AFTERMASTER, INC. - FORM 10-K - September 29, 2014

AFTERMASTER, INC. - FORM 10-K - September 29, 2014

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AFTERMASTER, INC. Reports

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EXCEL - IDEA: XBRL DOCUMENT - AFTERMASTER, INC.	Financial_Report.xls
EX-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. - AFTERMASTER, INC.	exhibit_32-1.htm
EX-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. - AFTERMASTER, INC.	exhibit_32-2.htm
EX-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. - AFTERMASTER, INC.	exhibit_31-1.htm
EX-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. - AFTERMASTER, INC.	exhibit_31-2.htm

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, 2014

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

EXCHANGE ACT OF 1934

For the transition period from __________ to __________

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)

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

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the 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 x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	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 first fiscal quarter: $31,633,291. 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 September 29, 2014, the number of shares of Registrant’s Common Stock outstanding was 70,296,203

DOCUMENTS INCORPORATED BY REFERENCE

STUDIO ONE MEDIA, INC.

FORM 10-K

FOR THE FISCAL YEAR ENDED

JUNE 30, 2014

INDEX

PART I		Page
Item 1.	Business	5
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	14
Item 3.	Legal Proceedings	14
Item 4.	Submission of Matters to a Vote of Security Holders	14

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6.	Selected Financial Data	15
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 8.	Financial Statements and Supplementary Data	18
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	19
Item 9A(T).	Controls and Procedures	19
Item 9B.	Other Information	20

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	20
Item 11.	Executive Compensation	22
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	24
Item 13.	Certain Relationships and Related Transactions, and Director Independence	26
Item 14.	Principal Accounting Fees and Services	29

PART IV
Item 15.	Exhibits, Financial Statement Schedules	31

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;

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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;

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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 subsidiary and predecessors.

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, 2014, there were 70,296,203 shares of Common Stock issued and outstanding. From April 2006 to June 2014, we have raised approximately $21.5 million in the form of equity for purposes of research and development, the launch of AfterMaster and MyStudio 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. The Company also operates research, recording and mastering studios located at 6671 Sunset Blvd., Suite 1520, Hollywood, CA 90028, and its telephone number is (310) 657-4886.

Business

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

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

The Company has the ability to generate revenue from several sources including: (1) mastering or “AfterMastering”/”ProMastering” of audio; (2) MyStudio recording sessions; (3) digital advertising and sponsorship opportunities; (4) mobile studio lease revenues. 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

Summary

AfterMaster HD Audio Processing Software

We believe that our AfterMaster audio technology is one of the most significant breakthroughs in digital audio technology and has the potential to create significant revenues for the Company. The feedback from music and consumer electonic products companies has been exceptional. The broad commercialization of this technology is a top priority for the Company.

AfterMaster is an internally-developed, proprietary (patents-pending) mastering, remastering and audio processing technology that makes music and other audio files sound significantly louder, fuller and clearer. 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, Nick Cannon, Ray J, , Akon, Diddy, Janet Jackson, and many others. Further information on AfterMaster HD Audio Labs and AfterMaster products can be found at www.AfterMasterHD.com.

AfterMaster Audio Chip

In April of this year, we entered into a multiyear joint development and marketing agreement with ON Semiconductor ("ON") of Phoenix, Arizona. ON is a multibillion dollar, multinational semiconductor manufacturer.

The agreement calls for ON to implement our AfterMaster technology in a semiconductor chip that will be marketed to their customers and others. We selected ON for its technical capabilities, coupled with its deep customer breadth.

We recently completed the successful development of the AfterMaster software algorithm to be used in semiconductor chips in conjunction with ON We believe the sound quality from our algorithm/semiconductor chip will provide a superior audio experience relative to other products on the market.

Since entering into the agreement, both Studio One and ON have identified a large number of prospective customers that will be key targets for this new and unprecedented technology. We have also received strong indications of customer interest in the AfterMaster chip since the announcement of the partnership. We have begun developing a joint marketing plan with ON for the expected launch of the AfterMaster semiconductor chip late this year or in early 2015

As the convergence of features on consumer electronics continues, it is becoming more difficult for leading consumer electronics companies to differentiate their products. We believe that AfterMaster provides a unique and significant competitive advantage for consumer electronics manufacturers while offering their customers a superior audio product. Such uses are intended to include phones (mobile, home, business and VoIP); headphones; televisions; stereo speakers; stereos (home, portable, commercial and automobile); and computers (desktop, laptop and tablets).

Through the combined relationships of Studio One and ON, we hope to generate significant revenues for both parties through the sale of the AfterMaster chips in 2015.

ProMasterHD

ProMaster HD is an online music mastering service designed for independent artists which utilizes proprietary AfterMaster audio technologies developed by AfterMaster.

Millions of independent songs are produced each month around the world, however, the expense of mastering such music for the amateur musician is often cost prohibitive, as a professional mastering can cost over $500 per song. Musicians can transmit their music directly to our www.ProMasterHD.com website, where it can be "ProMastered" with AfterMaster Technology for $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 this product, we believe that ProMaster has the potential to generate significant revenues for the Company.

Reverb Nation

The Company is party to an agreement with Reverb Nation to offer remastering/enhancement services to their members. Reverb Nation is a leading website which hosts music for independant music artists. 6,000,000 songs have been completed by the Company to date. A majority of such songs have not yet been distributed to their members.

Early test marketing demonstrated that an effective marketing campaign for online music mastering/enhancement will require product education and a strong impetus such as a high profile music artist to introduce and endorse our technology. The Company is currently in an advanced stage of negotiations with such an artist.

MyStudio HD Recording Studios

The Company currently has a MyStudio installed at Opry Mills Mall in Nashville, Tennessee related to a sponsorship agreement with Warner Music Nashville. The MyStudios located at SONY Pictures Studios in Los Angeles for The Queen Latifah Show and the Hard Rock Cafe in Las Vegas were recently removed at the end of their lease terms. The Company also has four additional studios on stand-by for future deployment, as discussed below. Further information on MyStudio can be found at www.mystudio.net.

The Company has delayed the installation of additional available studios pending the sale of proposed MyStudio themed television series with Lionsgate. The Company believes that the viability of the MyStudio Recording Studio business lies with national exposure through television programming or a branding and operational partnership with a large corporation.

The Company is currently involved in advanced discussions with two companies to purchase its MyStudio operations and license our related IP. If successful, such a transaction will provide substantial additional working capital for the Company and shift its focus solely to its AfterMaster audio products and their rollout.

Warner Music Nashville Studio

The Company entered into an exclusive promotional 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, and Faith Hill. The revenue sharing agreement provides for WMN to utilize MyStudio as an exciting and innovative way to promote its artists, as well as connect with the artists' fans by way of interaction with the studio at the Opry Mills Mall and through online video contests. Country music fans can create a variety of high definition videos and enter 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.

Mobile Studio

In 2012, we built and successfully deployed a temporary version of a mobile MyStudio for Pepsi, which was used throughout the country for Simon Cowell’s The X Factor auditions; Pepsi was a sponsor of The X Factor auditions.

We subsequently developed our own mobile MyStudio recording studio which is twenty-seven feet long and built for rental to third party companies. It can be viewed at www.MyStudio.net. An example of such intended use was a rental by the nationally recognized Coors brand for its "Coors Light, Search for the multicity Coldest" promotional tour.

Corporate

The Company has been awarded four patents with other patent applications pending. The Company has an aggressive intellectual property strategy to protect the MyStudio, AfterMaster and the related technologies it has developed. We expect to continue raising capital through both equity and debt financings, as needed, to further our corporate objectives.

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:

Bret Zahn - Executive with ON Semiconductor, a nearly $3 billion semiconductor company; formerly held senior roles with Lifelock, Hypercom, ChipPAC and Amkor.

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.

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.

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.

Charlie Weber - Former CEO of Lucas Films; former COO of Embassy Communications.

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 four patents issued with several patents and trademarks pending.

Employees

As of June 30, 2014 we employed ten full-time and five part-time employees. 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.

The Company has continued to embark on several key initiatives, which included redefining our existing products, engaging in research and development for new products, analyzing pricing models based on market analysis, and defining our target demographics. In addition, the Company experienced a decline in studio revenues as it was not able to launch studios in strategic locations until it fulfilled among other things existing lease arrangements.

The information collected through the various initiatives has led the company to a new operational plan for its recording studio business unit as well as its audio technology unit.

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 lease an office in Los Angeles for use by our audio team in connection with our AfterMaster product. This lease expires on December 31, 2017. The total lease expense for the facility is approximately $8,670 per month, and the total remaining obligations under these leases at June 30, 2014 were approximately $52,110.

We also lease one retail location in Opry Mills Mall Nashville, Tennessee in connection with our MyStudio Kiosk on a month-by month basis. The total lease expense for the facility is approximately $3,000 per month.

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 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.

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 its 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.

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.

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.

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.

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.

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, 2014 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, 2014, we had 70,296,203 shares of Common Stock, $0.001 par value, issued and outstanding. We have granted options to purchase 638,429 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 833,000 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 1,407,092 shares of Common Stock. We had outstanding convertible debt with a face value of $4,829,748, which can be converted into approximately 15,361,866 shares of Common Stock. In addition, we had warrants outstanding that would permit, if exercised, the issuance of 8,332,579 additional shares of Common Stock at an average exercise price of $0.76. 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.

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.

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.

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.

ITEM 2. DESCRIPTION OF PROPERTIES.

ITEM 3. 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.

