State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 156,014,316 shares of common stock, $.001 par value per share, outstanding as of May 15, 2008.

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TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	Condensed Consolidated Balance Sheets as of March 31, 2008 and September 30, 2007	3
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Six and Three Months Ended March 31, 2008 and 2007	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2008 and 2007	5
	Notes to Condensed Consolidated Financial Statements	6
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS	22
ITEM 3.	CONTROLS AND PROCEDURES	25
PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	25
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	25
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	25
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	25
ITEM 5.	OTHER INFORMATION	25
ITEM 6.	EXHIBITS	26
SIGNATURES		27

2

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Item 1. Financial Statements.

MYSTARU.COM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31, 2008			September 30,2007
		Unaudited			Audited
ASSETS
Current Assets
Cash		$	1,271,398		$	1,150,422
Accounts Receivable, Net of Allowances for Doubtful Accounts of $257,199 (September 30, 2007 - $413,036) (Note 4)			13,230,217			7,982,668
Accounts Receivable, Related Party (Notes 4, 12)			1,054,834			1,107,359
Inventory			10,641			-
Prepaid Expenses			1,750,955			1,778,966
Deposit on Commercial Real Estate Contract (Note 5)			600,000			-
Other Current Assets			338,482			598,588
Total Current Assets			18,256,527			12,618,003
Property, Plant & Equipment, Net (Note 9)			7,578,713			8,376,420
Intangible Assets
Copyrights, Net of Accumulated Amortization of $2,526,119 (September 30, 2007 - $2,534,178) (Note 8)			5,490,790			6,262,456
Goodwill (Notes 6, 8)			556,896			354,615
Total Intangible Assets			6,047,687			6,617,071
TOTAL ASSETS		$	31,882,927		$	27,611,494
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities
Accounts Payable		$	3,039,088		$	3,435,530
Accrued Liabilities			443,529			257,712
Customer Deposits			594,550			-
Due to Related Party (Note 2)			5,934			-
Total Current Liabilities			4,083,101			3,693,242
Total Liabilities			4,083,101			3,693,242
Minority Interest in Consolidated Subsidiaries (Note 12)			6,097,392			3,801,642
Commitment and Contingencies (Note13)
Stockholders’ Equity (Note 10)
Preferred stock, $0.001 par value, authorized: 50,000,000 shares, zero shares issued and outstanding at March 31, 2008 and September 30, 2007			-			-
Common stock, $0.001 par value, authorized: 300,000,000 shares, - and 156,014,316 and 146,288,000 shares issued and outstanding at March 31, 2008 and September 30, 2007			156,014			146,288
Additional Paid in Capital			24,274,069			22,905,224
Shares to be Issued			-			2,065
Deferred Stock-Based Compensation			(1,928,201	)		(479,225	)
Accumulated Other Comprehensive Income (loss)			56,422			(7,016	)
Accumulated Deficit			(855,870	)		(2,450,726	)
Total Stockholders’ Equity			21,702,434			20,116,610
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY		$	31,882,927		$	27,611,494

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX AND THREE MONTHS ENDED MARCH 31, 2008 AND 2007

Note 1 - BUSINESS DESCRIPTION AND ORGANIZATION

MyStarU.com, Inc., a Delaware corporation (together with its consolidated subsidiaries, “MYST” or the “Company”) is a fully integrated information and entertainment service provider to the business, internet, and consumer markets in the People’s Republic of China (the “PRC”). The Company was originally incorporated on January 6, 1997 in the State of Indiana under the corporate name MAS Acquisition XXI Corp. On December 21, 2000, the Company acquired Telecom Communications of America, a sole proprietorship in California, and changed its name to Telecom Communications, Inc. On February 28, 2005, the Company reincorporated in the State of Delaware by merging with a Delaware corporation of the same name. The surviving Delaware corporation succeeded to all of the rights, properties and assets and assumed all of the liabilities of the original Indiana corporation. On July 10, 2007, the Company changed its name from Telecom Communications, Inc. to MyStarU.com, Inc. The Company's common stock continues to be quoted under the symbol, “MYST.OB,” on the over-the-counter bulletin board (“OTCBB”) in the United States of America.

The Company operates under the following business segments:

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.

