UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-K





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


ACT OF 1934





For the fiscal year ended June 30, 2009





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)


1





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





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





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





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





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





Large accelerated filer
o
Accelerated filer
oNon-accelerated filer
o
Smaller reporting company
þ





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





State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed fiscal year. As of June 30,
2009 the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $5,715,640 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, 2009, the number of shares of Registrant’s Common Stock outstanding was 16,417,447.














DOCUMENTS INCORPORATED BY REFERENCE





None











2


STUDIO ONE MEDIA, INC.





FORM 10-K





FOR THE FISCAL YEAR ENDED


JUNE 30, 2009


INDEX





PagePART IItem 1.
Business
5Item 1A.
Risk Factors
9Item 1B.
Unresolved Staff Comments
17Item 2.
Properties
17Item 3.
Legal Proceedings
17Item 4.
Submission of Matters to a Vote of Security Holders
17PART IIItem 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
18Item 6.
Selected Financial Data
19Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
24Item 8.
Financial Statements and Supplementary Data.
24Item 9.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
24Item 9A(T).
Controls and Procedures
25Item 9B.
Other Information
26PART IIIItem 10.
Directors, Executive Officers and Corporate Governance
27Item 11.
Executive  Compensation
29Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
31Item 13.
Certain Relationships and Related Transactions, and Director Independence
33Item 14.
Principal Accounting Fees and Services
34PART IVItem 15.
Exhibits, Financial Statement Schedules
35














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.








4


PART  I





ITEM 1. DESCRIPTION OF BUSINESS.





General





Corporate Background





Studio One Entertainment, Inc., of Scottsdale, Arizona, was formed in 2004 to develop the MyStudio® concept.  In April 2007, it completed a reverse merger with Studio One Media, Inc., (formerly Dimensional Visions, Incorporated).  The
acquisition of Studio One Entertainment, Inc. by Studio One Media, Inc. (the “Company”, “Registrant” or “Studio One”), included a one-for-one, stock-for-stock transaction, involving the issuance of 7 million shares of Studio One Media, Inc. stock to the shareholders of Studio One Entertainment, Inc.





Studio One is a Delaware public company traded on the Over-The-Counter Bulletin Board (ticker symbol: SOMD).  As of June 30, 2009, there were 16,417,447 shares issued and outstanding.  Insiders and affiliates control approximately 55% of the issued and outstanding shares.  Since April 2006, the Company has
raised approximately $8 million in the form of equity for purposes of research and development and the launch of MyStudio.





Commencement of Operations





Over the last six years, Studio One and its wholly-owned subsidiary Studio One Entertainment, Inc., have been engaged in the research and development of proprietary, leading edge audio and video technologies for professional and consumer use. During the first quarter of fiscal year 2009, the Company transitioned from a Development Stage
Company to an operating entity with the installation of its first MyStudio interactive audio and video recording studio in the Scottsdale Fashion Square mall in Scottsdale, Arizona on September 29, 2008. The Scottsdale studio has enjoyed high customer satisfaction, a high ratio of repeat customers and has operated with negligible downtime.  Despite launching and operating in the most difficult retail environment in decades, the Scottsdale studio generated $141,861 in sales and trade revenues during
its first nine months of operations including an initial sixty day launch period which offered free or discounted recording sessions to attract customers and build brand awareness.





Business





Studio One Media, Inc. is a diversified media and technology company based in Scottsdale, Arizona. Studio One subsidiaries and divisions include Studio One Entertainment, Inc., MyStudio Recording Studios, MyStudio Audio Labs, Inc., MyStudio Music, MyStudio Management  and MyStudio Masters.




Over the last six years, Studio One and its wholly-owned subsidiary, Studio One Entertainment, Inc., have been engaged in the research and development of proprietary, leading-edge audio and video technologies for professional and consumer use.




Studio One introduced its first groundbreaking product on September 29, 2008 with the installation of its first MyStudio interactive audio and video recording studio in the Scottsdale Fashion Square mall in Scottsdale, Arizona.  A second studio was introduced in Los Angeles in August 2009 and currently resides in a showroom on
Sunset Boulevard where it is being showcased for entertainment industry executives.  The LA studio is expected to be permanently relocated in a local mall at a future date.  The Company expects to install its third studio in the New York area in November 2009.




Studio One’s MyStudio business model and website featuring user generated content (“UGC”) are highly differentiated from leading companies in the entertainment and Internet industries. MyStudio offers a unique “bricks and clicks” business model of cash-generating studios and Internet-based advertising revenues.
Currently, all major video sharing and social networking websites receive little or no revenue from the creation of the UGC hosted on their websites, forcing them to rely almost exclusively on revenue from website advertisers. The MyStudio business model uniquely provides for revenues generated from both the creation of the UGC by MyStudio customers and advertising. MyStudio revenue is derived from paid session revenue, on-studio video monitoring advertising and traditional website advertising..




In addition, the Company expects additional future revenue to be generated from music sales and talent management arising from UGC on the MyStudio.net website. Subject to the availability and timing of capital, Studio One expects to install and operate many MyStudios both nationally
and internationally.




5


ITEM 1. DESCRIPTION OF BUSINESS - continued





The multiple revenue streams differentiate the Company from other social media sites that rely primarily on website advertising.




MyStudio® Recording Studios




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




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





MyStudio enables users, for a $20 fee, to record up to a five-minute personalized video with professional-quality backdrop, lighting and sound. The studios feature Hollywood-style green screen technology, and users can select from over a thousand HD virtual backgrounds (static and dynamic) and thousands of exclusively licensed karaoke tracks
from EMI Music Publishing. The studio lighting is custom programmed for each virtual background, and the sound quality is derived from a specially engineered acoustic design and a proprietary audio signal sequencing process.  Professional users, such as musicians and entertainers, often pay hundreds or thousands of dollars for comparable professionally produced audio and video.




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




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




Current MyStudio locations include Scottsdale, Arizona and Los Angeles, California. The Company expects to install its next studio in the New York area in November 2009.




Business Strategy





The Company plans to introduce its MyStudios into key markets throughout the U.S. followed by a rollout into international markets.  The ease and quality of the studios have created significant repeat users and increasing traffic to the Company’s MyStudio.net website.





