UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-KSB





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


ACT
OF 1934





For the
fiscal year ended June 30, 2008





or





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


EXCHANGE
ACT OF 1934





For the
transition period from __________ to __________





Commission
file number: 001-10196







STUDIO
ONE MEDIA, INC.


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





DELAWARE
            
            23-2517953(State
      or other jurisdiction of
            
            (IRS
      EmployerIncorporation
      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 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 xNo o






1





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained herein, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.     Yes xNo o




For the
fiscal year ended June 30, 2008, the Company had no revenue.





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).     Yes oNo 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 average bid and asked price of such common equity, as of the last
business day of the registrant’s most recently completed second fiscal quarter.
As of June 30, 2008 the aggregate market value of the registrant’s common stock
held by non-affiliates of the registrant was approximately $63,414,000 based on
the average bid and asked price of such common stock as reported on the
Over-The-Counter Bulletin Board system.  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
June 30, 2008, the number of shares of Registrant’s Common Stock outstanding was
13,212,398.








DOCUMENTS
INCORPORATED BY REFERENCE





None











2





TABLE
      OF CONTENTS
            PAGE
    NUMBERITEM
      1.
            DESCRIPTION
      OF BUSINESS
            4General
            4Company
      History
            5Fiscal
      Years 1988-1994
            5Fiscal
      Years 1995-1997
            5Fiscal
      Years 1998-2008
            5Patents,
      Trademarks and Proprietary Protection
            7Employees
            8Selected
      Financial Data
            15ITEM
      2
            DESCRIPTION
      OF PROPERTY
            16ITEM
      3
            LEGAL
      PROCEEDINGS
            16ITEM
      4
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            16ITEM
      5
            MARKET
      FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
      MATTTERS
            16Market
      Information
            16Per
      Share Common Stock Bid Price by Quarter
            17Holders
            17Dividends
            17ITEM
      6
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            18Fiscal
      Years 2008 and 2007
            18Results
      of Operations
            18Liquidity
      and Capital Resources
            19ITEM
      7
            FINANCIAL
      STATEMENTS
            21ITEM
      8
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTING AND
      FINANCIAL DISCLOSURE
            21ITEM
      8A.
            CONTROLS
      AND PROCEDURES
            22ITEM 9
            DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL  PERSONS; COMPLIANCE
      WITH SECTION 16(A) OF THE EXCHANGE ACT
            23Indemnification
      of Directors and Officers
            24Compliance
      with Section 16(A) of the Exchange Act
            24Code
      of Ethics
            24Audit
      Committee
            25ITEM
      10
            EXECUTIVE
      COMPENSATION
            25Summary
      Compensation Table
            25Equity
      Compensation Plans
            251999
      Stock Option Plan
            252004
      Stock Incentive Plan
            262006
      Employee Stock Incentive Plan
            262007
      Non-Executive Employee Stock Option Plan
            26ITEM
      11
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
            26ITEM
      12
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
            27ITEM
      13
            EXHIBITS
            28ITEM
      14
            PRINCIPAL
      ACCOUNTING FEES AND SERVICES
            29SIGNATURES
            
            30





3


FORWARD-LOOKING
AND CAUTIONARY STATEMENTS





This
Annual 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 the rate of growth of our business and acceptance of any
      products or services;




·
            volatility
      of the stock market, particularly within the technology sector;
      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.








PART  I





ITEM 1. DESCRIPTION OF BUSINESS.





GENERAL





CORPORATE
BACKGROUND





Studio
One Media, Inc., (the “Company” or “SOMD”) was originally organized in Delaware
on May 12, 1988, as Dimensional Visions Group, Ltd.  Historically, the
Company produced and marketed lithographically printed stereoscopic and
animation print products.  The Company ceased all marketing and sales
activity during the last quarter of 2002. Subsequently, we have explored
possible new businesses and also a sale, merger, or other business combination
with another entity.





On March
28, 2006, the Company changed its name to Studio One Media, Inc.  On
March 29, 2006, the Company entered into an agreement to purchase 100% of Studio
One Entertainment, Inc., (“SO Entertainment”) of Scottsdale, Arizona, in a
one-for-one, stock-for-stock transaction.  SO Entertainment owns
proprietary audio/video recording technology, patent and trademark applications,
studio design, methods and related concepts for MyStudio®.  MyStudio
is a self contained interactive audio/video recording studio designed for
installation in shopping malls and other pedestrian high traffic public
areas.  The studios will enable the public, for a fee, to record their
video and voice images in a stand alone, state-of-the-art recording studio and
enter their MyStudio performances in music, modeling and other talent related
contests.  In addition, MyStudio can be used to record video resumes,
dating profiles and personal messages.  The Company believes MyStudio
methods, processes and business model are proprietary and a unique opportunity
in the entertainment industry.


The acquisition of SO Entertainment was completed
on April 17, 2007, with the exchange of 7 million shares of the Company’s Common
Stock for an equal number of shares of SO Entertainment common stock
constituting 100% of the issued and outstanding shares of SO
Entertainment.  SO Entertainment operates as a wholly-owned
subsidiary.





The
Company's office and principal place of business is located at 7650 E. Evans
Rd., Suite C, Scottsdale, Arizona 85260, and its telephone number is (480)
556-9303.






4




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued




COMPANY HISTORY





FISCAL
YEARS 1988-1994





In 1988,
Dimensional Visions Group, Ltd. was incorporated in the State of Delaware and
headquartered in Philadelphia, Pennsylvania.  From inception through
1994, the Company was engaged in the development of a three-dimensional
lithographic printing process using robotic photographic
equipment.  The Company was unable to refine the technology and ceased
development operations in 1994.





FISCAL
YEARS 1995-1997





In 1995,
the Company acquired InfoPak, Inc. of Phoenix, Arizona
("InfoPak").  InfoPak manufactured and marketed a hardware/software
package called the "InfoPakSystem".  The system converted databases
for use on a palm-top computer manufactured by InfoPak.  From 1995 to
1997, the Company utilized the software development resources of InfoPak to
develop the patent-pending software and systematic digital process for its
Living ImageTM Solutions. InfoPak discontinued operations in 1997.





FISCAL
YEARS 1998-2002





In
January 1998, a new executive management team was appointed and the Company was
restructured including a 1 for 25 reverse stock split, a name change to
Dimensional Visions Incorporated (from Dimensional Visions Group, Ltd.) and
stock trading symbol change from DVGL to DVUI.  The Company developed
a new patented process for printing 3D graphics for products, packaging and
marketing communications.  By late 2002, the Company discontinued all
operations.





FISCAL
YEARS 2003-2008





On
September 8, 2003, Preston J. Shea was elected as a director, President and
Secretary of the company to evaluate new opportunities for the Company, such as
a sale, merger, or other type of business combination.  On September
9, 2003, all directors except Preston Shea resigned, leaving him as the sole
officer and director of the Company.  On May 6, 2004, the Company was
restructured and affected a 1 for 60 reverse stock split.  On May 18,
2004, the Company changed its trading symbol from DVUI to DVSO.  On
March 28, 2006, the name of the Company was changed to Studio One Media, Inc.,
and its trading symbol was changed from DVSO to SOMD.





On March
29, 2006, the Company entered into an agreement to purchase 100% of Studio One
Entertainment, Inc. (“SO Entertainment”) of Scottsdale, Arizona, in a
one-for-one, stock-for-stock transaction.  The acquisition of SO
Entertainment was completed on April 17, 2007 with the issuance of 7 million
shares of the Company’s Common Stock to the shareholders of SO
Entertainment.  SO Entertainment is a Scottsdale, Arizona based
company that is engaged in the development of MyStudio a self- contained
interactive video recording studio designed for installation in shopping malls
and other high traffic public areas.  The Company believes MyStudio to
be a proprietary and unique opportunity in the entertainment and communications
industries.  MyStudio will enable the public, for a fee, to record
their video and voice images in a self contained state-of-the-art recording
studio environment and enter their performances in music, modeling and other
talent related contests.




On March 31, 2006, Barry M. Goldwater, Jr.,
joined the board, as chairman, and Kenneth Pinckard became a director and Vice
President.





In the
past two years the Company took steps to dramatically reduce its outstanding
debt.  In its fiscal year ended June 30, 2006, the Company wrote off
$373,416 in uncollectible debt that arose out of the operations that were
discontinued in 2002 and earlier.  On October 13, 2006, the Company
issued 137,500 shares of restricted common stock to extinguish $874,584 in debt
($579,253 in short term debt and $295,331 in accrued interest) from loans made
to the Company (then Dimensional Visions) in 2001. The debt was converted to
equity at a per share conversion price of $6.36.  On April 26, 2007,
the Company issued 25,328 shares of restricted common stock to extinguish
$33,433 in debt ($20,000 in short term debt and $13,433 in accrued interest)
from loans made to the Company in 2001.  The net effect of these
actions was to reduce the Company’s overall debt by approximately $1.28
million.  During the
Development Stage and in preparation for the launch of its product to the
general public, the Company has assiduously avoided taking on additional debt,
opting, instead for equity fundings.








5


ITEM 1. DESCRIPTION OF
BUSINESS.-
continued




COMPANY
OVERVIEW





The
recent phenomena of reality shows such as American Idol, Americas Next Top Model
and Last Comic Standing has demonstrated that millions of Americans not only
believe that they have talent, but they also want an opportunity to showcase
their talents, ultimately hoping they might be "discovered."  However,
these shows only audition a small fraction of those who want to try out and
offer only one contest per year, per show.  Millions of would be
artists in music, modeling, acting and comedy are left frustrated and unseen
with no mainstream venue to demonstrate their talents.  At the same
time, virtually every segment of the entertainment industry is constantly
searching for the next meteoric talent.  Studio One's MyStudio was
created to serve as the nexus between the needs of talent, on the one hand, and
the entertainment industry, on the other.  In
addition, MyStudio can be utilized for casting, dating, job resumes and personal
greeting videos.





MyStudio
is a proprietary, self contained, state-of-the-art interactive, high definition,
audio/video recording studio designed for installation in shopping malls and
other pedestrian high traffic public areas.  The studio will allow the
public, for a fee, to step into a state-of-the-art, sound proof recording studio
and record a 4 minute video in a private, user friendly,
environment.  MyStudio utilizes state of the art Green Screen
technology which allows users to choose a background environment in which to
appear to record their performance from an enormous library of visual
backgrounds – from a sunny beach to a concert stage and hundreds
more.  A DVD is burned for each session onsite and the user’s video,
if he or she so elects, will be posted online at the company's website within
minutes of their performance.  Users can then enter their performance
online from the MyStudio website in music, modeling comedy and other talent
related contests.  Contests will be sponsored by different
entertainment companies throughout the year, so users will have the opportunity
to enter numerous contests every year.  In addition, MyStudio can be
used to record video resumes, dating profiles and personal
messages.





On April
8, 2008, the Company issued a Master Production Order to American Integrated
Technologies, Inc., Tempe, Arizona (AIT) to commence production of its first
five (5) MyStudios (excluding electronic equipment and
components).  Each of the studios will be manufactured in a series of
modules and assembled into one unit according to the specifications for fit and
finishing testing.  Pursuant to the Order, Studio One will remit
one-half of the required payment for each module at commencement of fabrication
of the module, with the balance being due upon delivery.  The total
cost for the five recording studio structures manufactured by AIT is estimated
to be approximately $525,000 with delivery to occur in the third calendar
quarter of 2008. All electronic components will be supplied by Studio
One.  Manufacturing costs will reduce significantly with
volume.




Studio
One expects to install the studios in strategic locations in Arizona,
California, Nevada, Florida and New York in the third and fourth quarters
of 2008. The installations will coincide with the commencement of monthly
industry sponsored music, modeling and comedy contests which will be available
exclusively to users of MyStudio.





The
Company expects to install MyStudios nationally in the coming
months.  Each MyStudio is expected to generate revenue of $25,000 to
$50,000 per month and the Company expects to generate its first revenue in the
fourth quarter of calendar year 2008.





RECENT
DEVELOPMENTS





·
            Subsequent
      to June 30, 2008, the Company has raised approximately $1,500,000 from
      accredited investors.·
            On
      September 25, 2008, the Company announced that it had entered into an
      agreement with L.A. Models, Inc., to create an exclusive modeling contest
      giving users the opportunity to participate in a nationwide search that
      could launch a modeling career.  The contest will extend from
      September 29 through December 31, 2008 and utilizes the facilities and
      video backgrounds of MyStudio as well as the website of
      Mystudio.net.





·
            On
      September 19, 2008, the Company announced that it planned to officially
      launch its first MyStudio video recording studio in Scottsdale Fashion
      Square, Scottsdale, Arizona, on September 29,
  2008.





·
            On
      July 1, 2008, the Company entered into an agreement with EMI Music
      Publishing for consumer use of licensed music in MyStudio
      videos.  The agreement gives the Company and users of MyStudio
      access to EMI’s catalog of music spanning thousands of
      compositions.





·
            On
      April 8, 2008, the Company contracted for the manufacture of its first
      five MyStudio structures and announced plans to install those units in the
      third quarter of 2008, marking the commencement of operations and the
      expected generation of revenue.






6




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued




RECENT DEVELOPMENTS -
continued




·
            On
      December 5, 2007, the Company announced that its company information is
      now available via Standard & Poor's Market Access Program, an
      information distribution service that enables subscribing publicly
      traded companies to have their company information
      disseminated to users of Standard & Poor's Advisor
      Insight.  The company information to be made available through
      this program includes share price, volume, dividends, shares outstanding,
      company financial position, and earnings.  Standard & Poor's
      Advisor Insight is an Internet-based research engine used by more than
      100,000 investment advisors.  A public version of the site is
      available at www.advisorinsight.com.   In
      addition, information about companies in Standard & Poor's Market
      Access Program will also be available via S&P's Stock Guide database,
      which is distributed electronically to virtually all major quote
      vendors.  As part of the program, a full description of Studio
      One Media, Inc. has been published in the Daily News section of Standard
      Corporation Records, a recognized securities manual for secondary trading
      in approximately 38 states under the Blue Sky
  Laws.