On April 25, 2006, the Company’s majority-owned subsidiary, Subaye.com, Inc. (“Subaye.com”), acquired 100% of the shares of Guangzhou Panyu Metals & Minerals Import and Export Co., Limited (“Panyu M&M”), a PRC limited company, from the sole shareholder, Wukang IE Limited for $500,000. Panyu M&M’s principal activity is conducting import and export trade in PRC. On October 1, 2006, Subaye.com sold 100% of the shares of Panyu M&M to MYST.

On June 28, 2006, the Company acquired 53.92% of the outstanding common stock, par value of $0.001 of Subaye.com (F/K/A HRDQ Group, Inc.) by acquiring 2,024,190 shares of common stock of Subaye.com for $1,060,000. Concurrently, Subaye.com acquired certain valuable assets by selling 798,747 shares of its common stock to China Dongguan Networks, Inc (“CDN”) for $415,348 and 500,000 shares of its common stock to Top Rider Group Limited for $1,100,000.

Subaye.com also issued 200,000 Series A Convertible Preferred Stock, par value $0.01, to Top Rider Group Limited for $660,000. Each share of Subaye.com’s Series A Convertible Preferred Stock is convertible into two shares of Subaye.com’s common stock. The proceeds from the issuance of Subaye.com’s common stock and preferred stock were used primarily to acquire a new website, www.subaye.com.

On September 1, 2006, the Company formed Guangzhou Subaye Computer Technology Limited (“GSTC”) as a PRC limited company, wholly-owned by the Company. GSTC provides computer services, such as web development, networking infrastructure and web infrastructure support services.

On May 16, 2007, Subaye.com issued 1,150,000 shares of its common stock for $2,300,000 to the Company. As a result of this transaction, the Company held a direct 64.60% ownership interest in Subaye.com. An independent valuation of Subaye.com was completed as of September 30, 2006 in order to facilitate an impartial and best efforts arms-length transaction between the majority and minority shareholders of Subaye.com.

On July 10, 2007, the Company filed appropriate documents with the Secretary of State of Delaware and changed its name from Telecom Communications, Inc. to MyStarU.com, Inc.

On October 1, 2007, the Company sold 100% of the outstanding ownership units of GSTC to its majority-owned subsidiary, Subaye.com for $3,894,720. Payment of the purchase price was made in the form of 2,748,788 shares of Subaye.com common stock. In accordance with Accounting Principles Board Opinion No. 16, as amended, the transaction was accounted for as a reorganization using the historical cost basis of the Company’s investments and cash advances in GSTC, rather than the fair market value of Subaye.com common stock.

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On October 1, 2007, Top Rider Group Limited, the sole holder of the Subaye.com preferred stock, converted its shares of preferred stock to 400,000 shares of Subaye.com’s common stock.

 

On October 23, 2007, the Company’s subsidiary, Subaye.com, acquired 100% of the outstanding ownership units of Media Group International Limited, a Hong Kong company, for consideration of $200,000, which was paid in the form of 100,000 shares of common stock of Subaye.com Subaye.com will immediately begin executing the planned integration of the Corporate Video Online/Offline, commercial movie advertising markets, and overseas business operations and networks. Subaye.com expects the acquisition and the subsequent integration to be a leading provider of corporate video online/offline and product placement advertising in movies. The acquisition broadens its product portfolio and addressable market, helps develop overseas markets, and will immediately increase corporate video members and revenue.

 

On February 29, 2008, the Company disposed of two of its non operating subsidiaries, Arran Services Limited and Alpha Century Holdings Limited. The subsidiaries’ sole function in recent reporting periods was to maintain and disburse funds on behalf of the Company for payment to vendors and for other administrative purposes.

 

Subsequent to the above transactions and certain other transactions disclosed in Note 9, the Company holds a 69.01% ownership in Subaye.com, Inc.

