U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  FORM
10-K
  ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
ACT OF 1934
 
 For
the fiscal year ended December 31, 2009
 
 Commission File Number:333- 152952
 
 THE
MOBILE STAR, CORP.
 (Exact
name of small business issuer as specified in its charter)
 
 Delaware
                98-0565411(State
      of incorporation)
                (IRS
      Employer ID Number)
 
 c/o Danny
Elbaz
 53
Hanoter Street
 Even
Yehuda, Israel 40500
 (Address
of principal executive offices)
 
 972 -
(544) 655-341
 (Issuer's
telephone number)
 
 Securities registered pursuant to Section 12(b)
of the Exchange Act:
 None
 
 Securities
registered pursuant to Section 12(g) of the Exchange Act:
 Common
Stock, $0.0001 par value
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 Yes 
o
     No  x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
 Yes 
o
    No  x
 
 Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x   No o
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.    o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large
      accelerated filer    ̈
                
                Accelerated
      filer  oNon-accelerated
      filer    o
                
                Smaller
      reporting company   x(Do
      not check if a smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
 Yes   No
x
 
 The
number of shares of the issuer’s common stock issued and outstanding as of March
16, 2010, was 70,000,000 shares.
 
 State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant’s most recently computed fiscal quarter.
$2,100,000 based upon $0.03 per share which was the last price at which the
common equity purchased by non-affiliates was last sold.
 
 Documents
Incorporated By Reference:  None
  
  TABLE
OF CONTENTS
 
 PagePART
      I
                
                
                
                3Item
      1
                
                Business
                
                3Item
      1A
                
                Risk
      Factors
                
                5Item
      1B
                
                Unresolved
      Staff Comments
                
                6Item
      2
                
                Properties
                
                6Item
      3
                
                Legal
      Proceedings
                
                6PART
      II
                
                
                
                6Item
      4
                
                Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                
                6Item
      5
                
                Selected
      Financial Data
                
                7Item
      6
                
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                
                7Item
      6A
                
                Quantitative
      and Qualitative Disclosures About Market Risk.
                
                11Item
      7
                
                Financial
      Statements and Supplementary Data
                
                F-1Item
      8
                
                Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                
                12Item
      8A(T)
                
                Controls
      and Procedures
                
                12Item
      8B
                
                Other
      Information
                
                13PART
      III
                
                
                
                14Item
      9
                
                Directors,
      Executive Officers and Corporate Governance
                
                14Item
      10
                
                Executive
      Compensation
                
                16Item
      11
                
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                
                16Item
      12
                
                Certain
      Relationships and Related Transactions, and Director
      Independence
                
                17Item
      13
                
                Principal
      Accountant Fees and Services
                
                18PART
      IV
                
                
                
                18Item
      14
                
                Exhibits
      and Financial Statement Schedules
                
                18SIGNATURES
                
                
                
                19
 
 2
 
 PART
I
 
 Item
1.  Business.
 
 As used
in this Annual Report on Form 10-K (this “Report”), references to the “Company,”
the “Registrant,” “we,” “our,” “us” or “The Mobile Star  Corp , unless
the context otherwise indicates .
 
 Forward-Looking
Statements
 
 This
Report contains forward-looking statements. For this purpose, any statements
contained in this Report that are not statements of historical fact may be
deemed to be forward-looking statements. Forward-looking information includes
statements relating to future actions, prospective products, future performance
or results of current or anticipated products, sales and marketing efforts,
costs and expenses, interest rates, outcome of contingencies, financial
condition, results of operations, liquidity, business strategies, cost savings,
objectives of management, and other matters. You can identify forward-looking
statements by those that are not historical in nature, particularly those that
use terminology such as “may,” “will,” “should,” “expects,” “anticipates,”
“contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,”
“potential,” or “continue” or the negative of these similar terms. The Private
Securities Litigation Reform Act of 1995 provides a “safe harbor” for
forward-looking information to encourage companies to provide prospective
information about themselves without fear of litigation so long as that
information is identified as forward-looking and is accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in the
information.
 
 These
forward-looking statements are not guarantees of future performance and involve
risks, uncertainties and assumptions that we cannot predict. In evaluating these
forward-looking statements, you should consider various factors, including the
following: (a) those risks and uncertainties related to general economic
conditions, (b) whether we are able to manage our planned growth efficiently and
operate profitable operations, (c) whether we are able to generate sufficient
revenues or obtain financing to sustain and grow our operations, (d) whether we
are able to successfully fulfill our primary requirements for cash, which are
explained below under “Liquidity and Capital Resources.” We assume no obligation
to update forward-looking statements, except as otherwise required under the
applicable federal securities laws.
 
 Corporate
Background
 
 We were
incorporated in Delaware on September 25, 2007 and are a development stage
company. We began operations on January 1, 2008. Our Principal executive offices
are located at c/o Danny Elbaz, 53 Hanoter Street, Even Yehuda, Israel and our
telephone number at that address is 972 - (544) 655-341.  Our
registered office in Delaware is located at 113 Barksdale Professional Center,
Newark, DE 19711, and our registered agent is Delaware Intercorp. Our fiscal
year end is December 31.
 
 Business
Summary
 
 We began
operations on January 1, 2008 and on January 16, 2008, Eli Malki assigned all
his rights, title and interest in and to a self operated computerized karaoke
recording Booth (the ‘Technology”) to Mobile Star, including the right to
develop and market the Technology, in exchange for a percentage of revenues
(royalties) on future sales.
 
 On
February 20, 2008 the Company filed a patent application for the Technology
(Patent Application Number: 60/902,076) with the United States Patent Office.
The Technology is a coin-operated karaoke machine that combines a digital media
proprietary software platform, a US-wide broadband network, and a pay-per-use
device.
  3
 
 The
Technology comprises a closed booth, divided into two parts: an acoustically
isolated space wherein the singer sings, and the recording and processing
hardware including a computer and a computerized disc dispenser. The Technology
improves and upgrades the sound of the user allowing for better result. Four
different instruments process the user's voice: amplifier, compressor, reverb,
and equalizer. The amplifier amplifies the voice to the appropriate volume
compared to the background music. The compressor restricts singing volume to a
preset maximum. The reverb imitates the acoustics of a hall. The equalizer
allows frequency changes to loud and super loud frequencies for dramatic sound
improvement.
 
 An
animated three dimensional character acts as the virtual recording technician
that guides the user from the beginning of the process until the end, thereby
improving user satisfaction and enjoyment. The digital recording is saved
directly to a file on the hard disc, and the service includes burning a compact
disc (CD) while the program mergers between the singing and the
music.
 
 The
associated software controls the machine activities, including recording,
playback, burning, robotic arm movements, presenting the interface vocally and
visually, and choosing the songs and their categories. All songs, backgrounds,
and words are coded in files saved on the hard disc, which allows a choice of
hundreds and potentially even thousands of songs. The digitalized process
records only the user's voice digitally after processing with four instruments
and software algorithms digitally merge the voice with the background
music.
 
 The
Technology comprises of the following:
 
 (a)
              a
      DVD, a flash memory device, a device connectable to automated means for
      recording audio via a physical
cable;
 
 (b)
              a
      device connectable to automated means for recording audio via a
      communication link with the user multimedia
  file;
 
 (c)
              a
      door, ventilation means, a computer, screen, video camera and
      microphone;
 
 (d)
              optional
      lighting and an automatic money
box;
 
 (e)
              a
      database of multimedia files, earphones, a recording means for recording
      audio and multimedia on a computer usable media, and a processing unit,
      and may comprise labeling and packing means for labeling and packing said
      computer usable media;
 
 (f)
              a
      graphical user interface (GUI), an audio processing application, a
      multimedia processing application, a control
  application.
 
 A singer
enters an automated recording booth to record a multimedia file comprising an
audio performance of the singer in combination with a multimedia recording from
a database. The result is a computer-usable media with the singer’s multimedia
file.
 