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, 2014	High		Low
Quarter Ended June 30, 2014		0.23		0.20
Quarter Ended March 31, 2014		0.23		0.23
Quarter Ended December 31, 2013		0.28		0.25
Quarter Ended September 30, 2013		0.28		0.26


For the Fiscal Year Ending on June 30, 2013	High		Low
Quarter Ended June 30, 2013		0.27		0.25
Quarter Ended March 31, 2013		0.19		0.17
Quarter Ended December 31, 2012		0.17		0.15
Quarter Ended September 30, 2012		0.34		0.32

Stockholders

As of June 30, 2014, the number of stockholders of record according to our transfer agent was approximately 502. 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 accrued. Pursuant to the terms of our Series A-1 Senior Convertible Redeemable Preferred Stock, a 6% annual dividend is due and accrued. As of June 30, 2014, 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 $603,083. See Note 7 of Notes to Consolidated Financial Statements.

Supplemental Disclosure of Investing and Financing Activities for Fiscal Years 2014 and 2013

Fiscal Year 2014

During fiscal year ended June 30, 2014, we accepted subscriptions for 9,951,750 shares of unregistered restricted shares of Common Stock at an average price per share of $0.10 for a total of $966,565.

Fiscal Year 2013

During fiscal year ended June 30, 2013, we accepted subscriptions for 6,790,000 shares of unregistered restricted shares of Common Stock at an average price per share of $0.13 for a total of $814,800.

ITEM 6 - SELECTED FINANCIAL DATA.

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

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

RESULTS OF OPERSATIONS

Revenues
	Year Ended
	June 30,
	2014		2013
Session Revenues	$	36,192	$	192,205
AfterMaster Revenues		146,307		85,532
Total Revenues	$	182,499	$	277,737

Our business model currently generates revenues from three primary sources:

ProMaster HD online music mastering service designed for independent artists.

AfterMaster mastering, remastering and audio processing technology that makes music and other audio files sound significantly louder, fuller and clearer.

Paid user fees from customers who utilize the Fixed and Model studio to create an audio/video recording

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 and the development of the AfterMaster software algorithm.

AfterMaster Revenue for the fiscal year ended June 30, 2014 increased as compared to the comparable fiscal year ended June 30, 2013 due primarily increase in mastering, and remastering of music.

Session Revenue for the fiscal year ended June 30, 2014 decreased as compared to the comparable fiscal year ended June 30, 2013 due to the company moving away from the Studio Module.

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 revenues for the fiscal year ended June 30, 2014 over the comparable fiscal year is attributable, primarily, the development of the AfterMaster Software.

Other Operating Expenses

	Year Ended
	June 30,
	2014		2013
Depreciation and Amortization Expense	$	114,330	$	214,951
General and Administrative Expenses		3,212,694		3,033,876
Total	$	3,327,024	$	3,248,827

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 increase in general and administrative expenses are primarily a result of increase in professional fees.

Professional fees increased from $464,030 during the fiscal year ended June 30, 2013 to $ 746,867and during the fiscal year ended June 30, 2014. The increase in professional fees is primarily attributable to our issuing more Common Stock and warrants to various consultants for services rendered during the year.

Depreciation and amortization expense decreased due to the Company impairing assets related to the studios due to the decrease in revenue production and lack of use in the current year.

Other Income and Expenses

	Year Ended
	June 30,
	2014			2013
Interest Expense	$	(1,579,617	)	$	(1,362,732	)
Other Income		-			1,500
Gain (Loss) on Disposal of Property		-			(6,725	)
Gain (Loss) on Extinguishment of Debt		(25,787	)		188,436
Impairment of Assets		(202,206	)		-
Total	$	(1,807,610	)	$	(1,179,521	)

The other income and expenses during the fiscal year ended June 30, 2014, totaling $1,807,610 of net expenses consisted almost entirely of interest expense. During the comparable period in 2013, other income and expenses totaled $1,179,521. 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 and penalties assessed on defaulted loans. These additional borrowings have been used in the development of the AfterMaster HD software.

Net Income (Loss)

	Year Ended
	June 30,
	2014			2013
Net Income (Loss)	$	(5,333,915	)	$	(4,473,584	)

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 stock base compensation expenses of $1,206,885 and $1,081,314 for fiscal years ended June 30, 2014 and 2013, our net loss would have been $4,127,030 and $3,392,270 for fiscal years ended June 30, 2014 and 2013, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company had revenues of $182,499 during the fiscal year ended June 30, 2014 as compared to $277,737 in the comparable period in 2013. The Company has incurred losses since inception of $46,985,129. At June 30, 2014, the Company had negative working capital of $6,584,539, which was a decrease in working capital of $2,749,890 from June 30, 2013 which was mostly due to increases in convertible notes, long-term portions of convertible notes becoming current in the year, increases in accounts payable and related party consulting service liabilities.

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.

As of June 30, 2014, 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

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.

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.

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

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.

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, 2014 and June 30, 2013 have been audited to the extent indicated in the report by Sadler Gibb and SingerLewak, LLP, independent certified public accountants, respectively, 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.

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

Our auditor for the fiscal year ended June 30, 2014 was the firm of Sadler Gibb, 2455 East Parleys Way, Suite 320 Salt Lake City, UT 84109, who were engaged on October 11, 2013.

Our financial statements as of and for the fiscal year ended June 30, 2013 has 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.

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, 2014 and June 30, 2013, our disclosure controls and procedures were not effective 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, the company has 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, 2014 and June 30, 2013, 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, 2014 and June 30, 2013 were not effective, 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 2013. 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.

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, 2014 were as follows:

Name	Age	Position

Preston J. Shea	66	Director, President, CEO, Secretary
Joseph A. Desiderio	64	Director
Mirella Chavez	30	CFO, Vice President
Kenneth R. Pinckard	68	Director, Legal Counsel
Barry M. Goldwater, Jr.	76	Director
Frank Perrotti, Jr.	75	Director, Chairman
Sheldon Yakus	69	Vice President
Matthew R. Long	48	Vice President

The directors and officers of our wholly-owned operating subsidiary, MyStudio, Inc., at June 30, 2014 were:

Name	Age	Position

Lawrence G. Ryckman	55	Director, President, CEO, Secretary
Kenneth R. Pinckard	68	Director, Vice President

The directors and officers of our wholly-owned operating subsidiary, AfterMaster HD Audio Labs, Inc., at June 30, 2014 were:

Name	Age	Position

Lawrence G. Ryckman	55	Director, President, CEO, Secretary
Kenneth R. Pinckard	68	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.

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 Director of the Company. 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.

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.

Mirella Chavez is Chief Financial Officer. Miss Chavez has a Bachelor of Science in Accounting and Marketing from DeVry University. She has been with Studio One Media, Inc. since October 2006.

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 with Joseph 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.

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 ($)		Restricted Stock Awards ($)		Underlying Options/Shares ($)		LTIP Payout ($)		All Other Compensation ($)


Preston J. Shea, President, Secretary	2014	$	-	$	-	$	-	$	89,224	$	-	$	-	$	-
Preston J. Shea, President, Secretary	2013	$	-	$	-	$	-	$	90,159	$	-	$	-	$	-

Joseph Desiderio, Former CFO	2014	$	-	$	-	$	-	$	89,224	$	-	$	-	$	-
Joseph Desiderio, Former CFO	2013	$	100,000	$	-	$	-	$	81,604	$	-	$	-	$	-

Mirella Chavez CFO	2014	$	87,916	$	-	$	-	$	109,349	$	-	$	-	$	-
Mirella Chavez CFO	2013	$	12,543	$	-	$	-	$	21,825	$	-	$	-	$	-

Kenneth R. Pinckard, Vice-President, Treaurer	2014	$	2,500	$	-	$	-	$	89,224	$	-	$	-
Kenneth R. Pinckard, Vice-President, Treaurer	2013	$	47,185	$	-	$	-	$	315,236	$	-	$	-	$	-

Sheldon Yakus, Vice President	2014			$	-	$	-	$	-	$	-
Sheldon Yakus, Vice President	2013	$	62,825	$	-	$	-	$	1,603	$	-	$	-	$	-

Matthew R. Long, Vice President	2014	$	15,583	$	-	$	-	$	-	$	-	$	-	$	-
Matthew R. Long, Vice President	2013	$	67,570	$	-	$	-	$	555	$	-	$	-	$	-

Anna L. Madrid, Vice President	2014	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Anna L. Madrid, Vice President	2013	$	65,625	$	-	$	-	$	35,556	$	-	$	-	$	-

Timothy Grubb, Chief Tech. Officer	2014	$	30,100							$	-	$	-	$	-
Timothy Grubb, Chief Tech. Officer	2013	$	53,725	$	-	$	-	$	11,752	$	-	$	-	$	-

Lawrence G. Ryckman, President & CEO, MyStudio, Inc. & AfterMaster HD Audio Inc.	2014	$	209,100	$	-	$	-	$	-	$	-	$	-	$	-
	2013	$	140,000	$	-	$	-	$	112,235	$	-	$	-	$	69,798

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. Goldwater Jr.		50,000		-		-		0.52	8/29/2017		-		-		-		-
Barry M. Goldwater Jr.		75,000		-		-		0.52	11/18/2018		-		-		-		-

Preston J. Shea		50,000		-		-		0.52	8/29/2017		-		-		-		-
Preston J. Shea		75,000		-		-		0.52	11/18/2018		-		-		-		-

Kenneth R. Pinckard		300,000		100,000		-		0.52	9/11/2019		100,000		85,000		-		-
Kenneth R. Pinckard		150,000		-		-		1.35	4/5/2021		-		-		-		-

Lawrence G. Ryckman		375,000		125,000		-		0.52	9/11/2019		125,000		106,250		-		-
Lawrence G. Ryckman		200,000		-		-		1.35	4/5/2021		-		-		-		-

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.

