UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarter ended  March 31 2011





 ̈ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from _____ to _____





Commission file number: 333- 152952





THE MOBILE STAR CORP.


(Exact name of registrant as specified in its charter)





Delaware

98-0565411(State of incorporation)

(I.R.S. Employer Identification No.)





c/o Danny Elbaz


53 Hanoter Street


Even Yehuda, Israel 40500


(Address of principal executive offices)





972 - (544) 655-341


(Issuer's telephone number)







(Former name, former address and former fiscal year, if changed since last report)





Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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       ̈





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
 ̈Non-accelerated filer
 ̈
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 Exchange Act). Yes      ̈ No      x





As of  March 31 2011 ,100,848,675  shares of common stock, par value $0.0001 per share, were issued and outstanding.











TABLE OF CONTENTS





PagePART IItem 1. Financial Statements
F-1Item 2. Management’s Discussion and Analysis or Plan of Operation
3Item 3 Quantitative and Qualitative Disclosures About Market Risk
6Item 4 Controls and Procedures
7PART IIItem 1. Legal Proceedings
7Item IA. Risk Factors
7Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
7Item 3. Defaults Upon Senior Securities
7Item 4. Submission of Matters to a Vote of Security Holders
8Item 5. Other Information
8Item 6. Exhibits
8





2


PART I


FINANCIAL INFORMATION





Item 1. Financial Statements.


THE MOBILE STAR CORP.
 (A DEVELOPMENT STAGE COMPANY)
 
 INDEX TO FINANCIAL STATEMENTS
 MARCH 31, 2011
 
 Financial Statements-Balance Sheets as of March 31, 2011
F-2Statements of Operations for the Three Months Ended March 31, 2011 and 2010 and Cumulative from Inception
F-3Statement of Changes in Stockholders’ Equity (Deficit) for the Period from Inception Through March 31, 2011
F-4Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 and Cumulative from Inception
F-5Notes to Financial Statements
F-6
  F-1
  THE MOBILE STAR CORP.
 (A DEVELOPMENT STAGE COMPANY)
 BALANCE SHEETS
 AS OF MARCH 31, 2011 AND DECEMBER 31, 2010
 
 As of


As ofMarch 31,


December 31,2011


2010(Unaudited)


(Audited)ASSETSCurrent Assets:Cash and cash equivalents

$
9,372


$
18,513Total current assets


9,372



18,513Other Assets:Patent pending


7,300



7,300Assignment of invention rights


5,000



5,000Total other assets


12,300



12,300Total Assets

$
21,672


$
30,813LIABILITIES AND STOCKHOLDERS' (DEFICIT)Current Liabilities:Accounts payable and accrued liabilities

$
30,017


$
31,248Customer Deposits


3,189



-Loans from related parties - Directors and stockholders


2,426



51,426Convertible notes payable, net of dicount


43,112



34,327Total current liabilities


78,744



117,001Total liabilities


78,744



117,001Commitments and ContingenciesStockholders' Equity (Deficit):Common stock, par value $.0001 per share, 200,000,000 shares authorized; 100,848,675 and 80,000,000 shares issued and outstanding, respectively


10,085



8,000Additional paid-in capital


326,487



229,436(Deficit) accumulated during the development stage


(393,644
)


(323,624
)Total stockholders' equity (deficit)


(57,072
)


(86,188
)Total Liabilities and Stockholders' Equity (Deficit)

$
21,672


$
30,813
 
 The accompanying notes to financial statements
 are an integral part of this balance sheet.
  F-2
 
 THE MOBILE STAR CORP.
 (A DEVELOPMENT STAGE COMPANY)
 STATEMENTS OF OPERATIONS
 FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2011,
 AND CUMULATIVE FROM INCEPTION (SEPTEMBER 25, 2007)
 THROUGH MARCH 31, 2011
 (Unaudited)
 
 Three Months Ended


CumulativeMarch 31,


From2011


2010


InceptionRevenues

$
-


$
-


$
-Expenses:General and administrative-Professional fees


13,732



5,670



141,349Consulting fees


6,383



3,000



56,530Research and development


13,283



16,554



111,061Investor relations


3,500



3,060



9,911Legal - incorporation


-



-



2,350Other


7,432



6,240



22,761Total general and administrative expenses


44,330



34,524



343,962(Loss) from Operations


(44,330
)