 The
recording booth comprises a door, means of ventilation, a computer and screen, a
video camera, and a microphone. There is a means for lighting and an automatic
money box to collect the payment.
 
 The
recording booth further comprises a database of multimedia files from which the
singer selects the songs, and earphones through which the singer hears the music
and his voice integrated together. A recording device records the audio and the
selected multimedia on a computer usable media. The processing unit burns the
media. The media is then labeled and packaged.
  4


The
processing unit comprises a graphical user interface (GUI), an audio processing
application, a multimedia processing application, and a control
application.
 
 Employees
 
 Other
than our current Directors and officers, Danny Elbaz and Eran Gronich, we have
no other full time or part-time employees..
 
 Transfer
Agent
 
 We have
engaged Nevada Agency and Trust as our stock transfer agent. Nevada Agency and
Trust is located at 50 West Liberty Street, Reno, Nevada 89501. Their telephone
number is (775) 322-0626 and their fax number is (775) 322-5623. The transfer
agent is responsible for all record-keeping and administrative functions in
connection with our issued and outstanding common stock.
 
 Item
1A. Risk Factors
 
 In
addition to the risk factors described in our Registration Statement on Form S1,
as filed with the Securities and Exchange Commission, and although smaller
reporting companies are not required to provide disclosure pursuant to this
Item, your attention is directed to the following risk factor that relates to
our business.
  5
  We
do not have sufficient cash to fund our operating expenses for the next twelve
months, and plan to seek funding through the sale of our common stock. Without
significant improvement in the capital markets, we may not be able to sell our
common stock and funding may not be available for continued
operations.
 
 There is
not enough cash on hand to fund our administrative and other operating expenses
or our proposed research and development program for the next twelve months. In
addition, we will require substantial new capital following the development of a
strategic marketing plan for bringing our product to global markets in order to
actually market, arrange for the manufacturing of, and sell our product. Because
we do not expect to have any cash flow from operations within the next twelve
months, we will need to raise additional capital, which may be in the form of
loans from current stockholders and/or from public and private equity offerings.
Our ability to access capital will depend on our success in implementing our
business plan. It will also depend upon the status of the capital markets at the
time such capital is sought. Without significant improvement in the capital
markets, sufficient capital may not be available and the implementation of our
business plan could be delayed. If we are unable to raise additional funds in
the future, we may have to cease all substantive operations.
 
 Item
1B.  Unresolved Staff Comments
 
 None
 
 Item
2.  Properties
 
 Our Principal executive offices are
located at. Danny Elbaz 53 Hanoter Street Even Yehuda, Israel 40500
This location is the home of our
Director and we have been allowed to operate out of such location at no cost to
the Company. We believe that this space is adequate for our current and
immediately foreseeable operating needs.
 
 Item
3.  Legal Proceedings.
 
 There are
no pending legal proceedings to which the Company is a party or in which any
Director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company’s property is not the subject of any pending
legal proceedings.
 
 PART
II
 
 Item 4.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.
 
 Market
Information
 
 Our
common stock has been eligible to be traded on the Over-The-Counter Bulletin
Board since May 10 2009 , under the ticker
symbol  MBST
 
 6
  Holders
 
 As of
March 16, 2010, there were 70,000,000 common shares issued and outstanding,
which were held by 27 stockholders of record.
 
 Dividends
 
 We have
never declared or paid any cash dividends on our common stock nor do we
anticipate paying any in the foreseeable future. Furthermore, we expect to
retain any future earnings to finance our operations and expansion. The payment
of cash dividends in the future will be at the discretion of our Board of
Directors and will depend upon our earnings levels, capital requirements, any
restrictive loan covenants and other factors the Board considers
relevant.
 
 Equity
Compensation Plans
 
 We do not
have any equity compensation plans.
 
 Recent
Sales of Unregistered Securities; Use of Proceeds from Registered
Securities
 
 We did
not sell any unregistered securities during the fiscal year ended December 31,
2009.
 
 Purchases
of Equity Securities by the Small Business Issuer and Affiliated
Purchasers
 
 We have
not repurchased any shares of our common stock during the fiscal year ended
December 31, 2009.
 
 Item
5. Selected Financial Data.
 
 A smaller
reporting company is not required to provide the information required by this
item.
 
 Item
6.   Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
 
 Certain
statements contained in this Annual Report, including statements regarding the
anticipated development and expansion of our business, our intent, belief or
current expectations, primarily with respect to the future operating performance
of  The Mobile Star Corp and the services we expect to offer and other
statements contained herein regarding matters that are not historical facts, are
“forward-looking” statements. Future filings with the Securities and Exchange
Commission, future press releases and future oral or written statements made by
us or with our approval, which are not statements of historical fact, may
contain forward-looking statements, because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements.
 
 All
forward-looking statements speak only as of the date on which they are made. We
undertake no obligation to update such statements to reflect events that occur
or circumstances that exist after the date on which they are made.
 
 This
Management’s Discussion and Analysis or Plan of Operations (“MD&A”) section
of this Report discusses our results of operations, liquidity and financial
condition, and certain factors that may affect our future results. You should
read this MD&A in conjunction with our audited financial statements and
accompanying notes included in this Report. This plan of operation contains
forward-looking statements that involve risks, uncertainties, and assumptions.
The actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those presented under “Risk Factors” or elsewhere in this
Report.
 
 7
 
 Plan
of Operation
 
 We were
incorporated in Delaware on September 25, 2007 and we are a development stage
company. We intend to engage in the manufacturing and distribution of the
Technology. We have not generated any revenues to date and our operations have
been limited to organizational, start-up, and capital formation
activities.
 
 We
have  engaged a US  manufacturer to develop a fully
operational prototype of the Technology and the Company is currently in the
process of running a test pilot of the product. We estimate it
would  take an additional three to six months to bring this product to
the  market on a full scale basis.
 
 Liquidity
and Capital Resources
 
 As of
December 31, 2009, we had $15,663  in cash as compared to
$376  in cash as of December 31, 2008. We incurred a net
loss of $154,818 for the fiscal year ended December 31, 2009 as compared with a
net loss of $18,019  for the period December 31 2008.  Our
cumulative net loss since inception is $172,837, which is comprised entirely of
general and administrative and research and development expenses .
 
 The
Company does not believe that its cash resources will be sufficient to
fund its expenses over the next 12 months. There can be no assurance that
additional capital will be available to the Company. The Company currently has
no agreements, arrangements, or understandings with any person to obtain funds
through bank loans, lines of credit, or any other sources. Since the Company has
no such arrangements or plans currently in effect, its inability to raise funds
for the above purposes will have a severe negative impact on its ability to
remain a viable company.
 
 8
 
 Lack
of Insurance
 
 The
Company currently has no insurance in force for its office facilities and
operations and it cannot be certain that it can cover the risks associated with
such lack of insurance or that it will be able to obtain and/or maintain
insurance to cover these risks at economically feasible premiums.
 
 Going
Concern Consideration
 
 Our
registered independent auditors have issued an opinion on our financial
statements which includes a statement describing our going concern status. This
means that there is substantial doubt that we can continue as an on-going
business for the next 12 months unless we obtain additional capital to pay our
bills and meet our other financial obligations. This is because we have not
generated any revenues and no revenues are anticipated until we begin marketing
the product. Accordingly, we must raise capital from sources other than the
actual sale of the product. We must raise capital to implement our project and
stay in business. Even if we raise the maximum amount of money in this offering,
we do not know how long the money will last, however, we do believe it will last
at least 12 months.
 