Provide High Quality Interactive Recording Studios to the Public.  The Company believes MyStudio offers a service never before available to the public – a professional quality recording experience at an affordable price.  The HD virtual
backgrounds, professional lighting and specially engineered sound cannot be replicated by users at home or outside a professional studio.





Connect Talent to Talent Seekers.  MyStudio provides the aspiring artist or entertainer with a cost-effective, professional quality platform to showcase his or her talent.  Entertainers often pay hundreds or thousands of dollars for comparable
professionally produced audio and video products.  Users can often afford to make numerous videos to showcase their talents due to minimal price point for using MyStudio.  There have been several recent incidents where users’ videos have allowed them to be discovered by talent agents.




6


ITEM 1. DESCRIPTION OF BUSINESS- continued




The studios provide entertainment recruiters with an entirely new method for locating talent. Using MyStudio’s software casting applications, casting directors are able to review a standardized and efficient format for judging talent prospects. This contrasts with the inefficiencies of them receiving, loading and screening numerous
formats of video (i.e., VHS and DVDs) for talent. Additionally, MyStudio allows prospective contestants to perform their auditions on their own time and in unlimited quantities versus the current casting call standard of having only a few moments and a single opportunity in front of a casting agent.  Reality television producers understand that their shows are only as good as the talent. MyStudio will allow for a greater number of contestants to try-out for these shows which provides producers with
a much deeper well of talent. MyStudio has the ability to set a new standard and create a new marketplace for sellers and buyers of talent.





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





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





Business Model





The Company’s “bricks and clicks” business model is currently based upon three primary sources of revenue: recording session fees from the MyStudio studios and advertising revenue from both the individual studios and the Company’s MyStudio.net website.  The
Company plans to drive recording session revenue through the use of industry-sponsored music, modeling and talent contests and drive revenue growth through the addition of new studios and new and repeat users.  These studios in turn will drive exponential traffic to the MyStudio.net website as each new video generates a greater number of unique website visitors due to the viral effect of the Company’s video sharing offering.





MyStudio Recording Session Revenue.Each studio is designed to record videos during a mall’s operating hours, which can average 13 hours per day.  The Company charges $20 per session for use of the studio. Each session lasts up to five
minutes.  There are two pay stations on the studio to expedite the song and background selection and payment process.  Additionally, users may prepay their sessions from home and have an opportunity to select from a greater variety of songs and backgrounds.  The two pay stations and home prepayment are designed specifically to increase throughput of those using the studio.





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





MyStudio Advertising Revenue.  The exterior of the studios contain eight (8) 37” LCD flat screen monitors that are used to promote MyStudio and display advertising messages from selected sponsors and third party advertisers.  The Company
has successfully sold advertising on the Scottsdale studio, and the Company believes that it will secure national advertising sponsors when it has multiple studios in operation.





Website Advertising Revenue.Visitors, visitor demographics and time spent on a website are the primary drivers behind advertising-based revenue models for Internet properties.  The user-generated content created in MyStudio is the traffic generator
for the Company’s MyStudio.net website.  The number of visitors to the MyStudio.net website correlates in an exponential manner to the number of studios in operation.  MyStudio.net has seen substantial growth and averaged over 1,000,000 page views per month over the last quarter, with a single studio in operation.  However, unlike a number of other social media and Internet companies, the Company is not solely dependent
upon website advertising to generate revenues.







7


ITEM 1. DESCRIPTION OF BUSINESS- continued





Marketing and Promotion Strategy





The Company launched its first MyStudio in Scottsdale Fashion Square mall in Scottsdale, Arizona on September 29, 2008. The studio has enjoyed high customer satisfaction, a high number of repeat customers and has operated with negligible downtime. During its first month of operations, the Company offered mostly
free studio access through the distribution of unpaid promotional cards to familiarize the public with the operation and capabilities of the studio while building brand awareness. In November 2008, the Company began a 2-for-1 offer and then moved to the full retail price of $20 per paid session in December. The Company also commenced selling on-studio advertising in December 2008. Despite the significant and continuing slowdown in mall traffic and consumer spending throughout the United States, the Company
has realized session growth during each fiscal quarter since launch and confirmed the viability of its $20 price point.





The Company’s business plan calls for the establishment of regular events and contests to drive traffic to its studios; this assumption has been confirmed by a marked increase in studio traffic when contests and promotions have been offered.  Our comprehensive marketing and promotion strategy is designed to drive traffic
through the studios which in turn drives traffic to the MyStudio.net website.  The Company is focused on forming strategic partnerships at the local, regional and national level with talent seekers (the television, music, film, performing arts and modeling industries), the media (radio and television stations and printed media) and corporate sponsors who may seek access to the Company’s expanding user base.  The partnerships are
designed to generate industry-sponsored music, modeling and talent contests to stimulate trial of and demand for the studios.





In December 2008, the Company finalized two important multi-year agreements with Mark Burnett Productions for reality TV casting and The GRAMMY Foundation to host auditions for various GRAMMY Foundation programs.  Studio One’s MyStudio recording studios and its accompanying website, MyStudio.net,
have and are being used for auditions and promotions relating to several GRAMMY Foundation programs for young people including GRAMMY Camp®, GRAMMY® Signature Schools and the GRAMMY Jazz Ensembles.





Studio One’s agreement with Mark Burnett Productions provides for the use of MyStudiovideo recording studios to augment the casting of Mark Burnett television shows  such as Are You Smarter
Than a 5thGrader.  Mark Burnett Productions will also have the exclusive right to develop reality-based TV shows with MyStudio content.  Mark Burnett Productions is a leading production company for primetime television, cable and the Internet, and has produced over 1,100 hours of television programming which regularly air in over
70 countries around the world.  The Company believes the agreement is a significant development in encouraging trial and utilization of MyStudio and creating national exposure for the Company.





A number of high-profile organizations have hosted contests in the Scottsdale studio. The Company expects to continue to align itself and enter into partnerships with other high profile entertainment companies, so it can offer consumers an ongoing variety of contests to ensure steady studio traffic.