(34,524
)


(343,962
)Interest and Other Income (Expense)


(25,690
)


293



(49,682
)Provision for Income Taxes


-



-



-Net (Loss)

$
(70,020
)

$
(34,231
)

$
(393,644
)(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


86,338,083



70,000,000
 
 The accompanying notes to financial statements are
 an integral part of these statements.
  F-3
 
 THE MOBILE STAR CORP.
 (A DEVELOPMENT STAGE COMPANY)
 STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 FOR THE PERIOD FROM INCEPTION (SEPTEMBER 25, 2007)
 THROUGH MARCH 31, 2011
 (Unaudited)
 
 (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
)Common stock issued as compensation


10,000,000



1,000



24,000



-



25,000Convertible note discount


-



-



24,545



-



24,545Convertible note discount


-



-



22,091



-



22,091Net (loss) for the period


-



-



-



(150,787
)


(150,787
)Balance - December 31, 2010


80,000,000



8,000



229,436



(323,624
)


(86,188
)Common stock issued to extinguish debt


12,000,000



1,200



47,800



-



49,000Common stock issued upon conversion of convertible debt


8,848,675



885



20,615



-



21,500Convertible note discount


-



-



28,636



-



28,636Net (loss) for the period


-



-



-



(70,020
)


(70,020
)Balance - March 31, 2011


100,848,675


$
10,085


$
326,487


$
(393,644
)

$
(57,072
)
 
 The accompanying notes to financial statements are
 an integral part of this statement.
  F-4
  THE MOBILE STAR CORP.
 (A DEVELOPMENT STAGE COMPANY)
 STATEMENTS OF CASH FLOWS
 FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2011,
 AND CUMULATIVE FROM INCEPTION (SEPTEMBER 25, 2007)
 THROUGH MARCH 31, 2011
 (Unaudited)
 
 Three Months Ended


CumulativeMarch 31,


From2011


2010


InceptionOperating Activities:Net (loss)

$
(70,020
)

$
(34,231
)

$
(393,644
)Adjustments to reconcile net (loss) to net cash (used in) operating activities:Common stock issued as compensation


-



-



25,000Amortization of beneficial conversion feature


23,921



-



47,884Changes in net assets and liabilities-Accounts payable and accrued liabilities


(1,231
)


(10,000
)


30,017Customer deposits


3,189



-



3,189Net Cash Used in Operating Activities


(44,141
)


(44,231
)


(287,554
)Investing Activities:Purchase of patent pending


-



-



(7,300
)Net Cash Used in Investing Activities


-



-



(7,300
)Financing Activities:Proceeds from common stock issued


-



-



160,800Proceeds from convertible note payable


35,000



-



92,000Payment of stockholder loans


-



-



(14,300
)Proceeds from stockholder loans


-



28,670



65,726Net Cash Provided by Financing Activities


35,000



28,670



304,226Net (Decrease) Increase in Cash


(9,141
)


(15,561
)


9,372Cash - Beginning of Period


18,513



15,663



-Cash - End of Period

$
9,372


$
102


$
9,372Supplemental Disclosure of Cash Flow Information:Cash paid during the period for:Interest

$
-


$
-


$
-Income taxes

$
-


$
-


$
-Supplemental schedule of non-cash investing and financing activities:Common stock issued to extinguish debt

$
70,500


$
-


$
70,500Assignment of invention rights acquired through additional paid-in capital

$
-


$
-


$
5,000
 
 The accompanying notes to financial statements are
 an integral part of these statements.
  F-5
  THE MOBILE STAR CORP.
 (A DEVELOPMENT STAGE COMPANY)
 NOTES TO FINANCIAL STATEMENTS
 MARCH 31, 2011
 
 (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.
 
 Unaudited Interim Financial Statements
 
 The interim financial statements of the Company as of March 31, 2011, and for the periods then ended, and cumulative from inception, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2011, and the results of its operations and its cash flows for the periods ended March 31, 2011, and cumulative from inception. These results are not necessarily indicative of the results expected for the calendar year ending March 31, 2011. The accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited financial statements as of December 31, 2010, filed with the SEC, for additional information, including significant accounting policies.
 