 Recently
issued accounting pronouncements
 
 In March
2008, the FASB issued FASB Statement No. 161, (FASB ASC 815) “Disclosures about
Derivative Instruments and Hedging Activities – an amendment of FASB Statement
133.”  SFAS No. 161 (FASB ASC 815) enhances required disclosures
regarding derivatives and hedging activities, including enhanced disclosures
regarding how:  (a) an entity uses derivative instruments; (b)
derivative instruments and related hedged items are accounted for under FASB No.
133, “Accounting for Derivative Instruments and Hedging Activities”; and (c)
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows.  Specifically, SFAS
No. 161 (FASB ASC 815) requires:
  ·
              disclosure
      of the objectives for using derivative instruments be disclosed in terms
      of underlying risk and accounting designation;·
              disclosure
      of the fair values of derivative instruments and their gains and losses in
      a tabular format;·
              disclosure
      of information about credit-risk-related contingent
    features;·
              and
      cross-reference from the derivative footnote to other footnotes in which
      derivative-related information is
disclosed.
 
 SFAS No.
161 (FASB ASC 815) is effective for fiscal years and interim periods beginning
after November 15, 2008.  Earlier application is
encouraged.  The management of the Company does not expect the
adoption of this pronouncement to have a material impact on its financial
statements.
 
 On May 9,
2008, the FASB issued FASB Statement No. 162, (FASB ASC 105) “The Hierarchy of
Generally Accepted Accounting Principles.”  SFAS No. 162 (FASB ASC
105) is intended to improve financial reporting by identifying a consistent
framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements that are presented in conformity with U.S.
generally accepted accounting principles (“GAAP”) for nongovernmental
entities.
 
 Prior to
the issuance of SFAS No. 162 (FASB ASC 105), GAAP hierarchy was defined in the
American Institute of Certified Public Accountants (“AICPA”) Statement on
Auditing Standards (“SAS”) No. 69, “The Meaning of Present Fairly in Conformity
with Generally Accept Accounting Principles.”  SAS No. 69 has been
criticized because it is directed to the auditor rather than the
entity.  SFAS No. 162 (FASB ASC 105) addresses these issues by
establishing that the GAAP hierarchy should be directed to entities because it
is the entity (not the auditor) that is responsible for selecting accounting
principles for financial statements that are presented in conformity with
GAAP.
 
 The
sources of accounting principles that are generally accepted are categorized in
descending order as follows:
 
 a.
              FASB
      Statements of Financial Accounting Standards and Interpretations, FASB
      Statement 133 Implementation Issues, FASB Staff Positions, and American
      Institute of Certified Public Accountants (AICPA) Accounting Research
      Bulletins and Accounting Principles Board Opinions that are not superseded
      by actions of the FASB.
 
 b.
              FASB
      Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and
      Accounting Guides and Statements of
Position.
 
 c.
              AICPA
      Accounting Standards Executive Committee Practice Bulletins that have been
      cleared by the FASB, consensus positions of the FASB Emerging Issues Task
      Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts
      (EITF D-Topics).
 
 d.
              Implementation
      guides (Q&As) published by the FASB staff, AICPA Accounting
      Interpretations, AICPA Industry Audit and Accounting Guides and Statements
      of Position not cleared by the FASB, and practices that are widely
      recognized and prevalent either generally or in the
    industry.
 
 9
 
 SFAS No.
162 (FASB ASC 105) is effective 60 days following the SEC’s approval of the
Public Company Accounting Oversight Board amendment to its authoritative
literature. It is only effective for nongovernmental entities; therefore, the
GAAP hierarchy will remain in SAS 69 for state and local governmental entities
and federal governmental entities. The management of the Company does not expect
the adoption of this pronouncement to have a material impact on its financial
statements.
 
 On May
26, 2008, the FASB issued FASB Statement No. 163, (FASB ASC 944) “Accounting for
Financial Guarantee Insurance Contracts.” SFAS No. 163 (FASB ASC 944) clarifies
how FASB Statement No. 60, “Accounting and Reporting by Insurance Enterprises”
(“SFAS No. 60”), applies to financial guarantee insurance contracts issued by
insurance enterprises, including the recognition and measurement of premium
revenue and claim liabilities. It also requires expanded disclosures about
financial guarantee insurance contracts.
 
 The
accounting and disclosure requirements of SFAS No. 163 (FASB ASC 944) are
intended to improve the comparability and quality of information provided to
users of financial statements by creating consistency.  Diversity
exists in practice in accounting for financial guarantee insurance contracts by
insurance enterprises under SFAS No. 60, “Accounting and Reporting by Insurance
Enterprises.”  That diversity results in inconsistencies in the
recognition and measurement of claim liabilities because of differing views
about when a loss has been incurred under FASB Statement No. 5, “Accounting for
Contingencies” (“SFAS No. 5”).  SFAS No. 163 (FASB ASC 944) requires
that an insurance enterprise recognize a claim liability prior to an event of
default when there is evidence that credit deterioration has occurred in an
insured financial obligation.  It also requires disclosure about (a)
the risk-management activities used by an insurance enterprise to evaluate
credit deterioration in its insured financial obligations and (b) the insurance
enterprise’s surveillance or watch list.
 
 SFAS No.
163 (FASB ASC 944) is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and all interim periods within those fiscal
years, except for disclosures about the insurance enterprise’s risk-management
activities.  Disclosures about the insurance enterprise’s
risk-management activities are effective the first period beginning after
issuance of SFAS No. 163 (FASB ASC 944).  Except for those
disclosures, earlier application is not permitted.  The management of
the Company does not expect the adoption of this pronouncement to have material
impact on its financial statements.
 
 On May
22, 2009, the FASB issued FASB Statement No. 164, (FASB ASC 958) “Not-for-Profit
Entities: Mergers and Acquisitions”.  SFAS No. 164 (FASB ASC 958) is
intended to improve the relevance, representational faithfulness, and
comparability of the information that a not-for-profit entity provides in its
financial reports about a combination with one or more other not-for-profit
entities, businesses, or nonprofit activities.  To accomplish that,
this Statement establishes principles and requirements for how a not-for-profit
entity:
 
 a.
              Determines
      whether a combination is a merger or an acquisition.b.
              Applies
      the carryover method in accounting for a merger.c.
              Applies
      the acquisition method in accounting for an acquisition, including
      determining which of the combining entities is the
    acquirer.d.
              Determines
      what information to disclose to enable users of financial statements to
      evaluate the nature and financial effects of a merger or an
      acquisition.
 
 This
Statement also improves the information a not-for-profit entity provides about
goodwill and other intangible assets after an acquisition by amending FASB
Statement No. 142, Goodwill and Other Intangible Assets, to make it fully
applicable to not-for-profit entities.
 
 SFAS No.
164 (FASB ASC 958) is effective for mergers occurring on or after December 15,
2009, and acquisitions for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2009.  Early application is prohibited.  The management
of the Company does not expect the adoption of this pronouncement to have
material impact on its financial statements.
 
 On May
28, 2009, the FASB issued FASB Statement No. 165, (FASB ASC 855) “Subsequent
Events.”  SFAS No.  165 (FASB ASC 855) establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued.  Specifically, Statement 165 (FASB ASC 855)
provides:
 
 1.
              The
      period after the balance sheet date during which management of a reporting
      entity should evaluate events or transactions that may occur for potential
      recognition or disclosure in the financial statements.2.
              The
      circumstances under which an entity should recognize events or
      transactions occurring after the balance sheet date in its financial
      statements.3.
              The
      disclosures that an entity should make about events or transactions that
      occurred after the balance sheet
date.
 
 In
accordance with this Statement, an entity should apply the requirements to
interim or annual financial periods ending after June 15, 2009.  The
adoption of this pronouncement did not have a material impact on the financial
statements of the Company.
 
 In June
2009, the FASB issued FASB Statement No. 166, (FASB ASC 860) “Accounting for
Transfers of Financial Assets- an amendment of FASB Statement No,
140.”  SFAS No. 166 (FASB ASC 860) is a revision to SFAS No. 140
“Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities” and will require more information about transfers of financial
assets, including securitization transactions, and where companies have
continuing exposure to the risks related to transferred financial
assets.  It eliminates the concept of a “qualifying special-purpose
entity,” changes the requirements for derecognizing financial assets, and
requires additional disclosures.
 