Director Compensation
	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)

Barry M. Goldwater Jr.		-	$	89,224	$	-	$	-	$	-	$	-	$	89,224

Frank Perrotti, Jr.		-	$	89,224	$	-	$	-	$	-	$	-	$	89,224

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, 2014 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. During the year ended June 30, 2013, 85,000 shares expired. No Grants were made under the Plan during the fiscal year ended June 30, 2013. During the year ended June 30, 2014, 257,000 shares expired and 25,000 Grants were made under the Plan. The number of unexercised, outstanding options at June 30, 2014 was 381,429 at an average exercise price of $0.87 per share.

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

The following table sets forth certain information, as of June 30, 2014, 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, 2014, with the number of outstanding shares at 70,296,203, (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	Amount of Nature of			Percent of Class (2)
Beneficial Owner (1)	Beneficial Ownership			Percent of Class (2)

Preston J. Shea		1,133,322	Direct (3)		1.66	%
1 Youge Street, Suite 1801
Toronto, ON Canada M5E 1W7

Barry M. Goldwater Jr.		1,133,322	Direct (3)		1.66	%
3219 E. Camelback Rd., #552
Phoenix, AZ 85018

Kenneth R. Pinckard		2,659,132	Direct (4)		3.90	%
3104 E. Camelback Rd. #245
Phoenix, AZ 85016

Lawrence G. Ryckman		5,883,904	Direct (5)		8.63	%
7780 Vaquero Drive
Scottsdale, AZ 85258

Joseph Desiderio		783,119	Direct (3)		1.15	%
2171 Sandstone Cliffs Drive
Henderson, NV 01021

Sheldon Yakus		245,797	Direct (6)		0.36	%
1778 Lantana Drive
Miden, NV 89423

Matthew R. Long		115,000	Direct (6)		0.17	%
17197 N 54th Avenue
Glendale, AZ 85308

Anna L. Madrid		501,302	Direct (7)		0.74	%
15417 Becker Lane
Surprise, AZ 85379

Timothy Grubb		233,968	Direct (6)		0.34	%
21122 N. 106th Drive
Peoria, AZ 85382

Frank Perrotti, Jr.		9,365,100	Direct (3)		13.73	%
305 Spruce Bank Road
Hamden, CT 06518

Mirella Chavez		744,104	Direct (7)		1.09	%
5911 W Shangri La
Glendale, AZ 85301

Officers and Directors as a Group (11 persons)		22,798,070			33.43	%

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.

The above table is based on 70,296,203 shares of Common Stock outstanding as of June 30, 2014 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.

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

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

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

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.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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 the financial year ending June 30, 2014 the note has extended to September 30, 2014.

On April 18, 2013, the Company issued a convertible note to a related party for $30,000 that matures in September 18, 2014. 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 May, 2013 the company repaid the full amount of the note and accrued interest.

On June 30, 2014, the Company issued a convertible note to a related party for $9,000 that matures in July 04, 2014. The note bears an interest rate of 0% per annum and is convertible, along with all accrued interest, after 30 days into shares of the Company’s Common Stock at $0.10 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.

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, 2014 and 2013:

	2014		2013
Audit Fees (1)	$	89,000	$	199,600
Audit-Related Fees (2)		0		0
Tax Fees (3)		0		0
All Other Fees (4)		0		0
Total Fees	$	89,000	$	199,600

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, 2014 and 2013 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, 2014 and 2013.

No “audit-related,” “tax” and “all other” services in 2014 or 2013, 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.

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.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

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: September 29, 2014	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	September 29, 2014
Preston J. Shea	(Principal Executive Officer)

/s/ Mirella Chavez	Chief Financial Officer	September 29, 2014
Mirella Chavez

/s/ Barry M. Goldwater, Jr.	Director	September 29, 2014
Barry M. Goldwater, Jr.

/s/ Frank Perrotti, Jr.	Director	September 29, 2014
Frank Perrotti, Jr.

/s/ Kenneth R. Pinckard	Director	September 29, 2014
Kenneth R. Pinckard

STUDIO ONE MEDIA, INC.

FINANCIAL STATEMENTS

INDEX TO THE FINANCIAL STATEMENTS	PAGE NUMBER

Reports of Independent Registered Public Accounting Firms	F-2 - F-3

Financial Statements	F-4

Consolidated Balance Sheets	F-4

Consolidated Statements of Operations	F-5

Consolidated Statements of Stockholders' Deficit	F-6

Consolidated Statements of Cash Flows	F-7

Notes to Financial Statements	F-8 - F-34

F-1

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Studio One Media, Inc.

We have audited the accompanying consolidated balance sheet of Studio One Media, Inc. (the Company) as of June 30, 2014 and the related consolidated statement of operations, stockholders’ deficit, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit 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 consolidated 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 financia l reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 audit provides 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 Studio One Media, Inc. as of June 30, 2014, and the results of their operations and cash flows for the year 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 currently has revenues which are insufficient to cover its operating costs as of June 30, 2014 which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Sadler, Gibb & Associates, LLC

Salt Lake City, UT

September 29, 2014

F-3

STUDIO ONE MEDIA, INC.
Consolidated Balance Sheets

	June 30,				June 30,
	2014				2013

ASSETS

Current Assets
Cash		$	77,876		$	165,258
Other receivable			3,400			16,240
Other current assets			20,499			19,547

Total Current Assets			101,775			201,045

Property and equipment, net			133,730			326,242
Property and equipment, yet to be placed in service			31,250			93,357

Intangible assets, net			11,990			16,689

Other Assets
Deposits			107,057			161,229

Total Other Long-term Assets			107,057			161,229

Total Assets		$	385,802		$	798,562

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable and other accrued expenses		$	951,562		$	753,115
Accrued interest			74,483			50,725
Deferred revenue			3,500			24,182
Consulting services - related party			278,568			167,659
Lease payable			30,768			21,743
Notes payable - related party			610,000			575,000
Notes payable			40,488			40,488
Convertible notes payable - related party, net of dicount of $1,761 and $103,584, repectively			3,932,239			2,096,416
Convertible notes payable, net of dicount of $161,043 and $44,034, repectively			764,705			306,366

Total Current Liabilities			6,686,313			4,035,694

Long-Term Liabilities
Lease Payable, net of current portion			55,374			73,134
Convertible related party notes payable, net of dicount of $0 and $561, repectively			-			1,724,439

Total Liabilities			6,741,687			5,833,267

Stockholders' Deficit
Convertible preferred stock, Series A; $0.001 par value; 100,000 shares authorized, 15,500 shares issued and outstanding			16			16
Convertible preferred stock, Series A-1; $0.001 par value; 3,000,000 shares authorized, 696,000 shares issued and outstanding			696			696
Convertible preferred stock, Series B; $0.001 par value; 200,000 shares authorized, 3,500 shares issued and outstanding			3			3
Convertible preferred stock, Series C; $0.001 par value; 1,000,000 shares authorized, 13,404 shares issued and outstanding			13			13
Convertible preferred stock, Series D; $0.001 par value; 375,000 shares authorized, 130,000 shares issued and outstanding			130			130
Convertible preferred stock, Series E; $0.001 par value; 1,000,000 shares authorized, 275,000 shares issued and outstanding			275			275
Convertible preferred stock, Series P; $0.001 par value; 600,000 shares authorized, 86,640 shares issued and outstanding			87			87
Convertible preferred stock, Series S; $0.001 par value; 50,000 shares authorized, -0- shares issued and outstanding			-			-
Common stock, authorized 100,000,000 shares,
par value $0.001; 70,296,203 and 51,244,242 shares issued
and outstanding, respectively			70,297			51,243
Additional paid In capital			40,557,726			36,564,046
Accumulated Deficit			(46,985,129	)		(41,651,214	)

Total Stockholders' Deficit			(6,355,886	)		(5,034,705	)

Total Liabilities and Stockholders' Deficit		$	385,801		$	798,562

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

F-4

STUDIO ONE MEDIA, INC.
Consolidated Statements of Operations

	For the Year Ended
	June 30,
	2014			2013

REVENUES
Session Revenues	$	36,192		$	192,205
AfterMaster Revenues		146,307			85,532
Total Revenues		182,499			277,737

COSTS AND EXPENSES
Cost of Revenues (Exclusive of Depreciation and Amortization)		381,780			322,973
Depreciation and Amortization Expense		114,330			214,951
General and Administrative Expenses		3,212,694			3,033,876

Total Costs and Expenses		3,708,804			3,571,800

Loss from Operations		(3,526,305	)		(3,294,063	)

Other Expense
Interest Expense		(1,579,617	)		(1,362,732	)
Gain (Loss) on Extinguishment of Debt		(25,787	)		188,436
Loss on Disposal of Property		-			(6,725	)
Impairment of assets		(202,206	)		-
Other Income		-			1,500

Total Other Expense		(1,807,610	)		(1,179,521	)

Loss Before Income Taxes		(5,333,915	)		(4,473,584	)

NET LOSS	$	(5,333,915	)	$	(4,473,584	)

Preferred Stock Accretion and Dividends		(68,064	)		(68,066	)

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS	$	(5,401,979	)	$	(4,541,650	)

Basic and Diluted Loss Per Share of Common Stock	$	(0.09	)	$	(0.11	)

Weighted Average Number of Shares Outstanding		60,147,906			40,990,041

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

F-5

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, 2012		1,220,044	$	1,220		36,412,601	$	36,413	$	33,696,207		$	(37,177,630	)	$	(3,443,790	)

