x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
|
Delaware
|
35-2089848
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
No.)
|
9/F.,
Beijing Business World
56
Dongxinglong Avenue
CW
District
Beijing,
China 100062
(Address
of Principal Executive Offices)
|
(86)
10 6702 6968
(Issuer's
Telephone Number)
|
|
|
Page
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
|
|
ITEM
1.
|
FINANCIAL
STATEMENTS
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of December 31, 2007 and September
30,
2006
|
2
|
|
|
|
|
Condensed
Consolidated Statements of Operations and Comprehensive Income for
the
Three Months Ended December 31, 2007 and 2006
|
3
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Three Months Ended
December
31, 2007 and 2006
|
4
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
5
|
|
|
|
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
|
22
|
|
|
|
ITEM
3.
|
CONTROLS
AND PROCEDURES
|
36
|
|
|
|
PART
II. OTHER INFORMATION
|
|
|
|
|
|
ITEM
1.
|
LEGAL
PROCEEDINGS
|
36
|
|
|
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
36
|
|
|
|
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
37
|
|
|
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
37
|
|
|
|
ITEM
5.
|
OTHER
INFORMATION
|
37
|
|
|
|
ITEM
6.
|
EXHIBITS
|
37
|
|
|
|
SIGNATURES
|
38
|
|
December 31,
2007
|
September 30,
2007
|
|||||
Unaudited
|
Audited
|
||||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
|
$
|
529,567
|
$
|
1,150,422
|
|||
Accounts
Receivable, Net of Allowances for Doubtful Accounts of $247,066
(September
30, 2007 - $413,036) (Note 4)
|
11,424,981
|
7,982,668
|
|||||
Accounts
Receivable, Related Party (Note 4)
|
1,107,359
|
1,107,359
|
|||||
Inventory
|
76,386
|
-
|
|||||
Prepaid
Expenses
|
1,547,585
|
1,778,966
|
|||||
Other
Current Assets
|
337,580
|
598,588
|
|||||
|
|||||||
Total
Current Assets
|
15,023,458
|
12,618,003
|
|||||
|
|||||||
Property,
Plant & Equipment, Net (Note 8)
|
7,530,011
|
8,376,420
|
|||||
|
|||||||
Intangible
Assets
|
|||||||
Copyrights,
Net of Accumulated Amortization of $2,518,918
(September
30, 2007 - $2,534,178) (Note 7)
|
6,849,275
|
6,262,456
|
|||||
Goodwill
(Note 5, 7)
|
556,319
|
354,615
|
|||||
|
|||||||
Total
Intangible Assets
|
7,405,594
|
6,617,071
|
|||||
|
|||||||
TOTAL
ASSETS
|
$
|
29,959,063
|
$
|
27,611,494
|
|||
|
|||||||
LIABILITIES
& STOCKHOLDERS’ EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Accounts
Payable
|
$
|
4,210,971
|
$
|
3,435,530
|
|||
Accrued
Liabilities
|
195,127
|
257,712
|
|||||
Due
to Related Party (Note 2)
|
5,918
|
-
|
|||||
|
|||||||
Total
Current Liabilities
|
4,412,016
|
3,693,242
|
|||||
|
|||||||
Total
Liabilities
|
4,412,016
|
3,693,242
|
|||||
|
|||||||
Minority
Interest in Consolidated Subsidiaries (Note 12)
|
4,910,696
|
3,801,642
|
|||||
|
|||||||
Commitment
and Contingencies (Note 13)
|
|||||||
|
|||||||
Stockholders’
Equity (Note 9)
|
|||||||
Preferred
stock, $0.001 par value, authorized: 50,000,000 shares, zero shares