 This
statement is effective for financial asset transfers occurring after the
beginning of an entity's first fiscal year that begins after November 15,
2009.  The management of the Company does not expect the adoption of
this pronouncement to have material impact on its financial
statements.
 
 In June
2009, the FASB issued FASB Statement No. 167, (FASB ASC 810) "Amendments to FASB
Interpretation No. 46(R).”  SFAS No. 167 (FASB ASC 810) amends certain
requirements of FASB Interpretation No. 46(R), “Consolidation of Variable
Interest Entities” and changes how a company determines when an entity that is
insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated.  The determination of whether a
company is required to consolidate an entity is based on, among other things, an
entity’s purpose and design and a company’s ability to direct the activities of
the entity that most significantly impact the entity’s economic
performance.
 
 This
statement is effective as of the beginning of each reporting entity’s first
annual reporting period that begins after November 15, 2009.  The
management of the Company does not expect the adoption of this pronouncement to
have material impact on its financial statements.
 
 In June
2009, the FASB issued FASB Statement No. 168, (FASB ASC 105) "The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles - a replacement of FASB Statement No.
162.”  SFAS No. 168 (FASB ASC 105) establishes the FASB Accounting
Standards Codification (the "Codification") to become the single official source
of authoritative, nongovernmental U.S. generally accepted accounting principles
(“GAAP”).  The Codification did not change GAAP but reorganizes the
literature.
 
 SFAS No.
168 (FASB ASC 105) is effective for interim and annual periods ending after
September 15, 2009.  The adoption of this pronouncement did not have a
material impact on the financial statements of the Company.
 
 10
 
 Off Balance Sheet
Arrangements
 
 We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures, or capital resources that are material to investors.
 
 Item
6A.        Quantitative and Qualitative
Disclosures About Market Risk.
 
 A smaller
reporting company is not required to provide the information required by this
item.
 
 11
 
 Item 7. Financial Statements and
Supplementary Data.
 
 THE MOBILE STAR CORP.
 (A
DEVELOPMENT STAGE COMPANY)
 
 INDEX
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2009
  Report
      of Registered Independent Auditor
                        F-2Financial
      Statements-Balance
      Sheets as of December31, 2009 and December 31, 2008
                        F-3Statements
      of Operations for the Years EndedDecember
      31, 2009 and 2008 and Cumulative from Inception
                        F-4Statement
      of Changes in Stockholders’ Equity (Deficit) for the Period from
      InceptionThrough
      December 31, 2009
                        F-5Statements
      of Cash Flows for Years Ended December 31, 2009 and 2008and
      Cumulative from Inception
                        F-6Notes
      to Financial Statements
                        F-7
  F-1
  REPORT
OF REGISTERED INDEPENDENT AUDITORS
 
 To the
Board of Directors and Stockholders
 of The
Mobile Star Corp.:
 
 We have
audited the accompanying balance sheets of  The Mobile Star Corp. (a
Delaware corporation in the development stage) as of December 31, 2009 and 2008,
and the related statements of operations, stockholders’ equity (deficit), and
cash flows for years ended December 31, 2009 and 2008, and from inception
(September 25, 2007) through December 31, 2009. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.
 
 We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of  The Mobile Star Corp. as
of December 31, 2009 and 2008, and the results of its operations and its cash
flows for the years ended December 31, 2009 and 2008, and from inception
(September 25, 2007) through December 31, 2009, in conformity with accounting
principles generally accepted in the United States of America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company is in the development stage, and has not established any
source of revenue to cover its operating costs. As such, it has incurred an
operating loss since inception. Further, as of December 31, 2009, the cash
resources of the Company were insufficient to meet its planned business
objectives. These and other factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plan regarding these
matters is also described in Note 2 to the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
 
 Respectfully
submitted,
 
 /s/ Alan
Weinberg CPA
 
 Alan
Weinberg CPA
 Baltimore,
Maryland
 February
14, 2010
  F-2
  THE
MOBILE STAR CORP.
 (A
DEVELOPMENT STAGE COMPANY)
 BALANCE
SHEETS
 AS
OF DECEMBER 31, 2009 AND 2008
  As
      of
                        
                        
                        As
      ofDecember
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                        
                        $
                        15,663
                        
                        
                        $
                        376Total
      current assets
                        
                        
                        15,663
                        
                        
                        
                        376Other
      Assets:Patent
      pending
                        
                        
                        7,300
                        
                        
                        
                        7,300Assignment
      of invention rights
                        
                        
                        5,000
                        
                        
                        
                        5,000Deferred
      offering costs
                        
                        
                        -
                        
                        
                        
                        20,000Total
      other assets
                        
                        
                        12,300
                        
                        
                        
                        32,300Total
      Assets
                        
                        $
                        27,963
                        
                        
                        $
                        32,676LIABILITIES AND STOCKHOLDERS'
      (DEFICIT)Current
      Liabilities:Accounts
      payable and accrued liabilities
                        
                        $
                        32,000
                        
                        
                        $
                        30,595Loans
      from related parties - Directors and stockholders
                        
                        
                        3,000
                        
                        
                        
                        14,300Total
      current liabilities
                        
                        
                        35,000
                        
                        
                        
                        44,895Total
      liabilities
                        
                        
                        35,000
                        
                        
                        
                        44,895Commitments
      and ContingenciesStockholders'
      Equity (Deficit):Common
      stock, par value $.0001 per share, 200,000,000 shares authorized;
      70,000,000 and 56,000,000 shares issued and outstanding,
      respectively
                        
                        
                        7,000
                        
                        
                        
                        5,600Additional
      paid-in capital
                        
                        
                        158,800
                        
                        
                        
                        200(Deficit)
      accumulated during the development stage
                        
                        
                        (172,837
                        )
                        
                        
                        (18,019
                        )Total
      stockholders' equity (deficit)
                        
                        
                        (7,037
                        )
                        
                        
                        (12,219
                        )Total
      Liabilities and Stockholders' Equity (Deficit)
                        
                        $
                        27,963
                        
                        
                        $
                        32,676
 
 The
accompanying notes to financial statements
 are an
integral part of this balance sheet.
  F-3
 
 THE
MOBILE STAR CORP.
 (A
DEVELOPMENT STAGE COMPANY)
 STATEMENTS
OF OPERATIONS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008,
 AND
CUMULATIVE FROM INCEPTION (SEPTEMBER 25, 2007)
 THROUGH
DECEMBER 31, 2009
  Years
      Ended
                    
                    
                    CumulativeDecember 31,
                    
                    
                    From2009
                    
                    
                    2008
                    
                    
                    InceptionRevenues
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Expenses:General
      and administrative-Professional
      fees
                    
                    
                    54,709
                    
                    
                    
                    12,924
                    
                    
                    
                    67,633Consulting
      fees
                    
                    
                    19,602
                    
                    
                    
                    2,545
                    
                    
                    
                    22,147Research
      and development
                    
                    
                    73,401
                    
                    
                    
                    -
                    
                    
                    
                    73,401Investor
      relations
                    
                    
                    1,580
                    
                    
                    
                    -
                    
                    
                    
                    1,580Legal
      - incorporation
                    
                    
                    -
                    
                    
                    
                    2,350
                    
                    
                    
                    2,350Other
                    
                    
                    6,971
                    
                    
                    
                    200
                    
                    
                    
                    7,171Total
      general and administrative expenses
                    
                    
                    156,263
                    
                    
                    
                    18,019
                    
                    
                    
                    174,282(Loss)
      from Operations
                    
                    
                    (156,263
                    )
                    
                    
                    (18,019
                    )
                    