Common Stock Sold for Cash, net of offering costs of $44,085		-		-		7,023,735		7,025		693,890			-			700,915

Share-Based Compensation - Common shares		-		-		4,592,744		4,590		1,045,000			-			1,049,590

Share-Based Compensation - Warrants and options		-		-		-		-		10,914			-			10,914

Shares Issued for Conversion of Debt and Interest		-		-		545,168		545		116,359			-			116,904

Warrants issued in advance of services		-		-		-		-		37,840			-			37,840

Warrants and common shares issued for interest expense		-		-		2,584,994		2,585		740,757			-			743,342

Beneficial Conversion Feature		-		-		85,000		85		217,900			-			217,985

Debt discount on extension of debt		-		-		-		-		5,179			-			5,179

Net loss for the year ended June 30, 2013		-		-		-		-		-			(4,473,584	)		(4,473,584	)

Balance, June 30, 2013		1,220,044	$	1,220		51,244,242	$	51,243	$	36,564,046		$	(41,651,214	)	$	(5,034,705	)

Common Stock Sold for Cash, net of offering costs of $15,935		-		-		9,951,750		9,952		956,613			-			966,565

Share-Based Compensation to Directors and Employees- Common shares		-		-		2,272,495		2,272		614,518			-			616,790

Share-Based Compensation for Consulting Services and Rent		-		-		1,862,399		1,862		466,530			-			468,392

Common stock issued as incentive with Convertible debt		-		-		229,250		230		46,053			-			46,283

Common stock issued for conversion of debt		-		-		1,271,534		1,272		125,881			-			127,153

Common stock issued for conversion of cashless warrants/options		-		-		43,758		44		(44	)		-			-

Common stock issued for interest expense		-		-		3,040,775		3,041		769,268			-			772,309

Common stock issued to extend the maturity dates on debt		-		-		380,000		381		104,844			-			105,225

Beneficial Conversion Feature		-		-		-		-		620,226			-			620,226

Share-Based Compensation - Warrants and options		-		-		-		-		289,791			-			289,791

Net loss for the year ended June 30, 2014		-		-		-		-		-			(5,333,915	)		(5,333,915	)

Balance, June 30, 2014		1,220,044	$	1,220		70,296,203	$	70,297	$	40,557,726		$	(46,985,129	)	$	(6,355,886	)

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

F-6

STUDIO ONE MEDIA, INC.
Consolidated Statements of Cash Flows

	For the Years Ended
	June 30,
	2014				2013

OPERATING ACTIVITIES

Net Loss		$	(5,333,915	)	$	(4,473,584	)
Adjustments to reconcile net loss to cash from operating activities:
Depreciation and amortization			114,330			214,952
Share-based compensation - Common Stock			616,790			1,081,314
Share-based compensation - warrants			289,791			10,913
Common stock issued for services and rent			468,392			743,342
Common stock issued as incentive with Convertible debt			20,446			-
Common stock issued to extend the maturity dates on debt			105,225			-
Amortization of debt discount and issuance costs			635,602			726,925
(Gain)/Loss on Disposal of assets			-			45,653
(Gain)/Loss on extinguishment of debt			25,837			-
Penalties accrued on convertible notes			120,348			-
Impairment on long lived assets and intangibles			202,206			(183,257	)
Changes in Operating Assets and Liabilities:
Other receivables			12,840			(4,370	)
Other assets			53,220			116,036
Accounts payable and accrued expenses and deferred revenue			1,086,176			62,707

Net Cash Used in Operating Activities			(1,582,712	)		(1,659,369	)

INVESTING ACTIVITIES

Purchase of property and equipment			(58,500	)		(115,802	)

Net Cash Used in Investing Activities			(58,500	)		(115,802	)

FINANCING ACTIVITIES

Common Stock issued for cash, net of offering costs of $15,935 and $3,300, respectively			966,565			700,915
Proceeds from notes payable - related party			44,000			-
Proceeds from convertible notes payable - related party			-			1,050,000
Proceeds from convertible notes payable			624,000			205,000
Repayments of convertible notes payable			(72,000	)		(210,000	)
Lease Payable			(8,735	)		94,877

Net Cash Provided by Financing Activities			1,553,830			1,840,792

NET INCREASE (DECREASE) IN CASH			(87,382	)		65,621
CASH AT BEGINNING OF PERIOD			165,258			99,637

CASH AT END OF PERIOD		$	77,876		$	165,258

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

CASH PAID FOR:
Interest		$	918		$	9,125

NON CASH FINANCING ACTIVITIES:
Common Stock issued to extinguish debt and liabilities		$	-		$	85,179
Conversion of Notes and Interest into common stock			127,153			-
Common Stock and warrants issued for prepaid services		$	-		$	37,840
Common Stock and warrants issued for interest		$	607,000		$
Warrants and beneficial conversion feature on issuance of convertible debt		$	1,392,535		$	182,579

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

F-7

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

June 30, 2014 and 2013

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.

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.

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.

F-8

•

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’s financial instruments mainly consist of cash, receivables, current assets, accounts payable and accrued expenses and debt. The carrying amounts of its cash, receivables, current asserts, accounts payable, accrued expenses and current debt approximates fair value due to the Short-Term nature of these instruments. The debt consists of lease payable and notes payables, the lease payables, which is due 24 months after June 30, 2014, therefore its carrying amount also approximates fair value.

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, 2014 there were no customers that accounted for a material portion of total revenues, and 2013 there was one customer 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.

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

F-9

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. Cash sales are recognized as revenue upon the earlier of the use of or expiration of the prepaid session.

Cost of Revenues

The Company’s cost of revenues 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 $31,450 and $643 during the years ended June 30, 2014 and 2013, respectively.

Advertising Expenses

The Company expenses advertising costs in the period in which they are incurred. Advertising expenses were $85,810 and $8,064 for the years ended June 30, 2014 and 2013, respectively, and have been included within general and administrative expenses.

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, 2014 and 2013 of $68,064 and $68,066, 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, 2014 and 2013, 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 15,895,075 and 11,591,124 at June 30, 2014 and 2013, 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-10

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 2012 to 2014 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.

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 $46,985,129 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.

NOTE 3 – PROPERTY AND EQUIPMENT

The Company’s property and equipment are comprised of the following as of June 30, 2014 and 2013:

	2014			2013
Furniture and Office Equipment	$	25,912		$	25,912
Office Equipment and Computers		233,564			230,930
Studios		123,324			1,140,884
Vehicles		60,524			60,524
Leasehold Improvements		23,472			9,174
Computer Software		56,166			56,166
Accumulated Depreciation		(357,982	)		(1,197,348	)
Property and Equipment, net	$	164,980		$	336,242

The Company also had $31,250 and $93,357 in equipment that was yet to be placed in service as of June 30, 2014 and 2013, respectively. Depreciation expense for the years ended June 30, 2014 and 2013 was $104,127 and $204,333, respectively. For the year ending June 30, 2014 the Company impaired assets related to the studios due to the decrease in revenue production and lack of use, totaling $202,206.

F-11

NOTE 4 – INTANGIBLE ASSETS

The Company’s intangible assets are comprised of the following on June 30, 2014 and June 30, 2013:

	2014			2013
Patterns and Molds	$	18,916		$	18,916
Website Costs		100,410			91,375
Video Backgrounds		16,172			16,172
Accumulated Amortization		(123,508	)		(109,774	)
Intangible Assets, Net	$	11,990		$	16,689

Amortization expense for the years ended June 30, 2014 and 2013 was $10,193 and $10,618, respectively. The Company’s future estimated amortization for the above intangible assets are as follows:

Year	Amortization
2015	$	3,159
2016		4,970
2017		3,861
2018		-
2019		-
Total	$	11,990

NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

A summary of accounts payable and accrued expenses as of June 30, 2014 and 2013 follows:

	2014		2013
Accounts Payable	$	822,006	$	597,079
Accrued Interest		74,483		50,725
Deferred Revenue		3,500		24,182
Other Accrued Expenses		129,556		156,036
Consulting Services-Related Party		278,568		167,659
Total	$	1,308,113	$	995,681

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 relative 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, 2014 and 2013, respectively:

F-12

Convertible Notes Payable – Related Parties
	June 30,		June 30,
	2014		2013

$250,000 face value, issued in February 2010, interest rate of 12%, matures in February 2013, net of unamortized discount of $0 and $0 at June 30, 2014 and June 30,2013, respectively.	$	250,000	$	250,000
$250,000 face value, issued in May 2010, interest rate of 12%, matures in May 2013, net of unamortized discount of $0 and $0 at June 30, 2014 and June 30,2013, respectively.		250,000		250,000
$250,000 face value, issued in August 2010, interest rate of 12%, matures in August 2013, net of unamortized discount of $0 and $24,559 at June 30, 2014 and June 30,2013, respectively.		250,000		225,441
$250,000 face value, issued in December 2010, interest rate of 12%, matures in December 2013, net of unamortized discount of $0 and $40,148 at June, 2014 and June 30,2013, respectively.		250,000		209,852
$250,000 face value, issued in November 2011, interest rate of 15%, matures in November 2012, net of unamortized discount of $0 and $0 as of June 30, 2014 and June 30,2013, respectively.		250,000		250,000
$250,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $0 and $0 as of June 30, 2014 and June 30,2013, respectively.		250,000		250,000
$100,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $0 and $0 as of June 30, 2014 and June 30,2013, respectively.		100,000		100,000
$300,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $0 and $0 as of June 30, 2014 and June 30,2013, respectively.		300,000		300,000
$100,000 face value, issued in February 2012, interest rate of 15%, matures in August 2013, net of unamortized discount of $0 and $1,168 as of June 30, 2014 and June 30,2013, respectively.		100,000		98,832
$100,000 face value, issued in February 2012, interest rate of 15%, matures in August 2013, net of unamortized discount of $0 and $1,514 as of June 30, 2014 and June 30,2013, respectively.		100,000		98,486
$150,000 face value, issued in March 2012, interest rate of 15%, matures in September 2013, net of unamortized discount of $0 and $1,111 as of June 30, 2014 and June 30,2013, respectively.		150,000		148,889
$200,000 face value, issued in March 2012, interest rate of 15%, matures in September 2013, net of unamortized discount of $0 and $1,814 as of June 30, 2014 and June 30,2013, respectively.		200,000		198,186
$200,000 face value, issued in April 2012, interest rate of 10%, matures in October 2013, net of unamortized discount of $0 and $2,450 as of June 30, 2014 and June 30,2013, respectively.		200,000		197,550
$150,000 face value, issued in May 2012, interest rate of 10%, matures in November 2013, net of unamortized discount of $0 and $1,682 as of June 30, 2014 and June 30,2013, respectively.		150,000		148,318
$125,000 face value, issued in June 2012, interest rate of 10%, matures in December 2013, net of unamortized discount of $0 and $1,897 as of June 30, 2014 and June 30,2013, respectively.		125,000		123,103
$125,000 face value, issued in June 2012, interest rate of 10%, matures in December 2013, net of unamortized discount of $0 and $2,208 as of June 30, 2014 and June 30,2013, respectively.		125,000		122,792
$50,000 face value, issued in August 2012, interest rate of 10%, matures in February 2014, net of unamortized discount of $0 and $0 as of June 30, 2014 and June 30, 2013.		50,000		50,000
$50,000 face value, issued in September 2012, interest rate of 10%, matures in March 2014, net of unamortized discount of $0 and $0 as of June 30, 2014 and June 30, 2013.		50,000		50,000
$100,000 face value, issued in October 2012, interest rate of 10%, matures in April 2014, net of unamortized discount of $0 and $2,662 as of June 30, 2014 and June 30, 2013.		100,000		97,338
$100,000 face value, issued in October 2012, interest rate of 10%, matures in April 2014, net of unamortized discount of $0 and $2,786 as of June 30, 2014 and June 30, 2013.		100,000		97,214
$50,000 face value, issued in October 2012, interest rate of 10%, matures in April 2014, net of unamortized discount of $0 and $1,192 as of June 30, 2014 and June 30, 2013.		50,000		48,808
$75,000 face value, issued in November 2012, interest rate of 10%, matures in May 2014, net of unamortized discount of $0 and $1,804 as of June 30, 2014 and June 30, 2013.		75,000		73,196
$25,000 face value, issued in November 2012, interest rate of 10%, matures in May 2014, net of unamortized discount of $0 and $1,159 as of June 30, 2014 and June 30, 2013.		25,000		23,841
$50,000 face value, issued in November 2012, interest rate of 10%, matures in May 2014, net of unamortized discount of $0 and $2,358 as of June 30, 2014 and June 30, 2013.		50,000		47,642
$50,000 face value, issued in December 2012, interest rate of 10%, matures in June 2014, net of unamortized discount of $0 and $2,502 as of June 30, 2014 and June 2013.		50,000		47,498

F-13

$75,000 face value, issued in January 2013, interest rate of 10%, matures in July 2014, net of unamortized discount of $0 and $2,111 as ofJune 30, 2014 and June 30, 2013.		75,000		72,889
$25,000 face value, issued in January 2013, interest rate of 10%, matures in July 2014, net of unamortized discount of $1 and $637 as of June 30, 2014 and June 30, 2013.		24,999		24,363
$35,000 face value, issued in January 2013, interest rate of 10%, matures in July 2014, net of unamortized discount of $0 and $1,099 as of June 30, 2014 and June 30, 2013.		35,000		33,901
$5,000 face value, issued in February 2013, interest rate of 10%, matures in August 2014, net of unamortized discount of $0 and $156 as of June 30, 2014 and June 30, 2013.		5,000		4,844
$10,000 face value, issued in February 2013, interest rate of 10%, matures in August 2014, net of unamortized discount of $1 and $374 as of June 30, 2014 and June 30, 2013.		9,999		9,626
$50,000 face value, issued in February 2013, interest rate of 10%, matures in August 2014, net of unamortized discount of $0 and $2,296 as of June 30, 2014 and June 30, 2013.		50,000		47,704
$50,000 face value, issued in March 2013, interest rate of 10%, matures in September 2014, net of unamortized discount of $13 and $1,746 as of June 30, 2014 and June 30, 2013.		49,987		48,254
$75,000 face value, issued in April 2013, interest rate of 10%, matures in October 2014, net of unamortized discount of $546 and $2,712 as of June 30, 2014 and June 30, 2013.		74,454		72,288
$9,000 face value, issued in June 2014, interest rate of 0%, matures in July 2014, net of unamortized discount of $1,200 as of June 30, 2014		7,800		-
Total convertible notes payable – related parties		3,932,239		3,820,855
Less current portion		3,932,239		2,096,416
Convertible notes payable – related parties, long-term	$	-	$	1,724,439

In February 2010, the Company entered into a financing agreement with an unrelated third party to fund up to $1,000,000 in four equal increments. The proceeds of each advance by the lender to Studio One are to be used to manufacture, ship, install and operate MyStudios serving as collateral for such advances. Each advance is evidenced by a promissory note, bearing interest at 12% per annum and due in 3 years from the advance dates, and a security agreement granting the lender a first lien on specified studios. The principal and interest on these notes may be converted at the lender’s option into Common Stock based on a conversion price of fifty cents ($0.50) per share. The notes were issued on February 23, 2010, May 4, 2010, August 19, 2010, and December 23, 2010 in encruments of $250,000 per issuance. Additionally, the Company granted 200,000 warrants to the lender, which have an exercise price of $0.40 to $0.50 and expire in 5 years. The notes was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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 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. 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.

F-14

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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.

F-15

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

F-16

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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.

On August 9, 2012, the Company issued a convertible note to a related party for $50,000 that matures in February 9, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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 $0.25 per share and a contractual life of 5 years from the issuance date. The value of the beneficial conversion feature (BCF) recorded was $2,356 and the debt discount related to the attached warrants was $2,356, for a total debt discount of $4,712.

On September 10, 2012, the Company issued a convertible note to a related party for $50,000 that matures in March 10, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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 $0.25 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $17,060 and the debt discount related to the attached warrants was $3,505, for a total debt discount of $20,120.

On October 10, 2012, the Company issued a convertible note to a related party for $100,000 that matures in April 10, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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 $5,126, for a total debt discount of $5,126.

On October 17, 2012, the Company issued a convertible note to a related party for $100,000 that matures in April 17, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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 $5,236, for a total debt discount of $5,236.

On October 25, 2012, the Company issued a convertible note to a related party for $50,000 that matures in April 25, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

F-17

In conjunction with the note, the Company issued detachable warrants to purchase 12,500 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 $2,181, for a total debt discount of $2,181.

On November 13, 2012, the Company issued a convertible note to a related party for $75,000 that matures in May 13, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

In conjunction with the note, the Company issued detachable warrants to purchase 18,750 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 $3,107, for a total debt discount of $3,107.

On November 23, 2012, the Company issued a convertible note to a related party for $25,000 that matures in May 23, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

In conjunction with the note, the Company issued detachable warrants to purchase 6,250 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 $1,936, for a total debt discount of $1,936.

On November 28, 2012, the Company issued a convertible note to a related party for $50,000 that matures in May 28, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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 December 17, 2012, the Company issued a convertible note to a related party for $50,000 that matures in June 17, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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 14, 2013, the Company issued a convertible note to a related party for $75,000 that matures in July 14, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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 23, 2013, the Company issued a convertible note to a related party for $25,000 that matures in July 14, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

F-18

On January 31, 2013, the Company issued a convertible note to a related party for $35,000 that matures in July 31, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

In conjunction with the note, the Company issued detachable warrants to purchase 8,750 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 $1,644, for a total debt discount of $1,644.

On February 5, 2013, the Company issued a convertible note to a related party for $5,000 that matures in August 5, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

In conjunction with the note, the Company issued detachable warrants to purchase 1,250 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 $234, for a total debt discount of $234.

On February 14, 2013, the Company issued a convertible note to a related party for $10,000 that matures in August 14, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

In conjunction with the note, the Company issued detachable warrants to purchase 2,500 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 $559, for a total debt discount of $559.

On February 22, 2013, the Company issued a convertible note to a related party for $50,000 that matures in August 22, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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 March 6, 2013, the Company issued a convertible note to a related party for $50,000 that matures in September 6, 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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 April 8, 2013, the Company issued a convertible note to a related party for $75,000 that matures in October 8, 2014. 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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

F-19

On June 4, 2014, the Company issued a convertible note to a related party for $9,000 that matures in July 4, 2014. The note bears an interest rate of 0% per annum and is convertible, along with all accrued interest into shares of the Company’s Common Stock at $0.10 per share. The value the convertible note and recorded a BCF of 9,000.

