEFAMATION, VIOLATION OF RIGHT OF PRIVACY AND OTHER CLAIMS
COULD ADVERSELY AFFECT OUR BUSINESS.

         One of the risks of our publishing and television business is legal
claims for defamation, violation of right of publicity or privacy and other
liability claims. Because of the controversial nature of some of our
publications, the risk of liability claims may be greater for us compared to
publishers in general. We maintain liability insurance which we believe is
adequate to protect our assets. However, damages assessed against us for
existing and future claims may exceed the limits of insurance coverage. Adequate
insurance, on terms we believe are commercially reasonable, may not be available
in the future. In addition, the potential negative publicity that could arise
from a liability claim could have a material adverse effect on us, even if we
were ultimately to prevail in the defense of the claim.



OUR PUBLISHING BUSINESS IS DEPENDENT UPON SHELF SPACE AT AND DISTRIBUTION
THROUGH MAJOR OUTLET CHAINS.

         The level of our sales of books and audio books through major outlets
depends significantly on shelf space allocated to such products. We may not be
able to maintain current levels of shelf space or distribution in major outlet
chains or in other distribution outlets (including, increasingly, distribution
channels over the internet). Loss of any of these retail outlets as a
distribution channel or loss of a significant amount of shelf space would have a
material adverse effect on our results of operation and financial condition. We
may not be able to distribute our television product to television outlets to
which we have distributed in the past and/or alternate outlets may not be
available in the future. Loss of any television outlets would have a material
adverse effect on our results of operation and financial condition.

COMPETITION IS INTENSE WITHIN THE PUBLISHING, TELEVISION AND MOTION PICTURE
INDUSTRIES AND BETWEEN EACH OF THESE INDUSTRIES AND OTHER ENTERTAINMENT MEDIA.

         We are in competition with major television companies and film studios,
major publishing houses, other audio book companies and numerous smaller
companies. We compete with these companies for sales and for the services of
performing artists, other creative and technical personnel and creative
material. Many major publishing houses have established audio book operations
and we anticipate increased competition in the future from major record
companies. We also anticipate increased competition from internet based spoken
word and audiobook companies that provide distribution via downloading. Many of
the entities against which we compete have substantially greater financial,
personnel, technological, marketing, managerial and other resources and have
well-established reputations in the publishing, television and film industries.
We may not be able to successfully compete. The cost of obtaining publishing
rights from popular authors is escalating and, in many cases, obtaining such
rights is beyond our capital resources. We expect this trend to continue. As a
result, it may become more difficult to acquire rights to "blockbuster" works by
authors with past successes. Such ability may limit the opportunities available
to us to publish the works of such authors in audio format. In addition,
increased competition within the publishing industry could result in greater
price competition in the sale of books and audio books. Reductions in prices of
books and audio books, would adversely affect our results of operations and
financial condition.

THE VARIABILITY OF OUR QUARTERLY RESULTS COULD ADVERSELY AFFECT OUR STOCK PRICE.

         Our operating revenues, cash flow and net earnings (losses)
historically have fluctuated significantly from quarter to quarter, depending in
large part on the delivery or availability dates of our programs and product and
the amount of related costs incurred and amortized in the period. For example,



the demand for audio books is seasonal, with the majority of shipments taking
place in the third and fourth quarters of the year. Therefore, year-to-year
comparisons of quarterly results may not be meaningful and quarterly results
during the course of a fiscal year may not be indicative of results that may be
expected for the entire fiscal year. Such fluctuations may adversely affect the
market price of our common stock.

INADEQUATE RESERVES OR WRITEDOWNS WITH RESPECT TO OUR PUBLISHING AND
ENTERTAINMENT BUSINESS COULD ADVERSELY AFFECT OUR BUSINESS.

         We recognize revenues from the sale of audio and printed books,
including the licensing of audio and printed book rights to third parties, net
of estimated returns and allowances, upon shipment of the product or upon
availability of the rights pursuant to our licensing arrangements. To allow for
returns, we establish a reserve against revenues from audio and printed book
sales, the magnitude of which is based on management's estimate of returns. Our
future reported revenues will be negatively impacted if the actual returns
exceed our established reserves. Actual returns may exceed our reserves.