issued
and outstanding at December 31, 2007 and September 30,
2007
|
-
|
-
|
|||||
Common
stock, $0.001 par value, authorized: 300,000,000 shares, 151,014,316
and
146,288,000 shares issued and outstanding at December 31, 2007 and
September 30, 2007
|
151,014
|
146,288
|
|||||
Additional
Paid in Capital
|
23,679,069
|
22,905,224
|
|||||
Shares
to be Issued
|
-
|
2,065
|
|||||
Deferred
Stock-Based Compensation
|
(1,532,906
|
)
|
(479,225
|
)
|
|||
Accumulated
Other Comprehensive Income
|
19,339
|
(7,016
|
)
|
||||
Accumulated
Deficit
|
(1,680,165
|
)
|
(2,450,726
|
)
|
|||
|
|||||||
Total
Stockholders’ Equity
|
20,636,351
|
20,116,610
|
|||||
|
|||||||
TOTAL
LIABILITIES & STOCKHOLDERS’ EQUITY
|
$
|
29,959,063
|
$
|
27,611,494
|
|
2007
|
2006
|
|||||
Unaudited
|
Unaudited
|
||||||
|
|
(Restated)
|
|||||
Revenues
|
|||||||
Licensing
and Royalty Revenues
|
$
|
1,323,962
|
$
|
120,613
|
|||
Online
Membership Services
|
1,722,279
|
2,626,158
|
|||||
Import
and Export Sales
|
4,364,583
|
2,038,260
|
|||||
Media
and Marketing Management
|
300,900
|
-
|
|||||
Software
Sales
|
-
|
819,100
|
|||||
Software
Sales - Related Party
|
-
|
360,000
|
|||||
Other
Revenues
|
229
|
-
|
|||||
Total
Revenue
|
7,711,953
|
5,964,131
|
|||||
|
|||||||
Costs
of Sales
|
5,785,142
|
3,454,989
|
|||||
|
|||||||
Gross
Profit
|
1,926,811
|
2,509,142
|
|||||
|
|||||||
Operating
Expenses
|
|||||||
Salaries
and Wages
|
63,007
|
156,106
|
|||||
Stock
Compensation
|
363,869
|
1,027,030
|
|||||
Bad
Debt (Recovery) Expense
|
(161,415
|
)
|
1,139,325
|
||||
Selling,
general and administrative
|
634,566
|
279,678
|
|||||
|
|
||||||
Total
Operating Expenses
|
900,027
|
2,602,139
|
|||||
|
|||||||
Income
(Loss) From Continuing Operations
|
1,026,784
|
(92,997
|
)
|
||||
|
|||||||
Other
Income and Expenses
|
8,443
|
21,580
|
|||||
|
|||||||
Net
Income (Loss) From Continuing Operations Before Income Taxes &
Minority Interest
|
1,035,227
|
(71,417
|
)
|
||||
|
|||||||
Provision
for Income Taxes
|
(1,051
|
)
|
(873
|
)
|
|||
|
|||||||
Net
Income (Loss) From Continuing Operations Before Minority
Interest
|
1,034,176
|
(72,290
|
)
|
||||
|
|||||||
Minority
Interest in Income of Subsidiary
|
(263,615
|
)
|
(586,591
|
)
|
|||
|
|||||||
Net
Income (Loss) from Operations
|
770,561
|
(658,881
|
)
|
||||
|
|||||||
Foreign
Currency Translation Adjustment
|
(26,355
|
)
|
6,894
|
||||
|
|||||||
Comprehensive
Income (Loss)
|
$
|
744,206
|
$
|
(651,987
|
)
|
||
|
|||||||
Basic
Net Income (Loss) Per Common Share
|
$
|
0.01
|
$
|
(0.01
|
)
|
||
|
|||||||
Diluted
Net Income (Loss) Per Common Share
|
$
|
0.01
|
$
|
(0.01
|
)
|
||
|
|||||||
Number
of Common Shares Used to Compute Basic Weighted Average
|
148,675,128
|
109,512,315
|
|||||
|
|||||||
Number
of Common Shares Used to Compute Diluted Weighted Average
|
148,675,128
|
109,512,315
|
|
2007
|
2006
|
|||||
|
Unaudited
|
Unaudited
(Restated)
|
|||||
Cash
flows from operating activities