·
            On
      December 4, 2007, the Company announced that it had entered into a Lease
      Agreement to occupy approximately 9,147 square feet of office space in
      Scottsdale, Arizona.  The Lease Agreement provides for a term of
      5 years, with an option to renew for an additional 5 years.  The
      initial rent is $9,147 per month.  The office space is situated
      on two floors and will serve as the corporate headquarter for the
      Company.  In addition, the facilities will also house the
      Company’s network operations center, video production facilities and
      showroom.  The Company expects to complete tenant improvements
      at a cost of approximately $500,000 during the second and third quarters
      of calendar year 2008.  The Company presently occupies
      approximately 5,400 square feet of space under a lease that terminates
      June 30, 2008.





·
            On
      October 31, 2007, the Company launched a beta test version of its website,
      mystudio.net, which
      includes hundreds of musical and other video
      performances.  The Company expects to complete beta testing and
      introduce the finalized website to the general public in June
      2008.





COMPETITIVE
ADVANTAGES





The
Company knows of no direct competitors.  The Company believes that it
will be the first to market with a recording studio with its 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 the Company
valuable time to gain consumer recognition and a foothold in the market. While
the technology surrounding MyStudio is cutting edge and unique, the Company
believes there are other factors that will separate the Company from
competitors.  The Company has embarked on an aggressive intellectual
property protection program which it believes will be a significant barrier to
market entry to potential competitors.  In addition, the Company
employs individuals who have long standing relationships and expertise in
various segments of the entertainment and communications industries, which it
expects will help facilitate the negotiation of favorable partnerships,
sponsorships and industry support for MyStudio.





TECHNOLOGICAL
ADVANTAGES





Studio
One’s recording studio is based upon proprietary technology and other
intellectual property which, in part, is the subject of 21 pending foreign
and domestic patents and 8 trademark applications (for which we have received 4
Notices of Allowance from the USPTO). The Company believes that its multi-year
product development and engineering efforts have resulted in a multitude of
technological advantages over any other stand alone video recording studio in
operation.  The use of high definition recording, keying and audio
processing ensures the finest quality audio and video available today and in the
near future.





FINANCIAL
IMPACT





Each
studio is expected to generate $300,000 - $600,000 in revenue annually and the
company hopes to have several hundred such machines in operation within the next
12 to 18 months.  If the initial launch is successful, the Company
expects revenue will continue to escalate in following years as people become
more familiar with the product and it becomes available in more locations,
including internationally.  There are multiple potential revenue
streams for the company in addition to the revenue generated from the studios,
including revenues for advertising on the external monitors located on each
studio and on its website.





PATENTS,
TRADEMARKS AND PROPRIETARY PROTECTION





We rely
on a combination of patent, trademark, copyright and trade secret laws in the
U.S. and other jurisdictions as well as confidentiality procedures and
contractual provisions to protect our proprietary technology and our
brand.  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.


7




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued




PATENTS, TRADEMARKS AND
PROPRIETARY PROTECTION -
continued




The
Company has embarked on an aggressive intellectual property program including
the filing of 21 pending foreign and domestic patent applications and 8
trademark applications (for which we have received 4 Notices of Allowance) with
the U.S. Patent and Trademark Office all designed to protect what the Company
believes is innovative and proprietary technology and applications derived from
the extensive research and development program undertaken by its subsidiary, SO
Entertainment.  All persons who were or could be deemed inventors have
assigned all rights under these patent applications to SO
Entertainment.





Historically,
when the Company engages in business transactions involving its technology, it
enters into confidentiality agreements with all persons and entities who or
which may have access to our technology.  However, no assurance can be
given that such agreements, the pending patents, or any patents that may be
issued to the Company will prevent third parties from developing similar or
competitive technology.




EMPLOYEES





As of the
end of our fiscal year on June 30, 2008, we employed twenty one full-time
employees including three executives, eleven technical/engineering persons, one
production manager, one accountant and two clerical/administrative
persons.  Subsequent to June 30, 2008, we have added a vice president
of business development, a director of marketing, a research specialist, a
manufacturing engineer and a marketing specialist.  We expect to seek
additional employees in the next year to handle anticipated potential
growth.





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





FACILITIES





Pursuant
to a lease originally dated January, 2006, we currently occupy approximately
5,400 square feet of office space located at 7650 E. Evans Rd., Suite C,
Scottsdale, Arizona 75260.  On June 15, 2008, we expanded into and
also occupy approximately 5,400 square feet adjoining the original premises on a
month-by month basis.  Under the terms of the extended, expanded
lease, we occupy the premises on a month-o-month basis.  The total
lease expense is $12,000 per month, payable in cash and common stock of the
Company.





In
anticipation of implementation of our business plan, we have also leased an
additional 9,400 feet of office space in another building located at 7812 E.
Acoma, Scottsdale, Arizona, at a monthly cost of $12,225.   We
have not yet occupied this space.





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.





Studio
One Media, Inc., (the “Company” or “SOMD”) was originally organized in Delaware
on May 12, 1988, as Dimensional Visions Group, Ltd.  Historically, the
Company produced and marketed lithographically printed stereoscopic and
animation print products. The Company ceased all marketing and sales activity
during the last quarter of 2002. Subsequently, we have explored possible new
businesses and also a sale, merger, or other business combination with another
entity.





On March
28, 2006, the Company changed its name to Studio One Media, Inc.  On
March 29, 2006, the Company entered into an agreement to purchase 100% of Studio
One Entertainment, Inc., (“SO Entertainment”) of Scottsdale, Arizona, in a
one-for-one, stock-for-stock transaction.  SO Entertainment owns
proprietary audio/video recording technology, patent and trademark applications,
studio design, methods and related concepts for MyStudio.  MyStudio is
a self contained interactive video recording studio designed for installation in
shopping malls and other pedestrian high traffic public areas.  The
studios will enable the public, for a fee, to record their video and voice
images in a stand alone, state-of-the-art recording studio and enter their
MyStudio performances in music, modeling and other talent related
contests.  In addition, MyStudio can be used to record video resumes,
dating profiles and personal messages.  The Company believes MyStudio
methods, processes and business model are proprietary and a unique opportunity
in the entertainment industry.


8




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued




RISK
FACTORS -
continued




The
acquisition of SO Entertainment was completed on April 17, 2007, with the
exchange of 7 million shares of the Company’s common stock for an equal number
of shares of SO Entertainment common stock constituting 100% of the issued and
outstanding shares of SO Entertainment.  SO Entertainment operates as
a wholly-owned subsidiary.





The
Company intends to place the entertainment kiosks in malls across America, as
well as expand into other high traffic locations such as retail “power” and
“lifestyle centers”, theme parks, airport terminals and theaters. Ultimately,
Studio One intends to be a one-stop accessible facility that acts as a link
between an entertainment hopeful and the acting, fashion and music
industries.  Revenues for the Company are expected to be generated by
both services provided by the kiosk, such as the virtual audition, as well as
through web site advertising.





The
Company has a history of losses and will likely realize future
losses.  MyStudio has not yet been implemented in the market and is
not presently generating revenues.





Pending
the implementation of its business plan, the Company is dependent upon its
management, certain shareholders and investors for its
fundraising.  The Company expects additional operating losses will
occur until revenue is sufficient to offset the level of costs to be incurred
for marketing, sales, general and administrative and product and services
development.  The Company is subject to all of the risks inherent in
establishing a new start-up business enterprise.  Since the Company
has no significant operations, there can be no assurance that its business plan,
if executed at all, will be successful.  The potential for success of
the Company must be considered in light of the problems, expenses, difficulties,
complications and delays frequently encountered with the start-up of new
businesses and the competitive environment in which the Company will
operate.  A prospective investor should be aware that if the Company
is not successful in achieving its goals and achieving profitability, any money
invested in the Company will likely be lost.  The Company’s management
team believes that its potential near-term success depends on the Company’s
success in completing product development, manufacturing, marketing and selling
its products and services.




We cannot
be certain that if we create an executable business strategy that it will be
executed at all, or if executed in full or in part that it will be
successful.  As an early stage company we will be 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 the Company's shares.





New
Business Model.





We have a
relatively new business model in an emerging and rapidly evolving
market.  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 the Company will be inadequate to implement the business
plan of the Company.  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.  The Company will require
additional funding for continued operations and will therefore be dependent upon
its ability to raise additional funds through bank borrowing, equity or debt
financing, or asset sales. We expect to need to access the public and private
equity or debt markets periodically to obtain the funds we need to support our
operations and continued growth.  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.
 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 the
Company cannot obtain needed funds, the Company 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 in the Company.





The
Company requires substantial capital to manufacture its recording
studios.  Although the Company intends to engage in subsequent debt
and equity offerings 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.




9




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued
  RISK
FACTORS -
continued
  Lack of
Diversification.
  The size
of the Company makes it unlikely that the Company will be able to commit its
funds to diversify the business until it has a proven track record, and the
Company may not be able to achieve the same level of diversification as larger
entities engaged in this type of business.





Competition.





The
Company knows of no competitors.  The Company believes that it will be
the first to market with a recording studio with its 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 the Company valuable time
to gain consumer recognition and a foothold in the market. While the technology
surrounding MyStudio is cutting edge and unique, the Company believes there are
other factors that will separate the Company from competitors.  The
Company has embarked on an aggressive intellectual property protection program
which it believes will be a significant barrier to market entry to potential
competitors.  In addition, the Company employs individuals who have
long standing relationships and expertise in various segments of the
entertainment and communications industries, which it expects will help
facilitate the negotiation of favorable partnerships, sponsorships and industry
support for MyStudio.





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 the Company
proposes 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 the Company’s profitability or viability.





Performance
- Market Acceptance.





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





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 Entertainment, Inc., has
filed 21 patent applications relating to MyStudio and related technologies and
processes, and while the Company believes 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
the Company.





We have
filed 8 trademark applications and have received Notices of Allowance on 4 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 those used by the Company, 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, that result 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 competitors of the Company, some of which have substantially
greater resources, will not obtain patents or other intellectual property
protection that will restrict the Company’s ability to make and sell its
products.  If the Company were unsuccessful in protection of
proprietary and intellectual property rights to the MyStudio, related business
methods, and websites, it could have a material adverse effect on the Company's
business, results of operations, financial condition and value, and forecasted
financial results.






10




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued
  RISK
FACTORS -
continued
  Economic
Downturn.





The
Company is susceptible to adverse impacts caused by economic downturns locally
and in the markets in which it proposes to operate, as well as broader economic
downturns affecting a region, or the particular industry sector in which the
Company proposes to operate.  There can be no assurance that the
Company will survive any such economic downturn, or if the Company does survive,
that it will be capable of executing or furthering, to any meaningful degree,
the originally conceived business plan.




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 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 can have an adverse effect on the demand for some of our
products.  In addition, unforeseen events, such as terrorist attacks
or armed hostilities, could negatively affect our industry or the industries in
which our customers operate, resulting in a material adverse effect on our
business, results of operations and financial condition.




Disaster.




A
disaster that disables the Company’s operations will negatively impact the
Company’s ability to perform for a period of time.




Dependency
on Foreign Components for our Products.




We expect
to source components for our products outside 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 international manufacturing and sales that could cause loss of
revenue. 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 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 used in the manufacture of
My Studios. 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.






11




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued
  RISK
FACTORS -
continued
  Fluctuations
in Cost of Raw Materials.




Our
results of operations could be adversely affected by fluctuations in the cost of
raw materials. As
a manufacturer we are subject to world commodity pricing for some of the raw
materials used in the manufacture of our kiosks.  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 Financing.





Terms of
subsequent financings may adversely impact your investment.  We will
engage in common equity, debt, or preferred stock financings in the
future.  Your rights and the value of your investment in the 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 sale of common 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 market price.





Rapid
Technological Change.





The
industry in which we operate is 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 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 and the lack of an established product make 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 commercialize MyStudio;●
            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;


●
            general
      economic conditions and economic conditions specific to the entertainment
      industry; and●
            the
      ability to maintain a product margin on sales, given the early stage of
      our market for our products.





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.






12




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued
  RISK
FACTORS -
continued
  Our
Common Stock is Subject to Penny Stock Regulations.





Our
common stock is subject to regulations of the Securities and Exchange Commission
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 auditors on our June
30, 2008 financial statements contains a “going concern”
qualification.  The report of the independent auditors on our
financial statements for the year ended June 30, 2008, includes an explanatory
paragraph relating to our ability to continue as a going concern.  We
have suffered substantial losses from operations, require additional financing,
and have not yet brought MyStudio to market.  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, 2008, the Company has 13,212,398 shares of common stock, $0.001 par
value, issued and outstanding.  The Company contemplates issuing a
maximum of 1,000,000 shares of common stock pursuant to a Non-Executive Employee
Stock Incentive Plan approved by the Board on August 28, 2007, and further
shares to certain of its management, directors, officers, employees and
consultants in the immediate future.  The Company also has 524,044
shares of various classes of Convertible Preferred Stock outstanding, which can
be converted to 14,814 shares of common stock.  In addition, the
Company has warrants outstanding that would permit, if exercised, the issuance
of 2,473,362 additional shares of common stock at an average exercise price of
$3.63.  The issuance of additional shares by the Company will result
in a further dilution of the Company, which could be significant; meaning your
percentage ownership of any such merged entity will be significantly less than
your percentage ownership of the Company.  If the Company issues
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 Units will
occur.





Future
equity transactions, including exercise of options or warrants, could result in
dilution. From time to time, we sell restricted stock, warrants, and convertible
debt to investors in other private placements.  Because the stock is
restricted, the stock is sold at a greater discount to market prices compared to
a public stock offering, and the exercise price of the warrants sometimes is at
or even lower than market prices.  These transactions cause dilution
to existing stockholders.  Also, from time to time, options are issued
to officers, directors, or employees, with exercise prices equal to
market.  Exercise of in-the-money options and warrants will result in
dilution to existing stockholders.  The amount of dilution will depend
on the spread between the market and exercise price, and the number of shares
involved but this dilution could be significant.





Restrictions
on Transfer - No Public Market for Restricted Shares.





The
shares of common stock of the Company 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 are being
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.  Although our current revenue model contemplates revenues
from MyStudio sufficient to break-even within six to nine months, there is no
assurance that these revenues will occur.  In addition, we expect our
expenses to increase significantly as we develop the infrastructure necessary to
implement our business strategy.  Our expenses will continue to
increase as we: hire additional employees; pursue 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.






