UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended June 30, 2012

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number: 001-10196

STUDIO ONE MEDIA, INC.

(Name of Small Business Issuer as specific in its Charter)

DELAWARE	23-2517953
(State or other jurisdiction of	(IRS Employer
Incorporation or organization)	Identification No.)

7650 East Evans Road, Suite C

Scottsdale, Arizona 85260

(Address of Principal Executive Offices) (Zip Code)

(480) 556-9303

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value

(Title of Class)

1

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   No  

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   No  

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

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.   

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.

Large accelerated filer		Accelerated filer	
Non-accelerated filer		Smaller reporting company	x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

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 completed second fiscal quarter: $13,988,4326.  Shares of Common Stock held by each officer and director and each person, to Registrant’s knowledge, who owns more than 5% or more of the Registrant’s outstanding Common Stock have been excluded because these persons may be deemed to be affiliates. The determination of affiliate status for purpose of this calculation is not necessarily a conclusive determination for other purposes.

As of October 15, 2012, the number of shares of Registrant’s Common Stock outstanding was 32,862,932.

DOCUMENTS INCORPORATED BY REFERENCE

None

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STUDIO ONE MEDIA, INC.

FORM 10-K

FOR THE FISCAL YEAR ENDED

       JUNE 30, 2012

INDEX

		Page
PART I
Item 1.	Business	5
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	23
Item 3.	Legal Proceedings	23
Item 4.	Submission of Matters to a Vote of Security Holders	23
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	29
Item 9A(T).	Controls and Procedures	29
Item 9B.	Other Information	30
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	30
Item 11.	Executive Compensation	33
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	35
Item 13.	Certain Relationships and Related Transactions, and Director Independence	37
Item 14.	Principal Accounting Fees and Services	38
PART IV
Item 15.	Exhibits, Financial Statement Schedules	39

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FORWARD-LOOKING AND CAUTIONARY STATEMENTS

This Annual Report (the “Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended, and as contemplated under the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may relate to such matters as  the Company’s (and its subsidiaries) business strategies, continued growth in the Company’s markets, projections, and anticipated trends in the Company’s business and the industry in which it operates anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market performance and similar matters.  All statements herein contained in this Report, other than statements of historical fact, are forward-looking statements.

When used in this Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” “budget,” “budgeted,” “believe,” “will,” “intends,” “seeks,” “goals,” “forecast,” and similar words and expressions are intended to identify forward-looking statements regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, operating results, and financial position. These forward-looking statements are based largely on the Company’s expectations and are subject to a number of risks and uncertainties, certain of which are beyond the Company’s control.  We caution our readers that a variety of factors could cause our actual results to differ materially from the anticipated results or other matters expressed in the forward looking statements, including those factors described under “Risk Factors” and elsewhere herein.  In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Report will in fact transpire or prove to be accurate.  These risks and uncertainties, many of which are beyond our control, include:

● the sufficiency of existing capital resources and our ability to raise additional capital to fund cash requirements for future operations;

● uncertainties involved in growth and growth rate of our operations, business, revenues, operating margins, costs, expenses and acceptance of any products or services;

● volatility of the stock market, particularly within the technology sector;

● our dilution related to all equity grants to employees and non-employees;

● that we will continue to make significant capital expenditure investments;

● that we will continue to make investments and acquisitions;

● the sufficiency of our existing cash and cash generated from operations;

●   the increase of sales and marketing and general and administrative expenses in the future;

● the growth in advertising revenues from our websites and studios will be achievable and sustainable;

● that seasonal fluctuations in Internet usage and traditional advertising seasonality are likely to affect our business; and

●  general economic conditions.

Although we believe the expectations reflected in these forward-looking statements are reasonable, such expectations cannot guarantee future results, levels of activity, performance or achievements.  We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report.

All references in this report to “we,” “our,” “us,” the “Company” or “Studio One” refer to Studio One Media, Inc., and its subsidiaries and predecessors.

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PART I

ITEM 1. DESCRIPTION OF BUSINESS.

General

Corporate Background

We are a Delaware public company traded on the Over-The-Counter Bulletin Board (ticker symbol: SOMD).  As of June 30, 2012, there were 36,412,601 shares of Common Stock issued and outstanding.   From April 2006 to June 30, 2012, we have raised approximately $16.4 million in the form of equity for purposes of research and development, the launch of MyStudio and AfterMaster and general corporate purposes. The Company's office and principal place of business is located at 7650 E. Evans Road, Suite C, Scottsdale, Arizona 85260 USA, and its telephone number is (480) 556-9303.

Business

Studio One Media, Inc. (“Studio One” or the “Company”) is a diversified media and technology company. The Company’s wholly-owned subsidiaries include MyStudio HD Recording Studios, Inc. and AfterMaster HD Audio Labs, Inc.

Over the past several years, the Company and its subsidiaries have been engaged in the development and commercialization of proprietary (numerous patents pending), leading-edge audio and video technologies for professional and consumer use, including MyStudio® HD Recording Studios, AfterMaster™ HD Audio and ProMaster HD™.

The Company has the ability to generate revenue from four primary sources: (1) MyStudio recording sessions; (2) digital advertising and sponsorship opportunities; (3) website advertising revenues; and (4)  mastering or “AfterMastering”/,”ProMastering” of new music as well as existing catalog music.  The Company believes that Studio One’s award winning and groundbreaking audio/video technologies and unique business models have the potential to have a significant impact in the entertainment and social media sectors.

Business Update

The financial results for fiscal 2012 were below our targets as the Company embarked on several key initiatives, which included redefining our product, staffing, pricing, marketing and demographics. These initiatives included testing of off-site session purchases, promotional sessions, multiple fee changes, testing new locations and staffing, all of which had varying effect on sales. In addition, the Company did not undertake barter or marketing initiatives during the first, third or fourth quarters of our fiscal year and had only limited barter activity during the second quarter. This resulted in an overall decline in sales but a net increase in cash revenue due to some of the more successful initiatives.    

The information collected through the various initiatives has led the company to a new operational plan for its recording studios. The plan includes locating studios at venues which will offer cost and revenue sharing arrangements, as well as promotional and marketing support. Such partnerships eliminate rents and direct staffing costs for the Company, resulting in significant operational cost savings while providing new promotional and sales opportunities for revenue generation. The Company recently entered into such a revenue sharing agreement with Hard Rock International to relocate five of its existing seven studios to Hard Rock venues in the United States. The first Hard Rock/MyStudio is slated to open in Las Vegas in October 2012.

The Company recently entered into a revenue sharing agreement with Hard Rock International to relocate five of its existing seven studios to Hard Rock venues in the United States. The first Hard Rock/MyStudio is slated to open in Las Vegas in October 2012. In addition, subsequent to June 30, 2012, the Company entered into a revenue sharing and marketing agreement for its Nashville based studio with Warner Music Nashville (“WMN”). The agreement calls for WMN to use the studio to create awareness for its popular artists through contests and other interactive initiatives at the studio.

As a result of the new initiatives and realignment on our objectives, we believe that the Company is well positioned to capitalize on its MyStudio and AfterMaster technologies in the upcoming year.  We are encouraged by the growing interest in using MyStudio for casting purposes for national television shows and believe that MyStudio provides a compelling technological breakthrough for talent seekers.  Additionally, we remain very positive on the opportunity for AfterMaster to provide significant future revenues for the Company and its potential to greatly improve digital audio for music, motion pictures and television.

The X Factor

The second season of The X Factor has recently begun on FOX Television Network.  While the new season has only started airing the initial auditions, MyStudio has made a meaningful contribution to the show by providing high caliber contestants who were not otherwise able to attend other audition locations.

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ITEM 1. DESCRIPTION OF BUSINESS - continued

All seven of the studios plus a newly introduced mobile Pepsi/MyStudio unit were used by aspiring musicians to audition for the show.  The mobile Pepsi/MyStudio unit was utilized in nine cities throughout the United States.  The mobile studio was a successful opportunity for us to showcase the quality and ease of use of the studios, as well as build brand awareness for MyStudio in advance of installing studios in other cities and building additional mobile studios.  

As background, we announced in 2011 that we had entered into a multi-year strategic partnership with The X Factor in the United States.  Led by Simon Cowell, a highly acclaimed entertainment entrepreneur and music producer with a notable ability to identify some of the world’s top musical talent, The X Factor had tremendous success in Europe before being introduced into the U.S. last year.  Mr. Cowell recognized the significant opportunity MyStudio offered in terms of broadening the audition base.  Mr. Cowell and other reality television producers understand that their shows are only as good as the talent identified, and MyStudio provides a revolutionary new technology for finding talent in a cost-effective, operationally-efficient manner.

In its inaugural season in 2011, the show gained a tremendous following as a result of its unique and entertaining format for finding top musical talents.  During that season, the show featured some of the most talented aspiring singers ever performing in a nationally televised talent contest. Coached by some of the top names in the music industry, the participants continued to improve upon their existing skills and gain significant exposure for their future careers.  

For that season, it was reported that over 75,000 people auditioned for the show, including several thousand who participated in such auditions through MyStudio. A positively disproportionate number of MyStudio auditionees made it to all X Factor elimination levels, including three of the MyStudio acts making it into the top 32 nationally televised contestants. One of the MyStudio contestants, Drew Ryniewicz, made it into the top 3 female finalists.  We are precluded from reporting the total number of persons who made it through to this year’s boot camp until later in the broadcast season.

Television Production Agreement

Late last calendar year, the Company signed an agreement with one of North America’s largest television and movie production companies for the co-development of a television show for national broadcast. The plan for the television show is to use content produced by MyStudio users to showcase their talents in a variety of categories (e.g., music and comedy). Since the signing, the Company and production company have worked closely on the development process to ensure a fresh and exciting concept that will capture national audiences.    

We are very pleased to be working with the aforementioned television production company as it has had a great rate of success in getting television shows produced and aired on major television networks. Its stature and reach as an international television “powerhouse” provides additional credibility to the quality of our studios and the opportunity for the show to be a success.

While we had hoped that the new show would begin airing in calendar 2012, both parties have agreed that additional investment in the content development process would be prudent and enhance the likelihood for the show’s success.  We are currently working to finalize agreements for the show’s hosts and executive producers, which are internationally renowned entertainers.  We believe that the unique content of the show, coupled with the substantial fan base of the executive producers, will be of great interest to one of the national networks and accelerate the timing for the show’s debut.  

The production of a national television show such as this has been a long-time goal of the Company’s management team. We believe that such a show will allow for significant national and international exposure for MyStudio and thus drive substantially higher studio revenues. Based on the success of the show and the low cost of production, there is a significant possibility of rolling out such a format into many international markets.  

Hard Rock

We recently announced a strategic partnership with globally-recognized Hard Rock International, the owner and operator of over 175 restaurants, hotels and casinos around the world.  The partnership provides for us to install studios in Hard Rock locations. Three initial sites were announced, including the Hard Rock Café – Las Vegas, Hard Rock Café – Chicago and the Seminole Hard Rock Hotel Casino – Hollywood, Florida.  We expect to announce additional locations in the future.

We believe this is a very important development for the company.  First, we have always sought to partner with leading companies in their respective fields where there will be a synergistic value for both parties.  With the strong global brand of Hard Rock and the breadth of its properties around the world, the partnership should significantly enhance the brand awareness of MyStudio.  Secondly, this should create an important revenue stream for the company due to the high traffic of visitors at Hard Rock locations.  The agreement provides for the companies to share in the revenues generated from the studio sessions, as well as on-studio advertising. In exchange for placing studios in the Hard Rock venues, a Hard Rock affiliate will be responsible for overhead costs of the studios, which includes labor and rent.  Additionally, Hard Rock will promote the studios in its marketing campaigns, which could provide an additional uplift in session revenue for other non-Hard Rock MyStudio locations.   Hard Rock intends to seek sponsors and other partners to further compliment the MyStudio/Hard Rock partnership to drive additional traffic to those venues.

Hard Rock’s management views MyStudio as an important element of its new customer acquisition strategy.  The partnership underscores Hard Rock’s commitment to its customers of offering high quality food in fun and entertaining environment.  The placement of the studios within the Hard Rock venues allows patrons to live out their own fantasies and aspirations as “rock stars” through the creation of their own music videos using MyStudio.

The studios located on Hard Rock properties will also participate in other nationally sponsored contests and auditions that are coordinated through Studio One. 

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ITEM 1. DESCRIPTION OF BUSINESS - continued

Warner Music Nashville

The Company recently entered into an exclusive promotion agreement with Warner Music Nashville ("WMN") for the Company's Nashville based studio. WMN is one of the most important country and music labels with superstars such as Blake Shelton, Dwight Yoakam, Faith Hill and Big & Rich. The revenue sharing agreement calls for WMN to utilize MyStudio as an exciting and innovative way to promote its artists as well as connect with their fans by way of interaction with the studio at the mall and through online video contests.  Country music fans will have the opportunity to create a variety of high definition videos and enter them into contests hosted by Warner Music Nashville and MyStudio. The Company expects the arrangement to raise awareness of its brand and generate increased revenues from promotions initiated by such a high profile partner in the Tennessee market.

Additional Strategic Opportunities

Since the introduction of the first studio, one of the primary objectives of the management team has been to develop strategic relationships with industry leaders in the music and entertainment fields.  The Company has successfully partnered with leading names, such as The X Factor, that have allowed it to gain national branding exposure without having to expend significant capital for marketing.

As a result of favorable exposure from The X Factor and positive feedback from other partnerships, we have received a significant number of in-bound interest about using the studios for other reality television shows, live theater and a host of other auditions and contests.  The studios have recently been used for casting for the upcoming new reality series entitled America’s Most Eligible. The new series is produced by One-to-One Magazine, a premier publication for single men and women.   Earlier in the fiscal year, the studios were also used for casting and featured in the new series called Remodeled, which was led by supermodel agent Paul Fisher. The show centered around building a national network of new modeling talent.  Mr. Fisher is also an important member of the Company’s Advisory Board. Numerous other contests using the MyStudio technologies have been hosted in the current and prior years, including music, modeling and comedy.

MyStudio represents a revolutionary change in how auditioning/casting can be performed.  The quality of the audio and videos, coupled with a standardized easy-to-use viewing platform for casting agents, creates a compelling reason for widespread adoption of the technology.  Additionally, production companies can realize substantial cost savings from the use of the studios as they may no longer have to hold “cattle calls”, which require significant expenses for venue rental and associated labor.   As management teams at television and motion picture companies face greater pressure to contain costs for their productions, MyStudio provides a compelling new technology that could very favorably impact their bottom lines as they seek top talent.

Our stated goal has been to gain a national footprint of studios throughout the United States.  The recently announced Hard Rock partnership will aid in the accelerated rollout of new studios in the U.S. and abroad.  We continue to believe that there is a tremendous opportunity for MyStudio in Asia as karaoke plays a significant role in the culture and entertainment.  We continue to receive interest by foreign parties seeking to introduce MyStudio in various Asian markets.  We will continue to evaluate those opportunities as we identify key partners that have the financial and operational wherewithal to support a large rollout of studios in the region.

Based on the high cost of creating a national marketing campaign, the Company to date has had to identify unique and alternative means of marketing its products without incurring major cash outlays. However, based on greater brand awareness from our high profile partnerships and increased inbound interest by prospective advertising partners, we have recently engaged a proven marketing firm with broad relations with major consumer brands to create revenue-generating partnerships and advertising for the Company. This new marketing firm was played an important role in one of recently announced partnerships. Accordingly, we expect to substantially increase advertising and sponsorship revenues in future quarters.

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ITEM 1. DESCRIPTION OF BUSINESS - continued

Studios

We are currently in the process of relocating five studios in accordance with our agreement with Hard Rock International. When those studios are relocated, we will have a total of seven studios available for use by the general public.  

During the year, we also built and successfully deployed the first mobile MyStudio, which was used throughout the country for The X Factor auditions. There has been significant interest in mobile studios for several years.  Pepsi was a sponsor of this studio for the recent X Factor auditions.  Based on the success of this mobile studio, we believe that mobile studios could offer a significant revenue opportunity for the Company from both the session revenues, as well as the ability to sell advertising on the studios as they travel the United States promoting various contests and auditions.

In addition to our installed studio base noted above, we have taken possession of two additional studio chassis for future manufacture and installation. Additionally, we have identified and begun to utilize alternative suppliers for other studio components which have and will allow us to lower the costs of manufacturing studios.  

Subject to the availability of adequate capital, we expect to rollout additional studios – both fixed location and mobile – in the fiscal year ending June 30, 2013.

AfterMaster

We continue to believe that AfterMaster is one of the most significant breakthroughs in digital audio and that it has the potential to create significant revenues for the Company.  The feedback from music industry executives, leading artists, mastering houses and top consumer products companies has been exceptional.  The broad commercialization of this technology is a top priority for the management and Board of Directors of the Company.

AfterMaster was an internally-developed, patents-pending mastering and remastering technology that makes music and other audio files sound significantly louder, fuller and clearer than traditionally mastered music.  The technology can be applied to virtually all audio sources including music, radio, motion pictures and television.  The technology has been used to enhance music created by such artists as Lady Gaga, Janet Jackson, and many others.  AfterMaster has received credits on a number of top selling albums.

Like all newly introduced technologies, the adoption period can take longer than expected. This too has been the case for AfterMaster despite the very favorable feedback from music industry leaders (e.g., record label executives, producers and musicians).   With significant external forces adversely affecting the music industry, including industry consolidation and digital piracy, music industry executives have focused their resources on addressing such challenges.  With recent stabilization within the industry, executives are now able to refocus their efforts on new revenue-enhancing opportunities.  We believe that AfterMaster provides the record labels with such a significant opportunity as they are able to remonetize their catalogs by offering high definition (“HD”) audio through the use of our technology.   As such, we are in discussions with several leaders in music about utilizing our technology for the re-release of the HD versions of their catalogs.  Such songs can be released in physical format (e.g., CDs) or digital downloads through leading online music retailers.

Further supporting our beliefs about the public’s desire for higher quality audio is a growing grassroots movement by some of the top musicians who have publicly stated they are unhappy with the quality of the current state of digital audio.   As we begin “AfterMastering” music for top selling and influential artists and they have an opportunity to experience the significant difference from our technology, we believe that the musician-led movement to improve the sound of their music could grow significantly. Additionally, artists recognize that they can greatly benefit through future royalties from the re-release in the HD format of their music.   Accordingly, this could be a strong forcing function for the record labels to adopt such technologies broadly.

In addition to the record labels, we are in discussions with other potential users of the technology.  Such discussions include several consumer electronics companies that see the opportunity to differentiate their products with enhanced audio capabilities offered through the use of an AfterMaster chip in their products.   We believe this represents an enormous market for the Company to have its product integrated into phones, televisions, radios and a host of other products.   As the convergence of features for such consumer electronics continues, it can be difficult for leading consumer electronics companies to differentiate their products. We believe that AfterMaster provides a unique and significant competitive opportunity for one or more of the leading consumer audio OEMs.

The Company’s Advisory Board of influential leaders in the music and motion picture industry are a critical element of the Company’s marketing strategy for AfterMaster.

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ITEM 1. DESCRIPTION OF BUSINESS - continued

ProMaster

Utilizing technologies created in the development of AfterMaster, the Company has recently introduced a consumer version of AfterMaster which it has branded as ProMaster HD.

The ProMaster product was recently introduced through a new relationship with music retail giant Guitar Center.  Guitar Center has over 225 stores nationally and caters to recreational, amateur/aspiring and professional musicians.  

The ProMaster product will be marketed by Guitar Center through its catalogs, mailers and online advertising.    Musicians are able to upload their files and have them mixed, mastered and/or remastered by ProMaster at an affordable price and a short turnaround period.  

Alternatively, musicians can send their music directly to our www.ProMasterHD.com.   We have recently begun a viral marketing campaign for the product on various websites frequented by amateur musicians.   Key spokespersons for the campaign include our own audio engineer and Rock and Roll Hall of Fame nominee Shelly Yakus and music producers Rodney Jerkins, Richard Perry and Andrew Dawson.  

Music industry sources have stated that over 10 million independent songs are produced each month around the world, most of which will never be heard by anyone.  The expense of mastering such music for the amateur musician is often cost prohibitive, as it can cost over $500 per song.  At a price of $34.99 per song, ProMaster creates a compelling offering for those seeking to significantly enhance the quality of their music for personal use or with intent to showcase their music in hopes of advancing their career aspirations.

Based on the enormous addressable market for such a product, we believe that ProMaster has the potential to generate significant revenues for the Company.

Corporate

In November 2011, Board member Frank Perrotti, Jr. was elected to the position of Chairman of the Board of Directors of Studio One.  Mr. Perrotti is a successful and well regarded businessman with proven experience in building corporations organically and through acquisitions. Mr. Perrotti has provided the Company with more than $3,600,000 in loans to date to assist in the financing needs required to build and install additional studios.

In March 2012, Joseph Desiderio was hired as the Company’s new chief financial officer and was also elected to the Board of Directors.  Mr. Desiderio brings more than 25 years of financial and operational experience to the Company having worked with both public and private companies.  The Company’s then CFO, Kenneth Pinckard, was named as General Counsel and remains on the Board of Directors.

The Company has been awarded three patents over the past year.  The Company has a very aggressive intellectual property strategy to protect the MyStudio, AfterMaster and related technologies it has developed.  The Company has a number of other patents pending.Over the past several years, the weak capital markets have constrained our growth and the full implementation of our business plan for the roll-out of new studios.  Despite these difficulties, the Company has and continues to raise capital for studio operations and advancement of AfterMaster. We expect to continue raising required capital through both equity and debt financings to further our corporate objectives.

As capital markets improve and we begin to see fruits of new and pending revenue opportunities, we believe that we will be able to raise substantial additional capital to execute our full business plan and create significant shareholder value through our MyStudio and AfterMaster products.  Such funds are in addition to the aforementioned credit facility.

Advisory Board

Recognizing the significance of our technologies, we have been able to attract some of the leading music and entertainment executives to our Advisory Board. The Advisory Board is an important resource for the Company in terms of thought leadership and strategic introductions. This distinguished group includes:

● Ted Field – Chairman & CEO of Radar Pictures (over 60 motion pictures generating over $7 billion in gross revenues); co-founder of Interscope Records; former owner of Panavision.

● Frank Perotti, Jr. - Founder, Chairman and Chief Investment Officer of FPJ Investments (“FPJ”), a private investment firm based in New Haven, CT.

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ITEM 1. DESCRIPTION OF BUSINESS - continued

● Paul Fisher – internationally recognized modeling agent; CEO of The Network.

● Jason Flom – former CEO of Atlantic Records, Virgin Music, Capitol Music Group and Lava Records.

● Sheila Jaffe – Emmy Award winning casting director; partner in Walken/Jaffe Casting; casting for notable shows as Entourage and The Sopranos.

● Rodney Jerkins – Grammy Award winning music producer/song writer; clients include Janet Jackson, Madonna, Lady Gaga among others.

● Allan Kaplan – serial entrepreneur and venture capitalist; Director of Clearview Capital Partners.

● Andrew Knight – Director of News Corporation; former Editor of The Economist.

● Paul Oreffice – former Chairman & CEO of The Dow Chemical Company; served on the Boards of The Coca-Cola Company, Morgan Stanley, CIGNA and Nortel.

● Richard Perry – world renown record producer and winner of seven Grammy Awards; clients include Barbra Streisand and Cher.

● Diane Warren – considered to be the world’s most prolific songwriter; Golden Globe and Grammy Award winner.