 

CONTROL BY PRINCIPAL STOCKHOLDERS

 

The directors, executive officers and their affiliates or related parties, own beneficially and in the aggregate, the majority of the voting power of the outstanding shares of the common stock of the Company. Accordingly, the directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including increasing the authorized capital stock of the Company and the dissolution, merger or sale of the Company's assets or business.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

These condensed interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

The interim results of operations are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2008. The Company’s financial statements contained herein are unaudited and, in the opinion of management, contain all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of financial position, results of operations and cash flows for the period presented. The Company’s accounting policies and certain other disclosures are set forth in the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-KSB for the year ended September 30, 2007. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements, prepared in accordance with US GAAP, include the assets, liabilities, revenues, expenses and cash flows of the Company and all its subsidiaries. This basis of accounting differs in certain material respects from that used for the preparation of the books and records of the Company’s principal subsidiaries, which are prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises with limited liabilities established in the PRC (“PRC GAAP”) the accounting standards used in the place of their domicile. The accompanying consolidated financial statements reflect necessary adjustments not recorded in the books and records of the Company’s subsidiaries to present them in conformity with US GAAP.

The consolidated financial statements of the Company reflect the activities of the parent and the following subsidiaries. All significant intercompany accounts, transactions and cash flows are eliminated on consolidation.

Subsidiaries		Countries Registered In		Percentage of Ownership
MyStarU Limited		Hong Kong, The People’s Republic of China		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	%

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General Statement

The Securities and Exchange Commission ("SEC") has issued Financial Reporting Release No.60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies (“FRR 60”), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the SEC defined the most critical accounting policies to be the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The methods, estimates and judgments the Company uses in applying these most critical accounting policies have a significant impact on the results the Company reports in its consolidated financial statements.

We believe the following critical accounting policies and procedures, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

·  Revenue recognition;

·  Valuation of common stock issuances in lieu of cash compensation;

·  Valuation of intangible assets and long lived assets, review for impairment losses.

Foreign currency translation

The reporting currency of the Company is the US dollar. The Company’s principal operating subsidiaries established in the PRC and Hong Kong, use their local currency, Renminbi (RMB), and Hong Kong Dollar (HKD), as their functional currency. Results of operations and cash flows are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in stockholders’ equityon the balance sheets. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments resulting from this process are included in accumulated other comprehensive income in stockholders' equity on the balance sheets and amounted to $56,422 and $7,016 as of March 31, 2008 and September 30, 2007, respectively.

Revenue Recognition

 

In accordance with the SEC Staff Accounting Bulletin No. 104, Revenue Recognition ("SAB 104"), the Company recognizes revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured. These criteria are usually met at the time of product shipment or performance of service.

Revenue for the monthly subscription from the members who subscribed to the Company’s website(s) is recognized on a pro-rata basis, is calculated on a day-to-day basis and invoiced at the end of each month. The Company does not currently charge a cancellation fee or penalty if and when a customer decides to terminate their membership with our website(s).

Revenue for the monthly subscription of the Company’s licensed products, including all post-delivery support and the right to receive unspecified upgrades/enhancements of the licensed products, is charged at a monthly basic price. Pursuant to the terms of the agreements, a fixed sum is due at the beginning of each month regardless of whether the customer requires service during that month. The Company recognizes the subscription on the first day of each month for which the support service agreement is in place.

Licensing revenue derived from the Company’s copyrights is recognized in accordance with Statement of Position 00-2, Accounting by Producers or Distributors of Films (“SOP 00-2”). SOP 00-2 specifies that revenue is to be recognized when all of the following conditions are met:

1.

Persuasive evidence of a sale or licensing arrangement with a customer exists.

2.

The film is complete and, in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery.

3.

The license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale.

4.

The arrangement fee is fixed or determinable.

5.

Collection of the arrangement fee is reasonably assured.

 

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When the Company's licensing fee is based on a percentage or share of a customer's revenue from the exploitation of the films, the Company recognizes revenue as the customer exploits the films and the Company meets all of the other revenue recognition conditions. In those circumstances, the Company receives reports from the customers on a periodic basis and uses those reports as the basis for recording revenue.

Revenues generated by MGI for media placement and advertising-related services contracted and placed with other third parties are recognized as services are rendered and are calculated by the agreed-upon sum on a straight-line basis over the contract period. For advertising placed by MGI with the Company or any of its subsidiaries, revenues are recognized as media placements are utilized by the customers, whether or not the media placements occur throughout the contract period or are placed and utilized at one particular time.