13





ITEM
1. DESCRIPTION OF BUSINESS. -
continued
  RISK
FACTORS -
continued
  Possible
Claims That the Company Has Violated Intellectual Property Rights of
Others.





The
Company is not subject to any dispute, claim or lawsuit or threatened lawsuit
alleging the violation of intellectual property rights of a third
party.  The Company believes MyStudio is 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
the Company to costly litigation and the diversion of their technical and
management personnel.  If the Company incurs costly litigation and its
personnel are not effectively deployed, the expenses and losses incurred by them
will increase, and their profits, if any, will decrease.





Business
Plans and Operational Structure May Change.





We will
continually analyze our business plans and internal operations in light of
market developments.  As a result of this ongoing analysis, we may
decide to make substantial changes in our business plan and
organization.  In the future, as we continue our internal analysis 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.





The
Company believes that its present management has the experience and ability to
successfully implement its business plan for the foreseeable
future.  However, it is likely that the Company will continue to add
to its management and therefore will recruit additional persons to key
management positions in the future.  Should the Company be
unsuccessful in recruiting persons to fill the key positions or in the event any
of these individuals should cease to be affiliated with the Company for any
reason before qualified replacements can be found, there could be material
adverse effects on the Company's business and prospects.  Each new
officer, director, and other key personnel, will have an employment agreement
with the Company 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 the Company.





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





Inability
to Attract and Retain Qualified Personnel.





The
future success of the Company 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 the ability of the Company 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.





The
Company expects to grow very rapidly.  Rapid growth often places
considerable operational, managerial and financial strain on a
business.  To successfully manage rapid growth, the Company must
accurately project its rate of growth and:





●
            rapidly
      improve, upgrade and expand its business
  infrastructures;●
            deliver
      its 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 its technology, transaction processing systems and network
      hardware or software or find third parties to provide these
      services.


Our
business will suffer if the Company is unable to successfully manage its
growth.







14




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued
  RISK
FACTORS -
continued
  Effects
of Amortization Charges.





Our
losses will be increased, or our earnings, if we have them in the future, will
be reduced, by charges associated if the Company issues options.  We
have adopted a stock incentive plan for the benefit of our directors, officers,
employees and consultants.  The total unearned stock-based
compensation will be amortized as a stock-based compensation expense in our
consolidated financial statements over the vesting period of the applicable
options or shares, generally three years in the case of options granted to
employees, officers and directors and one year in the case of options granted to
non-employee directors, consultants and third parties.  These types of
charges may increase in the future.  The future value of these
potential charges cannot be estimated at this time because the charges will be
based on the future value of our stock.





Dividend
Policy.





There can
be no assurance that the proposed operations of the Company will result in
significant revenues or any level of profitability.  We do not
anticipate paying cash dividends on our capital stock in the foreseeable
future.  We plan to retain all future earnings, if any, to finance our
operations and for general corporate purposes.  Any future
determination as to the payment of 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.  No dividends have been
declared or paid by the Company, and the Company does not contemplate paying
dividends in the foreseeable future.





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.





Voting Control.





As a
result of the acquisition of SO Entertainment, certain persons, either
individually or acting together, are able to elect a majority of Directors or to
authorize or defeat any proposal presented to the stockholders for
action.





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.  All of our
executive officers and key employees are at-will employees, and 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.





SELECTED
FINANCIAL DATA





Set forth
below is selected financial data derived from the Company's Financial
Statements, some of which appear elsewhere in this Report.  This data
should be read in conjunction with the Financial Statements, included elsewhere
in this Report.





Year
      Ended
              June
      30,
              2008
            
            
            Year
      Ended
              June
      30, 2007
            
            
            Year
      Ended
              June
      30, 2006
            
            
            Year
      Ended
              June
      30,
              2005
            
            
            Year
      Ended
              June
      30,
              2004Cash
            
            $
            391,109
            
            
            $
            417,236
            
            
            $
            207
            
            
            $
            ---
            
            
            $
            ---Operating
      Revenue
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---Net
      Loss
            
            $
            (8,616,973
            )
            
            $
            (5,630,587
            )
            
            $
            (107,973
            )
            
            $
            (106,677
            )
            
            $
            (107,613
            )Net
      Loss per share of Common Stock
            
            $
            (0.71
            )
            
            $
            (0.80
            )
            
            $
            (0.08
            )
            
            $
            (0.10
            )
            
            $
            (0.10
            )Working
      Capital (deficit)
            
            $
            157,652
            
            
            $
            383,310
            
            
            $
            (496,620
            )
            
            $
            (1,322,130
            )
            
            $
            (1,264,203
            )Total
      Assets
            
            $
            2,109,338
            
            
            $
            1,759,007
            
            
            $
            588,306
            
            
            $
            ---
            
            
            $
            ---Total
      Liabilities
            
            $
            505,010
            
            
            $
            385,477
            
            
            $
            1,078,526
            
            
            $
            1,322,130
            
            
            $
            1,264,203Stockholder’s
      Equity (deficit)
            
            $
            1,593,275
            
            
            $
            1,373,530
            
            
            $
            (490,490
            )
            
            $
            (1,322,130
            )
            
            $
            (1,264,203
            )







15





ITEM 2. DESCRIPTION OF PROPERTY.





In
January 2006, the Company entered into a one-year lease for approximately 5,400
square feet of office space located at 7650 E. Evans Rd., Suite C, Scottsdale,
Arizona 75260.  The lease was extended for an additional year ending
January 31, 2007 and subsequently extended to August 31, 2008.  On June 15, 2008, we expanded into and
also occupy approximately 5,400 square feet adjoining the original
premises.  Under the terms of the extended, expanded lease, we occupy
the premises on a month-to-month basis.  The total lease expense is
$12,000 per month, payable in cash and common stock of the
Company.





In
anticipation of implementation of our business plan, we have also leased an
additional 9,400 feet of office space in another building located at 7812 E.
Acoma, Scottsdale, Arizona, at a monthly cost of $12,225.   We
have not yet occupied this space.







ITEM 3. LEGAL PROCEEDINGS.





The Company is an interpleader party to a
lawsuit in the Southern District of Georgia, Savannah Division, pursuant to
which the Company seeks to prevent the release of 100,000 shares of its common
stock to a third-party and asks the court to return those shares to the
Company.   The suit seeks no damages from the Company and the
Company believes that it will prevail in the matter.





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







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





On April
16, 2007, a majority of the shareholders of the Company and a majority of the
shareholders of Studio One Entertainment, Inc., approved the acquisition of
Studio One Entertainment, Inc., by the Company.  No further matters
were submitted to a vote of our securities holders during the fiscal year ended
June 30, 2007 and none were submitted to the securities holders during the
fiscal year ended June 30, 2008.







PART
II





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





MARKET INFORMATION





Studio
One’s common stock has been traded on the Over the Counter Bulletin Board (the
OTC Bulletin Board”) under the following various symbols:




DVGL
            -
            Prior
      to January 12, 1998DVUI
            -
            January
      12, 1998 to May 18, 2004DVSO
            -
            May
      18, 2004 to April 20, 2006SOMD
            -
            From
      April 20, 2006





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.






16




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




PER SHARE COMMON STOCK BID PRICE BY QUARTER





For the Fiscal Year Ending on June 30, 2008
            
            High
            
            
            LowQuarter Ended June 30, 2008
            
            
            5.50
            
            
            
            3.80Quarter Ended March 31, 2008
            
            
            5.80
            
            
            
            3.90Quarter Ended December 31, 2007
            
            
            6.25
            
            
            
            4.05Quarter Ended September 30, 2007
            
            
            6.40
            
            
            
            3.70




For the Fiscal Year Ending on June 30, 2007
            
            High
            
            
            LowQuarter Ended June 30, 2007
            
            
            6.80
            
            
            
            4.20Quarter Ended March 31, 2007
            
            
            6.95
            
            
            
            5.44Quarter Ended December 31, 2006
            
            
            6.90
            
            
            
            3.75Quarter Ended September 30, 2006
            
            
            4.05
            
            
            
            2.00





HOLDERS





As of
June 30, 2008, the number of stockholders of record according to the Company’s
transfer agent, not including beneficial owners whose shares are held by banks,
brokers and other nominees, was approximately 425.  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 the Company's Series A Convertible Preferred Stock, a 5% annual
dividend is due and owing. Pursuant to the terms of the Company Series B
Convertible Preferred stock, an 8% annual dividend is due and
owing.  As of June 30, 2008, the Company has not declared dividends on
Series A or B preferred stock.  The unpaid cumulative dividends
totaled approximately $158,625.  See Note 6 of Notes to Financial
Statements.





SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES FOR FISCAL YEARS 2008 AND 2007





FISCAL
YEAR 2008





During
fiscal year ended June 30, 2008, the Company accepted subscriptions for
1,115,830 shares of unregistered restricted shares of common stock at an average
price per share of $2.83 for a total of $3,152,500 and agreed to issue 1,089,163
shares pursuant to warrants granted in connection with such
placements.  The warrants may be exercised at any time within a
two-year period beginning on the date of the respective investments at an
average exercise price of $3.83.  The Company also agreed to issue
534,036 shares pursuant to warrants granted to various employees and
consultants, which may be exercised at varying times ranging from two to five
years.  In addition, the Company issued 683,489 shares of common stock
for consulting, legal and other services valued at $2,657, 493, 5,000 shares for
a vehicle valued at $24,125, and 833 shares in conversion of preferred shares
valued at $4,027.   During the fiscal year ended June 30, 2008,
Warrantholders exercised various options for 44,507 shares for a total of
$133,520, an average of $3.00 per share.











17




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




FISCAL
YEAR 2007





During
fiscal year ended June 30, 2007, the Company accepted subscriptions for
1,001,835 shares of unregistered restricted shares of common stock at an average
price per share of $1.90 for a total of $1,899,500 and agreed to issue 847,163
shares pursuant to warrants granted in connection with such
placements.  The warrants may be exercised at any time within a
two-year period beginning on the date of the respective investments at an
average exercise price of $3.19.  In addition, the Company issued
456,752 shares of common stock for consulting, legal and other services valued
at $2,224,147 and 162,828 shares to retire $925,710 in debt and associated
interest.  On April 17, 2007, the Company issued 7,000,000 shares in
exchange for the shares of Studio One Entertainment, Inc., completing its
acquisition of 100% of the issued and outstanding shares of SO
Entertainment.







ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.





FISCAL
YEARS 2008 AND 2007





RESULTS OF OPERATIONS





The
Company had no operating revenue in either fiscal year 2008 or
2007.





The net
loss for the fiscal year ended June 30, 2008, was $8,616,973 compared with a net
loss of $5,630,587 for the fiscal year ended June 30, 2007.  As a
result of the intensive research and development program embarked upon at the
end of fiscal year 2006, research & development costs increased from
$457,670 in fiscal year 2007 to $1,065,168 in fiscal year 2008.  These
costs included persons engaged on a contractual basis to develop MyStudio and
its intellectual components, as well as outside expenses incurred to construct a
working prototype and the first production model and the hardware and software
necessary to make the studio fully operational.





General
and administrative costs for fiscal year 2008 increased by approximately $2.4
million over fiscal year 2007 which included a one-time charge in fiscal year
2008 in the amount of $3,012,052 for Stock Warrants issued to various investors
in connection with equity raises during the year and to various parties
providing services to the Company.  This increase is attributable to
several events.  First, the active pursuit of the new business concept
offered in connection with the April 2007 acquisition of Studio One
Entertainment, Inc., was accompanied by expenses directly associated with the
undertaking.  Additional personnel, such as software developers,
design engineers, administrative staff and others were hired, increasing
expenses substantially.  The largest increases in general and
administrative expenses came, however, in the form of outside services secured
by the Company without, for the most part, the outlay of cash.  These
included: financial advisory services ($1,415,115), legal and professional
services ($342,915), technical and other services ($165,078), and advertising
and marketing services ($104,418).  For these services, the Company
issued shares of common stock valued, for financial statement purposes, at the
average between the high and low prices of the Company’s Common Stock on the
date of grant.  In addition, the Company incurred a one-time charge in
fiscal year 2008 in the amount of $3,012,052 for Stock Warrants issued to
various investors in connection with equity raises during the year and to
certain consultants.  We elected to use the Black-Scholes
option-pricing model to determine the fair value of stock option based awards
under SFAS 123R, consistent with that used for pro-forma disclosures under SFAS
No. 123, Accounting for
Stock-Based Compensation.





In contrast to increases in general and administrative expenses,
interest expense declined from $22,844 in fiscal year 2007 to $14,553 in fiscal
year 2008.  This decline is attributed to the reduction in outstanding
short-term debt in the form of extinguishment and conversion as discussed below
and elsewhere in this Report.





For the
fiscal year 2007 the Company did recognize other income of $374,416,
respectively, in the form of a gain on the extinguishment of indebtedness barred
by the statute of limitations. The extinguishments of these various debts were
non-cash transactions and did not result in an inflow of cash to the
Company.  No similar income was reported for fiscal year
2008.





By virtue
of the conversion of approximately $925,000 in debt to equity in October 2006,
the extinguishment of some $385,000 in indebtedness barred by the statute of
limitations, and the infusion of new capital, the Company has improved its
liquidity substantially.  At June 30, 2005, the Company had a Working
Capital deficitof
$1,322,130.  By the end of fiscal year 2008, the Company had a Working
Capital surplusof
$157,652.   At June 30, 2008, the Company had a Working Capital
surplus of
$298,307.





NET
OPERATING LOSSES




We have
accumulated approximately $23 million of net operating loss carryforwards as of
June 30, 2008, which the Company believes may be offset against future taxable
income through 2028.  The use of these losses to reduce future income
taxes will depend on
several factors including the generation of sufficient taxable income prior to
the expiration of the net operating loss carryforwards.  In the event
of certain changes in control, there will be an annual limitation on the amount
of net operating loss carryforwards which can be used.  No tax benefit
has been reported in the financial statements for the year ended June 30, 2008
because the potential tax benefits of the loss carryforward is offset by
valuation allowance of the same amount.






18





ITEM 6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.-
continued




LIQUIDITY AND CAPITAL RESOURCES





The
Company had no revenue collections during the fiscal year ended June 30,
2008.