● Charles Weber – former CEO of Lucas Films; former COO of Embassy Communications.

MyStudio HD Recording Studios

Studio One Media, Inc. has developed MyStudio, a self contained, state-of-the-art, high definition (“HD”) interactive audio/video recording studio designed for installation in shopping malls and other high traffic areas.

MyStudio offers consumers true professional recording studio-quality audio and HD broadcast-quality video with an ease, economy and convenience never before available to the public. MyStudio and its accompanying website www.mystudio.net incorporate into a single entertainment venue some of the best elements of the world’s leading Internet and entertainment properties including video sharing, social networking and talent-related television programming. MyStudio eliminates the high cost and technological and logistical barriers inherent in the creation of high quality production and uploading of video content onto the Internet for both amateurs and professionals alike.

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MyStudio enables users, for a fee, to record up to a five-minute personalized video with professional-quality backdrop, lighting and sound. The studios feature Hollywood-style green screen technology, and users can select from over a thousand HD virtual backgrounds (static and dynamic) and thousands of licensed karaoke tracks from Sony/ATV Music Publishing, EMI Music Publishing, Universal Music Group, BMG and others. The studio lighting is custom programmed for each virtual background, and the sound quality is derived from a specially engineered acoustic design and a proprietary audio signal sequencing process. Professional users, such as musicians and entertainers, often pay hundreds or thousands of dollars for comparable professionally produced audio and video.

Finished videos are available for viewing within minutes of completion of the recording at www.mystudio.net. Videos are protected with a privacy pass-code, and uses can decide whether to make their videos available to the public or keep them private. The website offers users the opportunity to share videos and create member profile pages in a dynamic social networking environment. Users may also create links between our website and other social networking sites or their own websites, such as their own small businesses.  MyStudio members can enter contests, order free DVDs or CDs of their videos, download MP3 audio files (restrictions apply), access embedded codes or print high resolution photos from their video.

MyStudio has been used to create videos for music, modeling, comedy, dating, job resumes, auditions, and personal messages and greetings. Users can also enter their videos into industry-sponsored music, casting, modeling and comedy contests. In addition, the Company has offered various themed holiday greetings, as well as greetings to U.S. troops overseas.

Currently there are MyStudio locations included in the greater metropolitan areas of Phoenix, Nashville and Las Vegas. Four additional studios are in various stages of moving to Hard Rock locations.

MyStudio Business Strategy

We plan to continue installing MyStudios into key markets throughout the U.S. followed by a roll-out into international markets. The ease and quality of the studios have created repeat users and increase traffic to the Company’s website, www.mystudio.net.We believe that MyStudio offers a service never before available to the public - a professional quality recording experience at an affordable price. The HD virtual backgrounds, professional lighting and specially engineered sound cannot be replicated by users at home or outside a professional studio.

Connect Talent to Talent Seekers. MyStudio provides the aspiring artist or entertainer with a cost-effective, professional quality platform to showcase his or her talent. Entertainers often pay hundreds or thousands of dollars for comparable professionally produced audio and video products. Users can often afford to make numerous videos to showcase their talents due to relative minimal price point for using MyStudio. There have been several incidents where users’ videos have allowed them to be discovered by talent agents. MyStudio played an integral part of the casting process to find talent for both seasons of The X Factor in the United States, as well as for other reality television shows.

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ITEM 1. DESCRIPTION OF BUSINESS - continued

The studios provide entertainment recruiters with an entirely new method for locating talent. Using MyStudio’s software casting applications, casting directors are able to review a standardized and efficient format for judging talent prospects. This contrasts with the inefficiencies of them receiving, loading and screening numerous formats of video (e.g., VHS and DVDs) for talent.

Additionally, MyStudio allows prospective contestants the ability to perform their auditions on their own time and in unlimited quantities versus the current casting call standard of having only a few moments and a single opportunity in front of a casting agent. Reality television producers understand that their shows are only as good as the talent. MyStudio will allow for a greater number of contestants to try-out for these shows which provides producers with a much deeper well of talent. MyStudio has the ability to set a new standard and create a new marketplace for sellers and buyers of talent.

We have focused significant efforts on this aspect of our business model and have formed strategic partnerships with Simon Cowell’s The X Factor, Hard Rock International, Mark Burnett Productions, Back Stage Casting and RealityWanted.com.

Build an Online Community Featuring User-Generated Content. Our website www.mystudio.net captures the social networking phenomena Facebook and video sharing of YouTube and combines it with a superior audio/visual experience. Our website allows users to create personal profiles, share videos with family and friends and make their videos available to the public, all of which encourage user loyalty and viral growth opportunities.

Expand the MyStudio Concept into New Vertical Industries. The potential utilization of the recording studios extends well beyond the entertainment industry. The studios can facilitate efficiency, personalization and differentiation in many industries including professional recruitment and staffing, Internet dating, corporate training, online greeting cards and business promotion. We expect to develop future partnerships for content and users with recruiting, dating and greeting card companies among others.

MyStudio Business Model

Our “bricks and clicks” business model is currently based upon three primary sources of revenue: recording session fees from MyStudio and advertising/sponsorship revenue from the individual studios and advertising on the MyStudio website. We plan to continue driving recording session revenue through the use of industry-sponsored music, modeling and talent contests with new and repeat users, as well as the installation of additional studios. Additional studios are expected to drive exponential traffic to the MyStudio website as each new video generates unique website visitors due to the viral effect of our video sharing offering. We believe that the success of the studios depends on our ability to raise additional capital, deploy multiple studios and continue to create strategic partnerships that drive traffic to the studios. Our current installed base of studios is insufficient to generate adequate revenues to achieve overall profitability for the Company. By deploying multiple studios and gaining “critical mass”, we believe that we will be able to successfully implement our business plan, attract a greater number of strategic partnerships and achieve profitability.

Recording Session Revenue. Each studio is designed to record videos during a mall or store’s operating hours, which can average 11 hours per day. MyStudio charges a fee per session for use of the studio. Each session lasts up to five minutes. There are two pay stations on the studio to expedite the song and background selection and payment process. Additionally, users may prepay their sessions from home and have an opportunity to select from a greater variety of songs and backgrounds. These payment options increase throughput for those using the studio.

MyStudio offers over 1,000 HD backgrounds from which to select, or users may provide their own custom backgrounds. Additionally, MyStudio currently offers thousands of songs licensed from Sony/ATV Music Publishing, EMI Music Publishing, Universal Music Group and others for karaoke usage. In many instances, users perform their own songs using their guitar, keyboard or other instruments, which may be plugged into the studios for a professionally sounding quality video.

On-Studio Advertising and Sponsorship Revenue. The exterior of the studios contain eight (8) 37” LCD flat screen monitors that are used to display videos produced through MyStudio and promote advertising messages from selected sponsors and third party advertisers. We have sold advertising on the studios, and we believe that we will be able to secure national advertising sponsors when we have a greater number of studios in operation and through our partnership with Hard Rock International. Website Advertising Revenue. The number of visitors, visitor demographics and the time spent on a website are the primary drivers behind advertising-based revenue models for Internet properties. The user-generated content created through MyStudio is the primary traffic generator for the MyStudio website.

We expect web traffic to grow substantially as additional studios are launched. We believe that our web property can create significant value for our shareholders. The leading social media websites, such as Facebook, have created substantial valuations for themselves based on website advertising. Unlike a number of other social media and Internet companies, we are not solely dependent upon website advertising to generate revenues. Our more diverse “bricks and clicks” business model allows our shareholders to benefit from multiple revenue streams, with the website being just one of the Company’s valuation drivers.

MyStudio Marketing and Promotion Strategy

 Our business plan calls for the establishment of regular events, auditions and contests to drive traffic to the studios; this revenue strategy has been confirmed by a marked increase in studio traffic when contests and promotions have been offered. Our marketing and promotion strategy is designed to drive traffic through the studios which in turn drives traffic to our website.

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ITEM 1. DESCRIPTION OF BUSINESS - continued

To date, we have not invested significant dollars for marketing as we believe such marketing efforts would not have been prudent without a national footprint for MyStudio. We expect to significantly increase our national marketing efforts to drive sponsorship and advertising revenues later in the future.  We did, however, recently engage a national marketing agency to assist us in securing advertising and sponsorship opportunities. With a broader installed studio base in major metropolitan markets and continued favorable feedback from the high profile auditions that we have and are hosting, we believe that we will have a much greater opportunity to gain national attention of large sponsors who understand the opportunity to partner with MyStudio for contests and auditions to favorably market their own businesses. To date, we have sold sponsorships that have led to increased utilization of the studio, as well as advertising monies.

We remain focused on forming strategic partnerships at the local, regional and national level with talent seekers (the television, music, film, performing arts and modeling industries), the media (radio and television stations and printed media) and corporate sponsors who may seek access to our expanding user base. Such partnerships are designed to generate industry-sponsored music, modeling and talent contests to stimulate trial of and demand for the studios.

MyStudio has successfully partnered with some of the top names in the entertainment business, as described below.

In 2011, we announced a multi-year partnership with Simon Cowell’s The X Factor, which has been one of the most successful new music-centric show introductions in the United States over the past few years. We believe that this agreement, among others, demonstrates that the Company has established its ability to partner with some of the leading producers in the music and entertainment business.

Led by Mr. Cowell, a highly acclaimed entertainment entrepreneur and music producer with a notable ability to identify some of the world’s top musical talent, The X Factor has had tremendous success in Europe. The show debuted last fall on the FOX Network and has recently begun its second season.  In its inaugural season, the show quickly generated a very significant following throughout the United States. The high quality of the talent selected to participate in the show has been a key source of fan enthusiasm for the show since its debut.

It has been reported that over 75,000 people auditioned for the show’s first season, including several thousand who participated in such auditions through MyStudio. Mr. Cowell recognized the significant opportunity provided by MyStudio in broadening the contestant base for his show. MyStudio allowed for contestants to visit the MyStudio locations in addition to the primary casting cities where “cattle calls” were held. Despite the enormous number of persons auditioning for the show, three of the acts using MyStudio made it into the show’s final 32 to date, as well as one of those acts advancing as a final three female’s finalist.

The studios were used again this year for Season 2 with both the fixed location and new Pepsi/MyStudio mobile unit being utilized.  Through the first four shows of the current season, there were 21 contestants that had been approved to go to the next level called “boot camp”. Of those 21, three were contestants who auditioned at MyStudio. The studios were used for two other reality television shows recently, including America’s Most Eligible and Remodeled.

The partnership with The X Factor demonstrated that the MyStudio recording studios are an efficient means for allowing for a large number of people in multiple cities to try-out for reality television shows and finding top talent. Accordingly, we expect television, theater and motion pictures to begin to follow Mr. Cowell’s lead in utilizing this technology to enhance their casting processes and thereby creating the potential for a number of other strategic partnerships for the Company as we install additional studios.

Our partnership with The X Factor has also allowed the Company to gain national attention for its studios without having to expend significant amounts of internal funds to achieve a comparable level of positive exposure and brand development.

We recently announced a strategic partnership with globally-recognized Hard Rock International, the owner and operator of over 175 restaurants, hotels and casinos around the world.  The partnership provides for us to install studios in Hard Rock locations. Three initial sites were announced, including the Hard Rock Café – Las Vegas, Hard Rock Café – Chicago and the Seminole Hard Rock Hotel Casino – Hollywood, Florida.  We expect to announce additional locations in the future.

We believe this is a very important development for the company.  First, we have always sought to partner with leading companies in their respective fields where there will be a synergistic value for both parties.  With the strong global brand of Hard Rock and the breadth of its properties around the world, the partnership should significantly enhance the brand awareness of MyStudio.  Secondly, this should create an important revenue stream for the company due to the high traffic of visitors at Hard Rock locations.  The agreement provides for the companies to share in the revenues generated from the studio sessions, as well as on-studio advertising. In exchange for placing studios in the Hard Rock venues, they will be responsible for overhead costs of the studios, which includes labor, utilities and rent.  Additionally, Hard Rock will promote the studios in its marketing campaigns, which could provide an additional uplift in session revenue for other non-Hard Rock MyStudio locations.   Hard Rock intends to seek sponsors and other partners to further compliment the MyStudio/Hard Rock partnership to drive additional traffic and generate revenue at those venues.

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ITEM 1. DESCRIPTION OF BUSINESS - continued

Hard Rock’s management views MyStudio as an important element of its new customer acquisition strategy.  The partnership underscores Hard Rock’s commitment to its customers of offering high quality food and fun in an entertaining environment.  The placement of the studios within the Hard Rock venues allows patrons to live out their own fantasies and aspirations as “rock stars” through the creation of their own music videos using MyStudio.

The studios located on Hard Rock properties will also participate in other nationally sponsored contests and auditions that are coordinated through Studio One.

Mark Burnett Productions (“MBP”) has used MyStudio in the casting of its shows, including Are You Smarter Than a Fifth Grader and Bully Beatdown. MBP is a leading production company for primetime television, cable and the Internet, and has produced over 1,100 hours of television programming which regularly air in over 70 countries around the world. 

MyStudio has been used by entertainment leaders Simon Fuller, Perez Hilton and Jamie King in their casting for Boy Band, a contest to identify five males between the ages of 13 and 21 with outstanding dance and vocal talent to form a high profile band. Mr. Fuller is the producer of American Idol. Mr. Hilton is a famous celebrity gossip columnist with a very extensive following. Mr. King is a world renowned choreographer. MyStudio was selected by Boy Band for the convenience and ease by potential contestants and was responsible for finding one of the Boy Band members. In addition to Boy Band, Mr. Fuller, through 19 Entertainment and MySpace, used MyStudio for the auditions of If I Can Dream, a reality television show offered through Hulu.com. The studios were used by a number of aspiring artists to perform their audition demos in hopes of being selected to join the cast of the show.

We have an ongoing partnership with RealityWanted.com, a leading source for reality TV casting calls in the U.S.  The partnership provides for members of both companies to create audition videos for hundreds of top reality television shows. Most reality TV applicants are missing one of the most critical components to being selected - the video. This partnership created a turnkey reality TV casting platform to help complete the casting process. Users can easily supplement their RealityWanted.com profiles with a high-quality video that better promotes their talents and unique personality traits, thus giving them a greater chance of being selected for a reality television show.  We also have a partnership with Back Stage Casting, the entertainment industry’s most recognized resource for real-time casting and audition information, acting advice, job listings and entertainment news. Utilizing MyStudio, Back Stage is able to offer its members and audition pieces for specific casting calls. Film, theater and television productions are asking actors to submit audition videos specific to their projects to streamline the casting process and identify the most talented candidates. MyStudio offers actors a high quality, convenient and inexpensive way to create their professional videos and increase their chances of being selected.  A number of contests using MyStudio have been sponsored by some high-profile music, modeling and comedy companies. We expect to continue entering into additional strategic partnerships with other high profile companies in the music, television, modeling and comedy fields to further traffic to our studios.

We continue to aggressively pursue additional reality TV, music, modeling and comedy audition opportunities.

AfterMaster HD Audio

We have developed a revolutionary audio mastering technology branded AfterMaster, for which the technology is held by AfterMaster HD Audio Labs, Inc., a wholly-owned subsidiary of the Company. We believe that the AfterMaster process for mastering audio makes music significantly louder, fuller and clearer than traditionally mastered music. The technology is a proprietary, patents-pending combination of hardware and software which was developed by our audio engineering team. It can be applied on virtually all audio sources including, music, radio, television and film.

The AfterMaster process can be used to create both a master from a master audio mix or to “AfterMaster” existing music that has already been mastered. The technology allows any mastered audio to be remastered without the need to access the master mix. The business model includes the mastering and “AfterMastering” of both new music releases as well as catalog music. We believe that AfterMaster can be the technological impetus that can revitalize the music industry by providing consumers with a new leap in sound quality and added value. Some music industry experts who have recently been introduced to our technologies have equated it with high definition television: this technology has the opportunity to do for music what HD has done for television.

We continue to believe that AfterMaster is one of the most significant breakthroughs in digital audio and that it has the potential to create significant revenues for the Company.  The feedback from music industry executives, leading artists, mastering houses and top consumer products companies has been exceptional.  The broad commercialization of this technology is a top priority for the management and Board of Directors of the Company.

AfterMaster was an internally-developed, patents-pending mastering and remastering technology that makes music and other audio files sound significantly louder, fuller and clearer than traditionally mastered music.  The technology can be applied to virtually all audio sources including music, radio, motion pictures and television.  The technology has been used to enhance music created by such artists as Lady Gaga, Janet Jackson, Madonna and many others.

We are in discussions with several leaders in music about utilizing our technology for the re-release of the HD versions of their catalogs.  Such songs can be released in physical format (e.g., CDs) or digital downloads through leading online music retailers.  In addition to the record labels, we are in discussions with other potential users of the technology.  Such discussions include several consumer electronics companies that see the opportunity to differentiate their products with enhanced audio capabilities offered through the use of AfterMaster.   We believe this represents an enormous market for the Company to have its product integrated into phones, televisions, radios and a host of other products.

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ITEM 1. DESCRIPTION OF BUSINESS - continued

The Company’s Advisory Board of influential leaders in the music and motion picture industry are a critical element of the Company’s marketing strategy for AfterMaster.

ProMaster

Utilizing technologies created in the development of AfterMaster, the Company has recently introduced a consumer version of AfterMaster which it has branded as ProMaster HD.

The ProMaster product was recently introduced through a new relationship with music retail giant Guitar Center.  Guitar Center has over 225 stores nationally and caters to recreational, amateur/aspiring and professional musicians.  The ProMaster product will be marketed by Guitar Center through its catalogs, mailers and online advertising.    Musicians are able to upload their files and have them mixed, mastered and/or remastered by ProMaster at an affordable price and a short turnaround period.    Alternatively, musicians can send their music directly to our website www.ProMasterHD.com.

Music industry sources have stated that over 10 million songs are produced each month around the world, most of which will never be heard by anyone.  The expense of mastering such music for the amateur musician is often cost prohibitive, as it can cost over $500 per song.  At a price of $34.99 per song, ProMaster creates a compelling offering for those seeking to significantly enhance the quality of their music for personal use or with intent to showcase their music in hopes of advancing their career aspirations.

Based on the enormous addressable market for such a product, we believe that ProMaster has the potential to generate significant revenues for the Company.

Intellectual Property and Licensing

We have implemented an aggressive intellectual property program including the filing of numerous foreign and domestic patent applications and trademark applications with the U.S. Patent and Trademark Office, all of which are designed to protect what we believe is innovative and proprietary technology. We also enter into confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with third parties, and we rigorously control access to proprietary technology. We currently have three patents approved with numerous patents and trademarks pending.  

Employees

As of the end of our fiscal year on June 30, 2012, we employed thirteen full-time and twenty nine part-time employees, including attendants at the MyStudio locations.  We expect to seek additional employees in the next year to handle anticipated potential growth.

We believe that our relationship with our employees is good.  None of our employees are members of any union nor have they entered into any collective bargaining agreements.

Facilities

Pursuant to a lease originally dated January, 2006, we currently occupy approximately 11,800 square feet of office space located at 7650 E. Evans Rd., Suite C, Scottsdale, Arizona on a month-by month basis.  The total lease expense is approximately $9,609 per month, payable in cash and Common Stock of the Company.

We also lease an office in Los Angeles for use by our audio team in connection with our AfterMaster product.  This lease expires on August 31, 2013.  The total lease expense for the facility is approximately $4,305 per month, and the total remaining obligations under these leases at June 30, 2012 were approximately $8,725.

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ITEM 1A.   RISK FACTORS.

You should carefully consider the risk factors and other uncertainties set forth below and all other information contained in this Report, as well as the public disclosure documents incorporated by reference herein.  If any of the events contemplated by the following risks actually occurs, then our business, financial condition, or results of operations could be materially adversely affected. As a result, the trading price of our Common Stock could decline, and you may lose all or part of your investment. The risks and uncertainties below are not the only risks facing our company. Additional risks and uncertainties, including those that are not yet identified or that we currently believe are immaterial, may also adversely affect our business, financial condition or operating results. 

History of Operations and Dependence on Future Developments.

We own proprietary audio/video recording technologies, patents, patent and trademark applications, studio design, methods and related concepts for the MyStudio HD Recording Studios and AfterMaster.  

MyStudio is a self-contained interactive video recording studio designed for installation in shopping malls and other pedestrian high traffic public areas.  The studios enable the public, for a fee, to record their video and voice images in a stand alone, state-of-the-art recording studio and enter their MyStudio performances in music, modeling and other talent related contests.  In addition, MyStudio can be used to record video resumes, dating profiles and personal messages.  We believe the MyStudio methods, processes and business model are proprietary and a unique opportunity in the entertainment industry. 

We opened our first studio in September 2008 and have since installed multiple studios in the U.S.  We intend to continue placing our studios in malls across America, as well as expand into other high traffic locations and theme parks.  Ultimately, MyStudio intends to be a one-stop accessible facility that acts as a link between an entertainment hopeful and the acting, fashion and music industries.  Our revenues are generated by services provided by the studio, as well as through website advertising. 

Subsequently, we have introduced our audio mastering technologies, AfterMaster and ProMaster.  The AfterMaster technology has been utilized by some of the top name artists within the music industry.  We are in discussions with record labels about adopting the technology for use in re-monetizing their music catalogues, as well as engaging in discussions with consumer electronics companies interested in utilizing the technology for their products.  ProMaster was recently introduced to the public. 

We have a history of losses and will likely realize future losses.  Both MyStudio and AfterMaster have limited operations and are currently generating modest revenues.  

We are dependent upon our management, certain shareholders and investors for fundraising.  We expect additional operating losses will occur until revenues are sufficient to offset our costs for marketing, sales, general and administrative and product and services development.  We are subject to all of the risks inherent in establishing an early stage business enterprise.  Since we have limited operations, there can be no assurance that our business plan will be successful.  The potential for our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered with an early stage business and the competitive environment in which we will operate.  A prospective investor should be aware that if we are not successful in achieving our goals and achieving profitability, any money invested in us will likely be lost.  Our management team believes that our potential near-term success depends on our success in manufacturing, marketing and selling our products and services. 

As an early stage company, we are particularly susceptible to the risks and uncertainties described herein, and we will be more likely to incur the expenses associated with addressing them.  Our business and prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in early stages of development.  These risks are particularly severe among companies in new markets, such as those markets in which we expect we will operate.  Accordingly, shareholders will bear the risk of loss of their entire investment in our shares.  

New Business Model.

We have a relatively new business model in an emerging and rapidly evolving market.  Accordingly, this makes it difficult to evaluate our future prospects and may increase the risk that we will not continue or be successful.  We will encounter risks and difficulties as a company operating in a new and rapidly evolving market.  We may not be able to successfully address these risks and difficulties, which could materially harm our business and operating results. 

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ITEM 1A.   RISK FACTORS - continued

Limited Capital and Need for Additional Financing.

The funds currently available to us are inadequate to fully implement our business plan.  Until we have achieved revenues sufficient for us to break-even, we will not be a self-sustaining entity, which could adversely impact our ability to be competitive in the areas in which do and intend to operate.  We require additional funding for continued operations and will therefore be dependent upon our ability to raise additional funds through bank borrowing, equity or debt financing or asset sales. We expect to access the public and private equity and/or debt markets periodically to obtain the funds we need to support our operations and continued growth.  There is no assurance that we will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to us.  If we require, but are unable to obtain, additional financing in the future on acceptable terms, or at all, we will not be able to continue our business strategy, respond to changing business or economic conditions, withstand adverse operating results or compete effectively.  If we cannot obtain needed funds, we may be forced to curtail, in whole or in part, or cease its activities altogether.  When additional shares are issued to obtain financing, current shareholders will suffer a dilutive effect on their percentage of stock ownership.   