|
|||||||
Net
income (loss)
|
$
|
770,561
|
(658,881
|
)
|
|||
Adjustments
to reconcile net income (loss) to net cash provided by (used
in) operating activities:
|
|||||||
Depreciation
|
1.407,050
|
9,042
|
|||||
Loss
on sale of copyrights
|
52,467
|
-
|
|||||
Bad
debt expense
|
25,014
|
1,139,325
|
|||||
Recovery
of bad debts
|
(185,431
|
)
|
-
|
||||
Minority
interests
|
263,615
|
-
|
|||||
Amortization
of prepaid entertainment arts advertising
|
262,515
|
-
|
|||||
Amortization
of stock based compensation
|
363,869
|
1,027,030
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(3,276,343
|
)
|
(2,969,968
|
)
|
|||
Inventory
|
(76,386
|
)
|
-
|
||||
Prepaid
expenses
|
(31,134
|
)
|
-
|
||||
Other
current assets
|
261,008
|
-
|
|||||
Accounts
payable
|
775,441
|
-
|
|||||
Accrued
expenses
|
(62,585
|
)
|
-
|
||||
Net
cash provided by (used in) operating activities
|
549,661
|
(1,453,452
|
)
|
||||
|
|||||||
Cash
flows from investing activities:
|
|||||||
Cash
received in acquisition of MGI
|
2,834
|
-
|
|||||
Cash
proceeds from sale of copyrights
|
279,824
|
-
|
|||||
Purchase
of copyrights
|
(914,810
|
)
|
-
|
||||
Capital
expenditures
|
-
|
(8,153
|
)
|
||||
Net
Cash Used In Investing Activities
|
(632,152
|
)
|
(8,153
|
)
|
|||
|
|||||||
Cash
flows from financing activities
|
|||||||
Repayments
to related party
|
-
|
(57,514
|
)
|
||||
Proceeds
from new issuance of common stock
|
-
|
695,000
|
|||||
Net
cash flows provided by financing activities:
|
-
|
637,486
|
|||||
Effect of exchange rate changes on cash |
(538,364
|
)
|
6,894 | ||||
Net
decrease in cash
|
(620,855
|
)
|
(817,225
|
)
|
|||
|
|||||||
Cash
- beginning of period
|
|
1,150,422
|
|
1,211,542
|
|||
|
|||||||
Cash
- end of period
|
$
|
529,567
|
$
|
394,317
|
|||
|
|||||||
Supplemental
disclosure of cash flow information:
|
|||||||
Taxes
paid
|
$
|
-
|
$
|
-
|
|||
Interest
paid
|
$
|
-
|
$
|
-
|
|||
Non
cash investing and financing activities:
|
|||||||
Issuance
of stock for services by subsidiary, deferred compensation
|
$
|
840,000 |
$
|
-
|
|||
Issuance
of stock for services, deferred compensation
|
$ | 577,550 |
$
|
-
|
|||
Common
stock issued in lieu of cash payment of accounts payable
|
$
|
-
|
$
|
705,000
|
|||
Acquisition of MG1 through issuance of common stock | 200,000 |
-
|
|||||
Acquired
websites through issuance of common stock
|
$
|
-
|
$
|
2,619,000
|
1.
Investments in Entertainment Arts Productions - The Company
purchases and licenses or resells copyrights of entertainment-related
assets.
|
|
2.
Online Content and Member Services Provider - The Company provides
online content and member services for commercial use.
|
|
3.
Software Sales - The Company provides web-based and mobile software
platforms.
|
4.
Media and Marketing Management - The Company’s subsidiary, Media
Group International, coordinates product placement activities for
filmmakers and advertisers within the entertainment arts industry
of the
PRC.
|
5.