Subsequent
to 2002, when its then operations as Dimensional Visions Incorporated were
discontinued, the Company has met its financial needs through debt financing and
through the sales and issuances of its securities.  During the fiscal
year ended June 30, 2008, the Company has undertaken several sales of
non-registered securities in a series of private transactions.  The
Company issued 1,115,830 unregistered restricted shares at an average price of
$2.83 per share for a total of $3,152,500 and granted warrants to these security
holders to acquire an additional 1,089,163 shares at an average exercise price
of $3.83 at any time within two years after the dates of their respective
investments.  In addition, the Company granted warrants to various
employees and consultants to acquire 534,036 shares at an average price of $3.92
at various times up to 5 years.  All shares issued were subject to the
restrictions set forth in Section 144 of the Securities Exchange Act of
1933.  The securities were sold only to persons who met the Accredited
Investor requirements and other requirements set forth in the offering
memoranda.





Based on
the Company’s current plans, management has determined that the funds currently
available to the Company will be inadequate to implement the business plan of
the Company.  In addition, the Company is unable to provide assurance
that its planned levels of revenue, costs and expenses will be
achieved.  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.  The Company will require additional funding
for continued operations and will therefore be dependent upon its ability to
raise additional funds through bank borrowing, equity or debt financing, or
asset sales. We expect to need to access the public and private equity or debt
markets periodically to obtain the funds we need to support our operations and
continued growth.  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.  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 the Company cannot obtain needed funds, the Company
may be forced to curtail, in whole or in part, or cease its activities
altogether.  If additional shares are issued to obtain financing, current
shareholders will suffer a dilutive effect on their percentage of stock
ownership in the Company.





Although
the Company intends to engage in a subsequent equity offering of its securities
to raise additional working capital for operations, 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.




RECENT ACCOUNTING PRONOUNCEMENTS.




In
September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 157, “Fair Value Measurements” which defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures about fair value
measurements. Where applicable, SFAS No. 157 simplifies and codifies
related guidance within GAAP and does not require any new fair value
measurements. SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Earlier adoption is encouraged. The Company does
not expect the adoption of SFAS No. 157 to have a significant effect on its
financial position or results of operation.





In June
2006, the Financial Accounting Standards Board  issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109”, which prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return.  FIN 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006.  The Company does not expect the adoption of FIN 48
to have a material impact on its financial reporting, and the Company is
currently evaluating the impact, if any, the adoption of FIN 48 will have on its
disclosure requirements.






19




ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS. -
continued




RECENT ACCOUNTING
PRONOUNCEMENTS. -
continued




In March
2006, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 156, “Accounting for Servicing of Financial Assets—an
amendment of FASB Statement No. 140.” This statement requires an entity to
recognize aservicing
asset or servicing liability each time it undertakes an obligation to service a
financial asset by entering into a servicing contract in any of the following
situations: a transfer of the servicer’s financial assets that meets the
requirements for sale accounting; a transfer of the servicer’s financial assets
to a qualifying special-purpose entity in a guaranteed mortgage securitization
in which the transferor retains all of the resulting securities and classifies
them as either available-for-sale securities or trading securities; or an
acquisition or assumption of an obligation to service a financial asset that
does not relate to financial assets of the servicer or its consolidated
affiliates. The statement also requires all separately recognized servicing
assets and servicing liabilities to be initially measured at fair value, if
practicable, and permits an entity to choose either the amortization or fair
value method for subsequent measurement of each class of servicing assets and
liabilities. The statement further permits, at its initial adoption, a one-time
reclassification of available for sale securities to trading securities by
entities with recognized servicing rights, without calling into question the
treatment of other available for sale securities under Statement 115, provided
that the available for sale securities are identified in some manner as
offsetting the entity’s exposure to changes in fair value of servicing assets or
servicing liabilities that a servicer elects to subsequently measure at fair
value and requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement of financial
position and additional disclosures for all separately recognized servicing
assets and servicing liabilities. This statement is effective for fiscal years
beginning after September 15, 2006, with early adoption permitted as of the
beginning of an entity’s fiscal year. Management believes the adoption of this
statement will have no immediate impact on the Company’s financial condition or
results of operations.





In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163,
“Accounting for Financial
Guarantee Insurance Contracts-and interpretation of FASB Statement No.
60”.SFAS
No. 163 clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement of  premium
revenue and claims liabilities. This statement also requires expanded
disclosures about financial guarantee insurance contracts. SFAS No. 163 is
effective for fiscal years beginning on or after December 15, 2008, and interim
periods within those years. SFAS No. 163 has no effect on the Company’s
financial position, statements of operations, or cash flows at this
time.





In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
“The Hierarchy of Generally
Accepted Accounting Principles”.SFAS No. 162 sets forth
the level of authority to a given accounting pronouncement or document by
category. Where there might be conflicting guidance between two categories, the
more authoritative category will prevail. SFAS No. 162 will become effective 60
days after the SEC approves the PCAOB’s amendments to AU Section 411 of the
AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s
financial position, statements of operations, or cash flows at this
time.





In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133.This standard requires companies to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company has not yet adopted the
provisions of SFAS No. 161, but does not expect it to have a material impact on
its consolidated financial position, results of operations or cash
flows.





In
December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding
the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS No. 123 (R), Share-Based
Payment.  In particular, the staff indicated in SAB 107 that it
will accept a company's election to use the simplified method, regardless of
whether the company has sufficient information to make more refined estimates of
expected term. At the time SAB 107 was issued, the staff believed that more
detailed external information about employee exercise behavior (e.g., employee
exercise patterns by industry and/or other categories of companies) would, over
time, become readily available to companies. Therefore, the staff stated in SAB
107 that it would not expect a company to use the simplified method for share
option grants after December 31, 2007. The staff understands that such detailed
information about employee exercise behavior may not be widely available by
December 31, 2007. Accordingly, the staff will continue to accept, under certain
circumstances, the use of the simplified method beyond December 31, 2007. The
Company currently uses the simplified method for “plain vanilla” share options
and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is
not believed that this will have an impact on the Company’s consolidated
financial position, results of operations or cash flows.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No.
51.  This statement amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. Before this
statement was issued, limited guidance existed for reporting noncontrolling
interests. As a result, considerable diversity in practice existed. So-called
minority interests were reported in the consolidated statement of financial
position as liabilities or in the mezzanine section between liabilities and
equity. This statement improves comparability by eliminating that diversity.
This statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009,
for entities with calendar year-ends). Earlier adoption is prohibited. The
effective date of this statement is the same as that of the related Statement
141 (revised
2007). The Company will adopt this Statement beginning March 1, 2009. It is not
believed that this will have an impact on the Company’s consolidated financial
position, results of operations or cash flows.






20





ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. -
continued
  RECENT ACCOUNTING
PRONOUNCEMENTS. -
continued




In
December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations.’This
Statement replaces FASB Statement No. 141, Business Combinations, but
retains the fundamental requirements in Statement 141.  This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may not apply it before that date. The
effective date of this statement is the same as that of the related FASB
Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  The Company will adopt this
statement beginning March 1, 2009. It is not believed that this will have an
impact on the Company’s consolidated financial position, results of operations
or cash flows.





In
February 2007, the FASB, issued SFAS No. 159,The Fair Value Option for Financial
Assets and Liabilities—Including an Amendment of FASB Statement No.
115.  This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value. This option is
available to all entities. Most of the provisions in FAS 159 are elective;
however, an amendment to FAS 115 Accounting for Certain Investments
in Debt and Equity Securities applies to all entities with available for
sale or trading securities. Some requirements apply differently to entities that
do not report net income. SFAS No. 159 is effective as of the beginning of an
entities first fiscal year that begins after November 15, 2007. Early adoption
is permitted as of the beginning of the previous fiscal year provided that the
entity makes that choice in the first 120 days of that fiscal year and also
elects to apply the provisions of SFAS No. 157 Fair Value
Measurements.  The Company will adopt SFAS No. 159 beginning
March 1, 2008 and is currently evaluating the potential impact the adoption of
this pronouncement will have on its consolidated financial
statements.





In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements  This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value measurements.
However, for some entities, the application of this statement will change
current practice. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Earlier application is encouraged, provided that the
reporting entity has not yet issued financial statements for that fiscal year,
including financial statements for an interim period within that fiscal year.
The Company will adopt this statement March 1, 2008, and it is not believed that
this will have an impact on the Company’s consolidated financial position,
results of operations or cash flows.








ITEM
7. FINANCIAL STATEMENTS.




Our
financial statements as of and for the fiscal years ended June 30, 2008 and 2007
have been examined to the extent indicated in their report by Moore &
Associates, Chartered, independent certified public accountants, and have been
prepared in accordance with generally accepted accounting principles and
pursuant to Regulation S-B as promulgated by the SEC.  The
aforementioned financial statements are included herein starting with page
F-1.







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





The
auditor for the Company is the firm of Moore & Associates, Chartered, 2675
S. Jones Blvd., Suite 109, Las Vegas, NV 89146, who were engaged on May 18,
2006.





The audit
reports of Moore & Associates on the financial statements for the year ended
June 30, 2008 contained a separate paragraph stating:  “The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1
to the financial statements, the Company has incurred losses since inception of
$39,081,880 and has no revenues, which raises substantial doubt about its
ability to continue as a going concern.  Management’s plans concerning
these matters are also described in Note 1.  The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.”






21




ITEM 8. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. -
continued




There
were no other adverse opinions, disclaimers of opinions, or qualifications or
modifications as to uncertainty, audit scope, or accounting
principles.




During
the two most recent fiscal years, there were no disagreements with Moore &
Associates on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction of Moore & Associates, would have caused it to make
reference to the subject matter of the disagreement in connection with its
report.  The registrant has requested Moore & Associates to
furnish it a letter addressed to the Commission stating whether it agrees with
the above statements.




There
were no other "reportable events" as that term is described in Item
304(a)(1)(iv) of Regulation S-B occurring within the registrant's two most
recent fiscal years.




During
the registrant's two most recent fiscal years, neither the registrant nor anyone
on its behalf consulted Moore & Associates, Chartered, regarding the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the registrant's financial statements.








ITEM 8A. 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 have evaluated the effectiveness 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, 2008 and June 30, 2007, our
disclosure controls and procedures were effective to ensure 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
rules and forms.  The Certifying Officers based their conclusion on
the fact that the Company had suspended operations in 2002 and had not
recommenced operations, and that the activities requiring disclosure were de
minimis, all of which were the subject of review by the Company’s outside
auditors.  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 framework of
conducting an extensive review of existing documentation and transactions to
make that evaluation.  As of June 30, 2008 and June 30, 2007, the
Company had a deficiency in internal controls. This deficiency is attributed to
the fact that the Company has an inadequate number of persons knowledgeable
about US GAAP principles among whom it can segregate accounting tasks within the
company so as to ensure the separation 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.  This control deficiency will be monitored and attention will
be given to the matter as the Company begins operations as an active business
entity. Management has concluded that this control deficiency constituted a
material weakness that continued throughout fiscal year 2008.  There
were no significant changes in our internal control over financial reporting or
in other factors that occurred during our most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, internal
control over financial reporting.





The
Company’s management is reviewing the Company’s internal controls over financial
reporting to determine the most suitable recognized control
framework.  The Company will give great weight and deference to the
product of the discussions of the SEC’s Advisory Committee on Smaller Public
Companies (the “Advisory Committee”) and the Committee of Sponsoring
Organizations’ task
force entitled Implementing the COSO Control Framework in Smaller Businesses
(the “Task Force”).  Both the Advisory Committee and the Task Force
are expected to provide practical, needed guidance regarding the applicability
of Section 404 of the Sarbanes-Oxley Act to small business
issuers.  The Company’s management intends to perform the evaluation
required by Section 404 of the Sarbanes-Oxley Act at such time as the Company
adopts a framework.  For the same reason, the Company’s independent
registered public accounting firm has not issued an “attestation report” on the
Company management’s assessment of internal controls.






22





PART III





ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT.





The
directors and executive officers of the Company as of June 30, 2008 are as
follows:





Name
            
            Age
            
            PositionPreston
      J. Shea
            
            60
            
            Director,
      President, CEO, SecretaryKenneth
      R. Pinckard
            
            62
            
            Director,
      Vice President, CFOBarry
      M. Goldwater, Jr.
            
            69
            
            Director,
      ChairmanShelly
      Yakus
            
            62
            
            Vice
      PresidentMatthew
      Long
            
            42
            
            Vice
      President





The
directors and officers of wholly owned operating subsidiary, Studio One
Entertainment, Inc., at June 30, 2008, is:





Name
            
            Age
            
            PositionLawrence
      G. Ryckman
            
            49
            
            Director,
      President, CEO, Secretary





Preston J. Shea, President,
Secretary, and Director 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 Russian, 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.





Kenneth Pinckardis 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.   Mr. Pinckard
holds a B.B.A., Accounting from the University of Texas at Austin and a Juris
Doctorate from the University of Houston.





Barry M. Goldwater, Jr.,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, Barry has been actively
involved in private business activities and has held a number of responsible
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.





Shelly Yakusis a renowned
music producer, audio engineer/mixer and recording studio designer. Shelly has
engineered/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.


23




ITEM 9. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT. -
continued




Mr. Matthew Long,an Emmy Award winner, 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 producing and managing the
video content for Studio One’s interactive studios and related television
production.





Larry Ryckmanis an award
winning entrepreneur and businessman with notable achievements in the
Entertainment, High Technology and Sports industries.  Larry
previously co-founded and served as president and CEO of
entertainment/technology company, QSound, Ltd., which develops proprietary sound
technologies for the entertainment, computer, cell phone and video game
industries. During his tenure as president, QSound grew from a start-up to a
NASDAQ listed, internationally recognized player in the industry and secured
over a dozen patents.  Larry completed licensing and joint venture
agreements with multi-national corporations such as Polygram, Nintendo, JVC,
Coca Cola, and NEC.  Larry is the founder of Studio One Entertainment,
Inc.





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.





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 the Act and is
therefore unenforceable.





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
Securities and Exchange Commission (“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 2007, and certain written representations from executive officers and
directors, the Registrant is aware that the Directors and certain officers have
inadvertently failed to file a Form 3 at the time of their respective election
to the Board.  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 that was filed As Exhibit 14 with its Annual
Report on Form 10-KSB for 2004 filed on November 15, 2004.  That 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.






24




ITEM 9. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT. -
continued




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 a member that would fulfill that
qualification.