                    
                    (174,282
                    )Other
      Income (Expense)
                    
                    
                    1,446
                    
                    
                    
                    -
                    
                    
                    
                    1,446Provision
      for Income Taxes
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      (Loss)
                    
                    $
                    (154,818
                    )
                    
                    $
                    (18,019
                    )
                    
                    $
                    (172,837
                    )(Loss)
      Per Common Share:(Loss)
      per common share - Basic and Diluted
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )Weighted
      Average Number of Common Shares Outstanding - Basic and
      Diluted
                    
                    
                    65,013,699
                    
                    
                    
                    50,783,565
 
 The
accompanying notes to financial statements are
 an
integral part of these statements.
  F-4
 
 THE
MOBILE STAR CORP.
 (A
DEVELOPMENT STAGE COMPANY)
 STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 FOR
THE PERIOD FROM INCEPTION (SEPTEMBER 25, 2007)
 THROUGH
DECEMBER 31, 2009
  (Deficit)AccumulatedAdditional
                      
                      
                      During theCommon stock
                      
                      
                      Paid-in
                      
                      
                      DevelopmentShares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      Stage
                      
                      
                      TotalsBalance
      - January 1, 2008
                      
                      
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Common
      stock issued for cash
                      
                      
                      56,000,000
                      
                      
                      
                      5,600
                      
                      
                      
                      (4,800
                      )
                      
                      
                      -
                      
                      
                      
                      800Assignment
      of invention rights
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      5,000
                      
                      
                      
                      -
                      
                      
                      
                      5,000Net
      (loss) for the year
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (18,019
                      )
                      
                      
                      (18,019
                      )Balance
      - December 31, 2008
                      
                      
                      56,000,000
                      
                      
                      
                      5,600
                      
                      
                      
                      200
                      
                      
                      
                      (18,019
                      )
                      
                      
                      (12,219
                      )Common
      stock issued for cash
                      
                      
                      14,000,000
                      
                      
                      
                      1,400
                      
                      
                      
                      158,600
                      
                      
                      
                      -
                      
                      
                      
                      160,000Net
      (loss) for the period
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (154,818
                      )
                      
                      
                      (154,818
                      )Balance
      - December 31, 2009
                      
                      
                      70,000,000
                      
                      
                      $
                      7,000
                      
                      
                      $
                      158,800
                      
                      
                      $
                      (172,837
                      )
                      
                      $
                      (7,037
                      )
 
 The
accompanying notes to financial statements are
 an
integral part of this statement.
  F-5
  THE
MOBILE STAR CORP.
 (A
DEVELOPMENT STAGE COMPANY)
 STATEMENTS
OF CASH FLOWS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008,
 AND
CUMULATIVE FROM INCEPTION (SEPTEMBER 25, 2007)
 THROUGH
DECEMBER 31, 2009
  Years Ended
                      
                      
                      CumulativeDecember 31,
                      
                      
                      From2009
                      
                      
                      2008
                      
                      
                      InceptionOperating
      Activities:Net
      (loss)
                      
                      $
                      (154,818
                      )
                      
                      $
                      (18,019
                      )
                      
                      $
                      (172,837
                      )Adjustments
      to reconcile net (loss) to net cash(used
      in) operating activities:Changes
      in net assets and liabilities-Accounts
      payable and accrued liabilities
                      
                      
                      21,405
                      
                      
                      
                      10,595
                      
                      
                      
                      32,000Net
      Cash Used in Operating Activities
                      
                      
                      (133,413
                      )
                      
                      
                      (7,424
                      )
                      
                      
                      (140,837
                      )Investing
      Activities:Purchase
      of patent pending
                      
                      
                      -
                      
                      
                      
                      (7,300
                      )
                      
                      
                      (7,300
                      )Net
      Cash Used in Investing Activities
                      
                      
                      -
                      
                      
                      
                      (7,300
                      )
                      
                      
                      (7,300
                      )Financing
      Activities:Proceeds
      from common stock issued
                      
                      
                      160,000
                      
                      
                      
                      800
                      
                      
                      
                      160,800Loans
      from shareholders
                      
                      
                      (11,300
                      )
                      
                      
                      14,300
                      
                      
                      
                      3,000Net
      Cash Provided by Financing Activities
                      
                      
                      148,700
                      
                      
                      
                      15,100
                      
                      
                      
                      163,800Net
      (Decrease) Increase in Cash
                      
                      
                      15,287
                      
                      
                      
                      376
                      
                      
                      
                      15,663Cash
      - Beginning of Period
                      
                      
                      376
                      
                      
                      
                      -
                      
                      
                      
                      -Cash
      - End of Period
                      
                      $
                      15,663
                      
                      
                      $
                      376
                      
                      
                      $
                      15,663Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the period for:Interest
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Income
      taxes
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Supplemental schedule of non-cash investing and financing
      activities:Accrual
      of deffered offering costs
                      
                      $
                      -
                      
                      
                      $
                      20,000
                      
                      
                      $
                      -Assignment
      of invention rights acquired through additional paid-in
      capital
                      
                      $
                      -
                      
                      
                      $
                      5,000
                      
                      
                      $
                      5,000
  The
accompanying notes to financial statements are
 an
integral part of these statements.
  F-6
  THE
MOBILE STAR CORP.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 (1)  Summary of Significant Accounting
Policies
 
 Basis
of Presentation and Organization
 
 The
Mobile Star Corp. (“The Mobile Star” or the “Company”) is a Delaware corporation in the
development stage and has not commenced operations. The Company was incorporated
under the laws of the State of Delaware on September 25, 2007 and began activity
in January 2008. The business plan of the Company is to develop a commercial
application of a self operated computerized karaoke recording booth. The Company
also intends to obtain approval of its patent application, and manufacture and
market the product and/or seek third party entities interested in licensing the
rights to manufacture and market the device. The accompanying financial
statements of The Mobile Star were prepared from the accounts of the Company
under the accrual basis of accounting.
 
 Cash
and Cash Equivalents
 
 For
purposes of reporting within the statement of cash flows, the Company considers
all cash on hand, cash accounts not subject to withdrawal restrictions or
penalties, and all highly liquid debt instruments purchased with a maturity of
three months or less to be cash and cash equivalents.
 
 Revenue
Recognition
 
 The
Company is in the development stage and has yet to realize revenues from
operations. Once the Company has commenced operations, it will recognize
revenues when delivery of goods or completion of services has occurred provided
there is persuasive evidence of an agreement, acceptance has been approved by
its customers, the fee is fixed or determinable based on the completion of
stated terms and conditions, and collection of any related receivable is
probable.
 
 Loss
per Common Share
 
 Basic
loss per share is computed by dividing the net loss attributable to the common
stockholders by the weighted average number of shares of common stock
outstanding during the period. Fully diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive. There were no dilutive financial instruments issued or outstanding for
the period ended December 31, 2009.
 
 Income
Taxes
 
 Deferred
tax assets and liabilities are determined based on temporary differences between
the bases of certain assets and liabilities for income tax and financial
reporting purposes. The deferred tax assets and liabilities are classified
according to the financial statement classification of the assets and
liabilities generating the differences.
 
 The
Company maintains a valuation allowance with respect to deferred tax assets. The
Company establishes a valuation allowance based upon the potential likelihood of
realizing the deferred tax asset and taking into consideration the Company’s
financial position and results of operations for the current period. Future
realization of the deferred tax benefit depends on the existence of sufficient
taxable income within the carryforward period under the federal tax
laws.
 
 Changes
in circumstances, such as the Company generating taxable income, could cause a
change in judgment about the realizability of the related deferred tax asset.
Any change in the valuation allowance will be included in income in the year of
the change in estimate.
  F-7
 
 Fair
Value of Financial Instruments
 
 The
Company estimates the fair value of financial instruments using the available
market information and valuation methods. Considerable judgment is required in
estimating fair value. Accordingly, the estimates of fair value may not be
indicative of the amounts the Company could realize in a current market
exchange. As of December 31, 2009, the carrying value of accrued liabilities,
and loans from directors and stockholders approximated fair value due to the
short-term nature and maturity of these instruments.
 