Convertible Notes Payable - Non-Related Parties

Convertible notes payable due to non-related parties consisted of the following as of June 30, 2014, and 2013, respectively:

Convertible Notes Payable - Non-Related Parties
	June 30,		June 30,
	2014		2013

$100,000 face value, issued in September 2011, interest rate of 0%, originally matured in December 2011, extended to August 2014, net of unamortized discount of $-0- and $4,064 as of June 30, 2014 and June 30,2013.	$	100,000	$	95,936
$10,000 face value, of which $10,000 has been paid back, issued in October 2011, interest rate of 10%, matures in June 2012, net of unamortized discount of $0 and $0 as of June 30, 2014 and June 30,2013.		-		10,000
$15,000 face value, issued in October 2011, interest rate of 10%, matures in June 2012, net of unamortized discount of $0 and $0 as of June 30, 2014 and June 30, 2013.		15,000		15,000
$75,000 face value, issued in January 2012, interest rate of 12%, originally matured in June 2013, extended to August 2014, net of unamortized discount of $-0- and $3,017 as of June 30, 2014 and June 30,2013.		75,000		71,983
$50,000 face value, issued in August 2012, interest rate of 10%, matures in February 2013, net of unamortized discount of $0 and $0 as of June 30, 2014 and June 30, 2013.		50,000		50,000
$10,000 face value, issued in September 2012, interest rate of 10%, matures in March 2013, net of unamortized discount of $0 and $0 as of June 30, 2014 and June 30,2013.		10,000		10,000
$50,000 face value of which $9,600 was converted leaving a $40,400 face value, issued in November 2012, interest rate of 10%, matures in November 2013 and an additional penalties were added to the principal of $120,348 bringing the face value to $160,748, net of unamortized discount of $0 and $13,789 as of June 30, 2014 and June 30, 2013.		160,748		26,611
$30,000 face value, issued in February 2013, interest rate of 0%, matures in November 2013, net of unamortized discount of $0 and $10,487 as of June 30, 2014 and June 30, 2013.		30,000		19,513
$20,000 face value, issued in April 2013, interest rate of -0-%, matures in October 2013, net of unamortized discount of $0 and $12,678 as of June 30, 2014 and June 30, 2013.		20,000		7,322
$60,000 face value, of which $60,000 has been paid back, issued in July 2013, interest rate of 6%, matures in October 2013, net of unamortized discount of $0 as of June 30, 2014.		-		-
$100,000 face value, issued in September 2013, interest rate of 0%, matures in February 2014, net of unamortized discount of $0 as of June 30, 2014.		100,000		-

F-20

$50,000 face value, issued in October 2013, interest rate of 0%, originally matured in November 2013, with an extended maturity date of May 2014, net of unamortized discount of $0 as of June 30, 2014.		50,000		-
$50,000 face value, of which $10,000 was converted leaving a $0 face value, issued in November 2013, interest rate of 0%, matured in May 2014, net of unamortized discount of $0 as of June 30, 2014.		-		-
$25,000 face value, of which $25,000 was converted leaving a $0 face value, issued in November 2013, interest rate of 0%, matured in February 27, 2014, net of unamortized discount of $0 as of June 30, 2014.		-		-
$10,000 face value, of which $10,000 was converted leaving a $0 face value, issued in February 2014, interest rate of 10%, matures in March 2014, net of unamortized discount of $0 as of June 30, 2014.		-		-
$50,000 face value, issued in February 2014, interest rate of 10%, matures in April 2014, net of unamortized discount of $0 as of June 30, 2014.		50,000		-
$50,000 face value, issued in February 2014, interest rate of 6%, matures in August 2014, net of unamortized discount of $3,868 as of June 30, 2014.		46,132		-
$30,000 face value, issued in March 2014, interest rate of 0%, matures in September 2014, net of unamortized discount of $7,011 as of June 30, 2014.		22,989		-
$20,000 face value, issued in March 2014, interest rate of 10%, matures in June 2014, net of unamortized discount of $0 as of June 30, 2014.		20,000		-
$25,000 face value, issued in April 2014, interest rate of 6%, matures October 2014, net unamortized discount of $15,437 as of June 30, 2014.		9,563		-
$5,000 face value, of which $5,000 was converted leaving a $0 face value, issued in May 2014, interest rate of 0%, matures August 2014, net unamortized discount of $0 as of June 30, 2014.		-		-
$25,000 face value, of which $25,000 was converted leaving a $0 face value, issued in May 2014, interest rate of 0%, matures in August 2014, net of unamortized discount of $0 as of June 30, 2014.		-		-
$15,000 face value, issued in June 2014, interest rate of 6%, matures December 2014, net unamortized discount of $14,098 as of June 30, 2014.		902		-
$20,000 face value, issued in June 2014, interest rate of 6%, matures December 2014, net unamortized discount of $18,798 as of June 30, 2014.		1,202		-
$30,000 face value, issued in June 2014, interest rate of 6%, matures December 2014, net unamortized discount of $28,033 as of June 30, 2014.		1,967		-
$20,000 face value, issued in June 2014, interest rate of 6%, matures December 2014, net unamortized discount of $18,798 as of June 30, 2014.		1,202		-
$25,000 face value, issued in June 2014, interest rate of 6%, matures September 2014, net unamortized discount of $25,000 as of June 30, 2014.		-		-
$12,000 face value, of which $12,000 was converted leaving a $0 face value, issued in May 2014, interest rate of 6%, matures August 2014, net unamortized discount of $0 as of June 30, 2014.		-		-
Total convertible notes payable – non-related parties		764,705		306,365
Less current portion		764,705		306,365
Convertible notes payable – non-related parties, long-term	$	-	$	-

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-21

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. On September 29, 2012, the Company negotiated an extension on the note to May 1, 2013. 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. As of the date of the filing of this report, this note is in default.

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 anum 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 June 30, 2014, this note has been paid in full.

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 470-50, “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. As of the date of the filing of this report, this note is in default.

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. As of the date of the filing of this report, this note is in default.

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 note holder elected to convert the note and accrued interest on June 6, 2013.

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.

F-22

On March 15, 2012, the note holder agreed to extend the maturity date of the note to June 13, 2012. The note holder elected to convert the note and accrued interest on June 6, 2013.

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.

On October 1, 2012, the note holder agreed to extend the maturity date of the note to June 30, 2013. 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. As of the date of the filing of this report, this note is in default.

On August 16, 2012, the Company issued a convertible note to an unrelated individual for $10,000 that matures 30 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 a single 30 day period. As of the date of the filing of this report, this note is in default.

As additional compensation, the Company issued to the holder 10,000 shares of restricted Common Stock. The note holder elected to convert the note and accrued interest on November 14, 2012. The value of the debt discount relate to the attached common stock was $2,063.

On August 21, 2012, the Company issued a convertible note to an unrelated individual for $50,000 that matures six months 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 a single 30 day period. As of the date of the filing of this report, this note is in default.

As additional compensation, the Company issued to the holder 50,000 shares of restricted Common Stock. The value of the debt discount related to the attached Common Stock was $10,000.

On September 4, 2012, the Company issued a convertible note to an unrelated individual for $15,000 that matures six months 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 $0.25 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The convertible note is in default and has been reclassified as current.

As additional compensation, the Company issued to the holder 15,000 shares of restricted Common Stock. The value of debt discount relate to the attached common stock was $3,889.

On September 4, 2012, the Company issued a convertible note to an unrelated individual for $10,000 that matures six months 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 a single 30 day period. The convertible note is in default and has been reclassified as current.

As additional compensation, the Company issued to the holder 10,000 shares of restricted common stock. The value of the debt discount relate to the attached Common Stock was $2,481.

On November 28, 2012, the Company issued a convertible note to an unrelated individual for $50,000 that matures one year after issuance. The note bears an interest rate of 0% for the first 90 days and 10% after 90 days per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at the lesser of $0.18 per share or 60% of the lowest trade price in the 25 trading days previous to conversion. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was $33,333. The note holder elected to convert $9,600 of the note and accrued interest on June 3, 2013. The convertible note is in default and has been reclassified as current. Per the agreement, the company accrued penalties of $120,348 which were added to the principal, see footnote 12. The balance of the note to date is $160,748.

On February 13, 2013, the Company issued a convertible note to an unrelated individual for $30,000 that matures on November 28, 2013. The note bears an interest rate of 0% for the first 90 days and 10% after 90 days per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at the lesser of $0.18 per share or 60% of the lowest trade price in the 25 trading days previous to conversion. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was $30,000. The convertible note is in default and has been reclassified as current. As of the date of the filing of this report, this note is in default.

F-23

On March 7, 2013, the Company issued a convertible note to an unrelated individual for $65,000 that matures 60 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 $0.25 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period.

As additional compensation, the Company issued to the holder 65,000 shares of restricted common stock. The value of the debt discount relate to the attached Common Stock was $8,376.

On June 5, 2013, the company paid the full balance of the note and $1,603 of accrued interest related to the note.

On April 24, 2013, the Company issued a convertible note to an unrelated individual for $20,000 that matures on October 24, 2013. The note bears an interest rate of 0% for the first 90 days and 10% after 90 days per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at the lesser of $0.18 per share or 60% of the lowest trade price in the 25 trading days previous to conversion. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was$20,000. The convertible note is in default and has been reclassified as current. As of the date of the filing of this report, this note is in default.

On July 30, 2013, the Company issued a convertible note to an unrelated individual for $60,000 that matures on October 30, 2013. The note bears an interest rate of 6% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.15 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was $49,226. Subsequent to period end on October 1, 2013, the Company paid the note and interest in full.

On September 30, 2013, the Company issued a convertible note to an unrelated individual for $100,000 that matures on February 28, 2014. The note bears an interest rate of 0% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was $100,000. The convertible note is in default and has been reclassified as current.