ITEM 10. 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.  Only one officer of
the Company earned more than $100,000 in the last three fiscal
years.





Long Term
      CompensationAnnual Compensation
            
            
            A
      wards
            
            
            PayoutsName
      and Principal Position
            
            Fiscal
              Year
            
            Salary
      ($)
            
            
            Bonus
      ($)
            
            
            Other
      Annual Compensation ($)
            
            
            Restricted
      Stock Award(s) ($)
            
            
            Securities
      Underlying Options/
              SARs
      (#)
            
            
            LTIP
              Payout
      ($)
            
            
            All Other Compensation
      ($)Preston
      J. Shea  President,
            
            2008
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            32,670Secretary
            
            2007
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            53,500Kenneth
      R. Pinckard, Vice
            
            2008
            
            $
            61,865
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            5,280President,
      Treasurer
            
            2007
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            59,800Shelly
      Yakus, Vice
            
            2008
            
            $
            16,200
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            5,280President
            
            2007
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            6,000Matthew
      Long, Vice
            
            2008
            
            $
            90,000
            
            
            
            -0-
            
            
            $
            12,495
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            29,020President
            
            2007
            
            
            30,940
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            -0-Lawrence
      E. Meyers, Vice
            
            2008
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            -0-President
            
            2007
            
            
            67,500
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            6,000Lawrence
      G. Ryckman,
            
            2008
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            29,914President
      of Studio One
            
            2007
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            6,000Entertainment,
      Inc.





EMPLOYMENT
AND RELATED AGREEMENTS





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





EQUITY
COMPENSATION PLANS





As of
June 30, 2008 our equity compensation plans were as follows:




1999
Stock Option Plan





On
November 15, 1999, the Board of Directors adopted the 1999 Stock Option Plan
(the "1999 Plan").  This plan was approved by a majority of our
stockholders on January 28, 2000.  The purpose of the 1999 Plan is to
advance the interests of the Company by encouraging
and enabling acquisition of a financial interest in the Company by its officers
and other key individuals.  The 1999 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 1999
Plan.  The option exercise price will be 100% of the fair market value
of the Company's common stock on the date the option is granted and will be
exercisable for a period not to exceed 10 years from the date of grant. As of
the date hereof, no options have been issued pursuant to this plan.






25




ITEM 10. EXECUTIVE
COMPENSATION. -
continued




2004
Stock Incentive Plan





On
February 28, 2004, the Board of Directors adopted the 2004 Stock Incentive Plan
(the "2004 Plan").  The purpose of the 2004 Plan is to advance the
interests of the Company by encouraging and enabling acquisition of a financial
interest in the Company by its officers and other key
individuals.  The 2004 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 100,000 shares of the Company's common stock is
reserved for issuance under stock options to be issued under the 2004
Plan.  On May 24, 2004, the Company filed a Registration on Form S-8
with the Securities Exchange Commission covering the 100,000 shares provided by
this plan, at a maximum offering price of $1.00 per share.  As of June
30, 2008, the Company has issued all of the shares covered by the 2004
Plan.





2006
Employee Stock Incentive Plan





On
October 13, 2006, the Board of Directors adopted the 2006 Employee Stock
Incentive Plan (the "2006 Plan"). The purpose of the 2006 Plan is to advance the
interests of the Company by encouraging and enabling acquisition of a financial
interest in the Company by its officers and other key
individuals.  The 2006 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 100,000 shares of the Company's common stock is
reserved for issuance under stock options to be issued under the 2006
Plan.  On October 13, 2006, the Company filed a Registration on Form
S-8 with the Securities Exchange Commission covering the 100,000 shares provided
by this plan, at a maximum offering price of $1.00 per share.  As of
June 30, 2008, the Company has issued all of the shares covered by the 2006
Plan.





2007
Non-Executive Employee Stock Option Plan





The Board
of Directors on August 28, 2007, approved the Non-Executive Employee Stock
Option Plan.  The purpose of the Employee Stock Option 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 Employee Stock Option 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 1,000,000 shares of the Company's common stock
is reserved for issuance under stock options to be issued under the Employee
Stock Option Plan.  The option exercise price will be 100% of the fair
market value of the Company's common stock on the date the option is granted and
will be exercisable for a period not to exceed 2 years from the date of
grant.  The Employee Stock Option Plan is administered by the Board of
Directors or, at its direction, the Compensation Committee comprised of officers
of the Company.







ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.





The
following table sets forth certain information, as of June 30, 2008, concerning
shares of the Company’s common stock, the only class of securities that are
issued and outstanding, held by (1) each stockholder known to own beneficially
more than five percent of the common stock as of June 30, 2007 with the number
of outstanding shares at 13,212,398, (2) each of the directors, (3) each of the
executive officers, and (4) all of the directors and executive officers as a
group:





Name and Address of
              Beneficial
      Owner (1)
            
            Amount
      and Nature of Beneficial Ownership
            
            
            Percent
      of Class (2)Preston
      J. Shea
              1
      Yonge Street, Suite 1801
              Toronto,
      ON  M5E 1W7
            
            67,000
      Direct
              (4)
            
            
            
            0.50
            %Barry
      M. Goldwater, Jr.
              3104
      E. Camelback Rd., #274
              Phoenix,
      AZ  85016
            
            57,000Direct
              (4)
            
            
            
            0.43
            %Kenneth
      R. Pinckard
              3104
      E. Camelback Rd. #245
              Phoenix,
      AZ  85016
            
            
            1,000
            
            
            
            0.01
            %Lawrence
      G. Ryckman
              13470
      N. 85 thPlace
              Scottsdale,
      AZ  85260
            
            5,129,500
      Indirect
              (3)
            
            
            
            38.46
            %Paul
      D. Fisher
              8956
      Wonderland Ave
              Los
      Angeles, CA  90046
            
            90,000
      Direct
            
            
            
            0.67
            %Shelly
      Yakus
              1778
      Lantana Drive
              Minden,
      NV  89423
            
            50,000
      Direct
            
            
            
            0.37
            %Matthew
      Long
              17197
      N. 54 thAvenue
              Glendale,
      AZ  85308
            
            31,000
      Direct
              (5)
            
            
            
            0.23
            %Andrea
      Dworshak
              20701
      N. Scottsdale Rd., #107-235
              Scottsdale,
      AZ  85255
            
            700,000
      Indirect
              (6)
            
            
            
            5.25
            %Perry
      D. Logan
              420
      Saint Andrews Court
              Las
      Vegas, NV  89144
            
            1,443,105
      Direct
            
            
            
            10.82
            %Officers
      and Directors as a group
              (7
      persons)
            
            5,414,500
            
            
            
            40.68
            %




26




ITEM 11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. -
continued




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





(2)
            This
      table is based on 13,212,398 shares of Common Stock outstanding as of June
      30, 2008 plus options to purchase 125,000 shares granted to two directors
      and one officer.  Shares of Common Stock subject to options or
      warrants currently exercisable, or exercisable within 90 days, are deemed
      outstanding for purposes of computing the percentage of the person holding
      such options or warrants, but are not deemed outstanding for purposes of
      computing the percentage of any other
person.





(3)
            The
      shares indirectly attributed to Lawrence Ryckman are held by
      affiliated entities.





(4)
            Includes
      Option to purchase 50,000 shares of Common Shares at $4.09 per share that
      have been approved by the Board as of the date of filing of this
      Report.





(5)
            Includes
      Option to purchase 25,000 shares of Common Shares at $4.09 per share that
      have been approved by the Board as of the date of filing of this
      Report.





(6)
            The
      shares beneficially owned by Andrea Dworshak are held through Digital
      Crossings, LLC, an entity in which she is the sole member and
      manager.







ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.





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




During
the year ended June 30, 2006, Lawrence Ryckman, President of Studio One
Entertainment, Inc., either directly or through affiliated entities, loaned the
Company $93,948; during the year ended June 30, 2007, these same persons loaned
an additional $43,400 to the Company.  These funds were advance to
further the Research and Development Program of the Company.  During
the year ended June 30, 2007, the Company repaid $40,566 of these
loans.  At June 30, 2007, the amount owed Mr. Ryckman and his
affiliated entities was $96,782.  These loans are demand notes, to be
repaid at ten percent interest.   During the year ended June 30,
2008, Mr. Ryckman, either directly or through affiliated entities, loaned the
Company $25,000.  The Company repaid $24,465.  At June 30, 2008,
the amount owed Mr. Ryckman and his affiliated entities, including accrued
interest, is $108,319.





On March
29, 2006, the Company entered into an agreement to acquire 100% of the issued
and outstanding shares of Studio One Entertainment, Inc., on a one-for-one,
stock-for-stock basis.  The purchase of SO Entertainment was
consummated on April 16, 2007.  At the date of the original agreement
and the date of the exchange, Lawrence Ryckman, Paul Fisher and Digital Crossing
owned or controlled directly or indirectly 6,387,500 of the 7 million shares of
SO Entertainment exchanged for Common Shares of the Company.





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 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.





27




ITEM
13. EXHIBITS





The
following Exhibits are incorporated by reference:





Exhibit No.
            Description3.1
            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 dated January 11, 2001 with Dale Riker and Russ Ritchie.
      (b)4.11
            Investment
      Agreement dated December 13, 2000, with Swartz Private Equity, LLC.
      (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, dated March 29, 2006, between Studio One
      Entertainment, Inc., and Dimensional Visions Incorporated.
    (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 dated January 1, 2001, with John D. McPhilimy.
    (c)10.3
            Accord
      and Satisfaction, dated October 11, 2006, between Dimensional Visions,
      Inc., and Russell H. Ritchie, Dale E. Riker, Suntine Enterprises, LLC, and
      Cornerstone Wireless Communications, LLC (g)10.4
            Employment
      Agreement dated July 1, 2001, with Bruce D. Sandig. (c)10.5
            Settlement
      Agreement and Release dated April 30, 2003, between the Company and
      Russell H. Ritchie, Dale E. Riker, Suntine Enterprises, LLC, and
      Cornerstone Wireless Communications, LLC. (d)14
            Dimensional
      Visions, Inc. Code of Ethics. (e)(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-KSB/A for the
      fiscal year ended June 30, 2007, filed May 27, 2008.The
      following Exhibits are filed herewith:21.1
            Subsidiaries
      of the Registrant23.1
            Consent
      of Moore & Associates, Chartered31.1
            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.












28





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, 2008 and 2007.





Fee
      Category
            
            Fiscal
      2008 Fees
            
            Fiscal
      2007 FeesAudit Fees (1)
            
            $
            32,800
            
            $
            17,000Audit-Related Fees (2)
            
            
            0
            
            
            0Tax Fees (3)
            
            
            0
            
            
            0All Other Fees (4)
            
            
            0
            
            
            0Total Fees
            
            $
            32,800
            
            $
            17,000




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, 2008 and 2007, and for review of the financial
      statements included in Registrant's Quarterly Reports on Form 10-QSB 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 a proposed spin-off
      transaction, 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, 2008 and 2007.




None of the
"audit-related," "tax" and "all other" services in 2007, 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.








29





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, 2008
            By:
            /s/ Preston
      J. Shea,Preston
      J. Shea,Title  
      President







In accordance with the Exchange Act,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.





STUDIO
      ONE MEDIA, INC.Date: September
      29, 2008
            By:
            /s/ Preston
      J. Shea,Preston
      J. Shea,Title:
       Director, President,
Secretary




STUDIO
      ONE MEDIA, INC.Date: September
      29, 2008
            By:
            /s/ Kenneth
      R. PinckardKenneth
      R. PinckardTitle: 
      Director, Vice President, Chief Accounting Officer




30




STUDIO
ONE MEDIA, INC.
 (A Development Stage
Company)
  FINANCIAL
STATEMENTS




INDEX TO THE FINANCIAL
      STATEMENTS
            PAGE
              NUMBERIndependent
      Auditor's Report
            F-1Financial
      StatementsConsolidated
      Balance Sheets
            F-2Consolidated
      Statements of Operations
            F-3Consolidated
      Statements of Stockholders' Equity
            F-4Consolidated
      Statements of Cash Flows
            F-5Notes
      to Financial Statements
            F-7
      - F-15










31


MOORE
& ASSOCIATES, CHARTERED


ACCOUNTANTS AND
ADVISORS


PCAOB REGISTERED








REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM








To
the Board of Directors


Studio
One Media, Inc


(A
Development Stage Company)





We have
audited the accompanying consolidated balance sheets of Studio One Media, Inc.
as of June 30, 2008 and 2007, and the related consolidated statements of
operations, stockholders’ equity and cash flows for the years then ended and
cumulative July 1, 2002 through June 30, 2008. These financial statements are
the responsibility of the Company’s management.  Our responsibility is
to express an opinion on these financial statements based on our
audits.





We
conduct our audits in accordance with standards of the Public Company Accounting
Oversight Board (United States).  Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Studio One Media, Inc. as of June
30, 2008 and 2007, and the related consolidated statements of operations,
stockholders’ equity and cash flows for the years then ended and cumulative July
1, 2002 through June 30, 2008, in conformity with accounting principles
generally accepted in the United States of America.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1
to the financial statements, the Company has incurred losses since inception of
$39,081,880 and has no revenues, which raises substantial doubt about its
ability to continue as a going concern.  Management’s plans concerning
these matters are also described in Note 1.  The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.





/s/
Moore & Associates, Chartered





Moore
& Associates Chartered


Las
Vegas, Nevada


September
26, 2008





2675 S. Jones Blvd. Suite
109, Las Vegas, NV 89146 (702) 253-7499 Fax (702)
253-7501


F-1


STUDIO
ONE MEDIA, INC.