We require substantial capital to manufacture our recording studios.  Although we intend to engage in subsequent debt and equity offerings of our securities to raise additional working capital for operations, studio manufacturing and the AfterMaster operations, we have no firm commitments for any additional funding, either debt or equity, at the present time.  Insufficient financial resources may require us to delay or eliminate all or some of our sales and marketing efforts to generate revenues for both MyStudio and AfterMaster, which could have a material adverse effect on our business, financial condition and results of operations.  There is no certainty that our expenditures will result in a profitable business as proposed.

Lack of Diversification.

Our size makes it unlikely that we will be able to commit our funds to diversify the business until we have a proven track record, and we may not be able to achieve the same level of diversification as larger entities engaged in this type of business.

Competition.

We know of no competitors offering a similar high-quality, in-mall HD recording studio experience.  We believe that we are first to market with a recording studio with such functionality and quality combined with a groundbreaking website.  It would require a competitor significant time and capital to design, develop and manufacture a recording studio with similar functionality and features, giving us valuable time to gain consumer recognition and a foothold in the market.  Additionally, we have pursued an aggressive intellectual property strategy, including the recent approval of a patent that provides additional competitive barriers.

Additionally, based on feedback from executives within the music industry, we have not been made aware of any significant competitors offering an audio enhancement technology of the same quality level as AfterMaster.

While the technologies surrounding MyStudio and AfterMaster are cutting edge and unique, we believe there are other factors that will separate us from competitors.  We have embarked on an aggressive intellectual property protection program which we believe will be significant barriers to market entry to potential competitors for our current product offerings.  In addition, we employ individuals who have long standing relationships and expertise in various segments of the entertainment, marketing, finance and communications industries, which we expect will help facilitate the negotiation of favorable partnerships, sponsorships and industry support for MyStudio and AfterMaster.

Nonetheless, many potential competitors have greater name recognition, industry contacts and more extensive customer bases that could be leveraged to accelerate their competitive activity.  Moreover, potential competitors may establish future cooperative relationships among themselves and with third parties to enhance their products and services in this market space in which we propose to operate.  Consequently, competitors or alliances may emerge and rapidly acquire significant market share.  We cannot assure you that we will be able to compete effectively with any competitor should they arise or that the competitive pressures faced by us will not harm our business. Such intense competition will limit our opportunities and have a materially adverse effect on our profitability or viability.

Our web property competes in a growing social media market with companies like Facebook, YouTube and MySpace.  We believe our HD-quality and user-generated content is unique and may allow us to differentiate ourselves from other social media companies.

Performance - Market Acceptance.

The quality of our products, services, its marketing and sales ability, and the quality and abilities of our personnel are among the operational keys to our success.  We are heavily dependent upon successfully completing our product development, gaining market acceptance and subsequently recruiting and training a successful sales and marketing force.  There can be no assurance that we will be successful in attracting, training or retaining the key personnel required to execute the business plan.  Also, there can be no assurance that we can complete development of new technologies so that other companies possessing greater resources will not surpass it.  There can be no assurance that we can achieve our planned levels of performance.  If we are unsuccessful in these areas, it could have a material adverse effect on our business, results of operations, financial condition and forecasted financial results.  The entertainment industry may resist our business plan and refuse to participate in contests and other sponsorship events.   In that case we would be forced to fund and sponsor our own contests which would affect operating capital, liquidity and revenues.   The music industry may also resist the adoption of our AfterMaster technology for new and catalogue releases.

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ITEM 1A.   RISK FACTORS - continued

Dependence on Intellectual Property - Design and Proprietary Rights.

Our success and ability to compete depends to a degree on our intellectual property.  We will rely on copyright, trademark and patent filings as well as confidentiality arrangements, to protect our intellectual property locally and internationally.  Studio One and its subsidiaries have filed numerous patent applications relating to MyStudio, AfterMaster and related technologies and processes, and while we believe the technologies, methods and processes merit patent protection, there is no assurance that any patent will be issued.  If circumstances make it impossible to try to adequately protect our intellectual property, that intellectual property could be used by others without our consent and there could be material adverse consequences to us. We have filed several trademark applications and have received Notices of Allowance on four of those applications. Effective protection may not be available for our service marks. Although we plan to continue to register our service marks in the United States and in countries in which we do business or expect to do business, we cannot assure you that we will be able to secure significant protection for these marks. Our competitors, if any exist, or others may adopt product or service names similar to ours, thereby impeding our ability to build brand identity and possibly leading to client confusion. If circumstances make it impossible to adequately protect the name and brand, this could seriously harm our business.

Policing unauthorized use of our intellectual property is made especially difficult by the global nature of the high technology industry and difficulty in controlling hardware and software.  The laws of other countries may afford us little or no effective protection for our intellectual property.  We cannot assure you that the steps we take will prevent misappropriation of our intellectual property or that agreements entered into for that purpose will be enforceable. In addition, litigation may be necessary in the future to enforce our intellectual property rights; determine the validity and scope of the proprietary rights of others; or defend against claims of infringement or invalidity.  Such litigation, whether successful or unsuccessful, could result in substantial costs and diversions of resources, either of which could seriously harm our business.  There can be no assurance that our competitors, some of which have substantially greater resources, will not obtain patents or other intellectual property protection that will restrict our ability to make and sell our products.  If we are unsuccessful in protecting proprietary and intellectual property rights to the MyStudio and/or AfterMaster related business methods and websites, it could have a material adverse effect on our business, results of operations, financial condition and value, and financial results.

Economic Downturn.

We are susceptible to adverse impacts caused by domestic and/or international economic downturns (including the current challenging economic landscape) in the markets in which do or propose to operate, as well as broader economic downturns affecting a region, or a particular industry sector in which we propose to operate.  There can be no assurance that we will survive any such economic downturn, or if we do survive, that we will be capable of executing or furthering, to any meaningful degree, the originally conceived business plans.

Some of Our Markets are Cyclical.

Some of our markets are cyclical, and a decline in any of these markets could have a material adverse effect on our operating performance.   Our business is cyclical and dependent on consumer and business spending and is therefore impacted by the strength of the economy generally, interest rates, and other factors, including national, regional and local slowdowns in economic activity and job markets, which can result in a general decrease in product demand from professional contractors and specialty distributors.  For example, a slowdown in economic activity that results in less discretionary income for entertainment and music can have an adverse effect on the demand for some or all of our products.  In addition, unforeseen events, such as terrorist attacks or armed hostilities, could negatively affect our industry or the industries in which our customers operate, resulting in a material adverse effect on our business, results of operations and financial condition.

Disaster.

A disaster that disables our operations will negatively impact our ability to perform for a period of time.

Dependency on Foreign Components for our Products.

We do and expect to continue sourcing components for our products from both inside and outside of the United States, which may present additional risks to our business.  International sourcing of components subject to various risks, including political, religious and economic instability, local labor market conditions, the imposition of foreign tariffs and other trade restrictions, the impact of foreign government regulations, and the effects of income and withholding tax, governmental expropriation, and differences in business practices.  We may incur increased costs and experience delays or disruptions in product deliveries and payments in connection with component manufacturers, thus causing a potential loss of revenues. Unfavorable changes in the political, regulatory, and business climate could have a material adverse effect on our financial condition, results of operations, and cash flows. 

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ITEM 1A.   RISK FACTORS - continued

Exposure to Product Liability Lawsuits.

Our results of operations may be negatively impacted by product liability lawsuits.   While we expect to maintain what we believe to be suitable product liability insurance once we have commenced operations of services with the general public, we cannot assure you that we will be able to maintain this insurance on acceptable terms or that this insurance will provide adequate protection against potential liabilities.  A series of successful claims against us could materially and adversely affect our reputation and our financial condition, results of operations, and cash flows.

Dependency on Key Suppliers and Product Availability.

Loss of key suppliers, lack of product availability or loss of delivery sources could delay product development, manufacturing and decrease sales and earnings.  Our ability to manufacture our studios is dependent upon our ability to obtain adequate product supply from manufacturers or other suppliers. While in many instances we have agreements, including supply agreements, with our suppliers, these agreements are generally terminable by either party on limited notice.  The loss of, or a substantial decrease in the availability of, products from certain of our suppliers, or the loss of key supplier agreements, could have a material adverse effect on our business, results of operations and financial condition.  In addition, supply interruptions could arise from shortages of raw materials, labor disputes or weather conditions affecting products or shipments, transportation disruptions or other factors beyond our control.

Dependency on Long Supply Chains.

In some cases we are dependent on long supply chains, which may subject us to interruptions in the supply of many of the products or components used in the manufacturing and assembly of MyStudio.   The length and complexity of these supply chains make them vulnerable to numerous risks, many of which are beyond our control, which could cause significant interruptions or delays in delivery of our products.  Factors such as labor disputes, changes in tariff or import policies, severe weather or terrorist attacks or armed hostilities may disrupt these supply chains.  A significant interruption in our supply chains caused by any of the above factors could result in increased costs or delivery delays and have a material adverse effect on our business, results of operations and financial condition.

Fluctuations in Cost of Raw Materials.

Our results of operations could be adversely affected by fluctuations in the cost of raw materials.   The manufacturing process is subject to world commodity pricing for some of the raw materials used in the manufacture of our studios.  Such raw materials are often subject to price fluctuations, frequently due to factors beyond our control, including changes in supply and demand, general U.S. and international economic conditions, labor costs, competition, and government regulation.  Inflationary and other increases in the costs of raw materials have occurred in the past and may recur in the future.  Any significant increase in the cost of raw materials could reduce our profitability and have a material adverse effect on our business, results of operations and financial condition.

Regulatory Factors.

Our business model includes a component involving the Internet.  As such, we are subject to a number of foreign and domestic laws and regulations that effect business on the Internet.  We must contend with laws and regulations relating to user privacy, freedom of expression, content, advertising, information security and intellectual property rights of others.  Possible future consumer legislation, regulations and actions could cause additional expense, capital expenditures, restrictions and delays in the activities undertaken in connection with our business, the extent of which cannot be predicted.  The exact affect of such legislation cannot be predicted until it is proposed.

Terms of Subsequent Financings.

Terms of subsequent financings may adversely impact your investment.  We will engage in common equity, debt, and/or preferred stock financings in the future.  Your rights and the value of your investment in Preferred or Common Stock could be reduced.  Interest on debt securities could increase costs and negatively impacts operating results.  Shares of our Preferred Stock may be issued in series from time to time with such designations, rights, preferences, and limitations as needed to raise capital. The terms of Preferred stock could be more advantageous to those investors than to the holders of Common Stock. In addition, if we need to raise more equity capital from the sale of common or preferred stock, institutional or other investors may negotiate terms at least as, and possibly more, favorable than the terms of your investment. Shares of Common Stock which we sell could be sold into the market, which could adversely affect the market price.

Rapid Technological Change.

The industries in which we operate are characterized by rapid technological change that requires us to implement new technologies on an ongoing basis.  Our future will depend upon our ability to successfully implement new technologies in a rapidly changing technological environment.  We will likely require additional capital to develop new technologies to meet changing customer demands.  Moreover, expenditures for technology and product development are generally made before the commercial viability for such developments can be assured.  As a result, we cannot assure that we will successfully implement new technologies, that any implementations will be well received by customers, or that we will realize a return on the capital expended to develop such technology.

19

ITEM 1A.   RISK FACTORS - continued

Effect of Fluctuations in Operations on the Price of Common Stock.

Our future operating results may fluctuate and cause the price of our Common Stock to decline, which could result in substantial losses for investors.   Our limited operating history makes it difficult to predict accurately our future operations.  We expect that our operating results will fluctuate significantly from quarter to quarter, due to a variety of factors, many of which are beyond our control.  If our operating results fall below the expectations of investors or securities analysts, the price of our Common Stock could decline significantly.  The factors that could cause our operating results to fluctuate include, but are not limited to:

● Ability to broadly commercialize and expand MyStudio and/or AfterMaster;

● Changes in entertainment technology;

● Price and availability of alternative entertainment available to the public;

● Availability and cost of technology and marketing personnel;

● Our ability to establish and maintain key relationships with industry partners;

● The amount and timing of operating costs and capital expenditures relating to maintaining our business, operations, and infrastructure; and

● General economic conditions and economic conditions specific to the entertainment industry.

These and other external factors have caused and may continue to cause the market price and demand for our Common Stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Common Stock and may otherwise negatively affect the liquidity of our Common Stock. In the past, securities class action litigation has often been brought against companies following periods of volatility in the market price of their securities.  If securities class action litigation were to be brought against us, it could result in substantial costs and a diversion of our management’s attention and resources, which could hurt our business.

Our Common Stock is Subject to Penny Stock Regulations.

Our Common Stock is subject to regulations of the SEC relating to the market for penny stocks.  These regulations generally require that a disclosure schedule explaining the penny stock market and the risks associated therewith be delivered to purchasers of penny stocks and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors.  The regulations applicable to penny stocks may severely affect the market liquidity for our Common Stock and could limit your ability to sell your securities in the secondary market.

Uncertainty as a Going Concern.

Our future existence remains uncertain and the report of our independent auditors on our financial statements for the year ended June 30, 2012 includes an explanatory paragraph relating to our ability to continue as a going concern.  We have suffered substantial losses from operations and require additional financing.  Ultimately we need to generate additional revenues and attain profitable operations.  These factors raise substantial doubt about our ability to continue as a going concern. There can be no assurance that we will be able to develop commercially viable products or an effective marketing system. Even if we are able to develop commercially viable products, there is no assurance that we will be able to attain profitable operations.

Dilution; Dilutive Effect of Future Transactions.

As of June 30, 2012, we had 36,412,601 shares of Common Stock, $0.001 par value, issued and outstanding.  We have granted options to purchase 698,429 shares of Common Stock pursuant to our 2009 Long-Term Incentive Plan approved by the Board on June 10, 2009, and contemplate issuing options to purchase a maximum of 773,000 additional shares of Common Stock under this Plan.  We may also issue further shares to certain of our management, directors, officers, employees and consultants in the immediate future.  We also had 1,220,044 shares of various classes of Convertible Preferred Stock outstanding, which can be converted to 2,440,088 shares of Common Stock.  We had outstanding convertible debt with a face value of $3,275,000,which can be converted into approximately 6,550,000 shares of Common Stock. In addition, we had warrants outstanding that would permit, if exercised, the issuance of 6,529,331 additional shares of Common Stock at an average exercise price of $0.45.  Issuing additional shares will result in further dilution to existing shareholders, which could be significant; meaning your percentage ownership of any such merged entity will be significantly less than your percentage ownership in us.  If we issue additional shares either outright or through any future options or warrants programs or requires additional financing, further dilution in value and in the percentage ownership represented by the purchaser’s investment will occur.

20

ITEM 1A.   RISK FACTORS - continued

Future debt or equity transactions, as well as related grants and subsequent exercise of associated Common Stock warrants, could result in dilution.  From time to time, we sell restricted preferred or common stock, warrants, and convertible debt to investors in other private placements.  Because such stock is restricted, the stock is sold at a greater discount to market prices compared to a public stock offering, and the exercise price of related warrants, if any, sometimes is at or even lower than market prices.  These transactions cause dilution to existing stockholders.  Also, from time to time, options are issued to officers, directors, or employees, with exercise prices equal to the market price.  Warrants may also be issued to advisors and vendors at times in lieu or in addition to other compensation. Exercises of options and warrants will result in dilution to existing stockholders.  The amount of dilution will depend on the spread between the market and exercise price, and the number of shares involved, which could be significant.

Restrictions on Transfer - No Public Market for Preferred Shares or Restricted Common Shares.

Our shares of Common Stock are traded on the Over-The-Counter Bulletin Board System (OTCBB) under the ticker symbol SOMD.  However, for shares that have been issued and are restricted pursuant to SEC Rule 144 of the Securities Act of 1933 (the “Act”), there is presently no public or private market for such shares.  Such shares may only be offered or sold pursuant to registration under or an exemption from the Act and have not been registered under the Act, as amended, or any State securities laws and would be issued under Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the Act.  

Expect to Incur Losses for the Foreseeable Future.

We expect to incur losses for the foreseeable future and we may never become profitable.   Our business model requires that additional studios be deployed and operating for us to generate enough revenues to reach break-even.  There are no assurances that significant revenues from MyStudio and/or AfterMaster necessary for the Company to become break-even will occur. We expect our expenses to increase significantly as we continue to develop the infrastructure necessary to fully implement our business strategy.  Our expenses will continue to increase as we: hire additional employees; implement our marketing plans; pursue further research and development; expand our information technology systems; and lease and purchase more space to accommodate our operations.

Costs associated with designing, developing, manufacturing, marketing and developing the infrastructure we will need to support our customers will depend upon many factors, including the number of MyStudio locations.  Therefore, we cannot now determine the amount by which our expenses will increase as we grow.

Possible Claims That the Company Has Violated Intellectual Property Rights of Others.

We are not subject to any dispute, claim or lawsuit or threatened lawsuit alleging the violation of intellectual property rights of a third party.  We believe MyStudio and AfterMaster are not in violation of any patents claimed by others.  To the extent that the Company is ever alleged to have violated a patent or other intellectual property right of a third party, it may be prevented from operating its business as planned, and it may be required to pay damages, to obtain a license, if available, to use the patent or other right or to use a non-infringing method, if possible, to accomplish its objectives. Any of these claims, with or without merit, could subject us to costly litigation and the diversion of our technical and management personnel. If we incur costly litigation and our personnel are not effectively deployed, the expenses and losses incurred will increase, and our profits, if any, will decrease.

Business Plans and Operational Structure May Change.

We continually analyze our business plans and operations in light of market conditions and developments.  As a result of our ongoing analyses, we may decide to make substantial changes in our business plan and organization.  In the future, as we continue our internal analyses and as market conditions and our available capital change, we may decide to make organizational changes and/or alter some or all of our overall business plans.

Reliance on Management.

We believe that our present management has the experience and ability to successfully implement our business plans for the foreseeable future.  However, it is likely that we will continue to add to our management and therefore will recruit additional persons to key management positions in the future.  Should we be unsuccessful in recruiting persons to fill the key positions or in the event any of these individuals should cease to be affiliated with us for any reason before qualified replacements can be hired, there could be material adverse effects on our business and prospects.  Each officer, director, and other key personnel has or will have an employment agreement with us which will contain provisions dealing with confidentiality of trade secrets, ownership of patents, copyrights and other work product, and non-competition.  Nonetheless, there can be no assurance that these personnel will remain employed for the entire duration of the respective terms of such agreements or that any employee will not breach covenants and obligations owed to us. 

In addition, all management decisions will be made exclusively by our officers and directors.  Investors will only have rights associated with minority ownership interest rights to make decisions that affect the Company.  Our success, to a large extent, will depend on the quality of our directors, officers and senior management.

21

ITEM 1A.   RISK FACTORS - continued

Inability to Attract and Retain Qualified Personnel.

Our future success depends in significant part on its ability to attract and retain key management, technical and marketing personnel.  Competition for highly qualified professional, technical, business development, and management and marketing personnel is intense.  We may experience difficulty in attracting new personnel, may not be able to hire the necessary personnel to implement our business strategy, or we may need to pay higher compensation for employees than we currently expect.  A shortage in the availability of required personnel could limit our ability to grow.  We cannot assure you that we will succeed in attracting and retaining the personnel we need to grow.

Inability to Manage Rapid Growth.

We expect to grow rapidly.  Rapid growth often places considerable operational, managerial and financial strain on a business.  To successfully manage rapid growth, we must accurately project its rate of growth and:

● Rapidly improve, upgrade and expand our business infrastructure;

● Deliver our product and services on a timely basis;

● Maintain levels of service expected by clients and customers;

● Maintain appropriate levels of staffing;

● Maintain adequate levels of liquidity; and

● Expand and upgrade our technology, transaction processing systems and network hardware or software or find third parties to provide these services.

Our business will suffer if we are unable to successfully manage our growth.

Effects of Amortization Charges/Stock Based Compensation. 

Our losses will increase, or our earnings, if applicable, will be reduced by charges associated with the issuance of options and/or warrants.  We have adopted a stock incentive plan for the benefit of our directors, officers and employees.  We may also compensate consultants and vendors with restricted stock and/or warrants in lieu of, or in addition to, cash for services provided. The total unearned stock-based compensation will be amortized as a stock-based compensation expense in our consolidated financial statements over the applicable vesting periods, generally two to ten years in the case of options granted to employees, officers and directors and two years in the case of warrants granted to consultants and other third parties.  These types of charges may increase in the future.  The future value of these potential charges cannot be estimated at this time because the charges will be based on the future value of our stock and the related exercises of the aforementioned options and warrants.

Dividend Policy.

There can be no assurance that our operations will result in future significant revenues or any level of profitability.  We have not, and do not, anticipate paying cash dividends on our Common Stock in the foreseeable future.  We plan to retain all future earnings and cash flows, if any, to finance our operations and for general corporate purposes.  Any future determination as to the payment of cash dividends will be at our Board of Directors’ discretion and will depend on our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that our Board of Directors considers relevant.

Conflicts of Interest.

Existing and future officers and directors may have other interests to which they devote time, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on boards of directors, and each may continue to do so.  As a result, certain conflicts of interest may exist between the Company and its officers and/or directors that may not be susceptible to resolution.  All potential conflicts of interest will be resolved only through exercise by the directors of such judgment as is consistent with their fiduciary duties to the Company, and it is the intention of management to minimize any potential conflicts of interest.

Loss of Services of Key Members of Our Senior Management Team.

Our future success depends in a large part upon the continued services of key members of our senior management team.  These persons are critical to the overall management of Studio One as well as the development of our technology, our culture and our strategic direction.  We do not maintain any key-person life insurance policies.  The loss of any of our management or key personnel could seriously harm our business.

ITEM 1B.  UNRESOLVED STAFF COMMENTS.

None.

22

ITEM 2. DESCRIPTION OF PROPERTIES.

Pursuant to a lease originally dated January, 2006, we currently occupy approximately 11,800 square feet of office space located at 7650 E. Evans Rd., Suite C, Scottsdale, Arizona on a month-to-month basis.  The total lease expense is approximately $9,609 per month, payable in cash and Common Stock of the Company.

 We also lease an office in Los Angeles for use by our audio team in connection with our AfterMaster product.  This lease expires on August 31, 2013.  The total lease expense for the facility is approximately $4,305 per month, and the total remaining obligations under these leases at June 30, 2012 were approximately $8,725.

We lease space at mall locations for MyStudio generally pursuant to one-year leases. The monthly rent for these spaces is at market rates commensurate with other kiosk operations.  As we expand, we will continue to secure space for our recording studios at various venues and locations throughout the country.

ITEM 3. LEGAL PROCEEDINGS.

We were an interpleader party to a lawsuit in the Southern District of Georgia, Savannah Division, pursuant to which we sought to prevent the release of 100,000 shares of its Common Stock to a third-party and asked the court to return those shares to the Company.   During the fiscal year ended June 30, 2012 we elected to relinquish claim to the shares and the matter was dismissed.

The Company is also a defendant in a suit brought by one if its suppliers.  The Company has defended the claim alleging that the vendor failed to deliver the goods and services contracted for.  Subsequent to June 30, 2012, a tentative settlement agreement has been negotiated pursuant to which, if executed, will result in the Company paying the vendor approximately $75,000 in equal payments, without interest, over a period of eighteen months.