The Company negotiates contracts with its customers which may include revenue arrangements with multiple deliverables, as outlined by Emerging Issues Task Force No. 00-21 (EITF 00-21). The Company’s accounting policies are defined such that each deliverable under a contract is accounted for separately. Historically, the Company has negotiated and signed contracts with its customers that outline the contract amount and specific terms and conditions associated with each deliverable. In these arrangements, our fee includes both the initial selling price of our software package profits and the monthly subscription of the licensed products for the contract period, usually for two years. The Company has historically separated out the various components of revenues as outlined within its contracts and has accounted for each component of the contract separately, in accordance with the terms of the contracts applicable to each component of the Company’s revenues.

The Company recognizes revenue on import and export sales when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. Net sales of products represent the invoiced value of goods, net of value added taxes, sales returns, trade discounts and allowances. In December 1999, the Securities Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition" and in July 2000, the Emerging Issues Task Force ("EITF") issued EITF Abstract No. 99-19 "Reporting Revenue Gross as a Principal versus Net as an Agent" ("EITF 99-19") which provided further guidance to SAB 101 on revenue recognition in certain circumstances. Prior to the introduction of EITF 99-19, the manner in which the Company recognized revenues depended on the goods and services sold. We reviewed the considerations included in EITF 99-19 with respect to sales of products within each of our business segments but with particular attention to our importing and exporting business segment. We determined that while EITF 99-19 outlines the variety of types of business transactions which would require the Company to report its revenues and costs of goods sold on a net basis, we do not believe our importing and exporting business should be accounted for with net reporting of revenues and costs of sales. The Company takes full ownership and assumes the risk of loss for its imported goods while the goods are in transit. The Company does not consider itself an agent for its customers, as described by EITF 99-19. After reviewing EITF 99-19, management believes that the Company is correct in continuing to present its revenues and costs of goods sold on a gross basis.

Sales revenue represents the invoiced value of goods, net of a value-added tax (VAT). All of the Company’s products sold in the PRC are subject to a Chinese value-added tax at a rate of 6% of the gross sales price or at a rate approved by the Chinese local government.

Amortization of Copyrights

The Company amortizes its copyrights using the individual-film-forecast-computation method, in accordance with the SOP 00-2, which amortizes or accrues (expenses) such costs in the same ratio that current period actual revenue (numerator) bears to estimated remaining unrecognized ultimate revenue as of the beginning of the current fiscal year (denominator). The Company began amortization of certain movie copyrights in December 2006, when the Company began to recognize revenue from one of its copyrighted titles, “Big Movie: Subaye.” Amortization related to the movies was $0 and $496,188 and $0 and $430,555 for the six and three months ended March 31, 2008 and 2007, respectively, and was included in cost of sales.

The ultimate revenue to be included in the denominator of the individual-film-forecast-computation method fraction is subject to certain limitations as set forth in the SOP. If an event or change in circumstance indicates that the Company should assess whether the fair value of the copyright is less than its unamortized costs, the Company will determine the fair value of the film and will write off the amount by which the unamortized capitalized costs exceeds the episode's fair value. Accordingly, the Company cannot subsequently restore any amounts written off in previous fiscal years to income.

 

Concentrations of Credit Risk

 

Cash

 

Cash includes cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC and Hong Kong. Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash and accounts receivable. Balances at financial institutions or state-owned banks within the PRC are not covered by insurance. Total cash in PRC or Hong Kong banks and cash on hand at March 31, 2008 and September 30, 2007, amounted to $1,271,398 and $1,150,422, respectively, of which no deposits are covered by insurance. The Company has not experienced any losses in such bank accounts and believes it is not exposed to any specifically identifiable risks on its cash in bank accounts. Cash on hand is susceptible to misappropriation. However, the Company has not experienced any losses of this nature and believes appropriate controls are in place to avoid a possible misappropriation of funds.

 

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Accounts Receivable

 

We have a concentration of customers in each of our business segments. We are diligent in attempting to ensure that we issue credit to credit-worthy customers. However, our customer base is small and our accounts receivable balances are usually over 90 days outstanding, and that exposes us to significant credit risk. Therefore, a credit loss can be significant relative to our overall profitability.

 

Geographic, Political, Economic, Taxation and Legal

 

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

 

Trade Accounts Receivable

 

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts represents the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable balance. The Company determines the allowance for doubtful accounts based upon historical write-off experience and current economic conditions. The Company reviews the adequacy of its allowance for doubtful accounts on a regular basis. Receivable balances past due over 120 days, which exceed a specified dollar amount, are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does have off-balance sheet credit exposure related to its customers. The concentration of customers owing at least 5% of the Company’s outstanding accounts receivable as of March 31, 2008 was 85% of the Company’s accounts receivable.