Licensed musical content is another facet in the Company’s marketing and promotional strategy.  In July 2008, the Company entered into a multi-year licensing agreement with EMI Entertainment (“EMI”) which grants Studio One access to EMI’s extensive music catalog.  Notable EMI artists include Madonna,
Stevie Wonder, Reba McEntire, Beyoncé, Kelly Clarkson, Alicia Keyes and Elvis Presley.  The agreement allows users to legally incorporate popular music from one of the world’s largest music publishers into their creative endeavors, synchronizing music, voice and video into a single format.  The Company believes this licensing agreement is unique in the user-generated content industry, and the Company plans to expand its music licensing activities in the future.





The Company is in discussion with a several reality television companies about using the studios for casting.  These companies recognize the casting efficiencies from using MyStudio in terms of screening a greater number of candidates on an expedited basis to provide viewers with the best on-screen personalities possible.





The Company continues to aggressively solicit additional reality TV, music, modeling and comedy audition opportunities and expects to make additional partnership announcements in the future.





MyStudio Audio Labs, Inc. and MyStudio Masters [




The Company has recently completed the research and development of a new technology for mastering audio that it has branded MyStudio Masters. The Masters technology falls under the recently incorporated MyStudio Audio Labs, Inc., a wholly-owned subsidiary of the Company. The Company believes that its MyStudio Masters process for mastering
audio makes music significantly louder, fuller and more exciting than traditionally mastered music. The MyStudio Mastering process achieves its sound without adding compression distortion or exceeding recording industry limits of digital zero. MyStudio Mastering technology is a proprietary, patent pending combination of hardware and software which was developed over the last four years by the MyStudio audio engineering team.  It can be applied on virtually all audio sources including, music, radio,
television and film.


8


ITEM 1. DESCRIPTION OF BUSINESS- continued





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





While the Company has not generated any revenues to date from the technology, the Company’s management team is diligently working on developing and refining its business and marketing strategy to maximize the revenue potential for these technologies for the Company’s shareholders.





Manufacturing





The studios are currently outsourced for manufacture to an Arizona-based manufacturing company. The Company plans to take delivery of two additional MyStudio structures for installation in strategic locations before calendar year-end for a total of five MyStudios expected to be operating by year-end.





Intellectual Property and Licensing





The Company has embarked on an aggressive intellectual property program including the filing of 24 pending foreign and domestic patent applications and eight trademark applications (for which it has received four Notices of Allowance) with the U.S. Patent and Trademark Office all designed to protect what the Company believes is innovative
and proprietary technology. We also enter into confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with third parties, and we rigorously control access to proprietary technology.





With respect to licensed content, Studio One will be responsible for paying for all underlying music- related licensing rights including publishing, synchronization and internet performance rights, for karaoke music used in MyStudio videos.





Employees





As of the end of our fiscal year on June 30, 2009, we employed seventeen full-time employees consisting of three executives, nine technical/engineering persons, one manufacturing engineer, one accountant, one clerical/administrative person, and one talent coordinator.  We also employed four part-time employees as attendants at the
MyStudio recording studio.  Subsequent to June 30, 2009, we have added a vice president of corporate development.  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.








ITEM 1A.   RISK FACTORS




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




History of Operations and Dependence on Future Developments.





Studio One Media, Inc., (the “Company”, “Studio One” 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.


9





ITEM 1A.   RISK FACTORS- continued





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.





The reverse merger 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 opened its first studio in Scottsdale Fashion Square, Scottsdale, Arizona, on September 29, 2008, and intends to place its studios in malls across America, as well as expand into other high traffic locations, 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 studio, 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 limited operations and is currently generating modest revenues.





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 an early stage business enterprise.  Since the Company has limited operations, there can be no assurance that its business plan 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 an early stage business 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.





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


10


ITEM 1A.   RISK FACTORS- continued





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.





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 offering a similar high-quality, in-mall HD studio experience.  The Company believes that it is 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.





The Company’s web property competes in a growing social media market with companies like Facebook, YouTube and MySpace.  The Company believes its HD-quality, user-generated content is unique and may allow it
to differentiate itself from other social media companies.





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 dependent 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 initiatives, 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.








11


ITEM 1A.   RISK FACTORS- continued





Dependence on Intellectual Property - Design and Proprietary Rights.





Our success and ability to compete depends to a degree on our intellectual property.  We will rely on copyright, trademark and patent filings as well as confidentiality arrangements, to protect our intellectual property locally and internationally.  Studio One Entertainment, Inc. has filed 24 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 eight trademark applications and have received Notices
of Allowance on four of those applications.  Effective protection may not be available for our service marks.  Although we plan to continue to register our service marks in the United States and in countries in which we do business or expect to do business, we cannot assure you that we will be able to secure significant protection for these marks.  Our competitors, if any exist, or others may adopt product or service names similar to 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 was unsuccessful in protection of proprietary and intellectual property rights to 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 financial results.





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.








12


ITEM 1A.   RISK FACTORS- continued





Exposure to Product Liability Lawsuits.





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





Dependency on Key Suppliers and Product Availability.





Loss of key suppliers, lack of product availability or loss of delivery sources could delay product development, manufacturing and decrease sales and earnings.  Our ability to manufacture 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.





Fluctuations in Cost of Raw Materials.





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





Regulatory Factors.





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





Terms of Subsequent Financings.





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








13


ITEM 1A.   RISK FACTORS- continued





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 the Price of Common Stock.





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





●
Ability to broadly commercialize and expand MyStudio;●
Changes in entertainment technology;●
Price and availability of alternative entertainment available to the public;●
Availability and cost of technology and marketing personnel;●
Our ability to establish and maintain key relationships with industry partners;●
The amount and timing of operating costs and capital expenditures relating to maintaining our business, operations, and infrastructure; and●
General economic conditions and economic conditions specific to the entertainment industry.


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





Our Common Stock is Subject to Penny Stock Regulations.