Except as described in the preceding paragraph, to the best knowledge of our management, there are no material litigation matters pending or threatened against us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of the shareholders during the current fiscal year. 

 PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

Studio One’s Common Stock is traded on the Over-The-Counter Bulletin Board System (OTCBB) under the symbol “SOMD”.  The following table sets forth the range of high and low bid quotations for each fiscal quarter for the last two fiscal years.  These quotations reflect inter-dealer prices without retail mark-up, markdown, or commissions and may not necessarily represent actual transactions.

For the Fiscal Year Ending on June 30, 2012	High		Low
Quarter Ended June 30, 2012	$	0.37	$	0.16
Quarter Ended March 31, 2012		0.51		0.28
Quarter Ended December 31, 2011		0.68		0.35
Quarter Ended September 30, 2011		0.83		0.42

For the Fiscal Year Ending on June 30, 2011	High		Low
Quarter Ended June 30, 2011	$	1.85	$	0.72
Quarter Ended March 31, 2011		1.40		0.80
Quarter Ended December 31, 2010		0.99		0.81
Quarter Ended September 30, 2010		1.02		0.61

23

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - continued

Stockholders

As of June 30, 2012, the number of stockholders of record according to our transfer agent was approximately 524.  Because many of our shares are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of stockholders represented by these record holders.  Consequently, the actual number of stockholders of record as of the date of this Report was not available. The Company believes, however, that it has approximately 1,500 stockholders in total.

Dividends

The Company has paid no dividends on its Common Stock since its inception and does not anticipate or contemplate paying cash dividends in the foreseeable future. 

Pursuant to the terms of our Series A Convertible Preferred Stock, a 5% annual dividend is due and owing. Pursuant to the terms of our Series B Convertible Preferred Stock, an 8% annual dividend is due and owing.  Pursuant to the terms of our Series A-1 Senior Convertible Redeemable Preferred Stock, a 6% annual dividend is due and owing.  As of June 30, 2012, we had not declared dividends on Series A, Series B or its Series A-1 Preferred Stock.  We have, however, for those shares of Series A-1 Preferred Stock that were converted, calculated the dividends through the date of conversion and issued shares of common stock in payment of those dividends.  The unpaid cumulative dividends totaled approximately $392,138.  See Note 7 of Notes to Consolidated Financial Statements.  

Supplemental Disclosure of Non-Cash Investing and Financing Activities for Fiscal Years 2012 and 2011

Fiscal Year 2012

During the fiscal year ended June 30, 2012, we accepted subscriptions for 911,335 shares of unregistered restricted shares of Common Stock at an average price per share of $0.52 for a total of $481,960 and granted warrants to purchase 276,000 additional shares in connection with such placements.   We also issued warrants to purchase 2,820,822 shares to various employees and consultants and warrants to purchase an additional 50,000 shares for other financing related activities.  Generally, the warrants may be exercised at any time within a 2-5 year period beginning on the date of the respective investments at an average exercise price of $0.52. 

In June 2009, we adopted the 2009 Long-Term Incentive Plan intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company (“the Plan”).   As of June 30, 2012, we had granted options under this Plan to fourteen employees to purchase, in the aggregate, 698,429 shares of the Company’s Common Stock.  The exercise period for each of the grants is 2-3 years from the date of grant and the exercise price in each instance is $0.35 to $1.35.  

Fiscal Year 2011

During the fiscal year ended June 30, 2011, we accepted subscriptions for 1,847,501 shares of unregistered restricted shares of Common Stock at an average price per share of $0.54 for a total of $1,001,912 and 1,187,000 shares of Series A-1 Convertible Preferred Stock at $1.00 per share for a total of $1,187,000.  We granted warrants to purchase an additional 338,532 shares to various employees, consultants, and vendors, which may be exercised at varying times ranging from two to ten years at an average exercise price of $0.53 per share.  In addition, we issued 1,322,182 shares of Common Stock for consulting, legal and other services valued at $1,616,999, 206,099 shares in conversion of preferred shares, and 1,232,452 shares in conversion of debt valued at $702,280.   During the fiscal year ended June 30, 2011, warrant holders exercised various warrants for 351,983 shares for a total of $129,567, an average of $0.37 per share.

In June 2009, we adopted the 2009 Long-Term Incentive Plan intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company (“the Plan”).  A maximum of 1,500,000 shares of the Company’s Common Stock was reserved for issuance under stock options to be issued under the Plan.  The Plan permits the grant of Incentive Stock Options, Non-Statutory Stock Options and Restricted Stock Awards.  The Plan is administered by the Board of Directors or, at its direction, the Compensation Committee comprised of officers of the Company.   As of June 30, 2011, the Company had granted options to fifteen employees and key consultants to purchase, in the aggregate, 778,000 shares of the Company’s Common Stock.  The exercise period for each of the grants was two to five years from the date of grant and the average exercise price was $0.82.  During the fiscal year ended June 30, 2011 one employee elected to exercise the option to purchase 20,000 shares at a price of $0.52.  The number of unexercised, outstanding options at June 30, 2011 was 678,429, at an average exercise price of $0.86 per share.

ITEM 6 - SELECTED FINANCIAL DATA.

Not required by Form 10-K for smaller reporting companies.

24

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

RESULTS OF OPERATIONS

Revenues

	Years Ended
	June 30,
	2012			2011
Session Revenues		$	108,782		$	42,779
Advertising Revenues			5,000			7,750
AfterMaster Revenues			87,646			59,800
Barter Revenues			23,500			412,050
Total Revenues		$	224,928		$	522,379

Our business model currently generates revenues from four primary sources:

1)	Paid user fees from customers who utilize the Fixed and Model studios to create an audio/video recording;
2)	Advertising revenue from the external monitors located on each MyStudio facility;
3)	Advertising revenue from our website; and
4)	AfterMaster revenue.

The revenues from each of the first two of these sources are expected to increase proportionally to the number of studios we place in operation. The revenue from advertising on the website will depend on the number and length of visits to our website by MyStudio users and other viewers. Revenues from AfterMaster services resulted primarily from audio services provided to producers and artists on a contract basis. This source of revenue is expected to grow in coming years, and the Company is expecting to generate additional revenues from pay-per-play downloads.

Revenue for the fiscal year ended June 30, 2012 decreased as compared to the comparable fiscal year ended June 30, 2011 due primarily to a decrease in barter income activity. Such barter revenue was included in Session Revenues in the table above.

Cost of Sales

	Years Ended
	June 30,
	2012		2011
Cost of Sales (excluding depreciation and amortization)	$	941,808	$	619,143

Cost of sales consists primarily of studio rent, attendant labor and Internet connectivity and excludes depreciation and amortization on the studios. The increase in cost of sales for the fiscal year ended June 30, 2012 over the comparable fiscal year is attributable, primarily, to the operation of additional studios during the current periods.

Other Costs and Expenses

	Years Ended
	June 30,
	2012			2011
Cost of Barter Exchanges		$	23,500	$	412,050
Depreciation and Amortization Expense			493,139		340,900
Impairment on Long Lived Assets and Intangibles			1,145,450		-
General and Administrative Expenses			3,900,060		6,459,377
Total		$	6,503,957	$	7,212,327

As a result of a decrease in barter transactions during the fiscal year ended June 30, 2012, our costs of barter exchanges decreased.  Depreciation and amortization increased due to additional studios in operation during the current periods.

During the fiscal year ended June 30, 2012, we analyzed our studios and intangible assets for future recoverability in accordance with the guidance for the impairment of long-lived assets.  We used a replacement cost model and an undiscounted cash flow model to estimate their fair values.  Based on this analysis, we determined that the carrying value of the studios and intangible assets exceeded the total replacement cost of those assets.  Accordingly, we recorded an impairment of fixed assets totaling $937,240 which is recorded within operating expenses.

25

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  - continued

Also during the fiscal year ended June 30, 2012, a major supplier of our work-in-process property and equipment filed for bankruptcy.  We had deposits placed with this supplier for future studios of $93,016 and other work-in-process of $115,184.  We were able to recover some scrap material which has been allocated a $-0- fair value.  Thus, we recognized an impairment of these deposits and other work-in-process of $208,210.

The total impairment recognized within operations during the fiscal year ended June 30, 2012 was $1,145,450 compared to $-0- in 2011.

General and administrative expenses consist primarily of compensation and related costs for our finance, legal, human resources, and information technology personnel; advertising expenses; rent and facilities; and expenses related to the issuance of stock compensation.  

The overall decreases in general and administrative expenses are primarily a result of decreases in professional fees.

Professional fees decreased from $4,745,457 during the fiscal year ended June 30, 2011 to $2,393,194 and during the fiscal year ended June 30, 2012.  The decrease in professional fees is primarily attributable to our issuing less Common Stock and warrants to various employees and consultants for services rendered during the period.  Fewer issuances combined with a lower market price of our stock resulted in total expenses from issuances of Common Stock and warrants to employees and consultants of $745,652 during the fiscal year ended June 20, 2012 compared to $3,481,763 in 2011.  This decrease in professional fees was partially offset by an increase in wages and other general and administrative expenses resulting from the installation and deployment of the new studios. 

Other Income and Expenses

	Years Ended
	June 30,
	2012				2011
Other Income		$	-			$	3,906
Interest Expense			(1,203,433	)			(982,664	)
Gain on Disposal of Property			-				73,502
Gain (Loss) on Extinguishment of Debt			191				(888,900	)
Total		$	(1,203,242	)		$	(1,794,156	)

The other income and expenses during the fiscal year ended June 30, 2012, totaling $1,868,505 of net expenses consisted primarily of interest expense.  During the comparable period in 2011, other income and expenses totaled $1,794,156.  Interest expense has increased primarily due to non-cash interest expense relating to warrants attached to recent debt issuances, as well as conversion features included in recent convertible debt issuances.  These additional borrowings have been used to build and deploy additional studios. During the fiscal year ended June 30, 2011, the Company modified certain liabilities which were recorded as modifications of debt which resulted in losses on the extinguishment of debt.

Net Income/(Loss)

	Years Ended
	June 30,
	2012			2011
Net Income (Loss)	$	(7,482,271	)	$	(9,103,247	)

Due to the Company’s cash position, we use our Common Stock and warrants to pay many employees, vendors and consultants as well as to raise capital through incentives attached to our debt offerings.  Once we have raised additional capital from outside sources, as well as generated cash flows from operations, we expect to reduce the use of Common Stock as a significant means of compensation. Under FASB ASC 718, “Accounting for Stock-Based Compensation”, these non-cash issuances are expensed at the equity instruments fair market value.  Absent these large non-cash expenses, our net loss would have been $5,587,166 and $4,765,189 for fiscal years ended June 30, 2012 and 2011, respectively.

26

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  - continued

LIQUIDITY AND CAPITAL RESOURCES

The Company had revenues of $224,928 during the fiscal year ended June 30, 2012 as compared to $522,379 in the comparable period in 2011.  The Company has incurred losses since inception of $37,177,630.  At June 30, 2012, the Company had negative working capital of $2,858,770, which was a decrease in working capital of $1,957,481 from June 30, 2011.  The decrease in the working capital was primarily due to additional short-term borrowings that were used to finance non-current fixed assets.

The future of the Company as an operating business will depend on its ability to obtain sufficient capital contributions and/or financing as may be required to sustain its operations.  Management’s plan to address these issues includes a continued exercise of tight cost controls to conserve cash and obtaining additional debt and/or equity financing.

As we continue our activities, we will continue to experience net negative cash flows from operations, pending receipt of significant revenues that generate a positive sales margin.  

The Company expects that additional operating losses will occur until net margins gained from sales revenue is sufficient to offset the costs incurred for marketing, sales and product development. Until the Company has achieved a sales level sufficient to break even, it will not be self-sustaining or be competitive in the areas in which it intends to operate. 

In addition, the Company will require substantial additional funds to continue production and installation of the additional studios and to fully implement its marketing plans.  

The Company’s management team believes that its success depends on the Company’s ability to raise additional capital, deploy multiple studios and create strategic partnerships that drive traffic to the studios.  The Company’s current seven fixed and one mobile studios are insufficient to generate adequate revenues to achieve overall profitability for the Company.  By deploying multiple studios, the Company believes that it will be able to successfully implement its business plan, attract a greater number of strategic partnerships and achieve profitability.

As of June 30, 2012, the existing capital and anticipated funds from operations were not sufficient to sustain Company operations or the business plan over the next twelve months.  We anticipate substantial increases in our cash requirements which will require additional capital to be generated from the sale of Common Stock, the sale of Preferred Stock, equipment financing, debt financing and bank borrowings, to the extent available, or other forms of financing to the extent necessary to augment our working capital.  In the event we cannot obtain the necessary capital to pursue our strategic business plan, we may have to significantly curtail our operations.  This would materially impact our ability to continue operations. There is no assurance that the Company will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to the Company.  

Recent global events, as well as domestic economic factors, have recently limited the access of many companies to both debt and equity financings. As such, no assurance can be made that financing will be available or available on terms acceptable to the Company, and, if available, it may take either the form of debt or equity. In either case, any financing will have a negative impact on our financial condition and will likely result in an immediate and substantial dilution to our existing stockholders.   

Although the Company intends to engage in a subsequent equity offering of its securities to raise additional working capital for operations and studio manufacturing, the Company has no firm commitments for any additional funding, either debt or equity, at the present time.  Insufficient financial resources may require the Company to delay or eliminate all or some of its development, marketing and sales plans, which could have a material adverse effect on the Company’s business, financial condition and results of operations.  There is no certainty that the expenditures to be made by the Company will result in a profitable business proposed by the Company.

CRITICAL ACCOUNTING POLICIES

Fair Value Measurements – FASB ASC 820, “Fair Value Measurements and Disclosures,” clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2 – Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3 – Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

Income Taxes – The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

27

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  - continued

Revenue Recognition – The Company applies the provisions of FASB ASC 605, “Revenue Recognition in Financial Statements,” which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. ASC 605 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue related to goods and services provided when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured.

Intangible Assets – Intangible assets consist of intellectual property, website costs and video backgrounds. Website costs are costs incurred to develop the Company’s website and website costs are being amortized over the estimated useful life of 5 years. Video backgrounds are the costs incurred to develop video backgrounds for use in the Company’s recording kiosks. The video background costs are being amortized over the estimated useful life of 5 years. The Company’s intellectual property includes purchased patents and trademarks as well as other proprietary technologies. The costs of these are being amortized over the estimated useful life of 5 years.

Valuation of Long-lived Assets – Long-lived tangible assets and definite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses an estimate of undiscounted future net cash flows of the assets over the remaining useful lives in determining whether the carrying value of the assets is recoverable. If the carrying values of the assets exceed the expected future cash flows of the assets, the Company recognizes an impairment loss equal to the difference between the carrying values of the assets and their estimated fair values. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets. The evaluation of long-lived assets requires the Company to use estimates of future cash flows. However, actual cash flows may differ from the estimated future cash flows used in these impairment tests.

Research and Development – The Company follows the policy of expensing its research and development costs in the period in which they are incurred in accordance with FASB ASC 730, “Accounting for Research and Development Costs.”

Stock-based Compensation – The Company follows the provisions of FASB ASC 718, “Share-Based Payment,” which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Equity instruments issued to non-employees for goods or services are accounted for at fair value and are marked to market until service is complete or a performance commitment date is reached, whichever is earlier. The Company uses the Black-Scholes pricing model for determining the fair value of stock-based compensation.

Convertible Securities and Derivatives – The Company estimates the fair values of the debt and warrants, and allocates the proceeds pro rata based on these values.  The allocation of proceeds to the warrants results in the debt instrument being recorded at a discount from the face amount of the debt and the value allocated to the warrant is recorded to additional paid-in capital.

The Company reviews the terms of convertible financial instruments it issues to determine whether there are embedded derivative instruments, including the conversion option that may be required to be bifurcated and accounted for separately as a derivative financial instrument.  In circumstances where the convertible instrument contains more than one embedded derivative, including the conversion option that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

When the convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds from the convertible host instruments are first allocated to the bifurcated derivative instruments.  The remaining proceeds, if any, are then allocated to the convertible instruments themselves, resulting in those instruments being recorded at a discount from their face value.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required by Form 10-K for smaller reporting companies.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our financial statements as of and for the fiscal year ended June 30, 2012 and June 30, 2011 have been audited to the extent indicated in the report by SingerLewak, LLP, independent certified public accountants, and have been prepared in accordance with generally accepted accounting principles and pursuant to Regulation S-X as promulgated by the SEC.  

The aforementioned financial statements are presented in a separate section of this Report following Part IV.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Our auditor for the fiscal years ended June 30, 2012 and June 30, 2011 was the firm of SingerLewak, LLP, 10960 Wilshire Blvd., Suite 700, Los Angeles, CA  90024, who were engaged on August 17, 2010.

During the two most recent fiscal years, there were no disagreements with SingerLewak on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of SingerLewak for the fiscal years ended June 30, 2012 and June 30, 2011, would have caused them to make reference to the subject matter of the disagreement in connection with their reports. There were no adverse opinions, disclaimers of opinions, or qualifications or modifications as to audit scope or accounting principles, other than the modification due to uncertainty of the Company to continue as a going concern 

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer, President, and Chief Financial Officer (the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls and procedures for the Company.  The Certifying Officers have designed such disclosure controls and procedures to ensure that material information is made known to them, particularly during the period in which this Report was prepared.

 The Certifying Officers responsible for establishing and maintaining adequate internal control over financial reporting for the Company used the “Internal Control over Financial Reporting Integrated Framework” issued by Committee of Sponsoring Organizations (“COSO”) to conduct an extensive review of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act, Rules 13a-15(e) and 15-d-15(e)) as of the end of each of the periods covered by this Report (the “Evaluation Date”).  Based upon that evaluation, the Certifying Officers concluded that, as of June 30, 2012 and June 30, 2011, our disclosure controls and procedures were ineffective in ensuring that the information we were required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission (“SEC”) rules and forms.

The Certifying Officers based their conclusion on the fact that the Company has identified material weaknesses in controls over financial reporting, detailed below.  In order to reduce the impact of these weaknesses to an acceptable level, hawse have contracted with consultants with expertise in U.S. GAAP and SEC financial reporting standards to review and compile all financial information prior to filing that information with the SEC.  However, even with the added expertise of these consultants, we still expect to be deficient in our internal controls over disclosure and procedures until sufficient capital is available to hire the appropriate internal accounting staff and individuals with requisite GAAP and SEC financial reporting knowledge.  There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  Management used the “Internal Control over Financial Reporting Integrated Framework” issued by COSO to conduct an extensive review of the Company’s internal controls over financial reporting to make that evaluation.  As of June 30, 2012 and June 30, 2011, the Company had identified deficiencies in internal controls that constituted material weaknesses in internal controls. Due to these material weaknesses, management concluded that internal controls over financial reporting as of June 30, 2012 and June 30, 2011 were ineffective, based on COSO’s framework.  

The deficiencies are attributed to the fact that the Company does not have adequate resources to address complex accounting issues, as well as an inadequate number of persons to whom it can segregate accounting tasks within the Company so as to ensure the segregation of duties between those persons who approve and issue payment from those persons who are responsible to record and reconcile such transactions within the Company’s accounting system.  These control deficiencies will be monitored and attention will be given to the matter as we continue to accelerate through our current growth stage.

Management has concluded that these control deficiencies constitute a material weakness that continued throughout fiscal year 2012.  In order to reduce the impact of these weaknesses to an acceptable level, we have contracted with consultants with expertise in U.S. GAAP and SEC financial reporting standards to review and compile all financial information prior to filing that information with the SEC.  However, even with the added expertise of these consultants, we still expect to be deficient in our internal controls over disclosure and procedures until sufficient capital is available to hire the appropriate internal accounting staff and individuals with requisite GAAP and SEC financial reporting knowledge.  There were no significant changes in our internal control over financial reporting or in other factors that occurred during our most recent fiscal year that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

This Annual Report does not include attestation reports of the Company’s registered public accounting firms regarding internal controls over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

29

ITEM 9B.  OTHER INFORMATION.

None.

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The directors and executive officers of the Company as of June 30, 2012 were as follows:

Name	Age	Position
Preston J. Shea	64	Director, President, CEO, Secretary
Joseph A. Desiderio	62	Director, Vice President, CFO
Kenneth R. Pinckard	66	Director, Legal Counsel
Barry M. Goldwater, Jr.	74	Director
Frank Perrotti, Jr.	73	Director, Chairman
Sheldon Yakus	66	Vice President
Matthew R. Long	46	Vice President
Anna L. Madrid	39	Vice President
Timothy Grubb	45	Chief Technology Officer

The directors and officers of our wholly-owned operating subsidiary, MyStudio, Inc., at June 30, 2012 were:

Name	Age	Position
Lawrence G. Ryckman	53	Director, President, CEO, Secretary
Kenneth R. Pinckard	66	Director, Vice President

The directors and officers of our wholly-owned operating subsidiary, AfterMaster HD Audio Labs, Inc., at June 30, 2012 were:

Name	Age	Position
Lawrence G. Ryckman	53	Director, President, CEO, Secretary
Kenneth R. Pinckard	66	Director, Vice President

Directors serve until the next annual meeting or until their successors are qualified and elected. Officers serve at the discretion of the Board of Directors.

Barry M. Goldwater, Jr. is the Chairman of the Board of the Company.  He served as a U.S. Congressman for 14 years, representing a district in northern Los Angeles County.  Prior to that he was a stockbroker and partner in the Los Angeles securities firm of Noble Cook, Inc. (now Wedbush Securities) where he developed an institutional customer base and traded securities on all stock exchanges.  While in Congress, he served on a number of committees, including Committee on Science and Technology and the Joint Committee on Energy.  He authored the Privacy Act of 1974.  Since retiring from Congress in 1984, he has been actively involved in private business activities and has held a number of responsible senior positions involving finance and management.  He is presently on the Boards of two companies in addition to Studio One.  Mr. Goldwater holds a degree in Marketing from Arizona State University.

30

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE - continued

Preston J. Shea is President, CEO, Secretary, and Director and was the sole officer and director of the Company from September 2003 to March 2006.  He is licensed as an attorney in the State of Arizona and as a Barrister and Solicitor by the Law Society of Upper Canada in Ontario. From 1999 to present, he has been vice president and general counsel for an international business organization with offices in Canada and the United States and representative offices in Russia, China, Austria and Mexico. From 1990 to 1999, he practiced international immigration law and business law in Ontario, Canada, Detroit, Michigan and Phoenix, Arizona, with an emphasis on the North American Free Trade Agreement. Prior to that, from 1986 to 1990, he was employed by the government of Canada in various positions including Chief of Staff for the Federal Minister of the Environment, Special Assistant to the Federal Minister of International Trade, and as a Senior Investment Advisor in the Los Angeles offices of the Canadian Consulate. Prior to his tenure with the Canadian government, he was actively engaged in various legal and business positions in the private sector.

Frank Perrotti, Jr. is Founder, Chairman and Chief Investment Officer of FPJ Investments, a real estate and private investment firm. The firm focuses on the acquisition of undervalued assets in both the public and private marketplace. A notable investment of FPJ was the acquisition of Field Brook Farms out of bankruptcy. The company was then built into the largest private label ice cream packer in the United States. Prior to founding FPJ Investments, Mr. Perrotti was Chairman and CEO of Northeast Waste Services. That company was built through the acquisitions of over twenty-five companies, and, at the time of its, sale was the largest privately-owned diversified waste company in New England. In addition to his duties at FPJ Investments, he currently serves as a Director of Prime Bank, a regionally focused business bank located in Connecticut.