 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. Common stock equivalents were not included in the computation of diluted earnings per share in the statement of operations due to the fact that the Company reported a net loss and to do so would be anti-dilutive for the periods presented.
  F-6
 
 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.
 
 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 March 31, 2011, 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 March 31, 2011, 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 March 31, 2011, and expenses for the period ended March 31, 2011, and cumulative from inception. Actual results could differ from those estimates made by management.
  F-7
 
 Recent Accounting Pronouncements
 
 In April 2010, the FASB issued ASU No. 2010-17, Revenue Recognition—Milestone Method (ASU 2010-017). ASU 2010-017 provides guidance in applying the milestone method of revenue recognition to research or development arrangements. This guidance concludes that the milestone method is a valid application of the proportional performance model when applied to research or development arrangements. Accordingly, an entity can make an accounting policy election to recognize a payment that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. The guidance is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The adoption of this accounting standard had no impact on the Company's financial position or results of operations.
 
 In February 2010, the FASB issued amended guidance on subsequent events. Under this amended guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. This guidance was effective immediately and the Company adopted these new requirements upon issuance of this guidance.
 
 In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements (ASU No. 2010-06). ASU No. 2010-06 requires: (1) fair value disclosures of assets and liabilities by class; (2) disclosures about significant transfers in and out of Levels 1 and 2 on the fair value hierarchy, in addition to Level 3; (3) purchases, sales, issuances, and settlements be disclosed on gross basis on the reconciliation of beginning and ending balances of Level 3 assets and liabilities; and (4) disclosures about valuation methods and inputs used to measure the fair value of Level 2 assets and liabilities. ASU No. 2010-06 becomes effective for the first financial reporting period beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements of Level 3 assets and liabilities which will be effective for fiscal years beginning after December 15, 2010. The adoption of this accounting standard had no impact on the Company's financial position or results of operations.
 
 In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605)—Multiple-Deliverable Revenue Arrangements: a consensus of the FASB Emerging Issues Task Force (ASU 2009-13). ASU 2009-13 establishes a selling-price hierarchy for determining the selling price of each element within a multiple-deliverable arrangement. Specifically, the selling price assigned to each deliverable is to be based on vendor-specific objective evidence (VSOE) if available, third-party evidence, if VSOE is unavailable, and estimated selling prices if neither VSOE or third-party evidence is available. In addition, ASU 2009-13 eliminates the residual method of allocating arrangement consideration and instead requires allocation using the relative selling price method. ASU 2009-13 will be effective prospectively for multiple-deliverable revenue arrangements entered into, or materially modified, in fiscal years beginning on or after June 15, 2010 The adoption of this accounting standard had no impact on the Company's financial position or results of operations.
 
 In August 2009, the FASB issued ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820)—Measuring Liabilities at Fair Value (ASU 2009-05). ASU 2009-05 provides guidance in measuring the fair value of a liability when a quoted price in an active market does not exist for an identical liability or when a liability is subject to restrictions on its transfer. ASU 2009-15 was effective for the Company beginning with the quarter ended December 31, 2009. The adoption of this accounting standard had no impact on the Company's financial position or results of operations.
 
 (2)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.
  F-8
 
 (3)Loans from Related Parties - Directors and Stockholders
 
 As of March 31, 2011, loans from related parties amounted to $2,426, 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.
 
 (4)Convertible Notes Payable
 
 On July 7, 2010 the Company signed a $30,000 convertible promissory note with a third party.  The note bears interest at 8% per annum and is due on April 8, 2011.  The note has conversion rights that allow the holder of the note at any time to convert all or any part of the remaining principal balance into the Company’s common stock at a price equal to 55% of the average of the lowest three trading prices for the Common Stock during the most recent ten day period.
 
 On September 20, 2010 the Company signed a $27,000 convertible promissory note with a third party.  The note bears interest at 8% per annum and is due on June 23, 2011.  The note has conversion rights that allow the holder of the note at any time to convert all or any part of the remaining principal balance into the Company’s common stock at a price equal to 55% of the average of the lowest three trading prices for the Common Stock during the most recent ten day period.
 