Our common stock is subject to regulations of the 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, 2009 financial statements contains a “going concern” qualification.  The report of the independent auditors on our financial statements for the year ended June 30, 2009, includes an explanatory paragraph relating to our ability to
continue as a going concern.  We have suffered substantial losses from operations and require additional financing.  Ultimately we need to generate additional revenues and attain profitable operations.  These factors raise substantial doubt about our ability to continue as a going concern.  There can be no assurance that we will be able to develop commercially viable products or an effective marketing system.  Even if we are able to develop commercially viable
products, there is no assurance that we will be able to attain profitable operations.





Dilution; Dilutive Effect of Future Transactions.





As of June 30, 2009, the Company had 16,417,447 shares of common stock, $0.001 par value, issued and outstanding.  The Company contemplates issuing a maximum of 1,500,000 shares of common stock pursuant to its 2009 Stock Incentive Plan approved by the Board on June 10, 2009, and further shares to certain of its management, directors,
officers, employees and consultants in the immediate future.  The Company also had 774,044 shares of various classes of Convertible Preferred Stock outstanding, which can be converted to 514,814 shares of common stock.  In addition, the Company had warrants outstanding that would permit, if exercised, the issuance of 3,070,671 additional shares of common stock at an average exercise price of $3.14.  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 will occur.


14


ITEM 1A.   RISK FACTORS- continued





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 the market price.  Exercises 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 Preferred Shares or Restricted Common 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.  Furthermore, there is presently no public or private market for the Common shares made available in this Offering.





Expect to Incur Losses for the Foreseeable Future.





We expect to incur losses for the foreseeable future and we may never become profitable.   Our business model requires that additional studios be deployed and operating for the Company to generate such revenues to reach break-even.  There are no assurances that such revenues will occur. 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 further research and development; expand our information technology systems; and lease and purchase more space to accommodate our operations.





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





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





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 officer, director, and other key personnel has or 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.


15


ITEM 1A.   RISK FACTORS- continued





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.





Effects of Amortization Charges/ Stock Based Compensation





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 and/or warrants.  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 two to ten years in the case of options granted to employees, officers and directors and two years 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 common 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 cash dividends will be at our Board of Directors’ discretion and will depend on our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that our Board of Directors considers relevant.  No dividends have been declared or paid by the Company with respect to its common stock, and the Company does not contemplate paying dividends on the common stock in the foreseeable
future.








16


ITEM 1A.   RISK FACTORS- continued





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.  We do not maintain any key-person life insurance
policies.  The loss of any of our management or key personnel could seriously harm our business.








ITEM 1B.  UNRESOLVED STAFF COMMENTS





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








ITEM 2. DESCRIPTION OF PROPERTY.





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-to-month basis.  The total lease expense is $6,650 per month, payable in cash, common stock of the Company and on-studio advertising.





In anticipation of implementation of our business plan, we had 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 never occupied this space and in May 2009, entered into a termination agreement with the
landlord pursuant to which the Company will pay the sum of $50,000 over a period of ten months in exchange for terminating future obligations under the lease.





The Company leases space at Scottsdale Fashion Square for its MyStudio recording studio pursuant to a two-year lease.   The monthly rent for this space is at a market rate commensurate with other kiosk operations.  As the Company expands, it will continue to secure space for its recording studios at various venues
and locations around the country.





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, 2008 and
none were submitted to the securities holders during the fiscal year ended June 30, 2009.


17





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.





Per Share Common Stock Bid Price By Quarter





For the Fiscal Year Ending on June 30, 2009


High


LowQuarter Ended June 30, 2009


0.99


0.40Quarter Ended March 31, 2009


1.29


0.50Quarter Ended December 31, 2008


4.90


0.56Quarter Ended September 30, 2008


5.50


3.88








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








Holders





As of June 30, 2009, 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 439.  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.  Pursuant to the terms of the Company’s Series A-1 Senior Convertible Redeemable Preferred
stock, a 6% annual dividend is due and owing.  As of June 30, 2009, the Company has not declared dividends on Series A, Series B or its Series A-1 preferred stock.  The unpaid cumulative dividends totaled approximately $183,057.  See Notes 4 and 6 of Notes to Financial Statements.


18


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





Supplemental Disclosure of Non-Cash Investing and Financing Activities for Fiscal Years 2009 and 2008





Fiscal Year 2009





During fiscal year ended June 30, 2009, the Company accepted subscriptions for 1,505,478 shares of unregistered restricted shares of common stock at an average price per share of $1.27 for a total of $2,061,074 and agreed to issue 743,330 shares pursuant to warrants granted in connection with such placements.  Generally, the warrants
may be exercised at any time within a one to two-year period beginning on the date of the respective investments at an average exercise price of $3.18.  The Company also agreed to issue 890,391shares pursuant to warrants granted to various employees and consultants, which may be exercised at varying times ranging from two to ten years at an average exercise price of $1.72 per share.  In addition, the Company issued 1,142,935 shares of common stock for consulting, legal and other services valued
at $1,511,922, 50,000 shares in conversion of preferred shares valued at $50,000, and 52,733 shares in conversion of debt valued at $26,367.   The Company also issued 100,000 shares to a trustee as collateral for a promissory note made in termination of a lease agreement.   During the fiscal year ended June 30, 2009, Warrantholders exercised various options for 349,335 shares for a total of $363,417, an average of $1.21 per share.





In June 2009, the Company adopted the 2009 Long-Term Stock Incentive Plan intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company.   As of June 30, 2009, the Company had granted options under this Plan to two employees
to purchase, in the aggregate, 85,000 shares of the Company’s common stock.  The exercise period for each of the grants is two years from the date of grant and the exercise price in each instance is $0.80.





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 $3,010,725 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 684,322 shares of common stock for consulting, legal and other services valued at $2,405,096, 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.








ITEM 6 - SELECTED FINANCIAL DATA





Note required by Form 10-K for smaller reporting companies.








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





FISCAL YEARS 2009 AND 2008





RESULTS OF OPERATIONS





The Company launched its first MyStudio in Scottsdale Fashion Square mall in Scottsdale, Arizona on September 29, 2008. The studio has enjoyed high customer satisfaction, a high ratio of repeat customers and has operated with negligible downtime.  Despite the significant slowdown in mall traffic and
consumer spending which began in October, the Company has generated quarterly revenue growth.