Kenneth R. Pinckard is Legal Counsel and a Director of the Company.  He is a member of the State Bar of Arizona with extensive experience in startup ventures, investments, corporate acquisitions and mergers, turn-arounds and reorganizations, corporate finance, tax, bankruptcy matters, and commercial real estate development, construction, management and leasing.  He previously practiced law at Chamberlain Hrdlicka White Johnson & Williams in Houston, Texas, as well as having worked in Coopers & Lybrand’s tax department.  Additionally, he also served as in-house legal counsel for Congressman Barry Goldwater and Hormel Foods heir and music composer, Geordie Hormel. Mr. Pinckard holds a B.B.A., Accounting from the University of Texas at Austin and a Juris Doctorate from the University of Houston.

Joseph A. Desiderio is Vice President, Chief Financial Officer and Director of the Company. He has more than 25 years experience managing the financial operations of several private and public Companies in the role of CFO, Director of Finance, Regional and Corporate Controller. He served as CFO for Northeast Waste Systems, the largest private waste company in the Northeast for 10 years. There he played a key role in orchestrating,the acquisition and financing of 25 companies into the Northeast family. He also negotiated, structured and managed the due diligence process of the sale of  Northeast Waste to Waste Management Inc.. Other key positions held by Mr. Desiderio were Director of Finance for Sundance Helicopters in Las Vegas,  Northeast Regional Controller (managing 5 Divisional Controllers) for Waste Management Inc., and Corporate Controller for various companies including Silverstate Materials (Las Vegas,NV), MBI Ic. (Norwalk, CT), and Remington Arms (Dupont _ Bridgeport, CT). He received his Bachelor of Science Degree in Accounting from Fordham University, Bronx, NY. He was also in the Masters Program in Financial Management at Pace University, Pleasantville, NY. He has also been active in Community affairs, including graduating from Henderson,NV Leadership program, holding office of President elect for Henderson Civitan, and seving on the Board of Directors for the Southwest Community Center, Bridgeport, CT.

Lawrence G. Ryckman is the Founder, President & CEO of MyStudio, Inc. and AfterMaster HD Audio Labs, Inc., both being wholly-owned operating subsidiaries of Studio One Media, Inc.  He is an award-winning entrepreneur and businessman with notable achievements in the entertainment, high technology and sports industries. He previously co-founded and served as President & CEO of American Artists, Inc., a diversified film, video and music production and distribution company; as Owner and President of the Calgary Stampeder Football Club of the Canadian Football League; and was Co-Founder, President & CEO of QSound, Inc., which develops proprietary sound technologies for the entertainment industry.  QSound grew from a start-up to a NASDAQ-listed, internationally recognized participant in the entertainment/technology industry.  During his tenure, the company secured numerous patents and completed licensing and joint venture agreements with multi-national corporations such as Polygram, Nintendo, JVC, Coca Cola, and NEC.

Sheldon “Shelly” Yakus is Vice President, Audio Engineering.  He is a renowned music producer, audio engineer/mixer and recording studio designer. He has engineered and mixed recordings for some of the world’s best known artists including John Lennon, Stevie Nicks, Alice Cooper, Van Morrison, Tom Petty, Dire Straits, Blue Oyster Cult, Bob Seger, Amy Grant, Don Henley, U2 and Madonna. Known as “Golden Ears,” he is also widely respected for his expertise in recording studio design and acoustics. Mr. Yakus co-designed, equipped and supervised construction of the industry leading A&M Music recording studios in Los Angeles and served as vice-president of A&M studios from 1985-1995. He was previously vice president of the Record Plant recording studios in New York and a partner at Tongue and Groove Studios in Philadelphia. The music that Mr. Yakus has engineered, produced or mixed has grossed over a billion dollars in sales and in 1999 he was nominated for induction into the Rock and Roll Hall of Fame. Mr. Yakus’ career and accomplishments are widely covered in publications such as Rolling Stone, Mix Magazine, Audio Engineer and Spin.

Matthew R. Long is Vice President, Video Production and Engineering.  He is an Emmy Award winner and has enjoyed an extensive career as a producer, director, editor, director of photography and writer for television, feature film and video productions.  Mr. Long is responsible for developing, producing and managing the video technology and content for the Company’s studios and related television production. He is also responsible for all print and online graphics for MyStudio.net and the creation of MyStudio’s custom virtual backgrounds.

31

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE - continued

Anna L. Madrid is Vice President, Business Development.  Prior to joining Studio One, she specialized in leasing, marketing and corporate strategic partnerships within the shopping center industry.  She has extensive experience working with local, regional and national brands and advertisers.  She has represented some of the most recognized luxury shopping centers in the nation and now leads all aspects of Studio One’s overall business development.

Timothy Grubb is Chief Technology Officer.Mr. Grubb has spent much of his career working with remote and distributed computing services and technology companies along with wide ranging multimedia development. Prior to joining Studio One, he was a founding member and CTO of OnDigital Media and led the development of its award winning KnowledgeBox product. Mr. Grubb held positions with Pearson Education including Vice President of Pearson Digital Learning, Senior Director of Architecture and Senior Director of Special Projects. In 2005, his team developed the first ever digital textbook to be formally adopted through the textbook adoption process. Currently millions of students in the U.S., U.K. and Singapore use educational and edutainment products created by Mr. Grubb's teams.

Indemnification of Directors and Officers

The Certificate of Incorporation and Bylaws of the Company provide that the Company will indemnify and advance expenses, to the fullest extent permitted by the Delaware General Corporation Law, to each person who is or was a director, officer or agent of the Company, or who serves or served any other enterprise or organization at the request of the Company (an “Indemnitee”).  Under Delaware law, to the extent that an Indemnitee is successful on the merits of a suit or proceeding brought against him or her by reason of the fact that he or she was a director, officer or agent of the Company, or serves or served any other enterprise or organization at the request of the Company, the Company will indemnify him or her against expenses (including attorneys’ fees) actually and reasonably incurred in connection with such action.  If unsuccessful in defense of a third-party civil suit or a criminal suit, or if such a suit is settled, an Indemnitee may be indemnified under Delaware law against both (i) expenses, including attorneys’ fees, and (ii) judgments, fines and amounts paid in settlement if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal action, had no reasonable cause to believe his other conduct was unlawful.  If unsuccessful in defense of a suit brought by or in the right of the Company, where the suit is settled, an Indemnitee may be indemnified under Delaware law only against expenses (including attorneys’ fees) actually and reasonably incurred in the defense or settlement of the suit if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company except that if the Indemnitee is adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Company, he or she cannot be made whole even for expenses unless a court determines that he or she is fully and reasonably entitled to indemnification for such expenses.  Also under Delaware law, expenses incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by the Company in advance of the final disposition of the suit, action or proceeding upon receipt of an undertaking by or on behalf of the officer or director to repay such amount if it is ultimately determined that he or she is not entitled to be indemnified by the Company.  The Company may also advance expenses incurred by other employees and agents of the Company upon such terms and conditions, if any, that the Board of Directors of the Company deems appropriate.  Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, in the opinion of the Commission, such indemnification is against public policy as expressed in Delaware law and is therefore unenforceable.

 On July 21, 2009, the Company approved a Directors and Officers Indemnity Agreement for its directors and principal officers.  It has since entered into agreements with Messrs. Barry M. Goldwater, Preston J. Shea, Kenneth R. Pinckard, Lawrence G. Ryckman, Sheldon Yakus, Matthew Long and Anna L. Madrid.  Subsequently, we entered into a similar agreement withJoseph A. Desiderio and Frank Perrotti, Jr.  A copy of the Directors and Officers Indemnity Agreement was attached as an exhibit to our Annual Report for the fiscal year ended June 30, 2009, filed October 15, 2009.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires executive officers and directors, and persons who beneficially own more than 10% of any class of the Registrant’s equity securities (“Reporting Persons”) to file initial reports of ownership and reports of changes in ownership on Forms 3, 4 and 5 with the SEC.  Executive officers, directors and beneficial owners of more than 5% of any class of the Registrant’s equity securities are required by SEC regulations to furnish the Registrant with copies of all Section 16(a) forms they file.

Based solely on a review of the copies of such forms furnished to the Registrant during or with respect to fiscal 2011, and certain written representations from executive officers and directors, the Registrant is aware that the Directors and certain officers have inadvertently failed to file Forms 3 and 4 at the time of their respective election to the Board or appointment as an officer.  Except as stated in the preceding sentence, the Company believes that all Reporting Persons have complied on a timely basis with all filing requirements applicable to them.

32

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE - continued

Code of Ethics

The Company maintains a Code of Ethics (the “Code”) that was filed as Exhibit 14 with its Annual Report on Form 10-KSB for 2004 filed on November 15, 2004.  The Code applies to the Chief Executive, financial and accounting officers, controller and persons performing similar functions.  If the Company amends the Code or grants a waiver from the Code with respect to the foregoing persons, it will post that amendment or waiver on its website.

Audit Committee

The Company’s Audit Committee consists of Messrs. Pinckard and Shea.  Neither of those members has been designated by the Board or the Audit Committee as an “audit committee financial expert.”  The Board is seeking to fill a board seat with an independent Board member that would fulfill that qualification.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the total compensation earned by or paid to the Company’s officers for the last two fiscal years.  

								Long Term Compensation
	Annual Compensation							Awards				Payouts
Name and Principal Position	Fiscal Year	Salary ($)		Bonus ($)		Other Annual Compensation ($)		Restricted Stock Award(s) ($)		Securities Underlying Options/ SARs (#)		LTIP Payout ($)		All Other Compensation ($)
Preston J. Shea, President,	2012		-0-		-0-		-0-	$	71,031		-0-		-0-		-0-
Secretary	2011		-0-		-0-		-0-	$	73,442		-0-		-0-		-0-
Joseph Desiderio, CFO	2012	$	77,500		-0-		-0-	$	34,108		-0-		-0-		-0-
	2011	$	-0-		-0-		-0-	$	-0-		-0-		-0-		-0-
Kenneth R. Pinckard, Vice	2012	$	114,395		-0-		-0-	$	25,000		-0-		-0-	$	110,605	(1)
President, Treasurer	2011	$	110,573		-0-		-0-		92,422		150,000		-0-	$	73,000	(2)
Sheldon Yakus, Vice	2012	$	58,000		-0-		-0-	$	5,002		-0-		-0-		-0-
President	2011	$	57,600		-0-		-0-	$	10,571		32,000		-0-		-0-

Matthew R. Long,	2012	$	108,629	-0-	-0-	$	2,915	-0-	-0-	-0-
Vice President	2011	$	107,301	-0-	-0-	$	6,945	32,000	-0-	-0-

Anna L. Madrid,	2012	$	82,500	-0-	-0-	$	79,960	-0-	-0-	-0-
Vice President	2011	$	90,000	-0-	-0-	$	122,527	-0-	-0-	-0-

Timothy Grubb	2012	$	120,000	-0-	-0-	$	41,035	-0-	-0-	-0-
Chief Tech. Officer	2011	$	106,990	-0-	-0-	$	22,879	32,000	-0-	-0-

James A. Jacobs,	2012	-0-	-0-	-0-	$	-0-	-0-	-0-	-0-
Vice President	2011	-0-	-0-	-0-	$	188,539	-0-	-0-	-0-

Lawrence G. Ryckman,	2012	$	162,105	-0-	-0-	$	-0-	-0-	-0-	$	137,895	(1)
President & CEO, MyStudio,	2011	$	114,544	-0-	-0-	$	127,267	200,000	-0-	$	89,608	(2)
Inc. & AfterMaster
HD Audio Inc.

(1) Accrued at June 30, 2012.

(2) Accrued at June 30, 2011

33

 ITEM 11. EXECUTIVE COMPENSATION - continued

Outstanding Equity Awards at Fiscal Year-End

Name	OPTION AWARDS									STOCK AWARDS
	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock that have not Vested (#)		Market Value of Shares or Units of Stock that have not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have not Vested ($)
Barry M.		50,000		-0-		-0-		$ 0.52	08/29/17		-0-		-0-		-0-		-0-
Goldwater, Jr.		75,000		-0-		-0-		$ 0.52	11/18/18
Preston J.		50,000		-0-		-0-		$ 0.52	08/29/17		-0-		-0-		-0-		-0-
Shea		75,000		-0-		-0-		$ 0.52	11/18/18		-0-		-0-		-0-		-0-
Kenneth R.		300,000		100,000		-0-		$ 0.52	09/11/19		100,000		$  85,000		-0-		-0-
Pinckard		150,000		-0-		-0-		$ 1.35	04/05/21		-0-		-0-		-0-		-0-
Lawrence G.		375,000		125,000		-0-		$ 0.52	09/11/19		125,000		$ 106,250		-0-		-0-
Ryckman		200,000		-0-		-0-		$ 1.35	04/05/21		-0-		-0-		-0-		-0-
Anna L. Madrid		25,000		-0-		-0-		$ 0.52	09/10/12		-0-		-0-		-0-		-0-
Timothy Grubb		50,000		-0-		-0-		$ 0.80	06/01/13		-0-		-0-		-0-		-0-
		32,000		-0-		-0-		$ 1.35	04/05/14		-0-		-0-		-0-		-0-
Matthew R. Long		50,000		-0-		-0-		$ 0.52	09/10/12		-0-		-0-		-0-		-0-
		32,000		-0-		-0-		$ 1.35	04/05/14		-0-		-0-		-0-		-0-
Sheldon Yakus		50,000		-0-		-0-		$ 0.52	09/10/12		-0-		-0-		-0-		-0-
		32,000		-0-		-0-		$ 1.35	04/05/14		-0-		-0-		-0-		-0-

Compensation of Directors

Our non-employee Directors receive reimbursement for expenses of attendance for each scheduled meeting that requires physical attendance.  Effective July 1, 2010, each Director receives restricted common shares valued at the greater of (i) ten thousand (10,000) shares of Common Stock, or (ii) such number of shares as shall be determined by dividing the sum of ten thousand dollars ($10,000) by the per share price calculated at seventy five percent (75%) of the average of the closing prices of the Company’s Common Stock for the ten (10) trading days prior to the date such payment is due, for each quarter year service to the Company.  Compensation for our directors for our last completed fiscal year is set forth below, with the exception of Directors who are also Officers whose compensation is disclosed above.

34

ITEM 11. EXECUTIVE COMPENSATION - continued

Director Compensation

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Barry M. Goldwater, Jr.		-0-	$	70,850		-0-		-0-		-0-		-0-	$	70,805
Frank Perrotti, Jr.		-0-	$	70,850		-0-		-0-		-0-		-0-	$	70,850

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information, as of June 30, 2012, concerning shares of the Company’s Common Stock held by (1) each stockholder known to own beneficially more than five percent of the Common Stock as of June 30, 2012, with the number of outstanding shares at 36,405,221, (2) each of the Directors, (3) each of the executive officers, and (4) all of the Directors and executive officers as a group:

Name and Address of Beneficial Owner (1)	Amount and Nature of Beneficial Ownership			Percent of Class (2)
Preston J. Shea 1 Yonge Street, Suite 1801 Toronto, ON Canada  M5E 1W7		419,560	Direct (3)		1.08	%
Barry M. Goldwater, Jr. 3219 E. Camelback Rd., #552 Phoenix, AZ  85018		419,560	Direct (3)		1.08	%
Kenneth R. Pinckard 3104 E. Camelback Rd. #245 Phoenix, AZ  85016		1,085,823	Direct (4)		2.80	%
Lawrence G. Ryckman 7780 Vaquero Drive Scottsdale, AZ  85258		5,395,927	Direct (5)		15.86	%
Joseph Desiderio		105,005	Direct
2171 Sandstone Cliffs Drive
Henderson, NV  01021-9902
Sheldon Yakus 1778 Lantana Drive Minden, NV  89423		240,271	Direct (6)		0.62	%
Matthew R. Long 17197 N. 54th Avenue Glendale, AZ  85308		113,000	Direct (6)		0.29	%

Anna L. Madrid 15417 Becker Lane Surprise, AZ  85379 341,349 Direct (7) 0.88 %

35

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - continued

Timothy Grubb 21122 N. 106th Drive Peoria, AZ  85382	192,344	Direct (6)	0.50	%
Frank Perrotti, Jr. 305 Spruce Bank Road Hamden, CT  06518	1,709,388	Direct (8)	4.41	%
Officers and Directors as a Group  (10 persons)	10,772,881		27.80	%

1. Except as otherwise indicated, we believe that the beneficial owners of Common Stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.  Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.

2. The above table is based on 36,405,221 shares of Common Stock outstanding as of June 30, 2012 plus options to purchase 2,344,532 shares of Common Stock granted to various directors and officers.  Shares of Common Stock subject to options or warrants currently exercisable, or exercisable within 90 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.

3. Includes Options to purchase 125,000 shares of Common Stock.

4. Includes Options to purchase 450,000 shares of Common Stock.

5. Includes Options to purchase 575,000 shares of Common Stock.

6. Includes Option to purchase 82,000 shares of Common Stock.

7.	Includes Option to purchase 25,000 shares of Common Stock.
8.	Includes Option to purchase 798,532 shares of Common Stock.

The Company also has 1,220,044 shares of Preferred Stock outstanding at June 30, 2012, but none are held by any of the foregoing persons or anyone who would be included in the foregoing list by virtue of such holdings.

Employment and Related Agreements

The Company has no employment agreements with any of its current management.

Change in Control

The Company is not aware of any arrangements which may result in a change in control of the Company.

Equity Compensation Plans

As of June 30, 2012 our equity compensation plans were as follows:

2009 Long-Term Stock Incentive Plan

On June 10, 2009, the Board of Directors approved the 2009 Long-Term Stock Incentive Plan (the “2009 Plan”).  The purpose of the 2009 Plan was to advance the interests of the Company by encouraging and enabling acquisition of a financial interest in the Company by employees and other key individuals.  The 2009 Plan was intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company.  A maximum of 1,500,000 shares of the Company’s Common Stock was reserved for issuance under stock options to be issued under the 2009 Plan.  The Plan permits the grant of Incentive Stock Options, Non-Statutory Stock Options and Restricted Stock Awards.  The 2009 Plan is administered by the Board of Directors or, at its direction, the Compensation Committee comprised of officers of the Company.   As of June 30, 2011, the Company had granted options to fifteen employees to purchase, in the aggregate, 727,000 shares of the Company’s Common Stock.  The exercise period for each of the grants was two to five years from the date of grant and the average exercise price was $0.88.  During the year ended June 30, 2010, one employee exercised the option to purchase 28,571 shares for $10,000.  During the year ended June 30, 2011, one employee exercised the option to purchase 20,000 shares for $10,400, or $0.52 per share.  No Grants were made under the Plan during the fiscal year ended June 30, 2012. The number of unexercised, outstanding options at June 30, 2012 was 678,429, at an average exercise price of $0.86 per share.

36

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Other than as disclosed below, none of the Company’s present directors, officers or principal shareholders, nor any family member of the foregoing, nor, to the best of the Company’s information and belief, any of its former directors, senior officers or principal shareholders, nor any family member of such former directors, officers or principal shareholders, has or had any material interest, direct or indirect, in any transaction, or in any proposed transaction which has materially affected or will materially affect the Company.

During fiscal year ended June 30, 2010, another party who subsequently became a related party, loaned $250,000 to the Company pursuant to an agreement whereby the Company issued a three-year promissory note bearing interest at 12% per annum, and including a provision allowing the noteholder, at its option, to convert the debt to shares of restricted Common Stock of the Company at an agreed price of $0.50 per share.  During the fiscal year ended June 30, 2011, the same party advanced three additional loans to the Company each in the amount of $250,000, for a total of $750,000, on similar terms and conditions.  On April 1, 2011, this related party loaned the Company an additional $250,000 as a short-term, 90-day loan, with provisions for extension.  This loan was without interest during the initial term but bears interest at the rate of 15% after the initial 90-day term.  In lieu of interest during the initial term of the loan, the Company issued a warrant to the noteholder to purchase 30,000 shares of restricted Common Stock of the Company at a price of $0.60, for every 30-days that the note remains unpaid.  The total amount owing this related party at June 30, 2012 was $3,625,000 which is secured by first priority liens on the Company’s first ten studios.  Subsequent to June 30, 2011, in September 2011, this same related party advanced an additional $200,000 as an additional short-term 90-day loan, secured by liens on Studios 11 and 12 when completed, and bearing no interest during the initial 90-day term.  In lieu of interest during the first 90-days of the term of this second short-term loan, the Company issued the noteholder a warrant to purchase 25,000 shares of restricted Common Stock of the Company at a price of $0.40 per share for a period of 5 years, for each 30-days, or portion thereof, the loan remains unpaid.  In the event this note is not repaid when due, it bears interest at the rate of 15% per annum until paid.

During fiscal year ended June 30, 2012, a related party, loaned $1,575,000 to the Company pursuant to an agreement whereby the Company issued a three-year promissory note bearing interest at 15% per annum, and including a provision allowing the noteholder, at its option, to convert the debt to shares of restricted Common Stock of the Company at an agreed price of $0.50 per share. During fiscal year ended June 30, 2012, the same related party, loaned the Company an additional $600,000 eighteen month promissory note bearing interest at 10% per annum, and including a provision allowing the noteholder, at its option, to convert the debt to shares of restricted Common Stock of the Company at an agreed price of $0.50 per share.

Future Transactions

All future affiliated transactions are expected to be made or entered into on terms that are no less favorable to the Company than those that can be obtained from any unaffiliated third party. A majority of the independent, disinterested members of the Company’s Board of Directors are asked to approve future affiliated transactions. The Company believes that of the transactions described above have been on terms at least as favorable to it as could have been obtained from unaffiliated third parties as a result of arm’s length negotiations.

Conflicts of Interest

In accordance with the laws applicable to the Company, its Directors are required to act honestly and in good faith with a view to the Company’s best interests. In the event that a conflict of interest arises at a meeting of the Board of Directors, a Director who has such a conflict is expected to disclose the nature and extent of his interest to those present at the meeting and to abstain from voting for or against the approval of the matter in which he has a conflict.

Director Independence

Our Common Stock trades on the OTC Bulletin Board.  As such, we are not currently subject to corporate governance standards of listed companies, which require, among other things, that the majority of the board of directors be independent.

Since we are not currently subject to corporate governance standards relating to the independence of our directors, we choose to define an “independent” director in accordance with the NASDAQ Global Market’s requirements for independent directors (NASDAQ Marketplace Rule 4200).  The NASDAQ independence definition includes a series of objective tests, such as that a director is not an employee of the company and has not engaged in various types of business dealings with the company.

Barry M. Goldwater, Jr. and Frank Perrotti, Jr. are independent directors under the above definition.  We do not list that definition on our Company’s website.

We presently do not have a compensation committee, nominating committee, executive committee of our Board of Directors, stock plan committee or any other committees, except for an Audit Committee.

37

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES.

The following is a summary of the aggregate fees billed to Registrant by its principal accountant(s) for professional services rendered for the fiscal years ended June 30, 2012 and 2011:

	2012		2011
Audit Fees (1)	$	96,000	$	134,240
Audit-Related Fees (2)		0		0
Tax Fees (3)		0		0
All Other Fees (4)		0		0
Total Fees	$	96,000	$	134,240

 1. Audit Fees.  Consists of fees billed for professional services rendered for the audits of Registrant’s financial statements for the fiscal years ended June 30, 2012 and 2011 and for review of the financial statements included in Registrant’s Quarterly Reports on Form 10-Q for those fiscal years.  

