Item s
The
following table summarizes the results of our operations during the nine
months
ended June 30, 2008 and 2007 and provides information regarding the dollar
and
percentage increase or (decrease) from the current fiscal period to the prior
fiscal period:
AND
COMPREHENSIVE INCOME
FOR
THE NINE MONTHS ENDED JUNE 30, 2008 AND 2007
(UNAUDITED)
|
June 30,
|
June 30,
|
$ Increase
(Decrease)
|
% Increase
(Decrease)
|
||||||||||
|
(Unaudited)
|
|
(Unaudited)
|
|||||||||||
|
Net
revenues
|
$
|
21,708,427
|
$
|
16,791,961
|
$
|
4,916,466
|
29
|
%
|
|||||
|
Cost
of sales
|
15,480,755
|
10,776,897
|
4,703,858
|
44
|
%
|
||||||||
|
Gross
profit
|
6,227,672
|
6,015,064
|
212,608
|
4
|
%
|
||||||||
|
Operating
expenses
|
2,985,634
|
7,659,738
|
(4,674,104
|
)
|
(61
)
|
%
|
|||||||
|
Income
(loss) from continuing operations
|
3,242,038
|
(1,644,674
|
)
|
4,886,712
|
297
|
%
|
|||||||
|
Other
income
|
22,317
|
27,843
|
(5,526
|
)
|
(20
|
)%
|
|||||||
|
Income
(loss) from continuing operations before income taxes
|
3,264,355
|
(1,616,831
|
)
|
4,881,186
|
302
|
%
|
|||||||
|
Provision
for income taxes
|
(1,735
|
)
|
(1,440
|
)
|
(295
|
)
|
(20
)
|
%
|
|||||
|
Minority
interest in income of subsidiaries
|
(898,268
|
)
|
(443,778
|
)
|
(454,490
|
)
|
(102
)
|
%
|
|||||
|
Net
income (loss) from continuing operations
|
2,364,352
|
(2,062,049
|
)
|
4,426,401
|
215
|
%
|
|||||||
|
Other
comprehensive (loss) income
|
(132,726
|
)
|
8,038
|
(140,764
|
)
|
(1,751
)
|
%
|
||||||
|
Comprehensive
income (loss)
|
2,231,626
|
(2,054,011
|
)
|
4,285,637
|
209
|
%
|
|||||||
|
Earnings
(loss) per common share
|
|||||||||||||
|
-Basic
|
$
|
0.02
|
$
|
(0.02
|
)
|
||||||||
|
-
Fully diluted
|
$
|
0.02
|
$
|
(0.02
|
)
|
||||||||
|
|
|||||||||||||
|
Weighted
average common share Outstanding
|
|||||||||||||
|
-Basic
|
152,309,187
|
119,271,700
|
|||||||||||
|
-
Fully diluted
|
152,309,187
|
119,271,700
|
|||||||||||
Revenues
totaled $21,708,427 for the nine months ended June 30, 2008 compared to
$16,791,961 for the nine months ended June 30, 2007. The increase of $4,916,466
is due primarily to the significant growth of the Subaye.com membership business
segment, which generated 53% growth, or an additional $2,289,078 in revenues
for
the nine month period ended June 30, 2008 over the prior period. In addition,
the Company's total revenues included revenues of $2,597,338 from the sale
of
copyrights and $1,203,269 generated from the sale of the Company’s “Master
Franchise Licenses."
Costs
of Sales increased by $4,703,858:
Costs
of
sales totaled $15,480,755 and $10,776,897 for the nine months ended June 30,
2008 and 2007, respectively. The Company’s import and export business segment
had higher costs in 2008 versus 2007, which was in line with expectations.
Costs
of sales for Panyu M&M, which is the sole contributor to the import and
export business, totaled $9,121,360 for 2008 versus total costs of $6,620,945
for 2007. The Company also sold certain copyrights and included the adjusted
cost of those copyrights, $2,457,273, in costs of sales for the nine months
ended June 30, 2008.
Operating
Expenses decreased by $4,674,104:
For
the
nine months ended June 30, 2008, we incurred stock based compensation expenses
of $1,201,324 versus $2,062,363 for the nine months ended June 30, 2007. The
Company entered into less significant stock based compensation agreements in
2007 and many of the contracts signed in 2005 had been fully amortized as of
October 1, 2007. Additionally, during the course of the last quarter of fiscal
year 2007 and first quarter of 2008, the Company completed a full review of
its
accounts receivable balances and determined that it had over-reserved for its
potentially uncollectible accounts receivable in past years. The Company
recorded a bad debt recovery of approximately $185,000 during the three months
ended December 31, 2007 and believes its allowance for doubtful accounts and
accounts receivable balances are fairly presented as of June 30,
2008.
Other
income and expenses decreased by $5,526:
The
total
other income was $22,317 and $27,843 for the nine months ended June 30, 2008
and
2007, respectively. In both periods, the Company earned commissions on certain
export and import business that were outside the normal course of
business.
OVERALL
We
reported net income (loss) for the nine months ended June 30, 2008 and 2007
of
$2,364,352 and $2,062,049, respectively. Earnings (loss) per share for the
nine
and three months ended June 30, 2008 and 2007 was $0.02 and $(0.02)
and$0.00 and $0.01, respectively.