The Company’s business plan calls for the establishment of regular events and contests to drive traffic to its studios and this assumption was confirmed by a marked increase in studio traffic when contests and promotions have been offered. In late December 2008, the Company finalized two important multiyear partnerships with Mark
Burnett Productions for reality TV casting and The GRAMMY Foundation to do auditions for various GRAMMY Foundation programs. The Company expects to continue to align itself and enter into partnerships with other high profile entertainment companies, so it can offer consumers an ongoing variety of contests to ensure steady studio traffic.  During the fiscal year ended June 30, 2009 the Company hosted a variety of contests and auditions.


19


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





Revenues:





Twelve Months EndedIncrease/(Decrease)6-30-09

6-30-08

Amount

%Revenue


141,861



839



141,022

99
%








The Company opened its first MyStudio on September 29, 2008, and began generating revenue on October 1, 2008.





It had no operating revenue for the twelve months ended June 30, 2008 or for the three preceding fiscal years during which time it has expended considerable effort and funds in developing MyStudio.  Until the current fiscal year, the Company has been a Development Stage company.





The Company’s business model provides for revenues from three sources:





·
Paid revenue sessions from customers who utilize the studios to create audio/video recordings.·
Advertising revenue from the external monitors located on each MyStudio facility.·
Advertising revenue from its website.





The revenues from each of the first two of these sources is expected to increase proportionally to the number of studios we place in operation.   Future revenue from advertising on the website will depend on the number and length of visits to our website by MyStudio users and other viewers.





Cost of Sales:





Twelve Months EndedIncrease/(Decrease)6-30-09

6-30-08

Amount

%Cost of Sales


136,413



0



136,413

100.0
%


Cost of Sales is comprised of expenses directly related to the operation of the MyStudio facility and includes studio rent paid to the mall, connectivity charges for high speed internet access, utilities, advertising, attendant personnel and related payroll costs, and other expenses associated with a particular studio.  Depreciation
and amortization associated with the studio is accounted for in the Company’s general and administrative expenses.





General and Administrative Expenses:




Twelve Months EndedIncrease/(Decrease)6-30-09

6-30-08

Amount

%General and Administrative Expenses


2,600,675



1,729,396



871,279

50.4
%


General and administrative expenses consist primarily of compensation and related costs for personnel and facilities for our finance, human resources, information technology and general administration, and fees for professional services.  Professional services are principally comprised of outside legal, audit, information technology,
consulting and outsourcing services.





General and administrative expenses increased for the year ended June 30, 2009 by approximately $871,279 compared to the year ended June 30, 2008.








20


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





The overall increase for the twelve month period ended June 30, 2009 in general and administrative costs is attributable to the developmentof MyStudio, including the hiring of personnel, such as software developers, design engineers, administrative staff, marketing personnel and others, increasing expenses substantially.  The
greatest portion of the expenses occurred in the first quarter of the current fiscal year as we ramped up to open our first studio.  Subsequently, for the second and third quarters of the current fiscal year, we have taken actions to curtail our general and administrative expenses to address the uncertainties of the current economic environment.  The non-cash portion of general and administrative expenses for the twelve months ended June 30, 2009, was $789,487, compared
to $938,136 for the period ended June 30, 2008, a decline of approximately 16%.  These non-cash charges are attributable to shares issued to various employees and consultants for services rendered and for warrants to investors in connection with equity raises during the respective periods.  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.





Research and Development Expenses:




Twelve Months EndedIncrease/(Decrease)6-30-09

6-30-08

Amount

%Research and Development Expenses


800,967



778,834



22,133

2.8
%   Research and development expenses consist primarily of compensation and related costs for personnel and consultants responsible for developing the MyStudio prototype and the Company’s companion social networking website, MyStudio.net.  These costs include 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.  We expense research and development costs as they are incurred.





MyStudio is now a developed product and was formally introduced to the market place in September 2008.  Although the Company has now moved into an operational stage, with the production, installation and operation of its first studio and others contemplated in various locations, it will also continue to incur additional research
and development costs in refinement of the MyStudio facility and its website.  Research & development costs, however, as a percentage of overall costs, are expected to decline as the Company rolls-out additional MyStudio units.





For the twelve months ended June 30, 2009, research & development expenses increased by some 2.8% to $800,967 compared to $778,834 for the twelve months ended June 30, 2008.  The Company expects such expenses to continue at the current twelve-month level for an indefinite period.





Total Operating Expenses:




Twelve Months EndedIncrease/(Decrease)6-30-09

6-30-08

Amount

%Total Operating Expenses


6,585,561



6,188,444



397,117

6.4
%   This increase is mostly attributable to the launch of our first studio, for which the Company incurred marketing and promotion expenses not present in earlier periods and ramped up its staff in preparation of a more aggressive studio roll-out plan.  Consequently, for the twelve months ended June 30, 2009, Total operating expenses increased to $6,585,561, compared to $6,188,444 for the twelve months ended June 30, 2008,
an increase of approximately 6.4%.





Net Income/(Loss):




Twelve Months EndedIncrease/(Decrease)6-30-09

6-30-08

Amount

%Net Income (Loss)


6,599,366



6,178,992



420,374

6.8
%


21


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





The net loss for the twelve months ended June 30, 2009 was $(6,599,366) which is an 6.8% increase in the loss recorded for the comparable twelve months ended June 30, 2008.





The Company recorded an interest expense of $173,776 in the twelve months ended June 30, 2009 compared to $14,553 in interest expense for the twelve months ended June 30, 2008.  The nominal amount of interest expense for the twelve month periods ending June 30, 2008, is attributable to the reduction in outstanding short-term debt
in the form of extinguishment and conversion occurring in the previous two fiscal years.  The increased interest expense occurring for the twelve month periods ending June 30, 2009 relates to interest accrued on obligations to a related party.





The increase in the net loss for the twelve months ended June 30, 2009 parallels the changes in general and administrative expenses and research and development costs for the same periods.





Net Operating Losses





We have accumulated approximately $15,237,122 million of net operating loss carryforwards as of June 30, 2009, which the Company believes may be offset against future taxable income through 2029.  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, 2009 because the potential tax benefits of the loss carryforward is offset by valuation allowance of the same amount.