Importing and Exporting of Goods - The Company conducts
international trade using the PRC as its base of
operations.
|
Subsidiaries
|
|
Countries
Registered In
|
|
Percentage
of
Ownership
|
|
Arran
Services Limited
|
|
British
Virgin Islands
|
|
100.00
|
%
|
MyStarU
Limited
|
|
Hong
Kong, The People’s Republic of China
|
|
100.00
|
%
|
Alpha
Century Holdings Limited
|
|
British
Virgin Islands
|
|
100.00
|
%
|
3G
Dynasty Inc.
|
|
British
Virgin Islands
|
|
100.00
|
%
|
Subaye.com,
Inc.
|
|
United
States of America, Delaware
|
|
69.01
|
%
|
Subaye
IIP Limited
|
British
Virgin Islands
|
|
69.01
|
%
|
|
Guangzhou
Panyu Metals & Materials Limited
|
|
The
People’s Republic of China
|
|
100.00
|
%
|
Guangzhou
Subaye Computer Tech Limited
|
|
The
People’s Republic of China
|
|
69.01
|
%
|
Media
Group International Limited
|
Hong
Kong, The People’s Republic of China
|
|
69.01
|
%
|
|
MyStarU.com,
Inc.
|
|
United
States of America, Delaware
|
|
100.00
|
%
|
Description
|
|
Useful
Lives
|
Computer
hardware
|
|
3
years
|
Computer
software
|
|
3
years
|
Web
site
|
|
3
years
|
Motor
Vehicles
|
|
3
years
|
Furniture
and fixtures
|
|
5
years
|
Leasehold
improvements
|
|
5
years
|
|
December 31,
2007
|
September 30,
2007
|
|||||
Unaudited
|
Audited
|
||||||
Trade
accounts receivable
|
$
|
11,672,047
|
$
|
8,395,704
|
|||
Less:
allowance for doubtful accounts
|
(247,066
|
)
|
(413,036
|
)
|
|||
Totals
|
$
|
11,424,981
|
$
|
7,982,668
|
|
December 31,
2007
|
September 30,
2007
|
|||||
Unaudited
|
Audited
|
||||||
Beginning
allowance for doubtful accounts
|
$
|
413,036
|
$
|
883,220
|
|||
Additional
charged to bad debt expense
|
25,014
|
28,996
|
|||||
Recovery
of accounts charged to bad debt expense in 2006 and 2005
|
(185,431
|
)
|
(503,972
|
)
|
|||
Gain
on foreign currency translation
|
5,553
|
4,792
|
|||||
Ending
allowance for doubtful accounts
|
$
|
247,066
|
$
|
413,036
|
|
December 31,
2007
|
December 31,
2006
|
|||||
Unaudited
|
Audited
|
||||||
QXS Enterprise
|
15
|
%
|
-
|
%
|
|||
SSTH
|
23
|
%
|
-
|
%
|
|||
Fengcun
Electronic
|
23
|
%
|
6
|
%
|
|||
Fenglin
Qimao
|
17
|
%
|
-
|
%
|
December 31,
2007
|
September 30,
2007
|
||||||
Unaudited
|
Audited
|
||||||
Essential
Gallery Enterprises Limited
|
9
|
%
|
5
|
%
|
|||
TaiKang
Capital Management Corporation
|
9
|
%
|
5
|
%
|
|||
IC
China Corporation
|
9
|
%
|
5
|
%
|
|||
QXS
Enterprise
|
15
|
%
|
-
|
%
|
|||
SSTH
|
15
|
%
|
-
|
%
|
|||
China
Industry Park Holdings Ltd.