 Patent
and Intellectual Property
 
 The
Company capitalizes the costs associated with obtaining a Patent or other
intellectual property associated with its intended business plan. Such costs are
amortized over the estimated useful lives of the related assets.
 
 Deferred
Offering Costs
 
 The
Company defers the direct incremental costs of raising capital as other assets
until such time as the offering is completed. At the time of the completion of
the offering, the costs are charged against the capital raised. Should the
offering be terminated, deferred offering costs are charged to operations during
the period in which the offering is terminated.
 
 Impairment
of Long-Lived Assets
 
 The
Company evaluates the recoverability of long-lived assets and the related
estimated remaining lives when events or circumstances lead management to
believe that the carrying value of an asset may not be recoverable. For the
period ended December 31, 2009, no events or circumstances occurred for which an
evaluation of the recoverability of long-lived assets was required.
 
 Common
Stock Registration Expenses
 
 The
Company considers incremental costs and expenses related to the registration of
equity securities with the SEC, whether by contractual arrangement as of a
certain date or by demand, to be unrelated to original issuance transactions. As
such, subsequent registration costs and expenses are expensed as
incurred.
 
 Estimates
 
 The
financial statements are prepared on the basis of accounting principles
generally accepted in the United States. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of December 31, 2009, and expenses for the period ended December
31, 2009, and cumulative from inception. Actual results could differ from those
estimates made by management.
 
 Recent Accounting
Pronouncements
  In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”), codified
in FASB ASC 820-10-65, which provides additional guidance for estimating fair
value in accordance with ASC 820-10 when the volume and level of activity for an
asset or liability have significantly decreased. ASC 820-10-65 also includes
guidance on identifying circumstances that indicate a transaction is not
orderly. The adoption of ASC 820-10-65 did not have an impact on the Company's
results of operations or financial condition.
  F-8
  In May
2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165") codified in
FASB ASC 855-10-05, which provides guidance to establish general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. FASB
ASC 855-10-05 also requires entities to disclose the date through which
subsequent events were evaluated as well as the rationale for why that date was
selected. FASB ASC 855-10-05 is effective for interim and annual periods ending
after June 15, 2009. FASB ASC 855-10-05 requires that public entities evaluate
subsequent events through the date that the financial statements are
issued.
  In June
2009, the FASB issued SFAS No. 166, "Accounting for Transfers of Financial
Assets - an amendment of FASB Statement No. 140" ("SFAS 166"), codified as FASB
ASC 860, which requires entities to provide more information regarding sales of
securitized financial assets and similar transactions, particularly if the
entity has continuing exposure to the risks related to transferred financial
assets. FASB ASC 860 eliminates the concept of a "qualifying special-purpose
entity," changes the requirements for derecognizing financial assets and
requires additional disclosures. FASB ASC 860 is effective for fiscal years
beginning after November 15, 2009. The adoption of FASB ASC 860 did not have an
impact on the Company's financial condition, results of operations or cash
flows.
  In June
2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No.
46(R)" ("SFAS 167"), codified as FASB ASC 810-10, which modifies how a company
determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. FASB ASC
810-10 clarifies that the determination of whether a company is required to
consolidate an entity is based on, among other things, an entity's purpose and
design and a company's ability to direct the activities of the entity that most
significantly impact the entity's economic performance. FASB ASC 810-10 requires
an ongoing reassessment of whether a company is the primary beneficiary of a
variable interest entity. FASB ASC 810-10 also requires additional disclosures
about a company's involvement in variable interest entities and any significant
changes in risk exposure due to that involvement. FASB ASC 810-10 is effective
for fiscal years beginning after November 15, 2009. The adoption of FASB ASC
810-10 did not have an impact on the Company's financial condition, results of
operations or cash flows.
  In June
2009, the FASB issued FASB ASC 105, Generally Accepted Accounting Principles,
which establishes the FASB Accounting Standards Codification as the sole source
of authoritative generally accepted accounting principles. Pursuant to the
provisions of FASB ASC 105, we have updated references to GAAP in our financial
statements. The adoption of FASB ASC 105 did not impact the Company's financial
position or results of operations.
  (2)  Development Stage Activities and
Going Concern
 
 The
Company is currently in the development stage, and has no operations. The
business plan of the Company is to develop a commercial application of a self
operated computerized karaoke recording booth. The Company also intends to
obtain approval of its patent application, and manufacture and market the
product and/or seek third party entities interested in licensing the rights to
manufacture and market the device.
 
 In
January 2008, the Company entered into a Assignment Agreement whereby the
Company acquired all of the rights, title and interest in the invention known as
the “Self operated computerized karaoke recording booth” for consideration of
royalties ranging from 1% to 5% based on the net income of the Company for 30
years from the date of the Company's incorporation. On February 20, 2008 the
Company filed PCT and U.S. patent applications for the invention.
 
 The
Company has commenced a capital formation activity to submit a Registration
Statement on Form S-1 to the Securities and Exchange Commission (“SEC”) to
register and sell in a self-directed offering 14,000,000 (post forward stock
split) shares of newly issued common stock at an offering price of $0.10 for
proceeds of up to $200,000. The Registration Statement on Form S-1 was filed
with the SEC on August 12, 2008 and declared effective on September 8, 2008. The
Company has issued 14,000,000 (post forward stock split) shares of common stock
pursuant to the Registration Statement on Form S-1, and received proceeds of
$200,000.
  F-9
 
 The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company has not
established any source of revenue to cover its operating costs, and as such, has
incurred an operating loss since inception. Further, as of December 31, 2009,
the cash resources of the Company were insufficient to meet its current business
plan. These and other factors raise substantial doubt about the Company’s
ability to continue as a going concern. The accompanying financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the possible inability of the Company to
continue as a going concern.
 
 (3)  Patent Pending
 
 In
January 2008, the Company entered into a Assignment Agreement whereby the
Company acquired all of the rights, title and interest in the invention known as
the “Self operated computerized karaoke recording booth” for consideration of
royalties ranging from 1% to 5% based on the net income of the Company for 30
years from the date of the Company's incorporation. On February 20, 2008 the
Company filed PCT and U.S. patent applications for the invention.
 
 (4)  Loans from Related Parties -
Directors and Stockholders
 
 As of
December 31, 2009, loans from related parties amounted to $3,000, and
represented working capital advances from officers who are also stockholders of
the Company. The loans are unsecured, non-interest bearing, and due on
demand.
 
 (5)  Common Stock
 
 On February 4, 2008, the Company issued
56,000,000 (post forward stock split) shares of its common stock to founders of
the Company, some of whom are directors and officers, for proceeds of $800.
 
 The
Company has commenced a capital formation activity to submit a Registration
Statement on Form S-1 to the SEC to register and sell in a self-directed
offering 14,000,000 (post forward stock split) shares of newly issued common
stock at an offering price of $0.10 per share for proceeds of up to $200,000.
The Registration Statement on Form S-1 was filed with the SEC on August 12, 2008
and declared effective on September 8, 2008. The Company has issued 14,000,000
(post forward stock split) shares of common stock pursuant to the Registration
Statement on Form S-1, and received proceeds of $200,000. The Company incurred
$40,000 of deferred offering costs related to this capital formation
activity.
 
 On June
26, 2009, the Company implemented a 7 for 1 forward stock split on its
issued and outstanding shares of common stock to the holders of record as of
June 24, 2009. As a result of the split, each holder of record on the record
date automatically received four additional shares of the Company’s common
stock. After the split, the number of shares of common stock issued and
outstanding were 70,000,000 shares. The accompanying financial statements and
related notes thereto have been adjusted accordingly to reflect this forward
stock split.
 