Liquidity and Capital Resources





The Company had limited revenue during the fiscal year ended June 30, 2009.





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, 2009, the Company undertook several sales of non-registered securities
in a series of private transactions.  The Company issued 1,505,478 unregistered restricted shares at an average price of $1.27 per share for a total of $2,061,074 and granted warrants to these security holders to acquire an additional 743,330 shares at an average exercise price of $3.18 at any time within two years after the dates of their respective investments.  In addition, the Company issued 1,142,935 to various employees and consultants for services valued at $1,511,922 and granted warrants
to employees and consultants to purchase an additional 890,391shares at an average exercise price of $1.72 per share at various times up to ten years.  The Company also issued 50,000 shares in conversion of preferred shares valued at $50,000, and 52,733 shares in conversion of debt valued at $26,366.   The Company also issued 100,000 shares to a trustee as collateral for a promissory note made in termination of a lease agreement.   During the fiscal year ended June 30, 2009,
Warrantholders exercised various options for 349,335 shares for a total of $363,417, an average of $1.04 per share.  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 respective offering memoranda.





Based on the Company’s current plans, management has determined that the funds currently available to the Company will be inadequate to completely 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.  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 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.


22


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





Going Concern





The report of our independent registered public accounting firm on the financial statements for the year ended June 30, 2009, includes an explanatory paragraph indicating substantial doubt as to our ability to continue as a going concern.  We have an accumulated deficit of $15,237,122 and working capital deficit of $1,692,495
as of June 30, 2009.  We have not generated meaningful revenues in the last two fiscal years.  Our ability to establish the Company as a going concern is dependent upon our ability to obtain additional financing in order to fund our planned operations and ultimately to achieve profitable operations.





Intangible Assets





The Company’s intangible assets consist of 24 pending patents and 8 applications for trademarks, 4 of which Notices of Allowance have been received. Generally a patent has a life of 17 to 20 years.





The Company performed an impairment test in accordance with the guidance provided in SFAS 142, “Goodwill and Other Intangible Assets”, and has determined that, as of June 30, 2009, no impairment exists on any of the Company’s assets based on the present value of future cash flows generated from Company assets.





Off-Balance Sheet Arrangements





We do not have any off-balance sheet arrangements.





Critical Accounting Policies





We have identified the following policies as critical to our business operations and the understanding of our results of operations. The preparation of these financial statements require us to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the
date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that future actual results will not differ from those estimates. The effect of these policies on our business operations is discussed below where such policies affect our reported and expected financial results.





Fair Value Measurements.  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. The Company has adopted  SFAS No. 157 and there have been no significant effects on its financial position
or results of operation.





Income Taxes.  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 has adopted FIN 48 and there have been no material impacts on its financial reporting or on its disclosure requirements.





Revenue Recognition. The Company’s business model is based on three primary sources of revenue:  revenue from individual recording sessions in a studio, revenue from advertising on the exterior flat screen monitors located on each studio, and future revenue
from website advertising.  We record sales when revenue is earned.  We make no sales on credit.  We had $37,600 in revenue from kiosk sessions and $104,261 $141,861 in revenue from barter exchanges during the fiscal year ended June 30, 2009.





Barter Transactions - Barter revenue relates to recording session services provided by Studio One to business customers in exchange for products and services that Studio One would otherwise be required to buy for cash. Barter expenses reflect the expense offset to barter revenue.
The amount of barter revenue and expense is recorded at the estimated fair value of the services received or the services provided, whichever is more objectively determinable, in the month the services and advertising are exchanged.  Studio One applies APB 29, Accounting for Non-Monetary Transactions, the provisions of EITF 93-11, “Accounting for Barter Transactions Involving Barter Credits” and EITF 99-13 “Accounting for Advertising Barter Transactions” and, accordingly, recognizes
barter revenues only to the extent that Studio One has similar cash transactions within a period not to exceed six months prior to the date of the barter transaction.


23


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





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





Patents. We evaluate potential impairment of long-lived assets in accordance with FAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” FAS No. 144 requires that certain long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable based on expected undiscounted cash flows that result from the use and eventual disposition of the asset. The amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Patent and software costs include direct costs of obtaining patents. Costs for new patents are either expensed as they are incurred or capitalized and amortized over the estimated
useful lives of seventeen years and software over five years.





Research and Development.   Our research and development efforts concentrate on new product development, improving product durability and expanding technical expertise in the manufacturing process. We expense product research and development costs as they are incurred.  We
incurred research and development expense of $800,967 and $778,834 during the years ended June 30, 2009 and 2008, respectively.





Stock 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. We use 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.








ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





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








ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





Our financial statements as of and for the fiscal years ended June 30, 2009 and 2008 have been audited to the extent indicated in the report by Mantyla McReynolds, LLC, independent certified public accountants, and have been prepared in accordance with generally accepted accounting principles and pursuant to Regulation S-X as promulgated
by the SEC.  The aforementioned financial statements are presented in a separate section of this report following Part IV.








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





The auditor for the Company is the firm of Mantyla McReynolds, LLC, 178 South Rio Grande Street, Suite 200, Salt Lake City, Utah  84101, who were engaged on September 11, 2009.





The audit reports of Mantyla McReynolds on the financial statements for the years ended June 30, 2009 contained a separate paragraph stating:  "The Company has incurred losses since inception of $15,237,122 and has limited 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 substantial revenues from its personal recording studio 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 studios.  The financial statements
have been prepared on a going concern basis, which contemplates the realization and settlement of liabilities and commitments in the normal course of business.  The available funds at June 30, 2009, are not sufficient to satisfy the present cost structure. Management recognizes that the Company must obtain additional funding to enable it to continue operations and operate as a going concern.  ”


24


ITEM 9. 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 Mantyla McReynolds on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of Mantyla McReynolds, would have caused
it to make reference to the subject matter of the disagreement in connection with its report.


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 Mantyla McReynolds, 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 9A. CONTROLS AND PROCEDURES.