|
16
|
%
|
9
|
%
|
|||
Fenglin
Qimao
|
11
|
%
|
-
|
%
|
|||
Fengcun
Electronic
|
15
|
%
|
6
|
%
|
|
December 31,
2007
|
December 31,
2006
|
|||||
Unaudited
|
Audited
|
||||||
ZesTV
|
86.6
|
%
|
0
|
%
|
Accounts
receivables
|
$
|
193,453
|
||
Property,
plant, and equipment
|
12,024
|
|||
Other
current assets
|
368,951
|
|||
Goodwill
|
354,051
|
|||
Liabilities
assumed
|
(608,465
|
)
|
||
Net
assets acquired
|
$
|
320,014
|
||
|
||||
Purchase
consideration
|
$
|
500,000
|
||
Net
assets acquired
|
(320,014
|
)
|
||
Net
cash inflow from acquisition of the Panyu M&M
|
$
|
179,986
|
Accounts
receivables
|
642,262
|
|||
Property,
plant, and equipment
|
13,214
|
|||
Other
current assets
|
4,821
|
|||
Goodwill
|
354,615
|
|||
Accounts
payable and accrued liabilities assumed
|
(586,254
|
)
|
||
Customer
deposits liability assumed
|
(40,365
|
)
|
||
Net
assets acquired
|
$
|
388,293
|
||
|
||||
Purchase
consideration
|
$
|
500,000
|
||
Net
assets acquired
|
(388,293
|
)
|
||
Net
cash inflow from acquisition of Panyu M&M
|
$
|
111,707
|
Fixed
assets, net
|
$
|
653
|
||
Goodwill
|
202,453
|
|||
Due
to related party
|
(5,940
|
)
|
||
Net
assets acquired
|
$
|
197,166
|
||
|
||||
Purchase
consideration
|
$
|
200,000
|
||
Net
assets acquired
|
(197,166
|
)
|
||
Net
cash inflow from acquisition of MGI
|
$
|
2,834
|
|
2007
|
|||
Gross
proceeds from the sale of Copyright - First Open: internet
rights
|
$
|
279,824
|
||
Adjusted
cost basis
|
(332,291
|
)
|
||
Net
loss
|
$
|
(52,467
|
)
|
Intangible
assets
|
|
Estimated
useful lives
|
Copyrights
|
|
Variable
|
Permits
and licenses
|
|
5
years
|
December
31,
2007
|
September
30,
2007
|
||||||
Unaudited
|
Audited
|
||||||
Copyrights
- Motion Picture, Television, Internet and DVD Productions
|
$
|
9,368,192
|
$
|
8,796,635
|
|||
Accumulated
Amortization
|
(2,518,918
|
)
|
(2,534,178
|
)
|
|||
|
6,849,275
|
6,262,457
|
|||||
|
|||||||
Goodwill
|
556,319
|
354,614
|
|||||
Total
|
$
|
7,405,594
|
$
|
6,617,071
|
Big
Movie: Subaye ***
|
DaYouCun
|
BaoBu
|
YeLangQuan
a/k/a Pye Dog (50% ownership)
|
Big
Movie 2: Two Stupid Eggs
|
DaYouCun
|
BaoBu
|
ZuiAiZongDongYuan
|
ShiFenAi
|
HongMeiLi
|
Xin
Xiang
|
TianDiGaoBai
|
FengKuangFenShiWng
|
TuYaDeKunShi
|
YongShi
|
GongBu
|
NianCaiNuMo
|
DaTangFengYUN
|
|
December
31,
|
September
30,
|
|||||
|
2007
|
2007
|
|||||
Computer
Software & Equipment
|
$
|
9,216,539
|
$
|
8,650,977
|
|||
Websites
|
8,691,027
|
8,702,399
|
|||||
Motor
Vehicle
|
83,689
|
83,689
|
|||||
Leasehold
Improvements
|
216,842
|
211,101
|
|||||
Furniture
& Fixtures
|
32,098
|
30,277
|
|||||
|
18,240,195
|
17,678,443
|
|||||
Less:
Accumulated depreciation and amortization
|
(10,710,184
|
)
|
(9,302,023
|
)
|
|||
|
$
|
7,530,011
|
$
|
8,376,420
|
a.
|
The
new standard EIT rate of 25% will replace the 33% rate currently
applicable to both DES and FIEs, except for High Tech companies who
pays a
reduced rate of 15%. The Company currently believes it will qualify
as a
high tech company.
|
|
|
b.
|
Companies
established before March 16, 2007 will continue to enjoy tax holiday
treatment approved by local government for a grace period of the
next five
years or until the tax holiday term is completed, whichever is
sooner.
|
|
2007
|
2006
|
|||||
U.S.