 On January 6, 2011, the Company signed a $35,000 convertible promissory note with a third party.  The note bears interest at 8% per annum and is due on October 10, 2011.  The note has conversion rights that allow the holder of the note at any time to convert all or any part of the remaining principal balance into the Company’s common stock at a price equal to 55% of the average of the lowest three trading prices for the Common Stock during the most recent ten day period.
 
 In accordance with ASC 470, the Company has analyzed the beneficial nature of the conversion terms and determined that a beneficial conversion feature (BCF) exists.  The Company calculated the value of the BCF using the intrinsic method as stipulated in ASC 470.  Based on the stock price on the day of commitment, the discount as agreed to in the notes, and the number of convertible shares, the BCF was valued at $75,272.  The BCF has been recorded as a discount to the notes payable and to Additional Paid-in Capital.
 
 As of March 31, 2011 the Company has recognized $3,536 in interest expense related to the notes and has amortized $47,884 of the beneficial conversion features which has been recorded as interest expense.
 
 (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.
  F-9
 
 On May 26, 2010, the Company issued 10,000,000 shares of its common stock to a Director for services valued at $25,000 based on the current market price of the stock minus a discount for the restricted trading.
 
 On February 25, 2011, the Company issued 12,000,000 shares of its common stock to Directors for repayment of loans of $49,000 based on the current market price of the stock minus a discount for the restricted trading.
 
 On March 15, 2011, the Company issued 8,848,675 shares of its common stock upon conversion of convertible debt of $21,500.
 
 (6)Income Taxes
 
 The provision (benefit) for income taxes for the periods ended March 31, 2011 and 2010 was as follows (assuming a 23% effective tax rate):
 
 2011


2010Current Tax Provision:Federal-Taxable income

$
-


$
-Total current tax provision

$
-


$
-Deferred Tax Provision:Federal-Loss carryforwards

$
16,105


$
7,873Non-deductible amortization


(5,502
)


-Change in valuation allowance


(10,603
)


(7,873
)Total deferred tax provision

$
-


$
-
 
 The Company had deferred income tax assets as of March 31, 2011 and December 31, 2010 as follows:
 
 2011


2010Loss carryforwards

$
79,525


$
68,922Less - Valuation allowance


(79,525
)


(68,922
)Total net deferred tax assets

$
-


$
-
 
 The Company provided a valuation allowance equal to the deferred income tax assets for the periods ended March 31, 2011 and December 31, 2010, because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards.
 
 As of March 31, 2011, the Company had approximately $345,000 in tax loss carryforwards that can be utilized in future periods to reduce taxable income, and expire in the year 2031.
 
 The Company did not identify any material uncertain tax positions on returns that have been filed or that will be filed.  The Company did not recognize any interest or penalties for unrecognized tax benefits.
 
 The Company has filed income tax returns in the United States. All tax years are closed by expiration of the statute of limitations.
  F-10
 
 (7)Related Party Transactions
 
 As described in Note 3, as of December 31, 2010, the Company owed $2,426 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.
 
 As described in Note 5, on May 26, 2010, the Company issued 10,000,000 shares of its common stock to a Director for services valued at $25,000.
 
 On February 25, 2011, the Company issued 12,000,000 shares of its common stock to Directors for repayment of loans of $49,000 based on the current market price of the stock minus a discount for the restricted trading.
 
 For the period ended March 31, 2011, the Company paid consulting fees in the amount of $3,883 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.
 
 (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.
  F-11





Item 2. Management’s Discussion and Analysis or Plan of Operations.





As used in this Form 10-Q, references to the “Mobile Star,” Company,” “we,” “our” or “us” refer to The Mobile Star Corp.  Unless the context otherwise indicates.





Forward-Looking Statements





The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.





For a description of such risks and uncertainties refer to our Registration Statement on Form S-1, filed with the Securities and Exchange Commission on August 12, 2008. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.





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.





Our Business





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. To date, to our knowledge, no such product exists in the market.





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..The Company has 2 outside consultants.





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.





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 prototype is working as a pilot in NY .The Company is currently in negotiations with a US coin operating developer and  manufacturer for the manufacturing and distribution of the Company’s product.