         Audio and printed book inventory is valued at the lower of cost or
market using estimated average cost, determined using the first-in, first-out
method. Under generally accepted accounting principles, if our reserve for
excess inventory is not adequate at any time, we will be required to write down
audio and printed book inventory, which will increase cost of sales. Any such
write-downs would have an adverse impact on our operating results. Excess
inventory may arise as a result of, among other things, customer returns. The
extent of any write-downs will depend on, among other things, the quantity of
actual returns received and the level of production and sales activity and the
state and the state and volatility of the remainder market. We establish
reserves against such write-downs based on past experience with similar
products. Our reserve for excess inventory may not be adequate and additional
write-downs may be necessary. Film costs, which include development, production
and acquisition costs of television programming and feature films, are
capitalized and amortized, and participations and royalties are accrued, in
accordance with the individual film forecast method in the proportion that
current quarter's revenue bears to the estimated total revenues from all
sources. These costs are stated at the lower of unamortized costs or estimated
realizable value on an individual film basis. Revenue forecasts for films are
periodically reviewed by management, and our results of operations may be
adversely affected as a result of a write-down of carrying value of particular
films in the event management's estimate of ultimate revenues is materially
decreased. We may incur write-downs of our film and television operations in the
future and such write-downs would have an adverse impact on operating results.



WE ARE DEPENDENT ON OUR ABILITY TO HIRE QUALIFIED PERSONNEL AND AUTHORS.

         As we grow, we will need to hire additional qualified personnel.
Competition for qualified personnel is intense, and the loss of key employees or
inability to hire and retain additional qualified personnel would have a
material adverse effect on us. In addition, the success of our audio and printed
books is in large part dependent upon readers and authors. We do not have
long-term contractual arrangements with our readers and authors.

MANAGEMENT CONTROLS A SIGNIFICANT PERCENTAGE OF OUR STOCK.

         As of February 1, 2000, Media Equities International, LLC beneficially
owned approximately 7,642,042 shares of our common stock, approximately 27.5%
taking into account conversion or exercise of preferred stock and warrants held
by Media Equities International, LLC. This number includes 6,218,000 shares
underlying warrants, which do not have voting rights until the warrants are
exercised, and shares issuable upon conversion of preferred stock, which
currently have voting rights. Media Equities International, LLC is controlled by
Terrence A. Elkes, Kenneth F. Gorman, Ronald Lightstone, Bruce Maggin and John
T. Healy.

         Mr. Elkes is Chairman of the Board of Directors and Chief Executive
Officer of our company. Mr. Gorman is Vice-Chairman of our company. Messrs.
Healy, Maggin and Lightstone are directors.

         As of February 1, 2000, Mr. Elkes, through a limited partnership, owned
approximately 4,426,515 shares of our common stock, which is approximately 20.5%
of the outstanding common stock, not including shares owned by Media Equities
International, LLC. As of February 1, 2000, Mr. Gorman, through a limited
partnership, owned approximately 4,476,514 shares of our common stock, which is
approximately 20.5% of the outstanding common stock, not including shares owned
by Media Equities International, LLC. As of January 1, 2000, Mr. Lightstone
owned approximately 1 million shares of our common stock, which is approximately
5% of the outstanding common stock, not including shares owned by Media Equities
International, LLC, but including shares granted to him under his employment
agreement with us that have not yet vested.

         Accordingly, Media Equities International, LLC and/or Terrence Elkes
and/or Kenneth Gorman and/or Ronald Lightstone will continue to be in a position
to exercise significant control over our general affairs, including the ability
to elect directors, increase the authorized capital of our company, dissolve,
merge, or sell the assets of our company and generally direct the affairs of our
company.



THE PROVISIONS OF OUR ARTICLES OF INCORPORATION MAY INHIBIT A CHANGE IN CONTROL.

         Our Articles of Incorporation authorize the issuance of up to 2,000,000
shares of preferred stock with designations, rights and preferences determined
by its Board of Directors. Accordingly, our Board of Directors is empowered,
without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting, or other rights preferential to the rights of
the shareholders of the common stock. The Board of Directors has designated
214,113 shares as Series A Preferred Stock, 5,000 shares as Series B Preferred
Stock, 5,000 shares as Series C Preferred Stock, 400,000 shares of Series D
Preferred Stock and 1,500 shares as Series E Preferred Stock. We could use
preferred stock as a method of discouraging, delaying, or preventing a change in
control of our company.

WE HAVE OUTSTANDING A SIGNIFICANT NUMBER OF OPTIONS AND WARRANTS.

         As of February 1, 2000, there were outstanding options granted under
our Stock Incentive Plans to purchase an aggregate of 1,989,000 shares of common
stock, at exercise prices ranging from $0.50 to $6.00 per share, warrants to
purchase an aggregate of 4,664,013 shares of common stock at exercise prices
ranging from $0.50 to $12.00 per share, 4,000 shares of Series B Preferred Stock
which are convertible into an aggregate of 2,000,000 shares of common stock,
1,920 shares of Series C Preferred Stock which are convertible into an aggregate
of 960,000 shares of common stock and 214,113 shares of Series D Preferred Stock
which is convertible into an aggregate of 258,000 shares of common stock. There
are also approximately 1,300 shares of Series E Preferred Stock held in escrow
which are convertible into common stock only upon release from escrow. To the
extent that outstanding options or warrants are exercised or shares of preferred
stock are converted, the interests of our shareholders immediately prior to such
exercise or conversion will be diluted.