Statutory rates
|
35.0
|
%
|
35.0
|
%
|
|||
Foreign
income
|
(35.0
|
)
|
(35.0
|
)
|
|||
China
tax rates
|
33.0
|
33.0
|
|||||
China
income tax exemption
|
(33.0
|
)
|
(33.0
|
)
|
|||
Effective
income tax rates
|
0
|
%
|
0
|
%
|
|
December
31,
2007
|
December
31,
2006
|
|||||
Sales
of products to:
|
|||||||
TaiKang
Capital Management Corporation
|
$
|
-
|
$
|
360,000
|
December
31,
2007
|
September
30,
2007
|
||||||
Minority
interest of shareholders
|
$
|
4,910,696
|
$
|
3,021,642
|
|||
Minority
interest of preferred stock
|
-
|
780,000
|
|||||
Minority
interest in consolidated subsidiaries
|
$
|
4,910,696
|
$
|
3,801,642
|
Fiscal
Year Ended September 30,
|
||||
|
||||
2008
|
$
|
113,840
|
||
|
||||
|
113,840
|
1.
|
Investments
in Entertainment Arts Productions - The Company purchases and licenses
or
resells copyrights of entertainment-related assets.
|
|
|
||
2.
|
Online
Content and Member Services Provider - The Company provides online
content
and member services for commercial use
|
|
|
||
3.
|
Software
sales - The Company provides web-based and mobile software
platforms
|
|
4.
|
Entertainment
Arts Media and Marketing Management - The Company’s subsidiary, MGI,
coordinates product placement activities for filmmakers and advertisers
within the entertainment arts industry of the PRC.
|
|
5.
|
Importing
and exporting of goods - The Company conducts international trade
using
the PRC as its base of operations
|
Three Months Ended
December 31, 2007
|
Investments in
Entertainment
Arts Productions
|
Online Content
and Member
Services
Provider
|
Entertainment
Arts Media and
Marketing
Management
|
Importing and
Exporting of
Goods
|
Corporate/
Others
|
Consolidated
Total
|
|||||||||||||
Net
sales
|
$
|
1,323,962
|
$
|
1,722,279
|
$
|
300,900
|
$
|
4,364,583
|
229
|
$
|
7,711,953
|
||||||||
Cost
of sales
|
551,948
|
780,460
|
250,493
|
4,202,241
|
-
|
5,785,142
|
|||||||||||||
Segment
income (loss) before taxes
|
(733,432
|
)
|
815,255
|
40,785
|
78,472
|
543,125
|
744,205
|
||||||||||||
Segment
assets
|
11,792,596
|
8,975,306
|
264,928
|
3,952,199
|
4,974,034
|
29,959,063
|
|||||||||||||
Expenditures
for segment assets
|
914,810
|
-
|
-
|
-
|
-
|
914,810
|
Three Months Ended
December 31, 2006
|
Investments in
Entertainment
Arts Productions
|
Online
Memberships
for the B2B
Marketplace
|
Entertainment
Arts Media and
Marketing
Management
|
Importing and
Exporting of
Goods
|
Corporate/
Others
|
Consolidated
Total
|
|||||||||||||
Net
sales
|
$
|
120,613
|
$
|
2,626,158
|
$
|
-
|
$
|
2,038,260
|
$
|
1,179,100
|
$
|
5,964,131
|
|||||||
Cost
of sales
|
507,509
|
278,817
|
-
|
2,003,838
|
664,825
|
3,454,989
|
|||||||||||||
Segment
income (loss) before taxes
|
(398,279
|
)
|
964,372
|
-
|
492
|
(638,002
|
)
|
(71,417
|
)
|
||||||||||
Segment
assets
|
4,673,352
|
16,055,801
|
-
|
741,441
|
4,440,962
|
25,911,556
|
|||||||||||||
Expenditures
for segment assets
|
-
|
2,606,588
|
-
|
20,565
|
-
|
2,627,153
|
Subsidiaries
|
|
Countries
Registered In
|
|
Percentage
of
Ownership
|
Arran
Services Limited
|
|
British
Virgin Islands
|
|
100.00 %
|
MyStarU
Limited
|
|
Hong
Kong, The People’s Republic of China
|
|
100.00 %
|
Alpha
Century Holdings Limited
|
|
British
Virgin Islands
|
|
100.00 %
|
3G
Dynasty Inc.
|
|
British
Virgin Islands
|
|
100.00 %
|
Subaye.com,
Inc.