2. Audit-Related Fees.  Consists of fees billed for services rendered to Registrant for audit-related services, which generally include fees for audit and review services in connection with proposed spin-off transactions, separate audits of employee benefit and pension plans, and ad hoc fees for consultation on financial accounting and reporting standards.

3. Tax Fees.  Consists of fees billed for services rendered to Registrant for tax services, which generally include fees for corporate tax planning, consultation and compliance.

4. All Other Fees.  Consists of fees billed for all other services rendered to Registrant, which generally include fees for consultation regarding computer system controls and human capital consultations.  No services were performed related to financial information systems design and implementation for the fiscal years ended June 30, 2012 and 2011.

No “audit-related,” “tax” and “all other” services in 2012 or 2011, as defined above, were approved by the Audit Committee in reliance on the de minimus exception to the preapproval requirements under federal securities laws and regulations.

Pre-Approval of Services of Principal Accounting Firm

The Audit Committee’s written policy is to pre-approve all audit and permissible non-audit services provided by Registrant’s principal accounting firm (independent auditor).  These services may include audit services, audit-related services, tax services and other permissible non-audit services.  Any service incorporated within the independent auditor’s engagement letter, which is approved by the Audit Committee, is deemed pre-approved.  Any service identified as to type and estimated fee in the independent auditor’s written annual service plan, which is approved by the Audit Committee, is deemed pre-approved up to the dollar amount provided in such annual service plan.

During the year, the principal accounting firm may also provide additional accounting research and consultation services required by, and incident to, the audit of Registrant’s financial statements and related reporting compliance. These additional audit-related services are pre-approved up to the amount approved in the annual service plan approved by the Audit Committee.  The Audit Committee may also pre-approve services on a case-by-case basis during the year.

The Audit Committee’s approval of proposed services and fees are noted in the meeting minutes of the Audit Committee and/or by signature of the Audit Committee on the engagement letter.  The principal accounting firm of Registrant and management are periodically requested to summarize the principal accounting firm services and fees paid to date, and management is required to report whether the principal accounting firm’s services and fees have been pre-approved in accordance with the required pre-approval process of the Audit Committee.

Non-Audit Services

The Audit Committee of the Board of Directors has considered whether the provision of non-audit services by the Registrant’s principal accountants is compatible with maintaining auditor independence.

38

ITEM 15. EXHIBITS

The following Exhibits are incorporated by reference:

Exhibit No.	Description
3.1	Articles of Incorporation, dated May 12, 1988. (a)
3.1	Certificate of Amendment of Articles of Incorporation of Dimensional Visions Incorporated, dated January 16, 2006. (f)
3.2	Certificate of Amendment of Articles of Incorporation of Elevation Media, Inc., dated March 24, 2006. (f)
3.2	Bylaws. (a)
3.3	Certificate of Amendment of Certificate of Incorporation of Dimensional Visions Incorporated dated January 22, 2004. (f)
4.1	Certificate of Designation of Series A Convertible Preferred Stock, dated December 12, 1992. (a)
4.1	Form of Warrant issued to Participants in 2007 Private Placements. (g)
4.2	Certificate of Designation of Series B Convertible Preferred Stock, dated December 22, 1993. (a)
4.3	Certificate of Designation of Series P Convertible Preferred Stock, dated September 11, 1995. (a)
4.4	Certificate of Designation of Series S Convertible Preferred Stock, dated August 28, 1995. (a)
4.5	Certificate of Designation of Series C Convertible Preferred Stock, dated November 2, 1995. (a)
4.6	Certificate of Designation of Series D and Series E Convertible Preferred Stock, dated August 25, 1999. (a)
4.7	Form of Warrant Agreement to Debt Holders, dated January 15, 1998. (a)
4.8	Form of Warrant Agreement to Debt Holders, dated April 8, 1998. (a)
4.9	Form of Warrant Agreement to Participants in Private Placement, dated April 8, 1998. (a)
4.10	Pledge Agreement with Dale Riker and Russ Ritchie, dated January 11, 2001. (b)
4.11	Investment Agreement with Swartz Private Equity, LLC, dated December 13, 2000. (b)
4.12	Merrill Lynch Portfolio Reserve Loan and Collateral Account Agreement, dated January 12, 2002. (b)
10.1	1996 Equity Incentive Plan. (a)
10.1	Stock Purchase Agreement between Studio One Entertainment, Inc. and Dimensional Visions Incorporated, dated March 29, 2006 (g)
10.2	1999 Stock Option Plan. (a)
10.2	Exchange Agreement between Studio One Media, Inc., and Studio One Entertainment, Inc., dated April 16, 2007. (g)
10.3	Employment Agreement with John D. McPhilimy, dated January 1, 2001. (c)
10.3	Accord and Satisfaction between Dimensional Visions, Inc. and Russell H. Ritchie, Dale E. Riker, Suntine Enterprises, LLC, and Cornerstone Wireless Communications, LLC, dated October 11, 2006. (g)
10.4	Employment Agreement with Bruce D. Sandig, dated July 1, 2001. (c)
10.5	Settlement Agreement and Release between the Company and Russell H. Ritchie, Dale E. Riker, Suntine Enterprises, LLC, and Cornerstone Wireless Communications, LLC, dated April 30, 2003. (d)
10.6	2009 Long-Term Incentive Plan.
10.7	Form of Directors and Officers Indemnity Agreement.
14	Dimensional Visions, Inc. Code of Ethics. (e)
21.1	Subsidiaries of the Registrant (h)

(a)	Incorporated by reference from the Company’s Registration Statement on Form SB-2, dated June 19, 2000 (Registration No. 333-30368).
(b)	Incorporated by reference from the Company’s Registration Statement on Form SB-2, dated July 10, 2001 (Registration No. 333-56804).
(c)	Incorporated by reference from the Company’s Amendment No. 1 to Annual Report on Form 10-KSB, dated February 22, 2002.
(d)	Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2003, filed October 15, 2003.
(e)	Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2004, filed November 15, 2004.
(f)	Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2006, filed September 29, 2006.
(g)	Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2007, filed September 28, 2007, and Form 10-K/A for the fiscal year ended June 30, 2007, filed May 27, 2008.
(h)	Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2008, filed September 29, 2008.
(i)	Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2009, filed October 15, 2009.
(j)	Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2010, filed October 12, 2010.

The following Exhibits are filed herewith:

31.1	Certification of Chief Executive Officer pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

39

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.

	STUDIO ONE MEDIA, INC.
Date:	By:	/s/ Preston J. Shea
		Preston J. Shea
		President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Preston J. Shea	President and Director	October 15, 2012
Preston J. Shea	(Principal Executive Officer)
/s/ Joseph A Desiderio	Chief Financial Officer, Director	October 15, 2012
Joseph A Desiderio	(Principal Financial Officer)
/s/ Barry M. Goldwater, Jr.	Director	October 15, 2012
Barry M. Goldwater, Jr.
/s/ Frank Perrotti, Jr.	Director	October 15, 2012
Frank Perrotti, Jr.
/s/  Kenneth R. Pinckard	Director	October 15, 2012
Kenneth R. Pinckard

40

STUDIO ONE MEDIA, INC.

FINANCIAL STATEMENTS

INDEX TO THE FINANCIAL STATEMENTS	PAGE NUMBER
Report of Independent Registered Public Accounting Firm	F-2
Financial Statements	F-3
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Stockholders' Equity (Deficit)	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Financial Statements	F-7 - F-28

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Studio One Media, Inc.

Scottsdale, AZ

We have audited the accompanying consolidated balance sheets of Studio One Media, Inc. and subsidiaries (collectively the “Company”) as of June 30, 2012 and 2011, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years then ended. 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 audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audits 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the consolidated financial statements, the Company has historically suffered recurring losses from operations, has a substantial accumulated deficit and has limited revenues.  This raises substantial doubt about the Company’s ability to continue as a going concern.  Management’s plan in regard to these matters is also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/SingerLewak, LLP

Los Angeles, CA

October 15, 2012

F-2

STUDIO ONE MEDIA, INC.
Consolidated Balance Sheets
	June 30,				June 30,
	2012				2011
ASSETS
Current Assets
Cash		$	99,637			$	250,478
Other Receivables			11,870				20,347
Other Current Assets			96,383				142,951
Total Current Assets			207,890				413,776
Property and Equipment, net			445,235				1,384,992
Property and Equipment, yet to be placed in service			93,357				484,462
Intangible Assets, net			42,499				237,085
Other Assets
Deposits			93,016				104,016
Other Assets			69,573				77,934
Total Other Assets			162,589				181,950
Total Assets		$	951,570			$	2,702,265
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable and Accrued Expenses		$	1,161,989			$	1,042,964
Notes Payable - Related Party			575,000				200,000
Notes Payable			40,488				40,488
Convertible Notes Payable - Related Party, net of discount
of $335,817 and $-0-, respectively			1,064,183				-
Convertible Notes Payable, net of discount
of $-0- and $68,387, respectively			225,000				31,613
Total Current Liabilities			3,066,660				1,315,065
Long-Term Liabilities
Convertible Notes Payable - Related Party, net of discount
of $321,300 and $721,251, respectively			1,328,700				278,749
Total Liabilities			4,395,360				1,593,814
Stockholders' Equity (Deficit)
Convertible Preferred Stock, authorized 10,000,000 shares,
par value $0.001; 1,220,044 and 1,636,044 issued and
outstanding, respectively			1,220				1,636
Common Stock, authorized 100,000,000 shares,
par value $0.001; 36,412,601 and 30,916,182 shares issued
and outstanding, respectively			36,413				30,916
Additional Paid In Capital			33,696,207				30,748,186
Accumulated Deficit			(37,177,630	)			(29,672,287	)
Total Stockholders' Equity (Deficit)			(3,443,790	)			1,108,451
Total Liabilities and Stockholders' Equity (Deficit)		$	951,570			$	2,702,265

The accompanying notes are an integral part of these consolidated financial statements.

F-3

STUDIO ONE MEDIA, INC.
Consolidated Statements of Operations
	For the Years Ended
	June 30,
	2012			2011
REVENUES
Session Revenues	$	108,782		$	42,779
Advertising Revenues		5,000			7,750
AfterMaster Revenues		87,646			59,800
Barter Revenues		23,500			412,050
Total Revenues		224,928			522,379
COSTS AND EXPENSES
Cost of Revenues (Exclusive of Depreciation and Amortization)		941,808			619,143
Cost of Barter Exchanges		23,500			412,050
Depreciation and Amortization Expenses		493,139			340,900
Impairment on long lived assets and intangibles		1,145,450			-
General and Administrative Expenses		3,900,060			6,459,377
Total Costs and Expenses		6,503,957			7,831,470
Loss from Operations		(6,279,029	)		(7,309,091	)
Other Income (Expense)
Other Income		-			3,906
Interest Expense		(1,203,433	)		(982,664	)
Gain on Disposal of Property		-			73,502
Gain (Loss) on Extinguishment of Debt		191			(888,900	)
Total Other Expenses		(1,203,242	)		(1,794,156	)
Loss Before Income Taxes		(7,482,271	)		(9,103,247	)
Income Tax Expense		-			-
NET LOSS	$	(7,482,271	)	$	(9,103,247	)
Preferred Stock Accretion and Dividends		(392,138	)		(547,907	)
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS	$	(7,874,409	)	$	(9,651,154	)
Basic and Diluted Loss Per Share of Common Stock	$	(0.23	)	$	(0.35	)
Weighted Average Number of Shares Outstanding		33,586,953			27,680,108
The accompanying notes are an integral part of these consolidated financial statements.

F-4

STUDIO ONE MEDIA, INC.
Consolidated Statements of Stockholders' Equity (Deficit)
									Additional						Total
	Preferred Stock					Common Stock			Paid In			Accumulated			Stockholders'
	Shares		Amount			Shares	Amount		Capital			Deficit			Equity
Balance, June 30, 2010	549,044			549		25,891,768		25,892		22,346,842			(20,569,040	)		1,804,243
Preferred Stock issued for cash	1,187,000			1,187		-		-		1,185,813			-			1,187,000
Common Stock issued for cash, net of offering costs of $139,102	-			-		1,847,501		1,848		1,000,064			-			1,001,912
Warrants and options exercised for cash	-			-		351,983		352		129,215			-			129,567
Common Stock issued in conversion of debt and extinguishment of liabilities	-			-		1,232,452		1,232		701,048			-			702,280
Common Stock issued in conversion of preferred stock	(100,000	)		(100	)	206,099		206		(106	)		-			-
Share-based compensation - Common Stock	-			-		1,322,182		1,322		1,615,677			-			1,616,999
Share-based compensation - warrants	-			-		-		-		1,864,764			-			1,864,764
Warrants and Common Stock issued in advance of services	-			-		64,197		64		496,965			-			497,029
Warrants and Common Stock  issued for interest expense	-			-		-		-		131,913			-			131,913
Beneficial conversion feature on issuance of convertible debt	-			-		-		-		1,181,281			-			1,181,281
Warrants issued in connection to issuance of convertible debt	-			-		-		-		94,710			-			94,710
Net loss for the year ended
June 30, 2011	-			-		-		-		-			(9,103,247)			(9,103,247	)
Balance, June 30, 2011	1,636,044			1,636		30,916,182		30,916		30,748,186			(29,672,287)			1,108,451
Common Stock issued as dividend on preferred stock	-			-		45,550		46		23,026			(23,072)			-
Common Stock issued in conversion of preferred stock	(416,000	)		(416	)	832,000		832		(416	)		-			-
Common Stock issued for cash, net of offering costs of $45,098	-			-		925,600		926		435,943			-			436,869
Common Stock  issued in conversion of debt and extinguishment of liabilities	-			-		505,856		506		268,781			-			269,287
Share-based compensation - Common Stock	-			-		1,642,078		1,642		732,303			-			733,945
Share-based compensation - warrants and options	-			-		-		-		11,707			-			11,707
Warrants and Common Stock  issued in advance of services	-			-		775,103		775		460,515			-			461,290
Warrants and Common Stock  issued for interest expense	-			-		770,232		770		374,425			-			375,195
Beneficial conversion feature on issuance of convertible debt	-			-		-		-		388,443			-			388,443
Warrants issued in connection to issuance of convertible debt	-			-		-		-		253,294			-			253,294
Net loss for the year ended
June 30, 2012	-			-		-		-		-			(7,482,271	)		(7, 482,271	)
Balance, June 30, 2012	1,220,044		$	1,220		36,412,601	$	36,413	$	33,696,207		$	(37, 177,630	)	$	(3, 443,790	)
The accompanying notes are an integral part of these consolidated financial statements.

F-5

STUDIO ONE MEDIA, INC.
Consolidated Statements of Cash Flows
	For the Years Ended
	June 30,
	2012			2011
OPERATING ACTIVITIES
Net Loss	$	(7,482,271	)	$	(9,103,247	)
Adjustments to reconcile to cash from operating activities:
Depreciation and amortization		493,137			340,900
Share-based compensation - Common Stock		733,945			1,616,999
Share-based compensation - warrants		11,707			1,864,764
Common Stock and warrants issued for interest		375,195			131,913
Amortization of debt discount and issuance costs		774,258			724,382
(Gain)/Loss on extinguishment of debt		(191	)		888,900
(Gain)/Loss on disposal of property		-			(73,502	)
Bad debt expense		-			60,000
Impairment on long lived assets and intangibles		1,145,450			-
Changes in Operating Assets and Liabilities:
Other receivables		8,477			64,121
Other assets		527,219			677,277
Accounts payable and accrued expenses		288,503			(96,841	)
Net Cash Used in Operating Activities		(3,124,571	)		(2,904,334	)
INVESTING ACTIVITIES
Purchase of property and equipment		(113,139	)		(874,707	)
Proceeds from disposal of property		-			90,470
Net Cash Used in Investing Activities		(113,139	)		(784,237	)
FINANCING ACTIVITIES
Preferred stock issued for cash		-			1,187,000
Common Stock issued for cash, net of offering costs of $45,098 and $139,102, respectively		436,869			1,001,912
Warrants and options exercised for cash		-			129,567
Proceeds from notes payable - related party		375,000			-
Principal repayments of notes payable - related party		-			(40,000	)
Proceeds from convertible notes payable - related party		2,050,000			-
Proceeds from convertible notes payable		325,000			-
Principal repayments of convertible notes payable		(100,000	)		-
Proceeds from notes payable		-			1,242,590
Principal repayments of notes payable		-			(215,000	)
Net Cash Provided by Financing Activities		3,086,869			3,306,069
NET DECREASE IN CASH		(150,841	)		(382,502	)
CASH AT BEGINNING OF PERIOD		250,478			632,980
CASH AT END OF PERIOD	$	99,637		$	250,478
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID FOR:
Interest	$	148		$	5,813
NON CASH FINANCING ACTIVITIES:
Common Stock issued to extinguish debt and liabilities	$	269,287		$	702,280
Common Stock and warrants issued for prepaid services		461,290			497,029
Warrants and beneficial conversion feature on issuance of convertible debt		641,737			1,275,991
Common Stock issued as dividend on Preferred Stock		23,072			-
The accompanying notes are an integral part of these consolidated financial statements.

F-6

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Studio One Media, Inc. (the “Company” or “Studio One”) was originally organized in Delaware on May 12, 1988, as Dimensional Visions Group, Ltd. The name was changed on January 15, 1998 to Dimensional Visions Incorporated. On February 8, 2006, it changed its name to Elevation Media, Inc., and on March 28, 2006 the Company’s name was changed to Studio One Media, Inc. as part of its overall plan to implement its revised business plan.

In April 2006, the Company entered into an agreement to purchase MyStudio HD Recording Studios, Inc. (formerly known as Studio One Entertainment, Inc.), a privately-held Scottsdale, Arizona-based company that designed and manufactured the recording studios currently in use by the Company (the “MyStudio Agreement”).  

On April 17, 2007, the Company announced that it had finalized the reverse merger of MyStudio HD Recording Studios, Inc. through an all-stock transaction. The purchase was pursuant to an agreement entered into by the companies dated March 29, 2006. The reverse merger included the exchange of 7,000,000 restricted Common Shares of Studio One Media, Inc. for 100% of the issued and outstanding shares of MyStudio HD Recording Studios, Inc.   The substance of the transaction resulted in a reverse merger wherein MyStudio HD Recording Studios, Inc. became the accounting acquirer of Studio One.  Therefore, historical financial data reflects the operations and accumulated deficit of MyStudio HD Recording Studios, Inc.  The transaction essentially is a recapitalization of MyStudio HD Recording Studios, Inc. The reverse merger includes all right, title and interest to MyStudio HD Recording Studio, Inc.’s proprietary interactive recording studios, business plan and intellectual property, including pending patents, foreign patent rights and federal trademark applications.  MyStudio, Inc. continues to operate as a wholly owned subsidiary of Studio One.  Accordingly, the financial statements present on a consolidated basis the operations of Studio One and MyStudio HD Recording Studios, Inc., as well its other wholly-owned subsidiary, AfterMaster HD Audio, Inc.

Accounting Basis

The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.  The Company has elected a June 30 fiscal year end.

Principles of Consolidation

The consolidated financial statements include the accounts of Studio One Media, Inc. and its subsidiaries. All significant inter-company accounts and transactions have been eliminated.

Use of Estimates

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 and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates are made in relation to the allowance for doubtful accounts and the fair value of certain financial instruments.  Actual results could differ from those estimates.

Notes and Other Receivables

Notes and other receivables are stated at amounts management expects to collect. An allowance for doubtful accounts is provided for uncollectible receivables based upon management's evaluation of outstanding accounts receivable at each reporting period considering historical experience and customer credit quality and delinquency status.  Delinquency status is determined by contractual terms.  Bad debts are written off against the allowance when identified.

F-7

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Fair Values, Inputs and Valuation Techniques for Financial Assets and Liabilities Disclosures

The fair value measurements and disclosure guidance defines fair value and establishes a framework for measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with this guidance, the Company has categorized its recurring basis financial assets and liabilities into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The levels of the fair value hierarchy are described below:

• Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

• Level 2 inputs utilize other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly, for substantially the full term of the asset. Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active and inputs other than quoted prices that are observable in the marketplace for the asset. The observable inputs are used in valuation models to calculate the fair value for the asset.

• Level 3 inputs are unobservable but are significant to the fair value measurement for the asset, and include situations where there is little, if any, market activity for the asset. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

Disclosures for Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis

The Company also measures the fair value of certain assets on a non-recurring basis, generally on an annual basis, or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include long lived assets, and finite-lived intangible assets.

The Company utilized the income and cost valuation approach to determine the fair value used in its impairment analysis with an undiscounted cash flow model and a replacement cost model. The Company has determined the inputs used in such analysis as Level 3 inputs. During the year ended June 30, 2012, the Company determined that the carrying value of its studios, and a portion of its intangible assets exceeded their fair values.  Accordingly, the Company recorded impairment charges on long-lived assets of $1,145,150 within earnings for the period (see Note 3).

F-8

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

The following table presents the Company’s fair value hierarchy for long lived assets and intangibles measured at fair value on a non-recurring basis on which an impairment charge was recorded as of June 30, 2012:

Description	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Property and equipment, net	$	445,235	$	-	$	-	$	445,235
Intangible assets, net		42,499		-		-		42,499
Total	$	487,734	$	-	$	-	$	487,734

The following tables present the Company’s impairment charges recorded during the fiscal years ended June 30, 2012 and 2011:

	2012		2011
Studios	$	816,407	$	-
Equipment yet to be placed in service		208,210		-
Intangible assets		120,833		-
Total impairment expense	$	1,145,150	$	-

Fair Value of Financial Instruments Disclosures

The financial instruments guidance requires disclosure of fair value information about financial instruments, as defined therein, for which it is practicable to estimate such fair value. Therefore, it requires fair value disclosure for financial instruments that are not recognized or are not carried at fair value in the consolidated balance sheets. The carrying amounts of the Company’s financial instruments, which include cash, notes and other receivables, accounts payable and notes payable, approximate their fair value due to their short maturities.

Concentration of Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash.  Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States.  The Company occasionally maintains amounts on deposit with a financial institution that are in excess of the federally insured limits. The risk is managed by maintaining all deposits in high quality financial institutions.

For the year ended June 30, 2012 and 2011 there were no customers that accounted for a material portion of total revenues.  

Property and Equipment

Property and equipment is recorded at cost less accumulated depreciation. Depreciation and amortization is calculated using the straight-line method over the expected useful life of the asset, after the asset is placed in service. The Company generally uses the following depreciable lives for its major classifications of property and equipment:

Description	Useful Lives
Office Equipment and Computers	5 years
Computer Software	5 years
Furniture and Office Equipment	5 years
Vehicles	5 years
Leasehold Improvements	Shorter of Useful Life or Lease Term
Studios	5 years

Expenditures associated with upgrades and enhancements that improve, add functionality, or otherwise extend the life of property and equipment are capitalized, while expenditures that do not, such as repairs and maintenance, are expensed as incurred.

F-9

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Property and Equipment Yet to be Placed in Service

The Company capitalizes direct costs associated with the production of a new studio as it is being built.  Depreciation of these assets does not begin until the studio is complete and placed into service.