Evaluation of disclosure controls and procedures





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





The Certifying Officers responsible for establishing and maintaining adequate internal control over financial reporting for the Company used the Internal Control over Financial Reporting Integrated Framework issued by Committee of Sponsoring Organizations’ (COSO) to conduct an extensive review of the Company's “disclosure controls
and procedures” (as defined in the Exchange Act, Rules 13a-15(e) and 15-d-15(e)) as of the end of each of the periods covered by this report (the “Evaluation Date”).  Based upon that evaluation, the Certifying Officers concluded that, as of June 30, 2009 and June 30, 2008, our disclosure controls and procedures were ineffective in ensuring that the information we were required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in Securities and Exchange Commission (“SEC”) rules and forms.





The Certifying Officers based their conclusion on the fact that the Company has identified a material weakness in controls over financial reporting, detailed below.  In order to mitigate this risk, the Company has contracted with consultants with expertise in US GAAP and SEC financial reporting standards to review and compile
all financial information prior to filing that information with the SEC.  There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.





Internal Control over Financial Reporting





Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  Management used the Internal Control over Financial Reporting Integrated Framework issued by Committee of Sponsoring Organizations’ (COSO) to conduct an extensive review of the Company’s internal
controls over financial reporting to make that evaluation.  As of June 30, 2009 and June 30, 2008, the Company had a deficiency in internal controls that constituted a material weakness in internal controls. Due to this material weaknesses, management concluded that internal controls over financial reporting as of June 31, 2009 were ineffective, based on COSO’s framework.








25


ITEM 9A. CONTROLS AND PROCEDURES- continued





This deficiency is attributed to the fact that the Company does not have adequate resources to address complex accounting issues as well as an inadequate number of persons to whom it can segregate accounting tasks within the company so as to ensure the 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 2009  In order to mitigate this risk, the Company has contracted with consultants with expertise in US GAAP
and SEC financial reporting standards to review and compile all financial information prior to filing that information with the SEC.  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.





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








ITEM 9B.  OTHER INFORMATION





None








26


PART III





ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





The directors and executive officers of the Company as of June 30, 2009 are as follows:





Name
Age
PositionPreston J. Shea
61
Director, President, CEO, SecretaryKenneth R. Pinckard
63
Director, Vice President, CFO, Legal CounselBarry M. Goldwater, Jr.
70
Director, ChairmanShelly Yakus
63
Vice PresidentMatthew Long
43
Vice PresidentAnna Madrid
35
Vice President








The directors and officers of wholly owned operating subsidiary, Studio One Entertainment, Inc., at June 30, 2009, is:





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





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.





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





Kenneth R. 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 senior positions involving finance and management.  He is presently on the Boards of
two companies in addition to Studio One.  Mr. Goldwater holds a degree in Marketing from Arizona State University.





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


27


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





Mr. Matthew Long,isanEmmy Award winner and has enjoyed an extensive career as a producer, director, editor, director of photography and writer for television, feature film and video productions.  Mr.
Long is responsible for 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 developed
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.  He completed licensing and joint venture agreements with multi-national corporations such as Polygram, Nintendo, JVC, Coca Cola, and NEC.





Anna Madrid, prior to joining Studio One, specialized in leasing, marketing and corporate strategic partnerships within the Shopping Center industry.  She has extensive experience working with local, regional and national brands and advertisers.  Anna has represented
some of the most recognized luxury shopping centers in the nation and now leads all aspects of Studio One's overall business development.





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 (the “Act”), 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.





In addition, subsequent to June 30, 2009, on July 21, 2009, the Company approved a Directors and Officers Indemnity Agreement for its directors and principal officers.  It has since entered into agreements with Messrs. Barry M. Goldwater, Preston J. Shea, Kenneth R. Pinckard, Lawrence G. Ryckman, Sheldon Yakus, Matthew Long and Anna
Madrid.  A copy of  the Directors and Officers Indemnity Agreement is attached as an exhibit to this Annual Report.





Compliance with Section 16(a) of the Exchange Act





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





Based solely on a review of the copies of such forms furnished to the Registrant during or with respect to fiscal 2009, 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 Forms 3 and 4at the time of their respective
election to the Board or appointment as an officer.  Except as stated in the preceding sentence, the Company believes that all Reporting Persons have complied on a timely basis with all filing requirements applicable to them.


28


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





Code of Ethics





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





Audit Committee





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








ITEM 11. EXECUTIVE COMPENSATION.





Summary Compensation Table





The following table sets forth the total compensation earned by or paid to the Company's Officers for the last two fiscal years.  Only one officer of the Company earned more than $100,000 in the last two 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,
2009
-0-
-0-
-0-
-0-
-0-
-0-
$33,970Secretary
2008
-0-
-0-
-0-
-0-
-0-
-0-
$32,670Kenneth R. Pinckard, Vice
2009
$  -0-
-0-
-0-
-0-
-0-
-0-
$200,000 (2)President, Treasurer
2008
$61,865
-0-
-0-
-0-
-0-
-0-
$  5,280Shelly Yakus, Vice
2009
$51,450
-0-
-0-
-0-
-0-
-0-
$110,000President
2008
$16,200
-0-
-0-
-0-
-0-
-0-
$ 5,280Matthew Long, Vice
2009
$107,965
-0-
$12,495
-0-
-0-
-0-
$10,540President
2008
$ 90,000
-0-
$12,495
-0-
-0-
-0-
$29,020Anna Madrid, Vice President
2009
$181,790
-0-
-0-
-0-
-0-
-0-
$    -0-2008
-0-
-0-
-0-
-0-
-0-
-0-
$    -0-





Lawrence G. Ryckman,
2009
-0-
-0-
-0-
-0-
-0-
-0-
$250,000 (1)President of Studio One
2008
-0-
-0-
-0-
-0-
-0-
-0-
$29,914Entertainment, Inc.











29


ITEM 11. EXECUTIVE COMPENSATION - continued





(1)  Total compensation provided for fiscal year ended June 30, 2009.  Of this amount, $19,800 was paid in cash, $100,000 was paid in the form of a Convertible Promissory Note dated December 31, 2008 in the amount of $100,000, payable to an affiliate of Mr. Ryckman,
and the balance was accrued at year end.





(2) Total compensation provided for fiscal year ended June 30, 2009.  Of this amount, $138,124 was paid in cash and the balance was accrued at year end.