 

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

On October 1, 2006, the Company acquired 100% of the outstanding ownership interests in Panyu M&M from its majority owned subsidiary, Subaye.com, for gross consideration of $500,000. The net assets received by the Company from the acquisition of Panyu M&M totaled $145,385. In accordance with the purchase method of accounting, the results of Panyu M&M and the estimated fair market value of the assets and liabilities assumed have been included in the consolidated financial statements from the date of acquisition.

The purchase price of Panyu M&M was allocated to the assets acquired and liabilities assumed by the Company less the goodwill of $320,014, which was recorded upon Subaye.com’s acquisition of Panyu M&M. The Company recorded $354,615 of intangible assets, which was the excess of acquisition cost over fair value of net assets of Panyu M&M.

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

Acquisition of Media Group International Limited

On October 23, 2007, the Company’s subsidiary, Subaye.com, acquired 100% of the outstanding ownership units of Media Group International Limited (“MGI”) for 100,000 shares of common stock of Subaye.com, valued at $200,000 which was the fair market value of recent arms length transactions involving the common stock of Subaye.com Inc. The net assets received by Subaye.com from the acquisition of MGI totaled $197,166. In accordance with the purchase method of accounting, the results of MGI and the estimated fair market value of the assets and liabilities assumed have been included in the consolidated financial statements from the date of acquisition.

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The purchase price of MGI was allocated to the assets acquired and liabilities assumed by Subaye.com less the goodwill of $202,453, which was recorded upon Subaye.com’s acquisition of MGI. The Company recorded $202,453 of goodwill, which was the excess of acquisition cost over fair value of net assets of MGI.

 

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

NOTE 7 - SALE OF ASSETS

First Open

On December 30, 2007, the Company sold all rights under its copyright for the internet programming rights to First Open. Once the sale was complete, the Company had no remaining assets or copyrights associated with the First Open production. The details of the sale are listed below:

Gross proceeds from the sale of Copyright - First Open: internet rights		$	279,824
Adjusted cost basis			(332,291	)
Net loss		$	(52,467	)

The copyright’s adjusted cost basis was net of an impairment loss write down in 2006 of $332,291 and was not net of any amortization or depreciation.

Internet Broadcast Copyrights

On February 1, 2008, the Company sold all rights under its copyrights for the internet programming rights for a total of 11 distinct productions. These copyrighted films had been acquired through the Company's contract with ZesTV. Below is the list of the 11 movies included in the sale:

ZuiAiZongDongYuan

ShiFenAi

HongMeiLi

Xin Xiang

TianDiGaoBai

FengKuangFenShiWong

TuYaDeKunShi

YongShi

GongBu

NianCaiNuMo

DaTangFengYun

 

Gross proceeds from the sale of copyrights - ZesTV: internet rights		$	1,457,481
Adjusted cost basis			(1,374,982	)
Net gain		$	82,499

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Once the sale was complete, the Company had an additional $549,539 on deposit with ZesTV for additional internet programming rights which are expected to be produced and delivered to the Company during 2008.

The Company reviewed its business plan with regard to whether the Company will continue to sell off assets it doesn’t consider having immediate benefit to the Company. As a result, the Company believes the sale of these copyrights is in the ordinary course of business and should not be reported as an extraordinary event or as other income. Accordingly, the Company has reported the proceeds from the sales in “licensing and royalty revenues” within the consolidated statement of operations and the adjusted cost basis associated with the sale in costs of sales on the consolidated statement of operations.

 

NOTE 9 - PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

		March 31,			September 30,
		2008			2007
Computer Software & Equipment		$	9,091,399		$	8,650,977
Websites			9,710,674			8,702,399
Motor Vehicle			83,876			83,689
Leasehold Improvements			225,855			211,101
Furniture & Fixtures			6,898			30,277
			19,118,702			17,678,443
Less: Accumulated depreciation and amortization			(11,539,989	)		(9,302,023	)
		$	7,578,713		$	8,376,420

Depreciation and amortization related to the assets listed above totaled $2,075,164 and $1,951,390, and $668,114 and $1,942,348 for the six and three months ended March 31, 2008 and 2007, respectively.