Intangible Assets

Intangible assets consist of intellectual property, website costs,  video backgrounds, and patterns and molds. The Company’s intellectual property includes purchased patents and trademarks as well as other proprietary technologies.  Website costs are costs incurred to develop the Company’s website. Video backgrounds are the costs incurred to develop video backgrounds for use in the Company’s recording studios. Patterns and molds are for the design and construction of the studios. The Company amortizes intangible assets over the following useful lives:

Description	Weighted-Average Amortization Period
Intellectual Property	5 years
Website Costs	5 years
Video Backgrounds	5 years
Patterns and Molds	5 years

Valuation of Long-Lived Assets

Long-lived tangible assets and definite-lived intangible assets are reviewed for possible impairment annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses both an estimate of undiscounted future net cash flows of the assets over the remaining useful lives and a replacement cost method when determining their fair values. If the carrying values of the assets exceed the fair value of the assets, the Company recognizes an impairment loss equal to the difference between the carrying values of the assets and their fair values. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets. The evaluation of long-lived assets requires the Company to use estimates of future cash flows. However, actual cash flows may differ from the estimated future cash flows used in these impairment tests.

Revenue Recognition

The Company applies the provisions of FASB ASC 605, Revenue Recognition in Financial Statements, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. ASC 605 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue related to goods and services provided when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured.

The Company's revenues are generated from the studio sessions, on-studio advertising, website advertising and fees from the AfterMaster services.  Studio sessions are included in revenues as cash sales or barter transactions.  Cash sales are recognized as revenue upon the earlier of the use of or expiration of the prepaid session.  Barter revenues are recognized as stated below.

Barter Transactions - Barter revenue relates to recording session services provided by Studio One to business customers in exchange for products and services that Studio One would otherwise be required to buy for cash. Barter expenses reflect the expense offset to barter revenue. The amount of barter revenue and expense is recorded at the estimated fair value of the services received or the services provided, whichever is more objectively determinable, in the month the services and advertising are exchanged.  Studio One applies ASC 845, Accounting for Advertising Barter Transactions and, accordingly, recognizes advertising barter revenues only to the extent that Studio One has similar cash transactions within a period not to exceed six months prior to the date of the barter transaction.

To date, the amount of barter revenue to be recognized has been more objectively determinable based on the value of products or services received rather than based upon the value of advertising provided.  For revenue from recording sessions services provided for cash to be considered similar to the recording session services provided in barter transactions, the services rendered must have been in the same media and similar term as the barter transaction.

F-10

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

During the years ended June 30, 2012 and 2011, the Company recognized $23,500 and $412,050, respectively, of revenue from barter transactions.  

Cost of Sales

The Company’s cost of sales includes studio lease expense, employee costs, and other nominal amounts.  Depreciation is not included within cost of sales.

Research and Development

The Company follows the policy of expensing its research and development costs in the period in which they are incurred in accordance with ASC 730, Accounting for Research and Development Costs. The Company incurred research and development expenses of $3,052 and $29,189 during the years ended June 30, 2012 and 2011, respectively.

Advertising Expenses

The Company expenses advertising costs in the period in which they are incurred. Advertising expenses were $44,173 and $146,956 for the years ended June 30, 2012 and 2011, respectively, and have been included within general and administrative expenses.  During the same periods, the Company incurred approximately $23,500 and $412,050 in advertising expenses which the Company paid for in barter.  These costs are included in its cost of barter expenses, respectively.

Share-Based Compensation

The Company follows the provisions of ASC 718, Share-Based Payment, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.  The Company uses the Black-Scholes pricing model for determining the fair value of share-based compensation.

Equity instruments issued to non-employees for goods or services are accounted for at fair value and are marked to market until service is complete or a performance commitment date is reached, whichever is earlier.

Loss Per Share

Basic earnings (loss) per Common Share is computed by dividing losses attributable to Common shareholders by the weighted-average number of shares of Common Stock outstanding during the period. The losses attributable to Common shareholders was increased for accrued and deemed dividends on Preferred Stock during the years ended June 30, 2012 and 2011 of $392,138 and $547,907, respectively.

Diluted earnings per Common Share is computed by dividing income (loss) attributable to Common shareholders by the weighted-average number of Shares of Common Stock outstanding during the period increased to include the number of additional Shares of Common Stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding convertible Preferred Stock, stock options, warrants, and convertible debt. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s Common Stock can result in a greater dilutive effect from potentially dilutive securities.

For the years ended June 30, 2012 and 2011, all of the Company’s potentially dilutive securities (warrants, options, convertible preferred stock, and convertible debt) were excluded from the computation of diluted earnings per share as they were anti-dilutive.  The total number of potentially dilutive Common Shares that were excluded were 16,217,848 and 12,267,846 at June 30, 2012 and 2011, respectively.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

F-11

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

In July, 2006, the FASB issued ASC 740, Accounting for Uncertainty in Income Taxes, which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a return. ASC 740 provides guidance on the measurement, recognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties.  Under this pronouncement, the Company recognizes the financial statement benefit of a tax position only after determining that a position would more likely than not be sustained based upon its technical merit if challenged by the relevant taxing authority and taken by management to the court of the last resort. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon settlement with the relevant tax authority.

The Company’s policy is to recognize both interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties on unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest and penalties since its inception.

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The tax years for 2007 to 2011 remain open for federal and/or state tax jurisdictions. The Company is currently not under examination by any other tax jurisdictions for any tax years.

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements.

Reclassification of Financial Statement Accounts

Certain amounts in the June 30, 2011 consolidated financial statements have been reclassified to conform to the presentation in the June 30, 2012 consolidated financial statements.

NOTE 2 – GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred losses since inception of $37,177,630 and currently has revenues which are insufficient to cover its operating costs, which raises substantial doubt about its ability to continue as a going concern. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.

The future of the Company as an operating business will depend on its ability to (1) obtain sufficient capital contributions and/or financing as may be required to sustain its operations and (2) to achieve adequate revenues from its MyStudio and AfterMaster businesses. Management's plan to address these issues includes, (a) continued exercise of tight cost controls to conserve cash, (b) obtaining additional financing, (c) placing in service additional studios (d) more widely commercializing the AfterMaster and ProMaster products, and (e) identifying and executing on additional revenue generating opportunities.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

F-12

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 3 – PROPERTY AND EQUIPMENT

The Company’s property and equipment are comprised of the following as of June 30, 2012 and 2011:

	2012			2011
Furniture and Office Equipment	$	25,912		$	25,912
Office Equipment and Computers		230,091			223,032
Studios		1,093,669			1,624,469
Vehicles		29,125			29,125
Leasehold Improvements		6,574			6,574
Computer Software		56,166			52,796
Accumulated Depreciation		(996,302	)		(576,916	)
Property and Equipment, net	$	445,235		$	1,384,992

The Company also had $93,357 and $484,462 in equipment that was yet to be placed in service as of June 30, 2012 and 2011, respectively.  Depreciation expense for the years ended June 30, 2012 and 2011 was $419,368 and $267,311, respectively.

During the fiscal year ended June 30, 2012, a major supplier of the Company’s work-in-process property and equipment filed for bankruptcy.  The Company had deposits placed with this supplier for future studios of $93,016 and other work-in-process of $115,184.  The Company was able to recover some scrap material which has been allocated a $-0- fair value.  Thus, the Company recognized an impairment of these deposits and other work-in-process of $208,210.

Also during the fiscal year ended June 30, 2012, the Company analyzed its studios for future recoverability in accordance with the guidance for the impairment of long-lived assets.  The Company used a replacement cost approach to estimate their fair value.  Based on this analysis, the Company determined that the carrying value of the studios exceeded the total replacement cost of those assets.  Accordingly, the Company recorded an impairment of fixed assets totaling $816,407 which is recorded within the Company’s operating expenses.

NOTE 4 – INTANGIBLE ASSETS

The Company’s intangible assets are comprised of the following on June 30, 2012 and June 30, 2011:

	2012			2011
Patterns and Molds	$	24,095		$	24,095
Website Costs		91,375			91,375
Video Backgrounds		16,172			16,172
Intellectual Property		-			250,000
Accumulated Amortization		(89,143	)		(144,557	)
Intangible Assets, Net	$	42,499		$	237,085

Amortization expense for the years ended June 30, 2012 and 2011 was $73,753 and $73,589, respectively.  The Company’s future estimated amortization for the above intangible assets is as follows: 

Year	Amortization
2013	$	17,383
2014		13,706
2015		11,410
2016		-
2017		-
Total	$	42,499

F-13

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

A summary of accounts payable and accrued expenses as of June 30, 2012 and 2011 follows:

	2012		2011
Accounts Payable	$	763,354	$	718,557
Accrued Interest		18,625		10,305
Deferred Revenue		3,500		5,700
Deferred Rent		-		7,571
Other Accrued Expenses		376,510		300,831
Total	$	1,161,989	$	1,042,964

 Other accrued expenses consist primarily of accrued payroll liabilities, consulting fees payable and other fees payable.

NOTE 6 – NOTES PAYABLE

Convertible Notes Payable

In accounting for its convertible notes payable, proceeds from the sale of a convertible debt instrument with Common Stock purchase warrants are allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portions of the proceeds allocated to the warrants are accounted for as paid-in capital with an offset to debt discount. The remainder of the proceeds are allocated to the debt instrument portion of the transaction as prescribed by ASC 470-25-20.  The Company then calculates the effective conversion price of the note based on the fair value allocated to the debt instrument to determine the fair value of any beneficial conversion feature (“BCF”) associated with the convertible note in accordance with ASC 470-20-30.  The BCF is recorded to additional paid-in capital with an offset to debt discount.  Both the debt discount related to the issuance of warrants and related to a BCF is amortized over the life of the note.

Convertible Notes Payable – Related Parties

Convertible notes payable due to related parties consisted of the following as of June 30, 2012 and 2011, respectively:

	2012		2011
$250,000 face value, issued in February 2010, interest rate of 12%, matures in February 2013, net of unamortized discount of $54,290 and $137,774 at June 30, 2012 and 2011, respectively.	$	195,710	$	112,226
$250,000 face value, issued in May 2010, interest rate of 12%, matures in May 2013, net of unamortized discount of $70,256 and $153,741 at June 30, 2012 and 2011, respectively.		179,744		96,259
$250,000 face value, issued in August 2010, interest rate of 12%, matures in August 2013, net of unamortized discount of $122,820 and $222,848 at June 30, 2012 and 2011, respectively.		127,180		27,152
$250,000 face value, issued in December 2010, interest rate of 12%, matures in December 2013, net of unamortized discount of $123,404 and $206,888 at June 30, 2012 and 2011, respectively.		126,596		43,112
$250,000 face value, issued in November 2011, interest rate of 15%, matures in November 2012, net of unamortized discount of $49,285 as of June 30, 2012.		200,715		-
$250,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $63,955 as of June 30, 2012.		186,045		-

F-14

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 6 – NOTES PAYABLE - continued

$100,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $26,851 as of June 30, 2012.		73,149		-
$300,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $71,180 as of June 30, 2012.		228,820		-
$100,000 face value, issued in February 2012, interest rate of 15%, matures in August 2013, net of unamortized discount of $13,713 as of June 30, 2012.		86,287		-
$100,000 face value, issued in February 2012, interest rate of 15%, matures in August 2013, net of unamortized discount of $13,272 as of June 30, 2012.		86,728		-
$150,000 face value, issued in March 2012, interest rate of 15%, matures in September 2013, net of unamortized discount of $7,443 as of June 30, 2012.		142,557		-
$200,000 face value, issued in March 2012, interest rate of 15%, matures in September 2013, net of unamortized discount of $10,297 as of June 30, 2012.		189,703		-
$200,000 face value, issued in April 2012, interest rate of 10%, matures in October 2013, net of unamortized discount of $10,652 as of June 30, 2012.		189,348		-
$150,000 face value, issued in May 2012, interest rate of 10%, matures in November 2013, net of unamortized discount of $6,557 as of June 30, 2012.		143,443		-
$125,000 face value, issued in June 2012, interest rate of 10%, matures in December 2013, net of unamortized discount of $6,277 as of June 30, 2012.		118,723		-
$125,000 face value, issued in June 2012, interest rate of 10%, matures in December 2013, net of unamortized discount of $6,865 as of June 30, 2012.		118,135		-
Total convertible notes payable – related parties		2,392,883		278,749
Less current portion		1,064,183		-
Convertible notes payable – related parties, long-term	$	1,328,700	$	278,749

On November 3, 2011, the Company issued a convertible note to a related party for $250,000 that matures one year after issuance.  The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.40 per share.   This note includes the following priority repayment provisions:  1) the Company agrees to apply 50% of the first $600,000 of capital raised by the Company in the near term toward all outstanding notes the lender has outstanding with the Company; 2) the Company agrees to apply the first $825,000 of proceeds raised beyond the $600,000 to any outstanding notes the lender has outstanding with the Company; and 3) if the Company is unable to raise additional capital but a large marketing or sales agreement is entered into which provide for revenue in excess of $50,000, all funds received above $50,000 shall be applied to any notes the lender has outstanding with the Company at the time.

In conjunction with the note, the Company issued detachable warrants to purchase 60,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date.  The value of BCF recorded was $118,455 and the debt discount related to the attached warrants was $24,705, for a total debt discount of $143,160.

On December 2, 2011, the Company issued a convertible note to a related party for $250,000 that matures in June 2013.  The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.   In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement.

F-15

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 6 – NOTES PAYABLE - continued

In conjunction with the note, the Company issued detachable warrants to purchase 112,500 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $61,998 and the debt discount related to the attached warrants was $41,998, for a total debt discount of $103,996.

On December 15, 2011, the Company issued a convertible note to a related party for $100,000 that matures in June 2013.  The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.   In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement.

In conjunction with the note, the Company issued detachable warrants to purchase 50,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $24,020 and the debt discount related to the attached warrants was $18,020, for a total debt discount of $40,040.

On December 30, 2011, the Company issued a convertible note to a related party for $300,000 that matures in June 2013.  The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.   In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement.

In conjunction with the note, the Company issued detachable warrants to purchase 150,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $54,934 and the debt discount related to the attached warrants was $51,934, for a total debt discount of $106,868.

On February 3, 2012, the Company issued a convertible note to a related party for $100,000 that matures in August 2013.  The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.   In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement.

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $9,400 and the debt discount related to the attached warrants was $9,400, for a total debt discount of $18,800.

On February 16, 2012, the Company issued a convertible note to a related party for $100,000 that matures in August 2013.  The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.   In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement.

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $8,310 and the debt discount related to the attached warrants was $9,310, for a total debt discount of $17,620.

On March 2, 2012, the Company issued a convertible note to a related party for $150,000 that matures in September 2013.  The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.   In the event the Company enters into arevenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement.

F-16

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 6 – NOTES PAYABLE - continued

In conjunction with the note, the Company issued detachable warrants to purchase 37,500 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $9,525, for a total debt discount of $9,525.

On March 16, 2012, the Company issued a convertible note to a related party for $200,000 that matures in September 2013.  The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.   In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement.

In conjunction with the note, the Company issued detachable warrants to purchase 50,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $12,761, for a total debt discount of $12,761.

On April 17, 2012, the Company issued a convertible note to a related party for $200,000 that matures in October 2013.  The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.  

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $12,315, for a total debt discount of $12,315.

On May 3, 2012, the Company issued a convertible note to a related party for $150,000 that matures in November 2013.  The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.  

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $7,331, for a total debt discount of $7,331.

On June 5, 2012, the Company issued a convertible note to a related party for $125,000 that matures in December 2013.  The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.  

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $6,577, for a total debt discount of $6,577.

On June 20, 2012, the Company issued a convertible note to a related party for $125,000 that matures in December 2013.  The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.  

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $6,993, for a total debt discount of $6,993.

F-17

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 6 – NOTES PAYABLE - continued

Convertible Notes Payable - Non-Related Parties

Convertible notes payable due to non-related parties consisted of the following as of June 30, 2012 and 2011, respectively:

	2012		2011
$100,000 face value, issued in June 2011, interest rate of 8%, matures in December 2013, net of unamortized discount of $68,387 as of June 30, 2011.	$	-	$	31,613
$100,000 face value, issued in September 2011, interest rate of 0%, originally matured in December 2011, extended to July 2012, net of unamortized discount of $-0- as of June 30, 2012.		100,000		-
$10,000 face value, issued in October 2011, interest rate of 10%, matures in June 2012, net of unamortized discount of $-0- as of June 30, 2012.		10,000		-
$15,000 face value, issued in October 2011, interest rate of 10%, matures in June 2012, net of unamortized discount of $-0- as of June 30, 2012.		15,000		-
$15,000 face value, issued in December 2011, interest rate of 12%, matures in March 2012, net of unamortized discount of $-0- as of June 30, 2012.		15,000		-
$10,000 face value, issued in December 2011, interest rate of 12%, matures in March 2012, net of unamortized discount of $-0- as of June 30, 2012.		10,000		-
$75,000 face value, issued in January 2012, interest rate of 12%, matures in April 2012, net of unamortized discount of $-0- as of June 30, 2012.		75,000		-
Total convertible notes payable – non-related parties		225,000		31,614
Less current portion		225,000		31,614
Convertible notes payable – non-related parties, long-term	$	-	$	-

On June 3, 2011, the Company issued a convertible note for $100,000 that matured in December 2011.  The note provided for an interest rate of 8% per annum and was convertible into shares of the Company’s Common Stock at $0.50 per share.  The Company calculated the intrinsic BCF value of $80,000 which was recorded as a debt discount and was to be amortized over the life of the note.  In July 2011, the principal amount and the accrued interest for the above note was converted into 201,622 shares of the Company’s Common Stock pursuant to the conversion rate provision in the agreement.  Upon conversion, the remaining unamortized BCF amount of $62,796 was charged to interest expense and recorded in the other income (expense) section of statement of operations for the three and six months ended December 31, 2011.

On September 29, 2011, the Company issued a convertible note for $100,000 with an original maturity date 90 days after issuance.  All or any amount of the principal amount of the note together with the accrued interest may be converted into shares of the Company’s Common Stock at a conversion price of $0.50 per share.  In lieu of interest payments during the 90 day term, the Company issued to the holder a warrant to purchase 50,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date.  At the option of the Company, the due date of this note could be extended for three consecutive thirty-day periods.  In lieu of interest during the extension periods, the Company was required to grant the holder 16,667 five year warrants with a $0.50 exercise price.  The value of the BCF recorded was $57,845 and the debt discount relate to the attached warrants was $21,844, for a total debt discount of $79,689.  As of the date of the filing of this report, this note is in default.

F-18

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 6 – NOTES PAYABLE - continued

Prior to December 29, 2011, the Company elected to extend the maturity date of the note in accordance with the extension provisions which extended the due date to March 28, 2012.  On April 1, 2012, the Company negotiated an extension on the note to July 28, 2012.  In accordance with ASC 470-50, the Company performed an analysis of the note extension to determine if the note was substantially modified and therefore requires debt extinguishment accounting, or if the due date extension is to be accounted for as modification.  The Company determined that there is less than a 10 percent difference between the present value of the future cash flows associated with the modified note and the original note.  Thus the Company has recorded the modification as a debt modification.

On October 5, 2011, the Company issued a convertible note for $100,000 that matures 90 days after issuance.  The maturity date of the note can be extended, at the option of the holder, for a single 90 day period.  The note bears an interest rate of 12% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share.  The value of the BCF recorded was $26,000.

On October 13, 2011, the Company issued a convertible note for $10,000 that matures 90 days after issuance.  The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share.  The maturity date of the note can be extended, at the option of the holder, for two consecutive 30 day periods in exchange for a warrant equal to 20% of the initial amount of the note issued with a strike price of $0.50 per share for 5 years. As additional compensation, the Company issued to the holder a warrant to purchase 5,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $3,970 and the debt discount related to the attached warrants was $1,970, for a total debt discount of $5,940.  As of the date of the filing of this report, this note is in default.

On April 1, 2012, the note holder agreed to extend the maturity date of the note to June 30, 2012.  The Company evaluated amendment under ASC 470, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.

On October 13, 2011, the Company issued a convertible note for $15,000 that matures 90 days after issuance.  The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share.  The maturity date of the note can be extended, at the option of the holder, for two consecutive 30 day periods in exchange for a warrant equal to 20% of the initial amount of the note issued with a strike price of $0.50 per share for 5 years. As additional compensation, the Company issued to the holder a warrant to purchase 7,500 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $5,956 and the debt discount related to the attached warrants was $2,956, for a total debt discount of $8,912.  As of the date of the filing of this report, this note is in default.

On April 1, 2012, the note holder agreed to extend the maturity date of the note to June 30, 2012.  The Company evaluated amendment under ASC 470, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.

On December 9, 2011, the Company issued a convertible note to an unrelated individual for $15,000 that matures 90 days after issuance.  The note bears an interest rate of 12% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share.  The maturity date of the note can be extended, at the option of the holder, for a single 90 day period.  As additional compensation, the Company issued to the holder a warrant to purchase 7,500 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.50 per share and a contractual life of five (5) years from the issuance date.  The value of the beneficial conversion feature recorded was $2,003 and the debt discount relate to the attached warrants was $1,703, for a total debt discount of $3,706.  As of the date of the filing of this report, this note is in default.

On February 29, 2012, the note holder agreed to extend the maturity date of the note to May 29, 2012. The Company evaluated amendment under ASC 470, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.

F-19

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 6 – NOTES PAYABLE - continued

On December 14, 2011, the Company issued a convertible note for $10,000 that matures 90 days after issuance.  The note bears an interest rate of 12% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share.  The maturity date of the note can be extended, at the option of the holder, for a single 90 day period.  As additional compensation, the Company issued to the holder a warrant to purchase 5,000 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date.  The value of the BCF recorded was $1,222 and the debt discount related to the attached warrants was $1,122, for a total debt discount of $2,344.  As of the date of the filing of this report, this note is in default.

On March 15, 2012, the note holder agreed to extend the maturity date of the note to June 13, 2012. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.

On January 6, 2012, the Company issued a convertible note for $75,000 that matures 90 days after issuance.  In lieu of interest payments during the 90 day term, the Company issued to the holder a warrant to purchase 37,500 shares of the Company’s Common Stock.  The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date.  At the option of the Company, the due date of this note may be extended for three consecutive thirty-day periods by issuing a warrant to purchase 12,500 shares of the Company’s Common Stock.  The warrant will have an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date.  The value of the warrants issued was $15,477 and has been capitalized as prepaid interest expense to be amortized over the 90 day life of the note.  As of the date of the filing of this report, this note is in default.

Non-Convertible Notes Payable – Related Parties

Non-convertible notes payable due to related parties consisted of the following as of June 30, 2012 and 2011:

	2011		2011
Face value of $200,000, issued in April 2011, original maturity date of August 2011 extended to June 30, 2013, 30,000 warrants per month were granted in lieu of interest through June 2011, warrants increased to 50,000 shares per month through August 2011, from September until maturity, the note bears interest at 12%.	$	200,000	$	200,000
Face value of $250,000, issued in September 2011, matures in September 2012, 25,000 warrants per month issued for first 90 days of interest, note bears interest at 15% from December 2011 through maturity.		250,000		-
Face value of $125,000, issued in October 2011, matures in October 2012, 30,000 warrants issued in lieu of interest through December 2011, note bears interest at 15% from December 2011 through maturity.		125,000		-
Total non-convertible notes payable – related parties		575,000		200,000
Less current portion		575,000		200,000
Non-convertible notes payable - related parties, long term	$	-	$	-

In April 2011, the Company executed a $200,000 note payable with a related party that matured 90 days following the date of the note.  This note includes the following priority repayment provisions:  1) the Company agrees to apply 50% of the first $600,000 of capital raised by the Company in the near term toward all outstanding notes the lender has outstanding with the Company; 2) the Company agrees to apply the first $200,000 of proceeds raised beyond the $600,000 to any outstanding notes the lender has outstanding with the Company; and 3) if the Company is unable to raise additional capital but a large marketing or sales agreement is entered into which provide for revenue in excess of $50,000, all funds received above $50,000 shall be applied to any notes the lender has outstanding with the Company at the time.  As of the date of the filing of this report, this note is in default.