WE ARE SUBJECT TO LEGAL PROCEEDINGS AND CLAIMS THAT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.

         We are involved in numerous litigation and arbitration matters. These
matters cost us substantial amounts in legal fees and divert the attention of
management and employees from productive activities. In addition, if the outcome
of litigation or arbitration proceedings is decided against us, we may incur
significant monetary liability.

         Below is a brief explanation of significant litigation and arbitration
proceedings. In addition to these proceedings, we are a party to various other
legal proceedings and claims incidental to our business.

         We are a defendant in a case entitled Steven A. Stern and Steven A.
Stern as assignee of the claims of Sharmhill Productions (BC), Inc., a bankrupt
company v. Dove Audio, Inc. et. al. (British Columbia Supreme Court, Vancouver
Registry No. C930935). The plaintiff claims that he was fraudulently induced to
enter into an agreement relating to the film "Morning Glory". He is seeking in
excess of $4.5 million in damages. We believe that we have good and meritorious
defenses to the action. Nevertheless, we may not prevail in the action.



         In March 1996, we were served with a complaint in an action entitled
Alexandra D. Datig v. Dove Audio, et al. (Los Angeles Superior Court Case No.
BC145501). The action was brought by a contributor to, and relates to, the book
"You'll Never Make Love In This Town Again." The Datig complaint sought in
excess of a million dollars in monetary damages. In October 1996, we obtained a
judgment of dismissal of the entire action, which judgment also awarded us our
attorney's fees and costs in defending the matter. Ms. Datig, appealed the
judgment. On July 15, 1999, the Court of Appeal of the State of California
Second Appellate District Division 3 issued its opinion on plaintiff's appeal
from judgment in the matter, which opinion was modified on August 13, 1999. The
appeals court reversed the judgment and remanded the proceedings to the trial
court. While we believe that we have good and meritorious defenses to the claims
in the action at the trial court level, there is no assurance that we will
prevail in the action.

         In June 1997, we were served with a complaint in an action entitled
Michael Bass v. Penguin USA Inc., et al. (New York Superior Court Case No.
97-111143). The complaint alleged among other things that the book "You'll Never
Make Love In This Town Again" defamed Mr. Bass and violated his rights of
publicity under New York statutes. The complaint sought damages of $70,000,000
for defamation and $20,000,000 for violation of the New York right of publicity
statutes and an injunction taking the book out of circulation and prohibiting
the use of Mr. Bass' name. The action in New York was voluntarily stayed after
Mr. Bass filed a similar action in the State of California entitled Michael Bass
v. Penguin USA et. al. (California Superior Court Case No. SC049191) seeking
essentially the same damages. The action in California was dismissed with
prejudice on July 6, 1998. However, there is no assurance that the plaintiff
will not appeal the dismissal, or in the event of such an appeal, that we will
prevail.

         In August 1997, Michael Viner and Deborah Raffin Viner, former
principals, commenced an arbitration against us seeking specific performance of,
and alleging breach of, a termination agreement to which they and we are a
party, and claimed damages in excess of $165,000 and additional reimbursements
allegedly due for other items. We filed our own claims against the former
principals. On July 17, 1998, the arbitrator ruled in favor of us on some issues
and in favor of the former principals on other issues, resulting in a net
recovery by the former principals of approximately $30,000. The arbitrator also
confirmed an earlier ruling that a provision of the termination agreement
prohibiting the former principals from competing with us in the audio book
business for a period of four years from June 10, 1997 is valid and enforceable,
and enjoined and restrained the former principals from engaging in the audio
book business during that period. On November 20, 1998, the Los Angeles County
Superior Court confirmed the arbitrator's award. The former principals have
appealed the court's order confirming this award.