|
|
United
States of America, Delaware
|
|
69.01 %
|
Subaye
IIP Limited
|
British
Virgin Islands
|
|
69.01 %
|
|
Guangzhou
Panyu Metals & Materials Limited
|
|
The
People’s Republic of China
|
|
100.00 %
|
Guangzhou
Subaye Computer Tech Limited
|
|
The
People’s Republic of China
|
|
69.01 %
|
Media
Group International Limited
|
Hong
Kong, The People’s Republic of China
|
|
69.01 %
|
|
MyStarU.com,
Inc.
|
|
United
States of America, Delaware
|
|
100.00 %
|
1.
|
Investments
in Entertainment Arts Productions - The Company purchases and licenses
or
resells copyrights of entertainment-related assets.
|
|
|
||
2.
|
Online
Content and Member Services Provider - The Company provides online
content
and member services for commercial use
|
|
|
||
3.
|
Software
sales - The Company provides web-based and mobile software
platforms
|
|
4.
|
Media
and Marketing Management - The Company’s subsidiary, Media Group
International, coordinates product placement activities for filmmakers
and
advertisers within the entertainment arts industry of the
PRC.
|
|
5.
|
Importing
and exporting of goods - The Company conducts international trade
using
the PRC as its base of
operations
|
Big
Movie: Subaye ***
|
DaYouCun
|
BaoBu
|
YeLangQuan
a/k/a Pye Dog (50% ownership)
|
Big
Movie 2: Two Stupid Eggs
|
DaYouCun
|
BaoBu
|
ZuiAiZongDongYuan
|
ShiFenAi
|
HongMeiLi
|
Xin
Xiang
|
TianDiGaoBai
|
FengKuangFenShiWng
|
TuYaDeKunShi
|
YongShi
|
GongBu
|
NianCaiNuMo
|
DaTangFengYUN
|
Subaye.com
Corporate Profiles
|
||||
September
30, 2007
|
38,123
|
|||
December
31, 2007
|
45,243
|
|||
January
31, 2008
|
53,342
|
Subaye.com
Members
|
||||
December
31, 2007
|
16,348
|
|||
January
31, 2008
|
18,859
|
|
·
|
|
largest
corporate video online audience;
|
|
·
|
|
first
video uploading service provider in the PRC with an extensive customer
base across industries;
|
|
·
|
|
one
of the most widely recognized internet enterprise video brands--we
sponsored a movie in the PRC, enhancing our ability to attract both
users
and customers;
|
|
·
|
|
local
market experience and expertise in introducing and expanding our
services
across the PRC and operating in the PRC’s rapidly evolving internet
industry;
|
|
·
|
|
leading
technology with a proven platform, providing users with relevant
video
showcase and customers with a cost-effective way to reach potential
consumers; and
|
|
·
|
|
extensive
and effective nationwide network of over 100 regional distributors,
providing high-quality and consistent customer services.
|
|
·
|
|
growing
our online video marketing business by attracting potential customers
and
increasing per-customer spending on our services; enhancing user
experience;
|
|
·
|
|
increasing
traffic through the development and introduction of new video-related
features and functions;
|
|
·
|
|
expanding
the Subaye Alliance by leveraging our brand and offering competitive
economic arrangements to Subaye Alliance members; and
|
|
·
|
|
pursuing
selective strategic acquisitions and alliances that will allow us
to
increase user traffic, enlarge our customer base, expand our product
offerings and reduce customer acquisition costs.
|
|
·
|
|
maintain
our leading position in the internet video industry in the PRC;
|
|
·
|
|
offer
new and innovative products and services to attract and retain a
larger
user base;
|
|
·
|
|
attract
additional customers and increase per-customer spending;
|
|
·
|
|
increase
awareness of our brand and continue to develop user and customer
loyalty;
|
|
·
|
|
respond
to competitive market conditions;
|
|
·
|
|
respond
to changes in our regulatory environment;
|
|
·
|
|
manage
risks associated with intellectual property rights;
|
|
·
|
|
maintain
effective control of our costs and expenses;
|
|
·
|
|
raise
sufficient capital to sustain and expand our business;
|
|
·
|
|
attract,
retain and motivate qualified personnel; and
|
|
·
|
|
upgrade
our technology to support increased traffic and expanded services.