F-20

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 6 – NOTES PAYABLE - continued

The note provides for no interest but required the Company to issue to the lender, for each thirty day period of the original term, a warrant to purchase 30,000 shares of the Company’s common stock at a price of $0.60 per share over a contractual life of five years.  The Company may also elect, at its option, to extend the maturity date for two 30-day periods upon notice of such election to the lender and the issuance of a warrant to purchase up to 50,000 shares of the Company’s Common Stock at a price of $0.60 per share with a contractual life of 5 years for each such extension.  The note is not convertible and no warrant was issued in connection with the issuance of the note so there is no beneficial conversion feature value or debt discount applicable to the origination of the note.  

On June 30, 2011 and July 30, 2011, the Company exercised its options on the above notes to extend the maturity dates, each time for 30 days, pursuant to the provision contained in the original financing agreement.  Upon final maturity of the note payable at August 29, 2011, the Company and lender agreed to amend the original financing agreement in which the maturity date was extended to June 30, 2012 with an interest rate of 12% per annum.  The lender could choose to have the accrued interest outstanding on the note be repaid in shares of the Company’s common stock in lieu of cash.  For each instance where such election was made, the number of shares of the Company’s common stock to be issued was to be calculated at a discount based on seventy-five percent (75%) of the average of the closing prices of the Company’s Common Stock as reported by Bloomberg, L.P., or other independent reporting services acceptable to the lender and the Company for 10 trading days prior to the date such payment was due.

The Company evaluated the above amendment to extend the maturity date from August 29, 2011 to December 31, 2011 under the guidance of ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that such extension of the maturity date of the note did not result in a 10% or more change in the present value of the cash flow, and thus did not result in an extinguishment of the note.

On October 12, 2012, the note holder agreed to extend the maturity date of the note to June 30, 2013.  No consideration was paid to extend the maturity date.

In September 2011, the Company entered into a one-year note payable for $250,000 with a related party.  The note provided for 0% interest per annum for the first 90 days.  In lieu of interest for the first 90 days, the Company granted the lender a warrant to purchase 25,000 shares of Company’s Common Stock at an exercise price of $0.40 for a contractual period of 5 years for each 30 days or portion thereof the note remains outstanding.  If the note remained outstanding beyond the first 90 days, the note  provided for an interest rate of 15% per annum.  This note includes the following priority repayment provisions:  1) the Company agrees to apply 50% of the first $600,000 of capital raised by the Company in the near term toward all outstanding notes the lender has outstanding with the Company; 2) the Company agrees to apply the first $450,000 of proceeds raised beyond the $600,000 to any outstanding notes the lender has outstanding with the Company; and 3) if the Company is unable to raise additional capital but a large marketing or sales agreement is entered into which provide for revenue in excess of $50,000, all funds received above $50,000 shall be applied to any notes the lender has outstanding with the Company at the time.

The Company was also required to provide to the lender or its representative online access, for viewing purposes only, to the accounting and financial data maintained by the Company.  Online access shall be terminated once the loan and other funds advanced by the lender to the Company, including any accrued interest, have been fully paid.  

Further, per the terms of the agreement, if the note was not fully repaid by October 31, 2011, which was subsequently extended to November 15, 2011, and the Company had not deployed and made operational certain designated studios, the Company would be obligated to issue to the lender a warrant to purchase 25,000 shares of the Company’s Common Stock at an exercise price of $0.40 per share with a contractual life of 5 years. Such warrant was issued in accordance with the terms of the note.

In October 2011, the Company entered into a one-year note payable for $125,000 with a related party.  The note provided for 0% interest per annum for the first 45 days.  In lieu of interest for the first 45 days, the Company granted the lender a warrant to purchase 30,000 shares of Company’s Common Stock at an exercise price of $0.40 for a contractual period of 5 years.  Effective December 1, 2011, the note bears interest of 15% per annum until paid.

F-21

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 6 – NOTES PAYABLE - continued

This note includes the following priority repayment provisions:  1) the Company agrees to apply 50% of the first $600,000 of capital raised by the Company in the near term toward all outstanding notes the lender has outstanding with the Company; 2) the Company agrees to apply the first $575,000 of proceeds raised beyond the $600,000 to any outstanding notes the lender has outstanding with the Company; and 3) if the Company is unable to raise additional capital but a large marketing or sales agreement is entered into which provide for revenue in excess of $50,000, all funds received above $50,000 shall be applied to any notes the lender has outstanding with the Company at the time.

Non-Convertible Notes Payable – Non-Related Parties

Non-convertible notes payable due to non-related parties consisted of the following as of June 30, 2012 and 2011:

	2012		2011
Various term notes with total face value of $40,488 due upon demand, interest rates range from 12% to 14%.	$	40,488	$	40,488
Total non-convertible note payable – non-related parties		40,488		40,488
Less current portion		40,488		40,488
Non-convertible notes payable – non-related parties, long-term	$	-	$	-

NOTE 7 – CONVERTIBLE PREFERRED STOCK

The Company has authorized 10,000,000 shares of $0.001 par value per share Preferred Stock, of which the following were issued outstanding:

	Shares		Shares	Liquidation
	Allocated		Outstanding	Preference
Series A Convertible Preferred		100,000	15,500		-
Series A-1 Convertible Preferred		3,000,000	671,000		773,115
Series B Convertible Preferred		200,000	3,500		79,099
Series C Convertible Preferred		1,000,000	13,404		-
Series D Convertible Preferred		375,000	130,000		130,000
Series E Convertible Preferred		1,000,000	275,000		275,000
Series P Convertible Preferred		600,000	86,640		-
Series S Convertible Preferred		50,000	-		-
Total Preferred Stock		6,325,000	1,195,044	$	1,257,214

The Company's Series A Convertible Preferred Stock ("Series A Preferred") is convertible into Common Stock at the rate of 0.025 share of Common stock for each share of the Series A Preferred. Dividends of $0.50 per share annually from date of issue, are payable from retained earnings, but have not been declared or paid.

The Company’s Series A-1 Senior Convertible Redeemable Preferred Stock (“Series A-1 Preferred”) is convertible at the rate of 2 shares of Common Stock per share of Series A-1 Preferred. The dividend rate of the Series A-1 Senior Convertible Redeemable Preferred Stock is 6% per share per annum in cash, or commencing on June 30, 2009 in shares of the Company’s Common Stock (at the option of the Company).

Due to the fact that the Series A-1 Preferred has certain features of debt and is redeemable, the Company analyzed the Series A-1 Preferred in accordance with ASC 480 and ASC 815 to determine if classification within permanent equity was appropriate.  Based on the fact that the redeemable nature of the stock and all cash payments are at the option of the Company, it is assumed that payments will be made in shares of the Company’s Common Stock and therefore, the instruments are afforded permanent equity treatment.

The Company's Series B Convertible 8% Preferred Stock ("Series B Preferred") is convertible at the rate of 0.067 share of Common Stock for each share of Series B Preferred. Dividends from date of issue are payable on June 30 from retained earnings at the rate of 8% per annum but have not been declared or paid.

The Company's Series C Convertible Preferred Stock ("Series C Preferred") is convertible at a rate of 0.007 share of Common Stock per share of Series C Preferred.  Holders are entitled to dividends only to the extent of the holders of the Company’s Common Stock receive dividends.

F-22

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 7 – CONVERTIBLE PREFERRED STOCK

The Company's Series D Convertible Preferred Stock ("Series D Preferred") is convertible at a rate of 0.034 share of Common Stock per share of Series D Preferred.  Holders are entitled to a proportionate share of any dividends paid as though they were holders of the number of shares of Common Stock of the Company into which their shares of are convertible as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such distribution.

The Company's Series E Convertible Preferred Stock ("Series E Preferred") is convertible at a rate of 0.034 share of Common Stock per share of Series E Preferred. Holders are entitled to a proportionate share of any dividends paid as though they were holders of the number of shares of Common Stock of the Company into which their shares of are convertible as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such distribution.

The Company's Series P Convertible Preferred Stock ("Series P Preferred") is convertible at a rate of 0.007 share of Common Stock for each share of Series P Preferred. Holders are entitled to dividends only to the extent of the holders of the Company’s Common Stock receive dividends.

In the event of a liquidation, dissolution or winding up of the affairs of the Company, holders of Series A Preferred Stock, Series P Convertible Preferred Stock, Series C Convertible Preferred Stock have no liquidation preference over holders of the Company’s Common Stock.  Holders of Second Series B Preferred Stock have a liquidation preference over holders of the Company’s Common Stock and the Company’s Series A Preferred Stock.  Holders of Series D Preferred Stock are entitled to receive, before any distribution is made with respect to the Company’s Common Stock, a preferential payment at a rate per each whole share of Series D Preferred Stock equal to $1.00.  Holders of Series E Preferred Stock are entitled to receive, after the preferential payment in full to holders of outstanding shares of Series D Preferred Stock but before any distribution is made with respect to the Company’s Common Stock, a preferential payment at a rate per each whole share of Series E Preferred Stock equal to $1.00.  Holders of Series A-1 Preferred Stock are superior in rank to the Company’s Common Stock and to all other series of Preferred Stock heretofore designated with respect to dividends and liquidation.

The activity surrounding the issuances of the Preferred Stock is as follows: 

During the fiscal years ended June 30, 2012 and 2011, the Company issued -0- and 1,187,000 shares of Series A-1 Preferred Stock for $-0- and $1,165,712 in cash, net of $-0- and $21,288 of issuance costs, respectively.

During the fiscal year ended June 30, 2011, 1,187,000 shares of Series A-1 Preferred Stock, and the dividends accrued thereon, were converted into 206,099 shares of Common Stock.  In conjunction with this issuance, the Company recognized an associated beneficial conversion feature based on the convertibility of the Preferred Shares into Common Shares at a ratio of 2 to 1.  This resulted in an effective exercise price of $0.50 per share.  The value of the BCF was determined based on the stock price on the day of commitment, the number of convertible shares, and the difference between the effective conversion price and the fair value of the Common Stock on the dates of issuance and is capped  at the face value of the offering, in this case $1,187,000. The conversion feature was recorded in additional paid-in capital and the Preferred Stock was accreted to face value over six months, the first date the note holder could convert the security.  As of June 30, 2012, the BCF was fully amortized.

During the fiscal year ended June, 2012, the Company converted 416,000 shares of Convertible Preferred Stock and accrued dividends of $23,071 into 877,550 shares of Common Stock.

During the fiscal year ended June 30, 2012, the outstanding Preferred Stock accumulated $392,138 in dividends; in fiscal year ended June 30, 2011 it accumulated $547,907 in dividends on outstanding Preferred Stock.  The cumulative dividends in arrears through June 30, 2011 were approximately $586,070.

F-23

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 8 – COMMON STOCK

The Company has authorized 100,000,000 shares of $0.001 par value per share Common Stock, of which 36,412,601 and 30,916,182 were issued outstanding as of June 30, 2012 and 2011, respectively.  The activity surrounding the issuances of the Common Stock is as follows:

Fiscal Year Ended June 30, 2012

The Company issued 918,220 shares of Common Stock for net cash proceeds of $436,869.  The Company paid $45,091 in cash offering costs. Offering costs have been recorded as reductions to additional paid-in capital from Common Stock proceeds.

The Company issued 775,103 shares of Common Stock valued at $413,582 to non-employees in advance of services.  The shares of Common Stock were valued based on the quoted market price on the date of issuance.  The Company also issued 505,856 shares of Common Stock to convert $100,000 in convertible notes payable and $169,287 in accrued liabilities.  The difference between the fair market value of the stock on the date of conversion of the accrued liabilities resulted in a gain on conversion of these liabilities of $191.  An additional 877,550 shares of Common Stock were issued to convert 416,000 shares of Convertible Preferred Stock and accrued dividends of $23,072.

As share-based compensation to employees and non-employees, the Company issued 1,642,078 shares of Common Stock valued at $733,945, based on the market price of the stock on the date of issuance.   As interest expense on outstanding notes payable, the Company issued 770,232 shares of Common Stock valued at $300,599 based on the market price on the date of issuance.

Fiscal Year Ended June 30, 2011

The Company issued 1,847,501 shares of Common Stock for net cash proceeds of $1,001,912 and 351,983 shares of Common Stock for exercised warrants and options for total cash proceeds of $129,567.  The Company paid $45,091 in cash offering costs.  Offering costs have been recorded as reductions to additional paid-in capital from Common Stock proceeds.

The Company issued 625,103 shares of Common Stock valued at $1,228,273 to non-employees in advance of services.  The shares of Common Stock were valued based on the quoted market price on the date of issuance.  The Company also issued 1,232,452 shares of Common Stock to convert $864,471 in convertible notes payable and other accrued liabilities.  The difference between the fair market value of the stock on the date of conversion of the accrued liabilities resulted in a loss on conversion of these liabilities of $888,900.  An additional 206,099 shares of Common Stock were issued to convert 100,000 shares of Convertible Preferred Stock and accrued dividends of $5,370.

As share-based compensation to employees and non-employees, the Company issued 1,332,182 shares of Common Stock valued at $1,616,999, based on the market price of the stock on the date of issuance.

NOTE 9 – STOCK PURCHASE OPTIONS AND WARRANTS

The Board of Directors on June 10, 2009 approved the 2009 Long-Term Stock Incentive Plan.  The purpose of the 2009 Long-term Stock Incentive Plan is to advance the interests of the Company by encouraging and enabling acquisition of a financial interest in the Company by employees and other key individuals.  The 2009 Long-Term Stock Incentive Plan is intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company.  A maximum of 1,500,000 shares of the Company's Common Stock is reserved for issuance under stock options to be issued under the 2009 Long-Term Stock Incentive Plan.  The Plan permits the grant of incentive stock options, nonstatutory stock options and restricted stock awards.  The 2009 Long-Term Stock Incentive Plan is administered by the Board of Directors or, at its direction, a Compensation Committee comprised of officers of the Company.

Stock Purchase Options

During the fiscal year ended June 30, 2012, the Company did not issue any stock purchase options.  The Company did recognize $11,707 in employee stock option expense during the fiscal year ended June 30, 2012 for options vested during the period that were issued in prior periods.  

F-24

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 9 – STOCK PURCHASE OPTIONS AND WARRANTS - continued

During the fiscal year ended June 30, 2011, the Company granted options to employees to purchase in the aggregate 312,000 shares of the Company’s Common Stock.  The exercise period for the grants range from two to three years from the respective dates of the grants, and exercise prices ranged from $0.77 to $1.35.  During the fiscal year ended June 30, 2011, the number of options exercised and cancelled were 20,000 and 51,000 shares, respectively. The Company recognized $437,900 in employee stock option expense during the fiscal year ended June 30, 2011 for options vested during the period.  

Stock Purchase Warrants

During the fiscal year ended June 30, 2012, the Company issued warrants to purchase a total of 1,611,201 shares of the Company’s Common Stock.  

In conjunction with Common Stock issued for cash during the period, the Company issued 6,885 shares of the Company’s Common Stock and warrants to purchase 63,532 shares of the Company’s Common Stock as stock offering costs.  The value of these share and warrantstotaled $3,105 and $32,664, respectively. Offering costs have been recorded as reductions to additional paid-in capital from Common Stock proceeds. An additional 1,196,669 warrants valued at $450,113 were issued in lieu of interest on outstanding notes and 351,000 warrants valued at $112,733 to consultants for services rendered to the Company.

On July 21, 2011, the Company agreed to modify 150,000 warrants issued in conjunction with a prior equity financing agreement where in the maturity date was extended.  The modified warrants were treated as a modification of terms.  The old warrants were revalued immediately prior to modification and the new warrants valued upon issuance.  Because the warrants were originally issued in conjunction with debt financing, the difference between the old and new warrants was recorded to additional-paid in capital.

On February 22, 2012, the Company agreed to modify 150,000 warrants issued in conjunction with a prior equity financing agreement where in the maturity date was extended.  The modified warrants were treated as a modification of terms.  The old warrants were revalued immediately prior to modification and the new warrants valued upon issuance.  Because the warrants were originally issued in conjunction with debt financing, the difference between the old and new warrants was recorded to additional-paid in capital.

The following table presents the assumptions used to estimate the fair values of the stock warrants and options granted:

	2012			2011
Expected volatility		57 – 120	%		114-259	%
Expected dividends		0	%		0	%
Expected term	0-5 Years			3 Years
Risk-free interest rate		0.04 – 1.40	%		0.84-1.33	%

The following table summarizes the changes in warrants outstanding issued to employees and non-employees of the Company during the fiscal year ended June 30, 2012.

Date Issued	Number of Warrants			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Expiration Date (yrs)		Value if Exercised
Balance June 30, 2010		5,756,380		$	0.86	$	3.95		2.95	$	4,175,564
Granted		1,611,201			0.45		0.41		4.00		659,463
Exercised		-			-		-		-		-
Cancelled/Expired		(838,250	)		-		-		-		-
Outstanding as of June 30, 2012		6,529,331		$	2.84	$	3.55		1.95	$	4,835,028

F-25

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 9 – STOCK PURCHASE OPTIONS AND WARRANTS - continued

The following table summarizes the changes in options outstanding issued to employees of the Company during the fiscal year ended June 30, 2012.

Date Issued	Number of Warrants		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Expiration Date (yrs)		Value if Exercised
Balance June 30, 2010		698,429	$	0.85	$	1.20		2.95	$	590,843
Granted		-		-		-		-		-
Exercised		-		-		-		-		-
Cancelled/Expired		-		-		-		-		-
Outstanding as of June 30, 2012		698,429	$	0.85	$	1.20		1.95	$	590,843

NOTE 10 – INCOME TAXES

The components of the income tax (benefit) provision are as follows:

	As of
	June 30,		June 30,
	2012		2011
Current
Federal	$	-	$	-
State		-		-
Total Current		-		-
Deferred
Federal		-		-
State		-		-
Total Deferred		-		-
Income tax provision	$	-	$	-

A reconciliation of the expected income tax benefit (provision) computed using the federal statutory income tax rate of 34% to the Company’s effective income tax rate is as follows:

	As of
	June 30,				June 30,
	2012				2011
Income tax benefit based on federal statutory rate		$	(2,381,000	)		$	(3,095,000	)
State income tax benefit, net of federal income tax			(169,000	)			(183,000	)
Change in deferred tax valuation allowance			2,550,000				2,071,000
Other, net			-				1,207,000
Income tax provision		$	-			$	-

F-26

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 10 – INCOME TAXES - continued

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and deferred tax liabilities are presented below:

	As of
	June 30,			June 30,
	2012			2011
Deferred tax assets:
Debt extinguishment	$	298,000		$	298,000
Impairment of fixed assets		447,000			-
Domestic net operating loss carryforwards		7,239,000			5,793,000
Total gross deferred tax assets		7,984,000			6,091,000
Less valuation allowance on deferred tax assets		(7,984,000	)		(6,091,000	)
Net deferred tax assets		-			-
Deferred tax liabilities:
Deferred costs		-			-
Total deferred tax liabilities		-			-
Net deferred taxes	$	-		$	-

Deferred income taxes result from temporary differences between income tax and financial reporting computed at the effective income tax rate. The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. Management periodically evaluates the recoverability of the deferred tax assets. At such time it is determined that it is more likely than not that deferred tax assets are realizable, the valuation allowance will be reduced.

The Company files U.S. federal and Arizona income tax returns. Our major tax jurisdictions are U.S. federal and the State of Arizona and are subject to tax examinations for the open years from 2008 through 2011.  As of the date of this filing, the Company has not filed its tax return for the fiscal year ended 2011.  While none are anticipated, fines and/or penalties may be associated with the delinquent filing.

As of June 30, 2012, the Company had net operating loss carry-forwards for federal and state income tax purposes of approximately $20.6 million and $20.2 million, respectively.  Such carryforwards may be used to reduce taxable income, if any, in future year subject to limitations of Section382 of the Internal Revenue Code for federal income and Arizona tax purposes.  The Company believes an ownership change may have occurred, as defined by Sections 382 and 383 of the Internal Revenue Code, which could result in the forfeiture of a significant portion of its net operating loss carry-forwards. The Company is not using any tax attributes in the current year, but will analyze whether a change occurred and the related impact on its gross deferred tax assets, if needed. As the Company's analysis is not complete, the impact to its gross deferred tax assets is uncertain.  If not utilized, the federal and state net operating loss carry-forwards will begin expiring in 2012.

F-27

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2012 and 2011

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company may become involved in certain legal proceedings and claims which arise in the normal course of business. In addition, from time to time, third parties may assert intellectual property infringement claims against the Company in the form of letters and other forms of communication. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the Company’s results of operations, prospects, cash flows, financial position and brand.  

The Company was an interpleader party to a lawsuit in the Southern District of Georgia, Savannah Division, pursuant to which the Comapny sought to prevent the release of 100,000 shares of its Common Stock to a third-party and asked the court to return those shares to the Company.   During the fiscal year ended June 30, 2012 the Company elected to relinquish claim to the shares and the matter was dismissed.

The Company was a defendant in a suit brought by one if its suppliers.  The Company has defended the claim alleging that the vendor failed to deliver the goods and services contracted for.  Subsequent to June 30, 2012, a tentative settlement agreement has been negotiated pursuant to which, if executed, will result in the Company paying the vendor approximately $75,000 in equal payments, without interest, over a period of eighteen months.

Except as described in the preceding paragraph, to the best knowledge of the Company’s management, at June 30, 2012, there are no legal proceedings which the Company believes will have a material adverse effect on its business, results of operations, cash flows or financial condition.

Lease Agreements

Pursuant to a lease originally dated January 2006, we currently occupy approximately 11,800 square feet of office space located at 7650 E. Evans Rd., Suite C, Scottsdale, Arizona on a month-to-month basis.  The total lease expense is approximately $9,600 per month, payable in cash and Common Stock of the Company.

We are leasing office space on a month-to-month basis in West Hollywood, California.  We also lease an office in Los Angeles for use by our audio team in connection with our AfterMaster product under a lease expiring on August 31, 2013.  The total lease expense for both facilities is approximately $4,305 per month, and the total remaining obligations under these leases at June 30, 2012 were approximately $8,725.

We lease space at mall locations for MyStudio generally pursuant to one-year leases. The monthly rent for these spaces is at market rates commensurate with other kiosk operations.  As we expand, we will continue to secure space for our recording studios at various venues and locations throughout the country.

Rent expense for the year ended June 30, 2012 was $658,761, of which $572,611 was paid in cash and $86,150 was paid in Common Stock.  Rent expense for the year ended June 30, 2011 was $483,112, of which $397,487 was paid in cash $85,626 was paid in Common Stock.

Below is a table summarizing the annual operating lease obligations over the next 5 years:

Year	Lease Payments
2013	$	36,805
Thereafter		-
Total	$	36,805

Other

The Company has not declared dividends on Series A or B Convertible Preferred Stock or its Series A-1 Convertible Preferred Stock. The cumulative dividends in arrears through June 30, 2012 were approximately $586,000.

As of the date of this filing, the Company has not filed its tax return for the fiscal year ended 2012.

NOTE 12 - SUBSEQUENT EVENTS

In accordance with ASC 855, Company management reviewed all material events through the date of this filing and determined that there are no material subsequent events to report.

F-28