General Working Capital





We have raised as of today $200,000 in gross proceeds  pursuant to the effective Registration Statement on Form S-1, filed with the Securities and Exchange Commission on August 12, 2008 (file no. 333-152952).  We do not have any current intentions, negotiations, or arrangements to merge or sell the Company.





On July 7, 2010 the Company signed a $30,000 convertible promissory note with a third party.  The note bears interest at 8% per annum and is due on April 8, 2011.  The note has conversion rights that allow the holder of the note at any time to convert all or any part of the remaining principal balance into the Company’s common stock at a price equal to 55% of the average of the lowest three trading prices for the Common Stock during the most recent ten day period.





On September 20, 2010 the Company signed a $27,000 convertible promissory note with a third party.  The note bears interest at 8% per annum and is due on June 23, 2011.  The note has conversion rights that allow the holder of the note at any time to convert all or any part of the remaining principal balance into the Company’s common stock at a price equal to 55% of the average of the lowest three trading prices for the Common Stock during the most recent ten day period.





On January 6, 2011, the Company signed a $35,000 convertible promissory note with a third party.  The note bears interest at 8% per annum and is due on October 10, 2011.  The note has conversion rights that allow the holder of the note at any time to convert all or any part of the remaining principal balance into the Company’s common stock at a price equal to 55% of the average of the lowest three trading prices for the Common Stock during the most recent ten day period.





5





We are not aware of any material trend, event or capital commitment, which would potentially adversely affect liquidity. In the event such a trend develops, we believe that we will have sufficient funds available to satisfy working capital needs through lines of credit and the funds expected from equity sales.





Liquidity and Capital Resources





Our balance sheet as March 31 2011 reflects cash in the amount of $9,372. Cash and cash equivalents from inception to date have been sufficient to provide the operating capital necessary to operate to date. The operating expenses and net loss for the three months ended March 31 2011 and March 31 2010 amounted to $44,330 , $70,020 and $ 34,524 and $34,231, respectively .





We do not have sufficient resources to effectuate our business plan in full . We expect to incur a minimum of $100,000  in expenses during the next twelve months of operations.  Accordingly, we will have to raise the funds to pay for these expenses. We might do so through a private offering  or thru additional  debt or equity financing . There can be no assurance that additional capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.





Going Concern Consideration





Our auditors have issued an opinion on our annual 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 twelve 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.





Off-Balance Sheet Arrangements





We have no off-balance sheet arrangements.





Item 3.             Quantitative and Qualitative Disclosures About Market Risk.





A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.





6


Item 4. Controls and Procedures.





Disclosure Controls and Procedures





Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our principal executive officer and principal financial and accounting officers have reviewed the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13(a)-15(e) and 15(d)-15(e)) within the end of the period covered by this Quarterly Report on Form 10-Q and have concluded that the disclosure controls and procedures are effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the last day they were evaluated by our principal executive officer and principal financial and accounting officers.





Changes in Internal Controls over Financial Reporting





There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.





PART II


OTHER INFORMATION





Item 1. 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.





Item 1A.            Risk Factors





A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.





Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.





On February 25, 2011, the Company issued 12,000,000 shares of its common stock  for repayment of loans of $49,000 based on the current market price of the stock minus a discount for the restricted trading.




On March 15, 2011, the Company issued 8,848,675 shares of its common stock upon conversion of convertible debt of $21,500.





Purchases of equity securities by the issuer and affiliated purchasers





None.





Use of Proceeds





None





Item 3.  Defaults Upon Senior Securities.





None.





7


Item 4. Submission of Matters to a Vote of Security Holders.





There was no matters  submitted to a vote of security holders during the three months ended March 31 2011.





Item 5. Other Information.





None





Item 6. Exhibits





31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith)32.1
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley (filed herewith)32.2
Certification of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley (filed herewith)





8


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.





Date: May 13 ,2011
THE MOBILE STAR CORP.By:
/s/ Danny ElbazName: Danny Elbaz

Title: President and Director

(Principal Executive Officer)





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 May 13 2011
By:
/s/ Danny ElbazName: Danny Elbaz

Title: President and Director

(Principal Executive Officer)





Date: May 13 2011
By:
/s/ Eran GronichName: Eran Gronich

Title: Secretary and Director

(Principal  Internal Accounting  and financial Officer)





9