Included within accumulated depreciation as of March 31, 2008 is $1,111 of accumulated depreciation from the MGI acquisition.

NOTE 10 - STOCKHOLDERS’ EQUITY

The Company was incorporated on January 6, 1997 in the State of Indiana under the corporate name MAS Acquisition XXI Corp. On December 21, 2000, the Company acquired Telecom Communications of America, a sole proprietorship in Los Angeles, California since August 15, 1995, and changed its name to Telecom Communications, Inc. On February 28, 2005, the Company reincorporated in the State of Delaware by merging with a Delaware corporation of the same name. The surviving Delaware corporation succeeded to all of the rights, properties and assets and assumed all of the liabilities of the original Indiana corporation. On July 10, 2007, the Company changed its name from Telecom Communications, Inc. to MyStarU.com, Inc.

The Company is authorized to issue 350,000,000 shares, in aggregate, consisting of 300,000,000 shares of common stock, $0.001 par value, and 50,000,000 shares of preferred stock, $0.001 par value. The Company's Certificate of Incorporation authorizes the Board of Directors (the "Board") to determine the preferences, limitations and relative rights of any class or series of Company preferred stock prior to issuance and each such class or series must be designated with a distinguishing designation prior to issuance. As of the date of the report, no shares of the Company’s preferred stock and 156,014,316 shares of the Company’s common stock were issued or outstanding.

Stock-Based Compensation

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On May 1, 2005, the Company issued 4,000,000 shares of common stock to two consultants as part of their compensation at market price of $.29 with a total of $1,160,000. The Company amortized such consultancy fee as expense over its service period of 24 months commenced from May 1, 2005. The stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $0 and $290,000 and $0 and $145,000, respectively.

On July 22, 2005, the Company issued 3,500,000 shares of common stock to two consultants as part of their compensation at market price of $.24 with a total of $840,000. The stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $0 and $183,529 and $0 and $60,000, respectively.

On January 1, 2006, the Company issued 3,000,000 shares of common stock to three consultants as part of their compensation at market price of $.50 with a total of $1,500,000. The Company amortized the consultancy fee of $1,500,000 over services period of a 12 month period. The terms for these agreements are 12 months starting from January 1, 2006 to December 31, 2006. The stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $0 and $375,000 and $0 and - respectively.

On April 12, 2006, the Company issued 4,000,000 shares of common stock to five consultants as part of their compensation at a market price of $.52 with a total of $2,080,000. The Company amortized the consultancy fee of $1,300,000 over services period of a 24 month period, the remaining $780,000 is amortized over services period of a 12 month period. It resulted in an expense of $119,167 for each month for 12 months and the remaining 12 months will have an expense of $54,167. The stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $325,000 and $715,000 and $162,500 and $357,500, respectively.

On November 27, 2006, the Company issued 300,000 shares of the Company’s common stock to Mary Kratka for investor relations and promotions services at price of $0.26 per share for a total consideration equal to $78,000. The shares were amortized over 3 months with a stock-based compensation expense of $26,000 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $0 and $78,000 and $0 and $52,000, respectively.

On January 10, 2007, the Company issued 250,000 shares of common stock to Mary Kratka for investor relations and promotions services at price of $.45 per share for total consideration equal to $112,500. The shares are being amortized over 12 months with a stock-based compensation expense of $9,375 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $28,125 and $28,125 and $0 and $28,125, respectively.

On January 31, 2007, the Company issued 750,000 shares of common stock to Bon Air Group Limited for investor relations and promotion services at price of $.30 per share for a total consideration equal to $225,000. The shares are being amortized over 12 months with stock-based compensation expense of $18,750 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $75,000 and $37,500 and $18,750 and $37,500, respectively.

On October 3, 2007, the Company issued 735,000 shares of common stock to the Company’s Chief Financial Officer for services to be provided over a two year period at price of $.13 per share for a total consideration equal to $95,550. The shares are being amortized over 24 months with stock-based compensation expense of $3,981 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $23,888 and $0 and $11,944 and $0, respectively.

On October 3, 2007, the Company issued 1,000,000 shares of common stock to the Company’s Chief Executive Officer for services to be provided over a two year period at price of $.13 per share for a total consideration equal to $130,000. The shares are being amortized over 24 months with stock-based compensation expense of $5,417 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $32,500 and $0 and $16,250 and $0, respectively.