(A Development Stage
Company)




CONSOLIDATED
BALANCE SHEETS





June
      30,
            
            
            June
      30,2008
            
            
            2007ASSETSCurrent
      AssetsCash
            
            $
            391,109
            
            
            $
            417,236Accrued
      Interest Receivable
            
            
            55,701
            
            
            
            32,535Prepaid
      Expenses
            
            
            48,153
            
            
            
            124,184Notes
      Receivable-Current
            
            
            178,752
            
            
            
            194,663Total
      Current Assets
            
            
            673,715
            
            
            
            768,618Property
      and Equipment, Net
            
            
            548,070
            
            
            
            156,956Other
      AssetsDeposits
            
            
            29,630
            
            
            
            6,400Intangible
      Assets, net
            
            
            857,923
            
            
            
            827,033Total
      Other Assets
            
            
            887,553
            
            
            
            833,433Total
      Assets
            
            $
            2,109,338
            
            
            $
            1,759,007LIABILITIES AND
      STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      Payable and Accrued Expenses
            
            $
            358,359
            
            
            $
            235,090Notes
      Payable - Related Party
            
            
            108,319
            
            
            
            104,502Notes
      Payable - Current
            
            
            49,385
            
            
            
            45,885Total
      Current Liabilities
            
            
            516,063
            
            
            
            385,477Long-Term
      Liabilities
            
            
            -
            
            
            
            -Total
      Liabilities
            
            
            516,063
            
            
            
            385,477Stockholders'
      EquityPreferred
      Stock, authorized 10,000,000 shares, par value $0.001;issued
      and oustanding are 524,044 shares at June 30, 2008and
      June 30, 2007, respectively
            
            
            524
            
            
            
            524Common
      Stock, authorized 100,000,000 shares, par value $0.001;issued
      and outstanding are 13,212,398 and 11,362,739 shares atJune
      30, 2008 and June 30, 2007, respectively
            
            
            13,212
            
            
            
            11,363Additional
      Paid in Capital
            
            
            40,672,472
            
            
            
            31,837,603Accumulated
      Deficit - Pre Development Stage
            
            
            (24,404,302
            )
            
            
            (24,404,302
            )Accumulated
      Deficit - Development Stage
            
            
            (14,688,631
            )
            
            
            (6,071,658
            )Total
      Stockholders' Equity
            
            
            1,593,275
            
            
            
            1,373,530Total
      Liabilities and Stockholders' Equity
            
            $
            2,109,338
            
            
            $
            1,759,007






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









F-2




STUDIO
ONE MEDIA, INC.
 (A Development Stage
Company)
  CONSOLIDATED
STATEMENTS OF OPERATIONS







CumulativeJuly
      1, 2002Year
      Ended
            
            
            Year
      Ended
            
            
            throughJune
      30, 2008
            
            
            June
      30, 2007
            
            
            June
      30,2008RevenuesSales
            
            $
            -
            
            
            $
            -
            
            
            $
            -Cost
      of Sales
            
            
            -
            
            
            
            -
            
            
            
            -Gross
      Profit
            
            
            -
            
            
            
            -
            
            
            
            -Operating
      ExpensesGeneral
      and Administrative Expenses
            
            
            7,561,257
            
            
            
            5,158,340
            
            
            
            13,258,681Research
      and Development
            
            
            1,065,168
            
            
            
            457,670
            
            
            
            1,522,838Total
      Operating Expenses
            
            
            8,626,425
            
            
            
            5,616,010
            
            
            
            14,781,519Loss
      from Operations
            
            
            (8,626,425
            )
            
            
            (5,616,010
            )
            
            
            (14,781,519
            )Other
      Income (Expense)Interest
      Expense
            
            
            (14,553
            )
            
            
            (22,844
            )
            
            
            (312,800
            )Other
      Income
            
            
            24,005
            
            
            
            -
            
            
            
            24,005Gain
      on Extinguishment of Indebtedness
            
            
            -
            
            
            
            8,267
            
            
            
            381,683Total
      Other Income (Expense)
            
            
            9,452
            
            
            
            (14,577
            )
            
            
            92,888Loss
      before Income Taxes
            
            
            (8,616,973
            )
            
            
            (5,630,587
            )
            
            
            (14,688,631
            )Income
      Tax Expense
            
            
            -
            
            
            
            -
            
            
            
            -Net
      Loss
            
            $
            (8,616,973
            )
            
            $
            (5,630,587
            )
            
            $
            (14,688,631
            )Basic
      Loss Per Share of Common Stock
            
            $
            (0.71
            )
            
            $
            (0.80
            )Weighted
      Average Number of Shares Outstanding
            
            
            12,179,418
            
            
            
            7,077,032




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








F-3




STUDIO
ONE MEDIA, INC.
 (A Development Stage
Company)
  CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY





Accumulated
            
            
            AccumulatedDeficit
            
            
            DeficitPreferred
      Stock
            
            
            Common
      Stock
            
            
            Paid
      In
            
            
            Pre-Development
            
            
            Development
            
            
            TotalShares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Capital
            
            
            Stage
            
            
            Stage
            
            
            EquityBalance,
      June 30, 2002
            
            
            524,044
            
            
            $
            524
            
            
            
            1,065,984
            
            
            $
            1,066
            
            
            $
            23,343,180
            
            
            $
            (24,404,302
            )
            
            $
            -
            
            
            $
            (1,059,532
            )Common
      Shares surrenderedand
      cancelled
            
            
            -
            
            
            
            -
            
            
            
            (36,458
            )
            
            
            (36
            )
            
            
            36
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (118,808
            )
            
            
            (118,808
            )Balance,
      June 30, 2003
            
            
            524,044
            
            
            
            524
            
            
            
            1,029,526
            
            
            
            1,030
            
            
            
            23,343,216
            
            
            
            (24,404,302
            )
            
            
            (118,808
            )
            
            
            (1,178,340
            )Common
      Shares issuedfor
      services
            
            
            -
            
            
            
            -
            
            
            
            29,000
            
            
            
            29
            
            
            
            21,721
            
            
            
            -
            
            
            
            -
            
            
            
            21,750Net
      Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (107,613
            )
            
            
            (107,613
            )Balance,
      June 30, 2004
            
            
            524,044
            
            
            
            524
            
            
            
            1,058,526
            
            
            
            1,059
            
            
            
            23,364,937
            
            
            
            (24,404,302
            )
            
            
            (226,421
            )
            
            
            (1,264,203
            )Common
      Shares issuedfor
      services
            
            
            -
            
            
            
            -
            
            
            
            65,000
            
            
            
            65
            
            
            
            48,685
            
            
            
            -
            
            
            
            -
            
            
            
            48,750Net
      Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (106,677
            )
            
            
            (106,677
            )Balance,
      June 30, 2005
            
            
            524,044
            
            
            
            524
            
            
            
            1,123,526
            
            
            
            1,124
            
            
            
            23,413,622
            
            
            
            (24,404,302
            )
            
            
            (333,098
            )
            
            
            (1,322,130
            )Common
      Shares issuedfor
      services
            
            
            -
            
            
            
            -
            
            
            
            300,000
            
            
            
            300
            
            
            
            332,200
            
            
            
            -
            
            
            
            -
            
            
            
            332,500Common
      Shares issued inpurchase
      of promissory notes
            
            
            -
            
            
            
            -
            
            
            
            839,227
            
            
            
            839
            
            
            
            313,274
            
            
            
            -
            
            
            
            -
            
            
            
            314,113Common
      Shares issued inpurchase
      of securities
            
            
            -
            
            
            
            -
            
            
            
            50,000
            
            
            
            50
            
            
            
            93,950
            
            
            
            -
            
            
            
            -
            
            
            
            94,000Common
      Shares issued for cash
            
            
            
            
            
            
            
            
            
            
            478,571
            
            
            
            479
            
            
            
            198,521
            
            
            
            
            
            
            
            
            
            
            
            199,000Net
      Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (107,973
            )
            
            
            (107,973
            )Balance,
      June 30, 2006
            
            
            524,044
            
            
            
            524
            
            
            
            2,791,324
            
            
            
            2,792
            
            
            
            24,351,567
            
            
            
            (24,404,302
            )
            
            
            (441,071
            )
            
            
            (490,490
            )Common
      Shares issuedfor
      services
            
            
            -
            
            
            
            -
            
            
            
            456,752
            
            
            
            457
            
            
            
            2,223,690
            
            
            
            -
            
            
            
            -
            
            
            
            2,224,147Common
      Shares issued for cash
            
            
            -
            
            
            
            -
            
            
            
            1,001,835
            
            
            
            1,002
            
            
            
            1,898,498
            
            
            
            -
            
            
            
            -
            
            
            
            1,899,500Common
      Shares for assets
            
            
            -
            
            
            
            -
            
            
            
            6,950,000
            
            
            
            6,950
            
            
            
            116,031
            
            
            
            -
            
            
            
            -
            
            
            
            122,981Fair
      value of warrants granted
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,322,269
            
            
            
            -
            
            
            
            -
            
            
            
            2,322,269Common
      Shares issued insatisfaction
      of debt
            
            
            -
            
            
            
            -
            
            
            
            162,828
            
            
            
            162
            
            
            
            925,548
            
            
            
            -
            
            
            
            -
            
            
            
            925,710Net
      Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (5,630,587
            )
            
            
            (5,630,587
            )






F-4




CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY-
continued




Balance,
      June 30, 2007
            
            
            524,044
            
            
            
            524
            
            
            
            11,362,739
            
            
            
            11,363
            
            
            
            31,837,603
            
            
            
            (24,404,302
            )
            
            
            (6,071,658
            )
            
            
            1,373,530Common
      Shares issuedfor
      services
            
            
            -
            
            
            
            -
            
            
            
            684,322
            
            
            
            684
            
            
            
            2,794,313
            
            
            
            -
            
            
            
            -
            
            
            
            2,794,997Common
      Shares issued for cash
            
            
            -
            
            
            
            -
            
            
            
            1,160,337
            
            
            
            1,160
            
            
            
            3,151,384
            
            
            
            -
            
            
            
            -
            
            
            
            3,152,544Stock
      offering costs
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (147,000
            )
            
            
            -
            
            
            
            -
            
            
            
            (147,000
            )Common
      Shares for assets
            
            
            -
            
            
            
            -
            
            
            
            5,000
            
            
            
            5
            
            
            
            24,120
            
            
            
            -
            
            
            
            -
            
            
            
            24,125Fair
      value of warrants granted
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,012,052
            
            
            
            -
            
            
            
            -
            
            
            
            3,012,052Net
      Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (8,616,973
            )
            
            
            (8,616,973
            )Balance,
      June 30, 2008
            
            
            524,044
            
            
            $
            524
            
            
            
            13,212,398
            
            
            $
            13,212
            
            
            $
            40,672,472
            
            
            $
            (24,404,302
            )
            
            $
            (14,688,631
            )
            
            $
            1,593,275







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











F-5




STUDIO
ONE MEDIA, INC.
 (A Development Stage
Company)
  CONSOLIDATED
STATEMENTS OF CASH FLOWS





CumulativeYear
      Ended
            
            
            Year
      Ended
            
            
            July
      1, 2002 throughJune
      30, 2008
            
            
            June
      30, 2007
            
            
            June
      30, 2008Cash
      Flows From Operating ActivitiesNet
      Loss
            
            $
            (8,616,973
            )
            
            $
            (5,630,587
            )
            
            $
            (14,688,631
            )Adjustments
      to reconcile to cash fromoperating
      activities:Depreciation
      and amortization
            
            
            45,099
            
            
            
            8,968
            
            
            
            54,067Common
      stock issued for services
            
            
            2,794,997
            
            
            
            2,224,147
            
            
            
            5,040,894Fair
      value of warrants granted
            
            
            3,012,052
            
            
            
            2,322,269
            
            
            
            5,334,321Changes
      in Operating Assets & Liabilities:Accrued
      Interest Receivable
            
            
            (23,166
            )
            
            
            24,760
            
            
            
            (55,701
            )Notes
      Receivable
            
            
            15,911
            
            
            
            229,741
            
            
            
            (184,752
            )Prepaid
      Expenses
            
            
            76,031
            
            
            
            5,647
            
            
            
            81,678Investments
      - Securities
            
            
            -
            
            
            
            94,000
            
            
            
            -Deposits
            
            
            (23,230
            )
            
            
            -
            
            
            
            (29,630
            )Accounts
      Payable
            
            
            130,486
            
            
            
            (96,353
            )
            
            
            (41,039
            )Net
      Cash Used in Operating Activities
            
            
            (2,588,793
            )
            
            
            (817,408
            )
            
            
            (4,488,793
            )Cash
      Flows from Investing ActivitiesPurchase
      of Property and Equipment
            
            
            (398,475
            )
            
            
            (165,924
            )
            
            
            (564,399
            )Purchase
      of Other Assets
            
            
            (34,744
            )
            
            
            (827,883
            )
            
            
            (862,627
            )Net
      Cash Used in Investing Activities
            
            
            (433,219
            )
            
            
            (993,807
            )
            
            
            (1,427,026
            )Cash
      Flows from Financing ActivitiesIssuance
      of Common Stock
            
            
            3,152,544
            
            
            
            1,899,500
            
            
            
            6,040,677Repayment
      of Notes Payable
            
            
            (9,659
            )
            
            
            -
            
            
            
            (9,659
            )Stock
      Offering Costs Paid
            
            
            (147,000
            )
            
            
            -
            
            
            
            (147,000
            )Issuance
      of Notes Payable
            
            
            -
            
            
            
            328,744
            
            
            
            422,892Net
      Cash from Financing Activities
            
            
            2,995,885
            
            
            
            2,228,244
            
            
            
            6,306,910Net
      Increase (Decrease) in Cash
            
            
            (26,127
            )
            
            
            417,029
            
            
            
            391,091Cash,
      Beginning of Period
            
            
            417,236
            
            
            
            207
            
            
            
            18Cash,
      End of Period
            
            $
            391,109
            
            
            $
            417,236
            
            
            $
            391,109Supplemental
      Cash Flow Disclosure:Cash
      Paid For:Interest
      Expense
            
            $
            -
            
            
            $
            -
            
            
            $
            230,842Income
      Taxes
            
            $
            -
            
            
            $
            -
            
            
            $
            -Non
      Cash Financing Activities:Common
      stock issued for assets
            
            $
            24,125
            
            
            $
            122,981
            
            
            $
            147,136Equipment
      purchased under capital lease
            
            $
            9,759
            
            
            $
            -
            
            
            $
            9,759





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





F-6
 STUDIO
ONE MEDIA, INC.
 NOTES
TO FINANCIAL STATEMENTS
 JUNE
30, 2008 AND 2007


Note
1: Summary of Significant Accounting Policies





DESCRIPTION
OF BUSINESS, FINANCING AND BASIS OF FINANCIAL STATEMENT
PRESENTATION





Studio
One Media, Inc., (the “Company” or “SOMD”) 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.