On October 17, 2013, the Company issued a convertible note to an unrelated individual for $50,000 with an original maturity date of November 17, 2013, the note bears an interest rate of 0% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the original BCF recorded was $50,000. The note was amended on November 17, 2013 to extend the maturity date to May 17, 2014 and issued 25,000 common stock and 25,000 warrants as incentive to extending the maturity date. Under ASC 470-60-55-12, the debt was deemed to be extinguished and the company recognized a loss on extinguishment of debt $25,787. As of the date of the filing of this report, this note is in default.

On November 5, 2013, the Company issued a convertible note to an unrelated individual for $50,000 that matures on May 5, 2014. The note bears an interest rate of 0% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was $50,000. On June 30, 2014 the note holder elected to convert the entire note of $50,000.

On November 27, 2013, the Company issued a convertible note to an unrelated individual for $25,000 that matures on February 27, 2014. The note bears an interest rate of 0% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was $25,000. On May 7, 2014, the note holder elected to convert the entire note of $25,000. As of the date of the filing of this report, this note is in default.

On February 3, 2014, the Company issued a convertible note to an unrelated individual for $10,000 that matures on March 31, 2014. The note bears an interest rate of 10% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. On March 31, 2014 the note holder elected to convert the entire note and accrued interest of $10,000 and $153 respectively. As of the date of the filing of this report, this note is in default.

In conjunction with the note, the Company issued to the holder 10,000 shares of restricted Common Stock. The value of the BCF recorded was $8,065 and the debt discount related to the attached relative fair value of the restricted Common Stock was $1,935, for a total debt discount of $10,000.

On February 3, 2014, the Company issued a convertible note to an unrelated individual for $50,000 that matures on April 10, 2014. The note bears an interest rate of 10% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The convertible note is in default and has been reclassified as current.

In conjunction with the note, the Company issued to the holder 25,000 shares of restricted Common Stock. The value of the BCF recorded was $44,444 and the debt discount related to the attached relative fair value of the restricted Common Stock was $5,556, for a total debt discount of $10,000.

F-24

On February 21, 2014, the Company issued a convertible note to an unrelated individual for $50,000 that matures on August 21, 2014. The note bears an interest rate of 6% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The convertible note is in default and has been reclassified as current.

In conjunction with the note, the Company issued to the holder 25,000 shares of restricted Common Stock. The value of the BCF recorded was $45,249 and the debt discount related to the attached relative fair value of the restricted Common Stock was $4,751, for a total debt discount of $50,000.

On March 6, 2014, the Company issued a convertible note to an unrelated individual for $30,000 that matures on September 6, 2014. The note bears an interest rate of 0% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The convertible note is in default and has been reclassified as current.

In conjunction with the note, the Company issued to the holder 15,000 shares of restricted Common Stock. The value of the BCF recorded was $26,786 and the debt discount related to the attached relative fair value of the restricted Common Stock was $3,214, for a total debt discount of $30,000.

On March 31, 2014, the Company issued a convertible note to an unrelated individual for $20,000 that matures on June 28, 2014. The note bears an interest rate of 10% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The convertible note is in default and has been reclassified as current.

In conjunction with the note, the Company issued to the holder 10,000 shares of restricted Common Stock. The value of the BCF recorded was $17,937 and the debt discount related to the attached relative fair value of the restricted Common Stock was $2,063, for a total debt discount of $20,000.

On April 21, 2014, the Company issued a convertible note to an unrelated individual for $25,000 that matures on October 21, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

In conjunction with the note, the Company issued to the holder 12,300 shares of restricted Common Stock. The value of the BCF recorded was $22,422 and the debt discount related to the attached relative fair value of the restricted Common Stock was $2,578, for a total debt discount of $25,000.

On May 8, 2014, the Company issued a convertible note to an unrelated party for $12,000 that matures on August 8, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share. On May 13, 2014 the note holder elected to convert the entire note and accrued interest of $12,000 and $10 respectively.

In conjunction with the note, the Company issued to the holder 3,000 shares of restricted Common Stock. The value of the BCF recorded was $11,294 and the debt discount related to the attached relative fair value of the restricted Common Stock was $706, for a total debt discount of $12,000.

On May 12, 2014, the Company issued a convertible note to an unrelated individual for $5,000 that matures on August 12, 2014. The note bears interest rate of 0% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share. On June 30, 2014, the note holder elected to convert the entire note of $5,000.

In conjunction with the note, the Company issued to the holder 1,250 shares of restricted Common Stock. The value of the BCF recorded was $4,695 and the debt discount related to the attached relative fair value of the restricted Common Stock was $305, for a total debt discount of $5,000.

On May 23, 2014, the Company issued a convertible note to an unrelated individual for $25,000 that matures on August 23, 2014. The note bears interest rate of 0% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share. The value of the BCF recorded was $25,000. On June 30, 2014 the note holder elected to convert the entire note of $25,000.

On June 18, 2014, the Company issued a convertible note to an unrelated individual for $30,000 that matures on December 18, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

On June 19, 2014, the Company issued a convertible note to an unrelated individual for $15,000 that matures on December 19, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

F-25

In conjunction with the note, the Company issued to the holder 7,500 shares of restricted Common Stock. The value of the BCF recorded was $13,453 and the debt discount related to the attached relative fair value of the restricted Common Stock was $1,547, for a total debt discount of $15,000

On June 19, 2014, the Company issued a convertible note to an unrelated individual for $20,000 that matures on December 19, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

On June 30, 2014, the Company issued a convertible note to an unrelated individual for $25,000 that matures on September 30, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

In conjunction with the note, the Company issued to the holder 25,000 shares of restricted Common Stock. The value of the BCF recorded was $20,325 and the debt discount related to the attached relative fair value of the restricted Common Stock was $4,675, for a total debt discount of $25,000.

Notes Payable – Related Parties

Notes payable due to related parties consisted of the following as of June 30, 2014 and 2013:

Notes Payable – Related Parties

	June 30,			June 30,
	2014			2013

Face value of $200,000, issued in April 2011, original maturity date of August 2011 extended to September 2014, 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 extended to September 2014, 25,000 warrants per month issued for first 90 days, note bears interest at 15% from December 2011 through maturity.			250,000		250,000
Face value of $125,000, issued in October 2011, matures in October 2012 extended to September 2014, 30,000 warrants issued in lieu of interest through December 2011, note bears interest at 0% from December 2011 through maturity.			125,000		125,000
Face value of $35,000, issued in January 2014, matures in February 2014 extended to September 2014,, note bears interest at 10%, interest is accrued monthly and paid quarterly by issuing restricted stock until the January 2015 and thereafter interest to be paid in cash.			35,000		-
Total notes payable – related parties			610,000		575,000
Less current portion			610,000		575,000
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.

F-26

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 June 30, 2012 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 June 30, 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. The note was amended again on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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.

On October 1, 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. The note was amended again on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

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.

F-27

In February 6, 2013, the Company entered into a two-week note payable for $50,000 with a related party. The note provided for 0% interest per annum. The note was paid in full on maturity date.

In January 2014, the Company entered into a one month note payable for $35,000 with a related party. The note provided for 10% interest per annum in restricted common stock calculated at 75% of the preceding 10-day running average closing price for the first year payable each quarter. Thereafter, interest is to be paid in cash. The note was amended on June 30, 2014 to extend the maturity date to September 30, 2014. 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.

This note includes the following priority repayment provisions: 1) the Company agrees to apply the first and all subsequent funds raised by the company unless otherwise authorized by the holder; 2) the holder will approve all checks of the company before they are issued, until the note is repaid; and 3) if the terms are not complied with, the note will be due on demand.

Notes Payable – Non-Related Parties

Notes payable due to non-related parties consisted of the following as of June 30, 2014 and 2013:

Notes Payable – Non-Related Parties
	2014		2013
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 note payable – non-related parties		40,488		40,488
Less current portion		40,488		40,488
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		696,000		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		1,220,044	$	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.

F-28

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.

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, 2014 and 2013, the Company issued -0- shares of Series A-1 Preferred Stock for $-0- in cash, net of $-0- 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 Company accrued dividends of $23,071 into 877,550 shares of Common Stock.

During the fiscal year ended June 30, 2014, the outstanding Preferred Stock accumulated 49,790 in dividends; in fiscal year ended June 30, 2013 it accumulated $17,016 in dividends on outstanding Preferred Stock. The cumulative dividends in arrears through June 30, 2014 were approximately $652,873.

NOTE 8 – COMMON STOCK

The Company has authorized 100,000,000 shares of $0.001 par value per share Common Stock, of which 70,296,203 and 51,244,242 were issued outstanding as of June 30, 2014 and 2013, respectively. The activity surrounding the issuances of the Common Stock is as follows:

F-29

Fiscal Year Ended June 30, 2014

The Company issued 9,825,000 shares of Common Stock for net cash proceeds of $966,565. The Company paid $15,935 in cash offering costs and issued 126,750 in stock offering costs. Offering costs have been recorded as reductions to additional paid-in capital from common stock proceeds. Attached to the Common Shares, the Company issued 1,366,016 warrants to purchase shares of the Company’s Common Stock. The Company recognized $289,791 in employee stock option expense and for the amortization of warrants issued in prior periods.

The Company also issued 1,271,534 shares of Common Stock for conversion of notes payable for $127,153, issued 229,250 shares as incentive to convertible debt for $46,283, and issued 380,000 shares of Common Stock to extend the maturity dates on debt for $105,225. The Company also issued 43,758 shares of Common Stock conversion of warrants for $0 and recorded $620,226 in beneficial conversion features related to new issuances of debt.

As share-based compensation to employees and non-employees, the Company issued 4,134,894 shares of common stock valued at $1,085,182, based on the market price of the stock on the date of issuance. As interest expense on outstanding notes payable, the Company issued 3,040,775 shares of common stock valued at $772,309 based on the market price on the date of issuance.