|
|
·
|
"My
Star Friend", where members upload images of their artist friends,
create
star profiles, and enter them in a ratings system allowing members
to vote
on the my star friend;
|
|
·
|
Fans
Experiences Sharing, where members rate and review their favorite
movies,
music, and greetings;
|
|
·
|
Customizable
User Homepages, Profiles, where members track their favorite movies,
music, games, stars and greetings, as well as their friends' favorites,
upload photos, check music statistics, view event reminders, and
post on
"friends-only" message boards;
|
|
·
|
User
Music Critics, where members review and rate their choices of music,
add
their ratings to a community score and compare their reviews and
ratings
to those of professional music critics;
|
|
·
|
Online
& Downloadable Games, where members play single player and multiplayer
games online or download and purchase their favorites; and
|
|
·
|
User-Generated
Content, where developers and creators upload their own music, games
and
photos for the community to enjoy and review.
|
December
31,
2007
|
December
31,
2006
|
$
Increase
(Decrease)
|
%
Increase
(Decrease)
|
||||||||||
|
(Unaudited)
|
|
(Unaudited)
|
|
|
||||||||
Net
revenues
|
$
|
7,711,953
|
$
|
5,964,131
|
$
|
1,747,822
|
29
|
%
|
|||||
Cost
of sales
|
(5,785,142
|
)
|
(3,454,989
|
)
|
2,330,153
|
67
|
%
|
||||||
Gross
profit
|
1,926,811
|
2,509,142
|
(582,331
|
)
|
(23)
|
%
|
|||||||
Operating
expenses
|
900,027
|
2,602,139
|
(1,702,112
|
)
|
(65)
|
%
|
|||||||
Income
(Loss) from operations
|
1,026,784
|
(92,997
|
)
|
1,119,781
|
(1186)
|
%
|
|||||||
Other
income
|
8,443
|
21,580
|
(13,137
|
)
|
(61)
|
%
|
|||||||
Income
from continued operations
|
1,035,227
|
(71,417
|
)
|
1,106,644
|
(1204)
|
%
|
|||||||
Provision
for income taxes
|
(1,051
|
)
|
-
|
(1,051
|
)
|
(100)
|
%
|
||||||
Minority
interest in loss of subsidiary
|
(263,615
|
)
|
(586,591
|
)
|
322,976
|
(55)
|
%
|
||||||
Net
income (loss)
|
770,561
|
(658,881
|
)
|
(1,429,442
|
)
|
(217)
|
%
|
||||||
Other
comprehensive income
|
(26,355
|
)
|
6,894
|
(33,249
|
)
|
(482)
|
%
|
||||||
Comprehensive
income
|
744,206
|
(651,987
|
)
|
1,396,193
|
(214
)
|
%
|
|||||||
|
|||||||||||||
Earnings
per common shares
|
|||||||||||||
-Basic
|
$
|
0.01
|
$
|
(0.01
|
)
|
||||||||
-
Fully diluted
|
$
|
0.01
|
$
|
(0.01
|
)
|
||||||||
|
|||||||||||||
Weighted
average common share Outstanding
|
|||||||||||||
-Basic
|
148,675,128
|
109,512,315
|
|||||||||||
-
Fully diluted
|
148,675,128
|
109,512,315
|
Description
|
Useful
Lives
|
|
Computer
hardware
|
3
years
|
|
Computer
software
|
3
years
|
|
Web
site
|
5
years
|
|
Motor
Vehicles
|
3
years
|
|
Furniture
and fixtures
|
5
years
|
|
Leasehold
improvements
|
5
years
|
Date:
February 14, 2008
|
MYSTARU.COM,
INC.
|
|
|
|
|
By:
|
/s/
Alan R. Lun
|
|
|
Alan
R. Lun
President
and CEO
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
Date:
February 14, 2008
|
||
|
|
|
By:
|
/s/
James T. Crane
|
|
|
James
T. Crane
|
|
|
Principal
Financial and Accounting Officer
|