Historically,
the Company produced and marketed lithographically printed stereoscopic and
animation print products. The Company, through its wholly owned subsidiary,
InfoPak, Inc., developed a data delivery system that provides end users with
specific industry printed materials by way of a portable hand-held reader. Data
is acquired electronically from the data provided by mainframe systems and
distributed through a computer network to all subscribers. InfoPak has ceased to
operate and its corporate charter has been administratively
terminated.





The
volume of business was not sufficient to support the Company's cost structure.
Accordingly during April 2002 the Company ceased its prior operations and was
reclassified as a development stage company.  Since becoming a Development
Stage Company in 2002, the Company has financed its operations primarily through
the sale of its securities. The Company has had no sales during the year ended
June 30, 2008, or during the cumulative period from July 1, 2002 through June
30, 2008.





Effective
May 6, 2004, the Company's stockholders approved a one for sixty Reverse Split
of its common stock ("The Reverse Split"). The effect of the Reverse Split has
been retroactively reflected as of July 1, 2002 in the financial statements. All
references to number of shares issued conversions to common stock, per share
amounts and stock option data have been restated to reflect the effect of the
Reverse Split for the period presented.





In April
2006, the Company entered into an agreement to purchase Studio One
Entertainment, Inc., a private Scottsdale, Arizona based company that is engaged
in the design and manufacturing of a proprietary (patents pending), self
contained interactive audio/video recording and conferencing studio designed for
installation in shopping malls and other high traffic public areas (the “Studio
One Entertainment Agreement”). The Studio OneTM Kiosk will enable the public, for
a fee, to record their video and voice images in a portable state-of-the-art
recording studio environment and enter their performances in music, modeling and
other talent related contests.





On April
17, 2007, the Company announced that it had finalized the purchase of Studio One
Entertainment, Inc., (SOEI) through an all-stock transaction. The purchase is
pursuant to an agreement entered into by the companies dated March 29, 2006. The
purchase includes the exchange of 7,000,000 restricted common shares of Studio
One Media, Inc. for 100% of the issued and outstanding shares of Studio One
Entertainment, Inc.   The purchase includes all right, title and
interest to Studio One Entertainment's proprietary interactive recording
studios, business plan and intellectual property, including pending patents,
foreign patent rights and federal trademark applications.  Studio One
Entertainment, Inc. will operate as a wholly owned subsidiary of Studio One
Media, Inc. Accordingly, the financial statements present on a consolidated
basis the operations of SOMD and SOEI.





GOING
CONCERN





The
Company has incurred losses since inception of $39,092,933 and has no revenues
which raises substantial doubt about its ability 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) ultimately achieve revenues from its personal
recording studio kiosk business. Management's plan to address these issues
includes, (a) continued exercise of tight cost controls to conserve cash, (b)
obtaining additional financing, and (c) place in service its personal recording
kiosks.





INCOME
TAXES





The
Company accounts for income taxes under the 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.


F-7
 STUDIO
ONE MEDIA, INC.
 NOTES
TO FINANCIAL STATEMENTS
 JUNE
30, 2008 AND 2007




Note 1: Summary of
Significant Accounting Policies-
continued




LOSS
PER SHARE





Basic and
diluted loss per common share is calculated using the weighted average number of
common shares outstanding during the period. The Company’s 2,473,362 warrants,
14,814 shares to be issued upon the conversion of the preferred stock and 6,000
shares to be issued upon conversion of debt are excluded from the computation of
diluted earnings per share as they are anti-dilutive.





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.
Actual results could differ from those estimates.





SHARE-BASED
COMPENSATION





In
December 2004, the FASB issued FAS No. 123R, “Share-Based Payment.”
This statement is a revision to FAS No. 123, “Accounting for Stock-Based
Compensation,” and it supersedes APB Opinion No. 25, “Accounting for Stock
Issued to Employees,” and amends FAS No. 95, “Statement of Cash Flows.” FAS
No. 123R 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 stock 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.





IMPAIRMENT
OF LONG-LIVED ASSETS





The
Company continually monitors events and changes in circumstances that could
indicate carrying amounts of long-lived assets may not be recoverable. When such
events or changes in circumstances are present, the Company assesses the
recoverability of long-lived assets by determining whether the carrying value of
such assets will be recovered through undiscounted expected future cash flows.
If the total of the future cash flows is less than the carrying amount of those
assets, the Company recognizes an impairment loss based on the excess of the
carrying amount over the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or the fair value less costs to
sell.




CASH
AND CASH EQUIVALENTS





For
purposes of financial statement presentation, the Company considers all highly
liquid investments with a maturity of three months or less, from the date of
purchase, to be cash equivalents.




FAIR
VALUE OF FINANCIAL INSTRUMENTS





The
carrying value of cash and cash equivalents, accounts receivable and accounts
payable approximates fair value due to the short-term maturity of these
instruments.  The carrying value of notes payable approximates fair
value because negotiated terms and conditions are consistent with current market
rates as of June 30, 2008 and 2007.





CONCENTRATION
OF CREDIT RISK





Financial
instruments, which potentially subject us to concentrations of credit risk,
consist principally of cash and trade receivables.  Concentrations of
credit risk with respect to trade receivables are limited due to the clients
that comprise our customer base and their dispersion across different business
and geographic areas.  We estimate and maintain an allowance for
potentially uncollectible accounts and such estimates have historically been
within management's expectations.  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 limit of
$100,000.  Statement of Financial Accounting Standards No. 105
identifies this as a concentration of credit risk requiring disclosure,
regardless of the degree of risk. The risk is managed by maintaining all
deposits in high quality financial institutions. The Company had approximately
$290,000 in excess of federally insured limits at June 30, 2008.









F-8
 STUDIO
ONE MEDIA, INC.
 NOTES
TO FINANCIAL STATEMENTS
 JUNE
30, 2008 AND 2007




Note
1: Summary of Significant Accounting Policies-
continued




REVENUE
RECOGNITION





The
Company applies the provisions of SEC Staff Accounting Bulletin No. 104,
"Revenue Recognition in Financial Statements" ("SAB 104"), which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB 104 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 expected to be generated from sale of video and audio
recorded products. Revenues from the sale of products will be collected at the
point of sale. The products will be delivered simultaneously with the sale
accordingly revenues will be realized and recognized at the time of the
transaction.





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 SFAS No. 2, “Accounting
for Research and Development Costs”. The Company incurred research and
development expenses of $1,065,068 and $458,872 during the years ended June 30,
2008 and 2007, respectively.




ADVERTISING
AND MARKETING





The
Company expenses advertising costs in the period in which they are incurred.
Advertising and marketing expense was $24,362 and $5,392 for the years ended
June 30, 2008 and 2007, respectively.





RECLASSIFICATION





Certain
amounts in the June 30, 2007 financial statements have been reclassified to
conform to the presentation in the June 30, 2008 financial
statements.







Note
2: Accounts Payable and Accrued Expenses





A summary
of Accounts Payable and Accrued Expenses Follows:


June
      30, 2008
            
            
            June
      30, 2007Accounts
      Payable
            
            $
            180,000
            
            
            $
            219,990Outstanding Manufacturing Orders
            
            
            127,921
            
            
            
            0Accrued
      Interest
            
            
            35,438
            
            
            
            15,100Other Accrued
      Expenses
            
            
            15,000
            
            
            
            0Total
            
            $
            358,359
            
            
            $
            235,090






Note
3: Short-Term Borrowings





During
July and August of 2001 the Company borrowed $45,000 and issued a 14%
convertible debenture for $25,000 due in October 2001 and issued a 12%
convertible debenture for $20,000 due in February 2002. Both debentures were in
default under the terms of the debenture agreement. The $20,000 debenture,
together with all accrued interest thereon, was converted to equity in the year
ended June 30, 2007.  The Company continues to accrue interest on the
remaining $25,000 obligation. The debenture is convertible into 6,000 shares of
the Company's common stock at $7.50 per share after given effect for the 1 to 60
share reverse split.





As of
June 30, 2008, the Company owes $108,319 for funds borrowed from related parties
including accrued interest of $11,053. The loans are unsecured, accrue interest
at 10% per annum and are due upon demand.





During
2008, the Company purchased equipment under a capital lease. The lease is
secured by the equipment and due in monthly payments of $808.





A summary
of Short Term Borrowings Follows:


Rates
            
            June
      30, 2008
            
            
            June
      30, 2007Related Party Loan
            
            
            10%
            
            $
            108,319
            
            
            $
            104,502Convertible Debenture
            
            
            14
      %
            
            
            49,385
            
            
            
            45,885Equipment
      Lease
            
            
            12
      %
            
            
            7,336
            
            
            
            0Total
            
            
            
            
            $
            165,040
            
            
            $
            150,387






F-9
 STUDIO
ONE MEDIA, INC.
 NOTES
TO FINANCIAL STATEMENTS
 JUNE
30, 2008 AND 2007


Note
4: Commitments and Contingencies




There are
no legal proceedings, which the Company believes will have a material adverse
effect on its financial position.





The
Company has not declared dividends on Series A or B Convertible Preferred Stock.
The cumulative dividends in arrears through June 30, 2008 were approximately
$158,625.





The
Company leases certain office facilities pursuant to a one-year lease that
commenced February 2006, for approximately 5,400 square feet of office space
located in Scottsdale, Arizona.  The lease was extended for an
additional year ending January 31, 2007 and subsequently extended to August 31,
2008.  On June 15, 2008, the expanded into and also occupies
approximately 5,400 square feet adjoining the original
premises.  Under the terms of the extended, expanded lease, the
Company occupies the premises on a month-to-month basis.  The total
lease expense is $12,000 per month, payable in cash and common stock of the
Company.





In
anticipation of implementation of its business plan, the Company has also leased
an additional 9,400 feet of office space in another building located in
Scottsdale, Arizona, at a monthly cost of $12,225.   The Company
has not yet occupied this space.







Note
5: Common Stock





During
the year ended June 30, 2007, the Company issued 1,001,835 shares for $1,899,500
in cash.  456,752 shares of the Company’s common stock for consulting
services rendered to the Company valued at $2,224,146. The Company also
issued 6,950,000 shares for its wholly owned subsidiary valued at $122,981
and 162,828 shares in conversion of debt in the amount of $925,710.





During the year ended June 30, 2008, the Company
issued 1,160,337 shares for $3,152,544 in cash, 684,322 shares of the
Company’s common stock for consulting services rendered to the Company valued at
$2,794,997. The Company also issued 5,000 shares for a vehicle valued at
$24,125.






Note
6: Preferred Stock





The
Company has authorized 10,000,000 shares of $.001 par value per share Preferred
Stock, of which the following were issued outstanding:




Allocated
            
            
            OutstandingSeries
      A Preferred
            
            
            100,000
            
            
            
            15,500Series
      B Preferred
            
            
            200,000
            
            
            
            3,500Series
      C Preferred
            
            
            1,000,000
            
            
            
            13,404Series
      D Preferred
            
            
            375,000
            
            
            
            130,000Series
      E Preferred
            
            
            375,000
            
            
            
            275,000Series
      P Preferred
            
            
            600,000
            
            
            
            86,640Total
      Preferred Stock
            
            
            2,650,000
            
            
            
            524,044





The
Company's Series A Convertible 5% Preferred Stock ("Series A Preferred"),
100,000 shares authorized, is convertible into common stock at the rate of .027
share of common stock for each share of the Series A Preferred. Dividends from
date of issue, are payable from retained earnings, and have been accumulated on
June 30 each year, but have not been declared or paid.





The
Company's Series B Convertible 8% Preferred Stock ("Series B Preferred") is
convertible at the rate of .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 and have not been declared or
paid.





The
Company's Series C Convertible Preferred Stock ("Series C Preferred") is
convertible at a rate of .007 share of common stock per share of Series C
Preferred.





The
Company's Series D Convertible Preferred Stock ("Series D Preferred") is
convertible at a rate of .034 share of Common stock per share of Series D
Preferred.





The
Company's Series E Convertible Preferred Stock ("Series E Preferred") is
convertible at a rate of .034 share of Common stock per share of Series E
Preferred.





The
Company's Series P Convertible Preferred Stock ("Series P Preferred") is
convertible at a rate of .007 share of common stock for each share of Series P
Preferred.


F-10
 STUDIO
ONE MEDIA, INC.
 NOTES
TO FINANCIAL STATEMENTS
 JUNE
30, 2008 AND 2007


Note 6: Preferred Stock
-
continued





On
November 15, 1999, the Board of Directors of the Company adopted the 1999 Stock
Option Plan (the "1999 Plan"). This plan was approved by a majority of our
stockholders at our January 28, 2000, stockholders' meeting. The purpose of the
1999 Plan is to advance the interests of the Company by encouraging and enabling
acquisition of a financial interest in the Company by its officers and other key
individuals. The 1999 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 are available to be issued under the 1999
Plan. The option exercise price will be 100% of the fair market value of the
Company's common stock on the date the option is granted and will be exercisable
for a period not to exceed 10 years from the date of grant. As of June 30, 2008,
no stock options have been granted under this plan.





On May 17, 2004, the Company adopted an employee
stock incentive plan setting aside 100,000 shares of the Company’s common stock
for issuance to officers, employees, directors and consultants for services
rendered or to be rendered. A compensation committee appointed by the Board of
Directors who shall have the right to grant awards or stock options administers
the plan. On May 24, 2004, the Company filed a Registration on Form S-8 with the
Securities Exchange Commission covering the 100,000 shares provided by this
plan, at a maximum offering price of $1.00 per share. As of June 30, 2008, the
Company has issued all shares covered by the 2004 Stock Incentive
Plan.





On
October 13, 2006 the Company adopted an employee stock incentive plan setting
aside 100,000 shares of the Company’s common stock for issuance to officers,
employees, directors and consultants for services rendered or to be rendered.
The proposed maximum offering price of such shares is $1.00 per share.  A
compensation committee appointed by the Board of Directors who shall have the
right to grant awards or stock options administers the plan. On October 13,
2006, the Company filed a Registration on Form S-8 with the Securities Exchange
Commission covering shares provided by this plan. As of June 30, 2007, the
Company has issued 47,282 shares covered by the 2006 Stock Incentive Plan and
recorded an expense of $282,380. As of June 30, 2008, 52,718 remain unissued
under this Plan. The value of shares issued pursuant to this Plan is computed
using the Black-Scholes model as prescribed by FAS No. 123R.