Liquidity
and Capital Resources
We
believe that our currently-available working capital should be adequate to
sustain our operations for the twelve month period ending June 30,
2009.
As
of
June 30, 2008, we had a cash balance of $458,112 held in PRC banks, Hong Kong
banks as well as cash on hand. Historically, we have funded our operations
with
receipts from customers and have sold shares of our common stock in private
placement transactions only as necessary.
Management
continually invests substantial time evaluating and considering proposals for
possible investments, acquisitions or business combinations. The Company
maintains relationships with various potential business partners and routinely
works with investment professionals and other advisors. We continue to consider
acquisitions, business combinations, or start up proposals, which could be
advantageous to our shareholders. No assurance can be given that any such
project, acquisition or combination will be concluded, or that any such actions
will be approved by our Board of Directors.
Net
cash
used in operations for the nine months ended June 30, 2008 was $(1,101,134).
During the three months ended June 30, 2008, the Company paid approximately
$5,300,000 towards the purchase of two new copyrights which the Company
purchased for $6,160,000 in April and May, 2008. The Company's accounts
receivable balances have continued to increase over the last two quarters.
However, the Company continues to believe its accounts receivable are fairly
stated, although the Company does continue to encounter significant delays
in
the collection of accounts receivable balances. Cash balances have remained
fairly consistent throughout the nine month period ended June 30,
2008.
Net
cash
provided by investing activities for the nine months ended June 30, 2008 was
$2,834. The Company received cash of $2,834 upon the acquisition of
MGI.
Net
cash
provided by financing activities for the nine months ended June 30, 2008 was
$600,000. The Company completed a private placement and sold 5,000,000 shares
of
common stock for $600,000 on March 8, 2008.
Our
future growth is dependent on our ability to raise capital for expansion, and
to
seek additional revenue sources. If we decide to pursue any acquisition
opportunities or other expansion opportunities, we may need to raise additional
capital, although there can be no assurance such capital-raising activities
would be successful.
ITEM
3(A)(T).
Controls
and Procedures.
Our
Chief
Executive Officer and Chief Financial Officer (collectively, the "Certifying
Officers") are responsible for establishing and maintaining disclosure controls
and procedures for us. Based upon such officers' evaluation of these controls
and procedures as of a date within 90 days of the filing of this Quarterly
Report, and subject to the limitations noted hereinafter, the Certifying
Officers have concluded that our disclosure controls and procedures were not
effective to ensure that information required to be disclosed by us in this
Quarterly Report is accumulated and communicated to management, including our
principal executive officers as appropriate, to allow timely decisions regarding
required disclosure.
The
Certifying Officers have also indicated that, except as set forth above, there
were no significant changes in our internal controls or other factors that
could
significantly affect such controls subsequent to the date of their evaluation,
and there were no corrective actions with regard to significant deficiencies
and
material weaknesses.
Management’s
annual report on internal control over financial reporting
Management
is responsible for establishing and maintaining internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our
management evaluated, under the supervision and with the participation of our
Chief Executive Officer, the effectiveness of our internal control over
financial reporting as of the most recent fiscal year ended September 30, 2007.
Based
on
its evaluation under the framework in Internal Control—Integrated Framework,
issued by the Committee of Sponsoring Organizations of the Treadway Commission,
our management concluded that our internal control over financial reporting
was
not effective as of September 30, 2007, due to the existence of significant
deficiencies constituting material weaknesses, as described in greater detail
below. A material weakness is a control deficiency, or combination of control
deficiencies, such that there is a reasonable possibility that a material
misstatement of the annual or interim financial statements will not be prevented
or detected on a timely basis.
During
the course of the preparation of our September 30, 2007 financial statements,
we
identified certain material weaknesses relating to our internal controls and
procedures within the areas of accounting for equity transactions, document
control, account analysis and reconciliation. Some of these internal control
deficiencies may also constitute deficiencies in our disclosure
controls.
This
annual report does not include an attestation report of the company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's report
in this annual report.
PART
II. OTHER INFORMATION
ITEM
2.
Unregistered
Sales of Equity Securities and Use of Proceeds.
None.
ITEM
3.
Defaults
Under Senior Securities.
None.
ITEM
4.
Submission
of Matters to a Vote of Security Holders.
None.
ITEM
5.
Other
Information.
None.
ITEM
6.
Exhibits.
Exhibit
Number
31.1
Rule
13a-14(a)/15d-14(a) Certification (CEO)*
31.2
Rule
13a-14(a)/15d-14(a) Certification (CFO)*
32.1
Section 1350 Certification (CEO)*
32.2
Section 1350 Certification (CFO)*
II-1
In
accordance with the requirements of the Exchange Act, the registrant has caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
Date:
August 4, 2008
|
MYSTARU.COM,
INC.
|
|
|
|
|
|
|
|
By:
|
/s/
Alan R. Lun
|
|
|
|
Alan
R. Lun
President
and Chief Executive Officer
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
Date:
August 4 , 2008
|
|
|
|
|
By:
|
/s/
James T. Crane
|
|
|
|
James
T. Crane
|
|
|
|
Chief
Financial Officer
|
|
|
|
(Principal
Accounting and Financial Officer)
|