On October 3, 2007, the Company issued 400,000 shares of common stock to an investor relations consultant, for services to be provided over a 24 month period at price of $.13 per share for a total consideration equal to $52,000. The shares are being amortized over 24 months with stock-based compensation expense of $2,167 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $13,000 and $0 and $6,500 and $0, respectively.

On October 3, 2007, the Company issued 526,316 shares of common stock for investor relations purposes, for services to be provided over a 12 month period at price of $.57 per share for a total consideration equal to $300,000. The shares are being amortized over 12 months with stock-based compensation expense of $25,000 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $150,000 and $0 and $75,000 and $0, respectively.

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Subaye.com Stock Based Compensation

On October 1, 2007, Subaye.com issued 170,000 shares of common stock to Subaye.com’s Chief Executive Officer for services to be provided over a two year period from January 2, 2008 through December 31, 2009 at a price of $2.00 per share for a total consideration equal to $340,000. The shares will be amortized over 24 months with stock-based compensation expense of $14,167 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $42,500 and $0 and $42,500 and $0, respectively.

On October 1, 2007, Subaye.com issued 50,000 shares of common stock to an employee of Subaye.com for services to be provided beginning January 1, 2008 at a price of $2.00 per share for a total consideration equal to $100,000. The shares will be expensed once the employee has satisfied other terms within their employment contract, including certain aspects with regard to relocation terms and considerations. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $12,500 and $0 and $12,500 and $0, respectively.

On October 1, 2007 and January 2, 2008, Subaye.com issued 200,000 and 250,000 shares of common stock to an investor relations consultant, for services to be provided over a 24 month period at price of $2.00 per share for a total consideration equal to $900,000. The shares will be amortized over 24 months with stock-based compensation expense of $37,500 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $112,500 and $0 and $112,500 and $0, respectively.

On January 2, 2008, Subaye.com issued 50,000 shares of common stock to an executive, for services to be provided over a 24 month period at price of $2.00 per share for a total consideration equal to $100,000. The shares will be amortized over 24 months with stock-based compensation expense of $4,167 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $12,500 and $0 and $12,500 and $0, respectively.

On January 2, 2008, Subaye.com issued 70,800 shares of common stock to an executive, for services to be provided over a 24 month period at price of $2.00 per share for a total consideration equal to $141,600. The shares will be amortized over 24 months with stock-based compensation expense of $5,900 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $17,700 and $0 and $17,700 and $0, respectively.

On February 26, 2008, Subaye.com issued 78,425 shares of common stock to its Chief Financial Officer, for services to be provided over a 24 month period at price of $2.00 per share for a total consideration equal to $156,850. The shares will be amortized over 24 months with stock-based compensation expense of $6,535 each month. The total stock-based compensation expense for the six and three months ended March 31, 2008 and 2007 was $7,211 and $0 and $7,211 and $0, respectively.

Total stock compensation expense reported was $867,024 and $1,707,154 and $503,155 and $680,124 for the six and three months ended March 31, 2008 and 2007, respectively.

Purchase of Websites

On October 3, 2006, the Company issued 4,000,000 shares at a price of $0.20 per share, as consideration equivalent to $800,000, to World-East Corporation Ltd., in exchange for the website known as www.mystaru.com .

On October 20, 2006, the Company issued 5,300,000 shares at a price of $0.17 per share as consideration equivalent to $901,000, to Bloomen Corporation Ltd., in exchange for the website known as www.icurls.com .

On October 20, 2006, the Company issued 5,400,000 shares at a price of $0.17 per share as consideration equivalent to $918,000, to China IPTV Industry Park Holdings Ltd., in exchange for the website known as www.goongreen.org.

On January 20, 2008, the Company exchanged $1,000,000 in accounts receivable as consideration to Essential Gallery Enterprise, in exchange for the websites known as www.goongood.com and www.x381.com.

On February 20, 2008, the Company sold www.goongreen.org, www.goongood.com and x381.com to its subsidiary, Subaye.com, Inc., for 1,000,000 shares of Subaye.com, Inc. common stock valued $1,534,914, which is the historical cost basis net of any accumulated depreciation of the Company's investment in each website.

Sales of Common Stock Securities

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On March 8, 2008, pursuant to a stock purchase agreement, the Company issued 5,000,000 shares of its common stock for $600,000.