 (6)  Income Taxes
 
 The
provision (benefit) for income taxes for the periods ended December 31, 2009 and
2008 was as follows (assuming a 23% effective tax rate):
  F-10
 
 2009
                        
                        
                        2008Current
      Tax Provision:Federal-Taxable
      income
                        
                        $
                        -
                        
                        
                        $
                        -Total
      current tax provision
                        
                        $
                        -
                        
                        
                        $
                        -Deferred
      Tax Provision:Federal-Loss
      carryforwards
                        
                        $
                        35,608
                        
                        
                        $
                        4,144Change
      in valuation allowance
                        
                        
                        (35,608
                        )
                        
                        
                        (4,144
                        )Total
      deferred tax provision
                        
                        $
                        -
                        
                        
                        $
                        -
 
 The Company had deferred income tax
assets as of December 31, 2009 and December 31, 2008 as
follows:
 2009
                        
                        
                        2008Loss
      carryforwards
                        
                        $
                        39,752
                        
                        
                        $
                        4,144Less
      - Valuation allowance
                        
                        
                        (39,752
                        )
                        
                        
                        (4,144
                        )Total
      net deferred tax assets
                        
                        $
                        -
                        
                        
                        $
                        -
 
 The
Company provided a valuation allowance equal to the deferred income tax assets
for the period ended December 31, 2009, because it is not presently known
whether future taxable income will be sufficient to utilize the loss
carryforwards.
 
 As of
December 31, 2009, the Company had approximately $172,837 in tax loss
carryforwards that can be utilized in future periods to reduce taxable income,
and expire in the year 2029.
 
 The
federal income tax returns of the Company are subject to examinationby the IRS, generally for three years after they were
filed.
 
 (7)  Related Party
Transactions
 
 As
described in Note 4, as of December 31, 2009, the Company owed $3,000 to
directors, officers, and principal stockholders of the Company for working
capital loans.
 
 On
February 4, 2008, the Company issued 19,040,000 (post forward stock split)
shares of common stock to directors of the Company, for $272.
 
 From
inception through December 31, 2009, the Company paid consulting fees in the
amount of $11,153 to a director and officer of the Company.
 
 (8)  Commitments
 
 On June
15, 2008, the Company entered into a Transfer Agent and Registrar Agreement with
Nevada Agency and Trust Company ("NATCO"). Under the Agreement, the Company
agreed to pay to NATCO an annual fee of $1,500 for the first year and $1,800 for
every year thereafter. NATCO will act as the Company’s transfer agent and
registrar.
 
 As
described in Note 3, in January 2008, the Company entered into a Assignment
Agreement whereby the Company acquired all of the rights, title and interest in
the invention known as the “Self operated computerized karaoke recording booth”
for consideration of royalties ranging from 1% to 5% based on the net income of
the Company for 30 years from the date of the Company's
incorporation.
  F-11
 
 (9)  Concentration of Credit
Risk
 
 The
Company’s cash and cash equivalents are invested in a major bank
in Israel and are not insured. Management believes that the financial
institution that holds the Company’s investments is financially sound and
accordingly, minimal credit risk exists with respect to these
investments.
 
 (10)
Subsequent events
 
 The
Company evaluated events occurring between the balance sheet date and February
14, 2010, the date the financial statements were issued, and there were no
significant events.
  F-12
  Item
8.           Changes in
and Disagreements With Accountants on Accounting and Financial
Disclosure.
 
 None.
 
 Item
8A(T).   Controls and Procedures.
 
 Under the
supervision and with the participation of our management, including
our  Chief Executive Officer and Chief Financial Officer, we evaluated
the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
December 31, 2009. Based upon that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of December 31, 2009.
 
 There has
not been any change in our internal control over financial reporting (as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
the period ended December 31, 2009 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
 
 Management's
annual report on internal control over financial reporting
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as
a process designed by, or under the supervision of, a company’s principal
executive and principal financial officers and effected by the company’s Board
of Directors, management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
  ·
              pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;
 
 ·
              provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the Company
      are being made only in accordance with authorizations of management and
      directors of the Company; and
 
 12
 
 ·
              provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company’s assets that
      could have a material effect on the financial
  statements.
 
 Attestation
report of the registered public accounting firm
 
 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.
 
 Changes
in internal control over financial reporting
 
 During
the year ended December 31, 2009, there was no change in our internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect our internal control over financial
reporting.
 
 Item
8B.        Other
Information.
 
 None
  13
  PART
III
 
 Item
9.         Directors, Executive
Officers and Corporate Governance.
 
 Directors
and Executive Officers
 
 The
following table sets forth certain information regarding the members of our
Board of Directors and our executive officers:
 
 Positions and Offices HeldDanny
      Elbaz
                                    
                                    57
                                    
                                    President
      and DirectorEran
      Gronich
                                    
                                    37
                                    
                                    Secretary
      and
Director
 
 Our
Directors hold office until the next annual meeting of our stockholders or until
their successors are duly elected and qualified. Set forth below is a summary
description of the principal occupation and business experience of each of our
Directors and executive officers for at least the last five years.
 
 Danny
Elbaz has been our President and Director since the Company’s inception in
September 25, 2007 and began as of January 1, 2008 to oversee daily operation
when the company began actual operations. He is a seasoned entrepreneur, a
proven leader, and team player. With more than 20 years in the Hi-Tech industry
Danny has experience in management, international sales, and marketing. He is
among founders of NMC. Currently Mr. Elbaz is serving as a CEO and Executive
Partner for two High-Tech companies, tracing new patents and technologies. Prior
to that, in 1995 he founded Harmonic Data Systems Ltd., where he led the
strategy to position the company. His time at Digital (DEC) Israel, 1989 through
1995, and Cosmic, Ltd., 1980 through 1988, honed his management skills while he
developed his successful marketing and sales techniques.
 
 Eran
Gronich has served as our Secretary and Director since September 25, 2007.
Currently he is the CEO of Alefo Interactive Ltd., creator of an online,
web-based application that allows people to create personal homepages easily and
efficiently without the need for any programming knowledge or web development
expertise. Previously, in 2004 he founded IdeaPlus and was Director of Business
Development. From 2001 until 2003 Mr. Gronich managed the North American sales
for DayaGem. In 2000 he founded PyroPro and stayed on as the CEO. Mr. Gronich
holds an MBA in Finance and Investing and a BA in Marketing.
 
 14
 
 There are
no familial relationships among any of our directors or officers. None of our
directors or officers is a director in any other U.S. reporting companies. None
of our directors or officers has been affiliated with any company that has filed
for bankruptcy within the last five years. The Company is not aware of any
proceedings to which any of the Company’s officers or directors, or any
associate of any such officer or director, is a party adverse to the Company or
any of the Company’s subsidiaries or has a material interest adverse to it or
any of its subsidiaries.
 
 Each
director of the Company serves for a term of one year or until the successor is
elected at the Company's annual shareholders' meeting and is qualified, subject
to removal by the Company's shareholders. Each officer serves, at the pleasure
of the Board of Directors, for a term of one year and until the successor is
elected at the annual meeting of the Board of Directors and is
qualified.
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 Section
16(a) of the Securities Exchange Act of 1934 requires officers and directors of
the Company and persons who own more than ten percent of a registered class of
the Company's equity securities to file reports of ownership and changes in
their ownership with the Securities and Exchange Commission, and forward copies
of such filings to the Company. We believe, based solely on our review of the
copies of such forms, that during the fiscal year ended December 31, 2008, all
reporting persons complied with all applicable Section 16(a) filing
requirements.
 
 Auditors
 
 Alan
Weinbberg CPA , an independent registered public accounting firm, is our
auditor.
 
 We do not
currently have a Code of Ethics applicable to our principal executive, financial
and accounting officers. We do not have a “financial expert” on the board or an
audit committee or nominating committee.
 