         On September 28, 1998, the former principals commenced an arbitration
against us, alleging breach of, and seeking specific performance of, the
termination agreement. In December 1998, the former principals asserted that
they were entitled to rescission of the termination agreement for material
failure of consideration, or, in the alternative, unspecified damages against
us. In a decision dated March 31, 1999, the arbitrator determined that the
former principals may not rescind the termination agreement on the grounds
presented to the arbitrator. The arbitrator issued a subsequent decision dated
November 19, 1999, which he thereafter corrected and amended and purported to
later clarify, in which he determined that a provision of the termination
agreement prohibiting the former principals from hiring, soliciting, encouraging
the departure of, or engaging or seeking to employ authors under contract to us
or included in our catalogs is void and unenforceable. The arbitrator also
determined that the former principals had the discretion to elect to receive
payments under the termination agreement in cash, rather than preferred stock.
The former principals have sought to have the Los Angeles Superior Court confirm
the clarified, corrected and amended award. While we believe that we have good
and meritorious grounds to have the clarified, corrected and amended award
vacated, we may not prevail.

         On June 1, 1999, a complaint entitled Michael Viner and Deborah Raffin
v. NewStar Media Inc. (BC 211240) was filed in Los Angeles Superior Court. The
plaintiffs allege violation of the Lanham Act, statutory and common law unfair
competition and false advertising, and seek damages in an amount according to
proof, punitive damages, and preliminary and permanent injunctive relief. On
August 4, 1999 we removed the action to the United States District Court for the
Central District of California Western Division (Case No. 99-07970 CBM (SHx)).
While we believe that we have good and meritorious defenses to the claims in the
action, there is no assurance that we will prevail in the action.

         On March 1, 2000, a complaint entitled Michael Viner and Deborah Raffin
Viner v. NewStar Media Inc. (BC 225685) was filed in Los Angeles Superior Court.
The plaintiffs allege that they are entitled to indemnity for the arbitration
proceedings that MEI commenced against the former principals in the second
quarter of 1999. While we believe that we have good and meritorious defenses to
the claims in the action, there is no assurance that we will prevail in the
action.

         In December of 1997, we were served with a complaint in an action
entitled Gerald J. Leider v. Dove Entertainment, Inc., f.k.a. Dove Audio, Inc.
(Los Angeles Superior Court Case No. BC 183056). Mr. Leider is a former Chairman
of the Board and consultant to our company and sought damages of approximately
$287,000 for breach of contract and $60,000 for unpaid consulting fees. Mr.



Leider also sought a declaration that we must comply with certain purported
stock option agreements and for an order for inspection and copying of certain
of our records and an award of expenses related thereto. On April 21, 1998, Mr.
Leider obtained a writ of attachment for approximately $287,000 in respect of
his claims, for which we substituted an undertaking for the amount of
attachment. We have settled this action.

         On July 6, 1998, a first amended complaint in the action entitled
Mattken Corp. and Gerald J. Leider v. NewStar Media, Inc. was filed in the Los
Angeles County Superior Court (BC 191736). The plaintiffs alleged breach of
contract arising out of a purported agreement between Mr. Leider and us in
connection with executive producer services on the motion picture "Morning
Glory", and a purported sales agency agreement between Mattken Corp. and us.
Plaintiffs were seeking in excess of $350,000. We have settled this action.

         On July 10, 1998 an action entitled Palisades Pictures LLC, Nothing to
Lose Productions Inc., CUB Films, Mark Severini, Eric Bross and Jeff Dowd v.
Dove International, Inc., Dove Audio, Inc. and NewStar Media, Inc. was filed in
Los Angeles County Superior Court (BC 194069). Plaintiffs alleged breach of
contract, breach of implied covenant of good faith and fair dealing, breach of
fiduciary duty, interference with prospective economic advantage and promissory
estoppel, arising out of an alleged distribution agreement pursuant to which
Dove International, Inc. was to have distributed the motion picture "Nothing to
Lose." Plaintiffs were seeking damages in excess of $1,000,000, plus punitive
and exemplary damages. On August 30, 1999, the plaintiffs dismissed the action
without prejudice for the purpose of settlement discussions, and the defendants
entered into a tolling agreement so that the plaintiffs could refile the action
if the matter is not settled. We cannot assure you that we will be able to
settle the matter, or if the matter is not settled, that we will prevail in the
action.

         In February 1999, we were served with a complaint in an action entitled
Norton Herrick v. NewStar Media Inc., Michael Viner and Deborah Raffin Viner
(Los Angeles Superior Court Case No. SC055421). The action was brought by one of
the shareholders who opted out of the settlement of our class action lawsuits.
The complaint alleges fraud, negligent misrepresentation, violation of sections
25400 and 25401 of the California Corporations Code and breach of fiduciary
duty, and seeks recovery of in excess of $1,000,000 plus exemplary and punitive
damages. We have settled this action.




                                   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.



                                        NEWSTAR MEDIA INC.



Date: March 8, 2000                     By: /S/ Terrence A. Elkes
                                            ------------------------------------
                                            Terrence A. Elkes
                                            CHAIRMAN AND CHIEF EXECUTIVE OFFICER