Fiscal Year Ended June 30, 2013

The Company issued 7,023,735 shares of Common Stock for net cash proceeds of $700,915. The Company paid $44,085 in cash offering costs and issued 233,735 in stock offering costs. Offering costs have been recorded as reductions to additional paid-in capital from common stock proceeds. Attached to the Common Shares, the Company issued 1,395,732 warrants to purchase shares of the Company’s Common Stock. The Company recognized $14,090 in employee stock option expense and for the amortization of warrants issued in prior periods.

The Company also issued 505,856 shares of Common Stock to convert $44,600 in convertible notes payable and $45,454 in accrued liabilities.

As share-based compensation to employees and non-employees, the Company issued 4,592,744 shares of common stock valued at $951,301, based on the market price of the stock on the date of issuance. As interest expense on outstanding notes payable, the Company issued 2,584,994 shares of common stock valued at $759,435 based on the market price 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, 2014, the Company issued 25,000 stock purchase options for a value of $6,045. The Company did recognize $10,713 in employee stock option expense during the fiscal year ended June 30, 2014 for options vested during the period that were issued in prior periods.

During the fiscal year ended June 30, 2013, the Company did not issue any stock purchase options. The Company did recognize $10,914 in employee stock option expense during the fiscal year ended June 30, 2013 for options vested during the period that were issued in prior periods.

The following table summarizes the changes in options outstanding of the Company during the fiscal year ended June 30, 2014.

Date Issued	Number of Options			Weighted Average Exercise Price			Weighted Average Grant Date Fair Value		Expiration Date (yrs)		Value if Exercised
Balance June 30, 2013		613,429		$	0.85		$	1.20		1.95	$	522,843
Granted		25,000			0.15			0.24		5.00		3,750
Exercised		-			-			-		-		-
Cancelled/Expired		(257,000	)		(1.23	)		-		-		(316,950	)
Outstanding as of June 30, 2014		381,429		$	0.55		$	0.12		0.62	$	209,643

F-30

The following table summarizes the changes in options outstanding of the Company during the fiscal year ended June 30, 2013.

Date Issued	Number of Options			Weighted Average Exercise Price			Weighted Average Grant Date Fair Value		Expiration Date (yrs)		Value if Exercised
Balance June 30, 2012		698,429		$	0.85		$	1.20		2.95	$	522,843
Granted		-			-			-		-		-
Exercised		-			-			-		-		-
Cancelled/Expired		(85,000	)		(0.80	)		-		-		-
Outstanding as of June 30, 2013		613,429		$	0.55		$	1.20		1.95	$	522,843

Stock Purchase Warrants

During the fiscal year ended June 30, 2014, the Company issued warrants to purchase a total of 1,366,016 and expired 498,500 shares of the Company’s Common Stock. The Company issued 29,400 warrants in conjunction to a default clause in a convertible note payable and issued 311,616 warrants in conjunction to a consulting agreement entered into in July 2013. The Company also issued 500,000 warrants in conjunction to a consulting agreement entered into in October 2013.The Company issued 25,000 warrants in conjunction to an extension in a convertible note payable in conjunction with 50,000 shares of common stock. The Company issued 100,000 warrants in conjunction with a consulting agreement entered into January 2014. The Company issued 300,000 warrants in conjunction with an employment agreement entered into January 2014. The Company also issued 100,000 warrants as compensation for references purchased. The warrants were valued using the Black-Scholes pricing model under the assumptions noted below. The Company apportioned value to the warrants based on the relative fair market value of the Common Stock and warrants.

During the fiscal year ended June 30, 2013, the Company issued warrants to purchase a total of 1,395,732 and expired 395,000 shares of the Company’s Common Stock. As described in Note 6, the Company issued 495,000 warrants attached to Common Stock. The warrants were valued using the Black-Scholes pricing model under the assumptions noted below. The Company apportioned value to the warrants based on the relative fair market value of the Common Stock and warrants.

An additional 231,250 warrants were issued in conjunction with related party convertible notes payable. The warrants were valued using the Black-Scholes pricing model under the assumptions noted below. The fair market value of the warrants has been accounted for as debt discount.

An additional 574,482 warrants valued at $108,660, were issued for services to be expensed as services were performed.

An additional 95,000 warrants valued at $19,521, were issued in advance for services to be amortized over the term of the service period

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

	2014	2013
Expected volatility	113-132%	111-207%
Expected dividends	0%	0%
Expected term	2-10 Years	2-10 Years
Risk-free interest rate	0.35 – 1.75%	0.41-2.52%

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, 2014.

Date Issued	Number of Warrants			Weighted Average Exercise Price			Weighted Average Grant Date Fair Value		Expiration Date (yrs)		Value if Exercised
Balance June 30, 2013		7,530,063		$	0.67		$	2.45		4.17	$	4,770,713
Granted		1,366,016			1.30			0.23		5.00		1,774,467
Exercised		(65,000	)		(0.25	)		0.14		-		(16,250	)
Cancelled/Expired		(498,500	)		(0.70	)		-		-		(158,498	)
Outstanding as of June 30, 2014		8,332,579		$	0.76		$	0.70		2.96	$	6,370,432

F-31

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, 2013.

Date Issued	Number of Warrants			Weighted Average Exercise Price			Weighted Average Grant Date Fair Value		Expiration Date (yrs)		Value if Exercised
Balance June 30, 2012		6,529,331		$	2.84		$	3.55		1.95	$	4,835,028
Granted		1,395,732			0.33			0.19		4.17		458,185
Exercised		-			-			-		-		-
Cancelled/Expired		(395,000	)		(0.82	)		-		-		(552,500	)
Outstanding as of June 30, 2013		7,530,063		$	0.67		$	2.45		4.17	$	4,770,713

NOTE 10 – INCOME TAXES

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

	As of
	June 30,		June 30,
	2014		2013
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,
	2014				2013
Income tax benefit based on federal statutory rate		$	(1,123,000	)		$	(2,405,000	)
State income tax benefit, net of federal income tax			(444,000	)			(448,000	)
Change in deferred tax valuation allowance			1,567,000				2,778,000
Other, net			-				-
Income tax provision		$	-			$	-

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,
	2014			2013
Deferred tax assets:
Debt extinguishment	$	918,000		$	298,000
Impairment of fixed assets		604,000			447,000
Domestic net operating loss carryforwards		9.828,000			8,383,000
Total gross deferred tax assets		11,350,000			9,128,000

Less valuation allowance on deferred tax assets		(11,350,000	)		(9,128,000	)
Net deferred tax assets		-			-

Deferred tax liabilities:
Deferred costs		-			-

Total deferred tax liabilities		-			-
Net deferred taxes	$	-		$	-

F-32

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 2009 through 2012. As of the date of this filing, the Company has not filed its tax return for the fiscal year ended 2012. While none are anticipated, fines and/or penalties may be associated with the delinquent filing.

As of June 30, 2014 and 2013, the Company had net operating loss carry-forwards for federal and state income tax purposes of approximately $26.4 million and $22.3 million, respectively. Such carryforwards may be used to reduce taxable income, if any, in future year subject to limitations of Section 382 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 2014.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

In November 2012, the Company’s former Chief Financial Officer, Joseph Desiderio, signed a promissory note (“Note”) on behalf of the Company in favor of JMJ Financial or its Assignees. The Note provided, among other things, for the right on the part of the Lender to convert part of the debt to stock. Subsequently, the parties have disagreed on the validity and terms of the agreement. The Lender has filed suit in the state court in Dade County, Florida, seeking to enforce the agreement. The Company disputes the Lender’s position on the grounds that (1) the Note contains provisions that violate Florida’s usury laws, (2) there has been no default by Company under the Note, and (3) some provisions of the Note are void and unenforceable. The Company expects the matter to be resolved to its satisfaction. 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.

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, after which, the Company has agreed to lease on a month to month basis, and the total remaining obligations under these leases at June 30, 2014 were approximately $0.

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, 2014 was $282,453, of which $202,287 was paid in cash and $80,166 was paid in Common Stock. Rent expense for the year ended June 30, 2013 was $396,412, of which $226,346 was paid in cash and $170,067 was paid in Common Stock.

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

Year	Lease Payments
2015	$	52,110
Thereafter		-
Total	$	52,110

F-33

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, 2014 were approximately $652,873.

As of the date of this filing, the Company has not filed its tax return for the fiscal year ended 2013 and 2014.

NOTE 12 – NON-CASH FINANCING ACTIVITIES

Common Stock Issued to Extinguish Debt and Liabilities

The Company issued 1,271,534 and 425,168 shares of Common Stock for conversion notes payable for the years ended June 30, 2014 and 2013 totaling $127,153 and $85,179, respectively.

Common Stock and Warrants Issued for Prepaid Services

The Company recorded prepaid services for the years ended June 30, 2014 and 2013 totaling $-0- and $37,840, respectively.

Warrants, Stock, and Beneficial Conversion Feature on Issuance of Convertible Debt

The Company recorded $46,283 for beneficial conversion features in connection with the issuance of convertible debt for the year ended June 30, 2014. The Company recorded $1,852,579 for beneficial conversion features in connection with the issuance of convertible debt for the year ended June 30, 2013.

Common Stock Issued as Dividend on Preferred Stock

The Company issued -0- shares of Common Stock as dividends related to the Company’s preferred shares for the years ended June 30, 2014 and 2013, respectively.

NOTE 13 - SUBSEQUENT EVENTS

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

F-34

Cost of Revenues

Year Ended

Cost of Revenues (excluding depreciation and amortization)