During
the year ended June 30, 2007, the estimated value of the compensatory common
stock purchase warrants granted to non-employees in exchange for services and
financing expenses was determined using the Black-Scholes pricing model and the
following assumptions: expected term of 2 years, a risk free interest rate of
5.35%, a dividend yield of 0% and volatility of 31%. The amount of the expense
charged to operations for compensatory options and warrants granted in exchange
for services was $2,322,269.





During
the year ended June 30, 2008, the estimated value of the compensatory common
stock purchase warrants granted to non-employees in exchange for services and
financing expenses was determined using the Black-Scholes pricing model and the
following assumptions: expected term of 2 years, a risk free interest rate of
2.35% to 5.35%, a dividend yield of 0% and volatility of 26% to 70%. The amount
of the expense charged to operations for compensatory options and warrants
granted in exchange for services was $3,012,052.





The
following table summarizes the changes in options outstanding and the related
prices for the shares of the Company’s common stock issued to employees and
non-employees of the Company. These warrants were granted in lieu of cash
compensation for services performed.




Number
      of Shares
            
            
            Weighted
      Average Exercise PriceOutstanding
      as of July 1, 2006
            
            
            -
            
            
            $
            0.00Granted
            
            
            850,163
            
            
            
            3.18Exercised
            
            
            -
            
            
            
            0.00Cancelled
            
            
            -
            
            
            
            0.00Outstanding
      as of June 30, 2007
            
            
            850,163
            
            
            
            3.18Granted
            
            
            1,677,706
            
            
            
            3.83Exercised
            
            
            (54,507
            )
            
            
            2.91Cancelled
            
            
            -
            
            
            
            0.00Outstanding
      at June 30, 2008
            
            
            2,473,362
            
            
            $
            3.63





F-11
 STUDIO
ONE MEDIA, INC.
 NOTES
TO FINANCIAL STATEMENTS
 JUNE
30, 2008 AND 2007


Note
6: Preferred Stock-
continued




The
following table summarizes the warrants outstanding and the related exercise
prices for the shares of the Company’s common stock issued to non-employees of
the Company.





Warrants
      Outstanding
            
            
            Warrants
      ExercisableYear
            
            Exercise
      Price
            
            
            Number
      shares outstanding
            
            
            Weighted
      Average Contractual Life (Years)
            
            
            Number
      Exercisable
            
            
            Weighted
      Average Exercise Price2007
            
            $
            3.18
            
            
            
            820,163
            
            
            
            0.50
            
            
            
            820,163
            
            
            $
            3.182008
            
            $
            3.83
            
            
            
            1,653,199
            
            
            
            1.50
            
            
            
            1,653,199
            
            
            $
            3.83Total
            
            
            
            
            
            
            2,473,362
            
            
            
            
            
            
            
            2,473,362







Note
8: Income Taxes





SFAS No.
109 requires the reduction of deferred tax assets by a valuation allowance if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized. In the Company’s
opinion, it is uncertain whether they will generate sufficient taxable income in
the future to fully utilize the net deferred tax asset. Accordingly, a valuation
allowance equal to the deferred tax asset has been recorded. The total deferred
tax asset is calculated by multiplying a 35% marginal tax rate by the cumulative
NOL of $22,890,000. The total valuation allowance is equal to the total deferred
tax asset.





The tax
effects of significant items comprising the Company's net deferred taxes as of
June 30, 2008 and 2007 were as follows:




6-30-08
            
            
            6-30-07Deferred tax assets:Intangible assets
            
            $
            251,944
            
            
            $
            251,944Net operating loss carry
forwards
            
            
            8,994,974
            
            
            
            8,011,500$
            9,246,918
            
            
            $
            8,583,750Net deferred tax asset
            
            $
            9,246,918
            
            
            $
            8,583,750Valuation allowance
            
            
            (9,246,918
            )
            
            
            (8,583,750
            )Net
      deferred tax asset reported
            
            $
            --
            
            
            $
            --




The
income tax provision differs from the amount of income tax determined by
applying the U.S. federal and state income tax rates of 35% to pretax income
from continuing operations for the years ended June 30, 2008 and 2007 due to the
following:





6-30-08
            
            
            
            6-30-07Book loss from operations
            
            $
            (3,015,941
            )
            
            $
            (1,970,705
            )Options and warrants issued for services
            
            
            1,054,218
            
            
            
            812,794Common stock issued for services
            
            
            978,249
            
            
            
            778,451Valuation allowance
            
            
            983,474
            
            
            
            379,460$
            --
            
            
            $
            --




The
federal net operating loss carry forwards of approximately $27,335,000 expire in
various years through 2028. In addition the Company has state carry forwards of
approximately $10,821,000.





The
Company has had numerous transactions in its common stock.  Such
transactions may have resulted in a change in the Company's ownership, as
defined in the Internal Revenue Code Section 382.  Such change may result
in an annual limitation on the amount of the Company's taxable income that may
be offset with its net operating loss carry forwards.  The Company has not
evaluated the impact of Section 382, if any, on its ability to utilize its net
operating loss carry forwards in future years.






F-12
 STUDIO
ONE MEDIA, INC.
 NOTES
TO FINANCIAL STATEMENTS
 JUNE
30, 2008 AND 2007


Note
 9.  Intangible Assets


Intangible
assets consist of computer software, website costs and video
backgrounds.  Computer software is purchased from third party
developers and recorded at cost.  Computer software is amortized over
the estimated useful life of 3 years. Website costs are costs incurred to
develop the Company’s website.  The website costs will be amortized
over the estimated useful life of the website when placed in service during the
year ended June 30, 2009. Video backgrounds are the costs incurred to develop
video backgrounds for use in the Company’s recording Kiosks. The video
background costs will be amortized over the estimated useful life of the website
when placed in service during the year ended June 30,
2009.  Technology is the cost of proprietary knowhow and intellectual
property. The technology will be amortized over the estimated useful life when
placed in service during the year ended June 30, 2009. Patents and trademarks is
the cost of patents pending and applied for trademarks. Patents and trademarks
will be amortized over the estimated useful life when placed in service during
the year ended June 30, 2009. Management assesses the carrying values of
long-lived assets for impairment when circumstances warrant such a review. In
performing this assessment, management considers current market analysis and
appraisal of the technology, along with estimates of future cash flows. The
Company recognizes impairment losses when undiscounted cash flows estimated to
be generated from long-lived assets are less than the amount of unamortized
assets. The Company’s intangible assets are comprised of the following June 30,
2008:




Computer
    software
            
            $
            46,251Website
      costs
            
            
            91,375Video
      backgrounds
            
            
            4,312Technology
            
            
            575,871Patents and
      trademarks
            
            
            143,968Accumulated
      amortization
            
            
            (3,854
            )Net Intangible
      Assets
            
            $
            857,923


Note
 10.  Property and Equipment





The
Company’s property and equipment are comprised of the following June 30,
2008:




Furniture and
      equipment
            
            $
            15,708Office
      equipment and computers
            
            
            191,859Kiosks
            
            
            313,565Vehicles
            
            
            29,125Leasehold
      improvements
            
            
            42,168592,425Accumulated
      depreciation
            
            
            (44,355
            )Net Property
      and Equipment
            
            $
            548,070




The
equipment is depreciated over its estimated useful life of 5 to 7 years under
the straight-line method. Leasehold improvements are depreciated over the lesser
of the lease term or the useful life of the asset. Depreciation expense for the
years ended June 30, 2008 and 2007 was $41,245 and $8,968,
respectively.







Note
 11.  The Effect of Recent Account Standards





In September 2006, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” which defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. Where applicable, SFAS No. 157
simplifies and codifies related guidance within GAAP and does not require any
new fair value measurements. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. Earlier adoption is
encouraged. The Company does not expect the adoption of SFAS No. 157
to have a significant effect on its financial position or results of
operation.


F-13
 STUDIO
ONE MEDIA, INC.
 NOTES
TO FINANCIAL STATEMENTS
 JUNE
30, 2008 AND 2007


Note  11.  The
Effect of Recent Account Standards-
continued




In June
2006, the Financial Accounting Standards Board  issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109”, which prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return.  FIN 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006.  The Company does not expect the adoption of FIN 48
to have a material impact on its financial reporting, and the Company is
currently evaluating the impact, if any, the adoption of FIN 48 will have on its
disclosure requirements.





In March
2006, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 156, “Accounting for Servicing of Financial Assets—an
amendment of FASB Statement No. 140.” This statement requires an entity to
recognize a servicing asset or servicing liability each time it undertakes an
obligation to service a financial asset by entering into a servicing contract in
any of the following situations: a transfer of the servicer’s financial assets
that meets the requirements for sale accounting; a transfer of the servicer’s
financial assets to a qualifying special-purpose entity in a guaranteed mortgage
securitization in which the transferor retains all of the resulting securities
and classifies them as either available-for-sale securities or trading
securities; or an acquisition or assumption of an obligation to service a
financial asset that does not relate to financial assets of the servicer or its
consolidated affiliates. The statement also requires all separately recognized
servicing assets and servicing liabilities to be initially measured at fair
value, if practicable, and permits an entity to choose either the amortization
or fair value method for subsequent measurement of each class of servicing
assets and liabilities. The statement further permits, at its initial adoption,
a one-time reclassification of available for sale securities to trading
securities by entities with recognized servicing rights, without calling into
question the treatment of other available for sale securities under Statement
115, provided that the available for sale securities are identified in some
manner as offsetting the entity’s exposure to changes in fair value of servicing
assets or servicing liabilities that a servicer elects to subsequently measure
at fair value and requires separate presentation of servicing assets and
servicing liabilities subsequently measured at fair value in the statement of
financial position and additional disclosures for all separately recognized
servicing assets and servicing liabilities. This statement is effective for
fiscal years beginning after September 15, 2006, with early adoption permitted
as of the beginning of an entity’s fiscal year. Management believes the adoption
of this statement will have no immediate impact on the Company’s financial
condition or results of operations.





In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163,
“Accounting for Financial
Guarantee Insurance Contracts-and interpretation of FASB Statement No.
60”.SFAS
No. 163 clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement of  premium
revenue and claims liabilities. This statement also requires expanded
disclosures about financial guarantee insurance contracts. SFAS No. 163 is
effective for fiscal years beginning on or after December 15, 2008, and interim
periods within those years. SFAS No. 163 has no effect on the Company’s
financial position, statements of operations, or cash flows at this
time.





In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
“The Hierarchy of Generally
Accepted Accounting Principles”.SFAS No. 162 sets forth
the level of authority to a given accounting pronouncement or document by
category. Where there might be conflicting guidance between two categories, the
more authoritative category will prevail. SFAS No. 162 will become effective 60
days after the SEC approves the PCAOB’s amendments to AU Section 411 of the
AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s
financial position, statements of operations, or cash flows at this
time.





In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133.This standard requires companies to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company has not yet adopted the
provisions of SFAS No. 161, but does not expect it to have a material impact on
its consolidated financial position, results of operations or cash
flows.





In
December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding
the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS No. 123 (R), Share-Based
Payment.  In particular, the staff indicated in SAB 107 that it
will accept a company's election to use the simplified method, regardless of
whether the company has sufficient information to make more refined estimates of
expected term. At the time SAB 107 was issued, the staff believed that more
detailed external information about employee exercise behavior (e.g., employee
exercise patterns by industry and/or other categories of companies) would, over
time, become readily available to companies. Therefore, the staff stated in SAB
107 that it would not expect a company to use the simplified method for share
option grants after December 31, 2007. The staff understands that such detailed
information about employee exercise behavior may not be widely available by
December 31, 2007. Accordingly, the staff will continue to accept, under certain
circumstances, the use of the simplified method beyond December 31, 2007. The
Company currently uses the simplified method for “plain vanilla” share options
and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is
not believed that this will have an impact on the Company’s consolidated
financial position, results of operations or cash flows.






F-14
 STUDIO
ONE MEDIA, INC.
 NOTES
TO FINANCIAL STATEMENTS
 JUNE
30, 2008 AND 2007


Note
 11.  The Effect of Recent Account Standards-
continued




In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No.
51.  This statement amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. Before this
statement was issued, limited guidance existed for reporting noncontrolling
interests. As a result, considerable diversity in practice existed. So-called
minority interests were reported in the consolidated statement of financial
position as liabilities or in the mezzanine section between liabilities and
equity. This statement improves comparability by eliminating that diversity.
This statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009,
for entities with calendar year-ends). Earlier adoption is prohibited. The
effective date of this statement is the same as that of the related Statement
141 (revised 2007). The Company will adopt this Statement beginning March 1,
2009. It is not believed that this will have an impact on the Company’s
consolidated financial position, results of operations or cash
flows.





In
December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations.’This
Statement replaces FASB Statement No. 141, Business Combinations, but
retains the fundamental requirements in Statement 141.  This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may not apply it before that date. The
effective date of this statement is the same as that of the related FASB
Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  The Company will adopt this
statement beginning March 1, 2009. It is not believed that this will have an
impact on the Company’s consolidated financial position, results of operations
or cash flows.





In
February 2007, the FASB, issued SFAS No. 159,The Fair Value Option for Financial
Assets and Liabilities—Including an Amendment of FASB Statement No.
115.  This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value. This option is
available to all entities. Most of the provisions in FAS 159 are elective;
however, an amendment to FAS 115 Accounting for Certain Investments
in Debt and Equity Securities applies to all entities with available for
sale or trading securities. Some requirements apply differently to entities that
do not report net income. SFAS No. 159 is effective as of the beginning of an
entities first fiscal year that begins after November 15, 2007. Early adoption
is permitted as of the beginning of the previous fiscal year provided that the
entity makes that choice in the first 120 days of that fiscal year and also
elects to apply the provisions of SFAS No. 157 Fair Value
Measurements.  The Company will adopt SFAS No. 159 beginning
March 1, 2008 and is currently evaluating the potential impact the adoption of
this pronouncement will have on its consolidated financial
statements.





In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements  This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value measurements.
However, for some entities, the application of this statement will change
current practice. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Earlier application is encouraged, provided that the
reporting entity has not yet issued financial statements for that fiscal year,
including financial statements for an interim period within that fiscal year.
The Company will adopt this statement March 1, 2008, and it is not believed that
this will have an impact on the Company’s consolidated financial position,
results of operations or cash flows.















F-15