 Potential
Conflicts of Interest
 
 Since we
do not have an audit or compensation committee comprised of independent
directors, the functions that would have been performed by such committees are
performed by our directors. The Board of Directors has not established an audit
committee and does not have an audit committee financial expert, nor has the
Board established a nominating committee. The Board is of the opinion that such
committees are not necessary since the Company has only two directors, and to
date, such directors have been performing the functions of such committees.
Thus, there is a potential conflict of interest in that our directors and
officers have the authority to determine issues concerning management
compensation, nominations, and audit issues that may affect management
decisions. We are not aware of any other conflicts of interest with any of our
executive officers or directors.
 
 Involvement
in Certain Legal Proceedings
 
 There are
no legal proceedings that have occurred within the past five years concerning
our directors, or control persons which involved a criminal conviction, a
criminal proceeding, an administrative or civil proceeding limiting one's
participation in the securities or banking industries, or a finding of
securities or commodities law violations.
 
 15
 
 Item
10.         Executive
Compensation.
 
 Summary
Compensation
 
 Since our
incorporation , we have  paid $9,000 to one of  our
Directors  in consideration for their services rendered to our Company
in their capacity as such.  We have no employment agreements with any
of our Directors or executive officers.  We have no pension, health,
annuity, bonus, insurance, stock options, profit sharing or similar benefit
plans.
 
 Since our
incorporation , no stock options or stock appreciation rights were granted to
any of our Directors or executive officers.  We have no long-term
equity incentive plans.
 
 Outstanding
Equity Awards
 
 None of
our Directors or executive officers holds unexercised options, stock that has
not vested, or equity incentive plan awards.
 
 Compensation
of Directors
 
 Since our
incorporation , no compensation has been paid to any of our Directors other than
mentioned above  in consideration for their services rendered in their
capacity as directors.
 
 Item
11.         Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters.
 
 The
following table lists, as of March  16, 2010, the number of shares of
common stock of our Company that are beneficially owned by (i) each person or
entity known to our Company to be the beneficial owner of more than 5% of the
outstanding common stock; (ii) each officer and director of our Company; and
(iii) all officers and directors as a group. Information relating to beneficial
ownership of common stock by our principal shareholders and management is based
upon information furnished by each person using “beneficial ownership” concepts
under the rules of the Securities and Exchange Commission. Under these rules, a
person is deemed to be a beneficial owner of a security if that person has or
shares voting power, which includes the power to vote or direct the voting of
the security, or investment power, which includes the power to vote or direct
the voting of the security. The person is also deemed to be a beneficial owner
of any security of which that person has a right to acquire beneficial ownership
within 60 days. Under the Securities and Exchange Commission rules, more than
one person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which he or
she may not have any pecuniary beneficial interest. Except as noted below, each
person has sole voting and investment power.
 
 The
percentages below are calculated based on 70,000,000 shares of our common stock
issued and outstanding as of March 16, 2010. We do not have any outstanding
options, warrants or other securities exercisable for or convertible into shares
of our common stock.
 
 16
  Name and Address of
                  Beneficial Owner
                
                Number of Shares of Common
                  Stock Beneficially
                  Owned or Right to
                  Direct Vote(1)
                
                
                Percent of
                  Common
                  Stock Beneficially
                  Owned or Right
                  to Direct VoteElbaz,
      Danny
                
                
                11,200,000
                
                
                
                16.00
                %Gronich,
      Eran
                
                
                7,840,000
                
                
                
                11.00
                %Meshi
      Educational Rehab
                
                
                5,600,000
                
                
                
                9.00
                %Resheff,
      Benjamin
                
                
                11,200,000
                
                
                
                16.00
                %Zwebner,
      Asher
                
                
                5,300,000
                
                
                
                8.00
                %
  
 (1)
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") and generally includes voting or
investment power with respect to securities. In accordance with SEC rules,
shares of common stock issuable upon the exercise of options or warrants which
are currently exercisable or which become exercisable within 60 days following
the date of the information in this table are deemed to be beneficially owned
by, and outstanding with respect to, the holder of such option or warrant.
Except as indicated by footnote, and subject to community property laws where
applicable, to our knowledge, each person listed is believed to have sole voting
and investment power with respect to all shares of common stock owned by such
person.
 
 Item
12.         Certain Relationships
and Related Transactions, and Director Independence.
 
 Other
than the transactions discussed below, we have not entered into any transaction
nor are there any proposed transactions in which our Director, executive
officer, stockholders, or any member of the immediate family of the foregoing
had or is to have a direct or indirect material interest.
 
 As of
December 31, 2009, the Company owed to a  Director and stockholder of
the Company $3.000 .
 
 17
 
 Director
Independence
 
 We are
not subject to listing requirements of any national securities exchange or
national securities association and, as a result, we are not at this time
required to have our board comprised of a majority of “independent directors.”
We do not believe that any of our directors currently meet the definition of
“independent” as promulgated by the rules and regulations of the American Stock
Exchange.
 
 Item
13.         Principal Accounting
Fees and Services.
 
 Our
principal independent accountant is Alan Weinberg CPA. Their pre-approved fees
billed to the Company are set forth below:
  For Fiscal Year Ended
                      December 31, 2009
                    
                    
                    For Fiscal Year Ended
                      December 31, 2008Audit
      Fees
                    
                    $
                    14,000
                    
                    
                    $
                    14,000Tax
      Fees ( Paid to Alan Weinberg CPA )
                    
                    $
                    1,000
                    
                    
                    $
                    1,000
 
 As of
December 31, 2009, the Company did not have a formal documented pre-approval
policy for the fees of the principal accountant. The Company does not have
an audit committee. The percentage of hours expended on the principal
accountant's engagement to audit our financial statements for the most recent
fiscal year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was 0%.
 
 PART
IV
 
 Item
14.         Exhibits
and Financial Statement Schedules.
  Exhibit
                
                DescriptionExhibit3.1
                
                Articles
      of Incorporation of the Company (filed as Exhibit 3.1 to Registration
      Statement on Form S1, filed with the Securities and Exchange Commission on
      August 12  2008 )3.2
                
                Bylaws
      of the Company (filed as Exhibit 3.2 to Registration Statement on Form S1,
      filed with the Securities and Exchange Commission on August 12 2008
      )3.3
                
                Form
      of Common Stock Certificate of the Company (filed as Exhibit 3.3 to
      Registration Statement on Form S1, filed with the Securities and Exchange
      Commission on August 12 2008 )10.1
                
                Invention
      Technology Assignment   (filed as Exhibit 10.1 to Registration
      Statement on Form S1, filed with the Securities and Exchange Commission
      on  August 12 2008 )31.1
                
                Certification
      of Principal Executive  Officer Pursuant to Exchange Act Rule
      13A-14(A)/15D-14(A) as Adopted Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                
                Certification
      of Principal  Financial Officer Pursuant to Exchange Act Rule
      13A-14(A)/15D-14(A) as Adopted Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
                
                Certification
      of Principal Executive  Officer pursuant to Section 302(a) of
      the Sarbanes-Oxley Act of 2002(filed herewith)32.2
                
                Certification
      of Principal Financial Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of
  2002(filed  herewith)
 
 18
 
 SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 The
      Mobile Star CorpDate:
      March  16, 2010
              By:
              /s/Danny ElbazName:Danny
      ElbazTitle: Chief Executive Officer,  and DirectorBy
      ;
              /s/Eran GronichName :Eran
      GronichTitle
      : Principal Financial Officer , Secretary and
  Director
 
 In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
  Date:
      March  16, 2010
              By:
              /s/Danny ElbazName:Danny
      Elbaz
                Title: Chief Executive Officer,
      and DirectorDate:
      March 16, 2010
              By:
              /s/Eran GronichName:Eran
      Gronich
                Title:
      Principal Financial Officer , Secretary and
  Director
  19