NOTE 11 - INCOME TAX

 

United States of America

 

Since the Company had no operations within the United States, there is no provision for US taxes and there are no deferred tax amounts as of March 31, 2008 and September 30, 2007, respectively.

Delaware

 

The Company is incorporated in Delaware but does not conduct business in Delaware. Therefore, the Company is not subject to corporate income tax. However, the Company does have to pay Franchise Tax to the Delaware Department of State. Regardless of where the Company conducts business, it must file an Annual Franchise Tax Report and pay Franchise Tax for the privilege of incorporating in Delaware. The minimum Franchise Tax is $35 with a maximum of $165,000. The Company’s Franchise Tax owed to Delaware was approximately $500 and $200 for the fiscal years ended September 30, 2007 and 2006, respectively.

 

British Virgin Islands

 

3G Dynasty and Subaye IIP are incorporated in the British Virgin Islands and, under the current laws of the British Virgin Islands, are not subject to income taxes.

 

NOTE 12 - RELATED PARTY TRANSACTIONS

TaiKang Capital Management Corporation (“Taikang”) held more than 5% of the outstanding common stock of the Company as of March 31, 2008 and September 30, 2007, respectively. The table below details sales to Taikang during the six and three months ended March 31, 2008 and 2007, respectively.

		Six Months Ended March 31,						Three Months Ended March 31,
		2008			2007			2008			2007
		Unaudited			Unaudited			Unaudited			Unaudited
Taikang Capital Management Corporation		$	-		$	720,000		$	-		$	360,000

 

Additionally, TaiKang Capital Management Corporation owed the Company $1,054,834 and $1,107,359 as of March 31, 2008 and September 30, 2007.

 

NOTE 13 - MINORITY INTEREST

 

Minority interest represents the minority stockholders’ proportionate share of 30.99% (2006 - 46.08%) of the equity of Subaye.com. The Company’s 69.01% controlling interest requires that Subaye.com’s operations be included in the Consolidated Financial Statements. The 30.99% (2006 - 46.08%) equity interest of Subaye.com that is not owned by the Company is shown as “Minority interests in consolidated subsidiaries” in the financial statements is shown as $6,097,392 and $3,801,642, respectively. Included within Minority interests as of December 31, 2006, are 200,000 Series A Convertible Preferred stock outstanding in Subaye.com valued at $780,000. This preferred stock was convertible into 400,000 shares of common stock, at a conversion rate of two shares of common stock for every one share of preferred stock. On October 1, 2007, the preferred stock was converted into 400,000 shares of common stock.

		March 31,  2008			September 30,  2007
Minority interest of shareholders		$	6,097,392		$	3,021,642
Minority interest of preferred stock			-			780,000
Minority interest in consolidated subsidiaries		$	6,097,392		$	3,801,642

NOTE 14 - COMMITMENTS & CONTINGENCIES

 

Operating Leases - In the normal course of business, the Company leases office space under operating lease agreements. The Company rents office space, primarily for regional sales administration offices, in commercial office complexes that are conducive to administrative operations. The operating lease agreements generally contain renewal options that may be exercised at the Company's discretion after the completion of the base rental terms. In addition, many of the rental agreements provide for regular increases to the base rental rate at specified intervals, which usually occur on an annual basis. As of March 31, 2008, the Company had operating leases that have remaining terms of 3 and 6 months. The following table summarizes the Company’s future minimum lease payments under operating lease agreements as of March 31, 2008:

Fiscal Year Ended September 30, 2008		$	39,408
			39,408

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Rent expense under operating leases was $161,638 and $203,493, and $55,823 and $133,174 for the six and three months ended 2008 and 2007, respectively.

We may be involved from time to time in ordinary litigation that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against the company or our officers and directors in their capacity as such that could have a material impact on our operations or finances.

NOTE 15 - SEGMENT REPORTING

ITEM 5. Other Information.

None.

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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)*

*Filed herewith.

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SIGNATURES

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: May 16, 2008	MYSTARU.COM, INC.
	By:	/s/ Alan R. Lun
		Alan R. Lun President and Chief Executive Officer
		(Principal Executive Officer)
Date: May 16, 2008
	By:	/s/ James T. Crane
		James T. Crane
		Chief Financial Officer
		(Principal Accounting and Financial Officer)

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