Outstanding Equity Awards at Fiscal Year-End


Name
OPTION AWARDS
STOCK AWARDSNumber of Securities Underlying Unexercised Options (#) Exercisable
Number of Securities Underlying Unexercised Options (#) Unexercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
Option Exercise Price ($)
Option Expiration Date
Number of Shares or Units of Stock that have not Vested(#)
Market Value of Shares or Units of Stock that have not Vested($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have not Vested ($)Barry M. Goldwater, Jr.
125,000
-0-
-0-
1.00
08/29/17 (1)
11/18/18 (2)
-0-
-0-
-0-
-0-Preston J. Shea
125,000
-0-
-0-
1.00
08/29/17 (1)
11/18/18 (2)
-0-
-0-
-0-
-0-Matthew Long
25,000
-0-
-0-
5.95
03/12/10 (3)
06/12/10 (3)
-0-
-0-
-0-
-0-





(1)
50,000 shares expire on 8/29/2017


(2)
75,000 shares expire on 11/18/2018


(3)
20,000 shares expire on 3/12/10 and 5,000 shares expire on 6/12/10








Compensation of Directors





Our non-employee Directors receives reimbursement for expenses of attendance for each scheduled meeting that requires physical attendance.  Effective October 1, 2008, Messrs. Goldwater and Shea each receives 5,000 restricted common shares for each quarter year service to the Company.  Prior to that date, each such Director
received 1,000 shares for each quarter year service.





Compensation for our directors for our last completed fiscal year is set forth below, with the exception of Kenneth R. Pinckard and Preston J. Shea, whose compensation is disclosed above.





Director Compensation


Name
Fees Earned or Paid in Cash ($)
Stock Awards ($)
Option Awards ($)
Non-Equity Incentive Plan Compensation ($)
Non-qualified Deferred
Compensation
Earnings ($)
All Other Compensation ($)
Total ($)Barry M.   Goldwater, Jr.
-0-
$33,970
-0-
-0-
-0-
-0-
$33,970





30


ITEM 11. EXECUTIVE COMPENSATION- continued





Employment and Related Agreements





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








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





The following table sets forth certain information, as of June 30, 2009, 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, 2009 with the number of outstanding
shares at 16,417,447, (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
158,000 Direct
(4)
0.95%Barry M. Goldwater, Jr.
3104 E. Camelback Rd., #274
Phoenix, AZ  85016
148,000Direct
(4)
0.89%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)
30.73 %Shelly Yakus
1778 Lantana Drive
Minden, NV  89423
100,000 Indirect
0.60%Matthew Long
17197 N. 54 thAvenue
Glendale, AZ  85308
35,500 Direct
(5)
0.21%Anna Marid
15417 Becker Lane
Surprise, AZ  85379
65,101 Indirect
0.39%Perry D. Logan
420 Saint Andrews Court
Las Vegas, NV  89144
1,443,105 Direct
8.65%





Officers and Directors as a group
(7 persons)
5,637,101
33.77%





(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.








31


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






(2)
The above table is based on 16,417,447 shares of Common Stock outstanding as of June 30, 2009 plus options to purchase 275,000 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 125,000 shares of Common Shares at $1.00 per share that have been approved by the Board as of the date of filing of this Report.





(5)
Includes Option to purchase 20,000 shares of Common Shares at $5.95 per share and 5,000 shares at $4.00 per share that have been approved by the Board as of the date of filing of this Report.








Change in Control





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








Equity Compensation Plans





As of June 30, 2009 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.





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 was 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 was intended
to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company.  A maximum of 100,000 shares of the Company's common stock was 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, 2009, the Company had 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 was 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 was intended
to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company.  A maximum of 100,000 shares of the Company's common stock was 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, 2009, the Company had issued all of the shares covered by the 2006 Plan.


32


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





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 was intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company.  A maximum of 1,000,000 shares of the Company's common stock were reserved for issuance under stock options to be issued under the Employee Stock Option Plan.  The option exercise price was to 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 was administered by the Board of Directors.   No shares were issued or authorized pursuant to the 2007 Non-Executive Employee Stock Option Plan and on June 10, 2009, the Company rescinded the plan and replaced it with the 2009 Long-Term Stock Incentive Plan.





2009 Long-Term Stock Incentive Plan





The Board of Directors on June 10, 2009, approved the 2009 Long-Term Stock Incentive Plan.  The purpose of the 2009 Long-term Stock Incentive Plan is to advance the interests of the Company by encouraging and enabling acquisition of a financial interest in the Company by employees and other key individuals.  The 2009
Long-Term Stock Incentive Plan is intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company.  A maximum of 1,500,000 shares of the Company's common stock is reserved for issuance under stock options to be issued under the 2009 Long-Term Stock Incentive Plan.  The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options and Restricted Stock Awards.  The
2009 Long-Term Stock Incentive Plan is administered by the Board of Directors or, at its direction, the Compensation Committee comprised of officers of the Company.   As of June 30, 2009, the Company had granted such options to two employees to purchase, in the aggregate, 85,000 shares of the Company’s common stock.  The Exercise Period for each of the grants is two years from the date of grant and the exercise price in each instance is $0.80.











ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





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





During the year ended June 30, 2006, Lawrence Ryckman, President and CEO of Studio One Entertainment, Inc., either directly or through affiliated entities, loaned the Company $93,948; during the year ended June 30, 2007, he loaned an additional $43,400 to the Company.  These funds were used 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.  On December 31, 2008, the balance
owing Mr. Ryckman and his affiliated entities was reduced to a single Convertible Promissory Note payable bearing interest at 10% per annum and due on demand.  The original principal amount of this note was $101,591.  In addition, on December 31, 2008, the Company issued a second Convertible in the amount of $100,000 to an affiliate of Mr. Ryckman as partial compensation for services rendered in 2008.  At June 30, 2009, the amount owed Mr. Ryckman and his affiliated entities, included
interest is $211,587.  Subsequent to June 30, 2009, the two Convertible Promissory Notes have been converted to common shares according to the terms of the respective notes.





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.


33


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS- continued





Future Transactions





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





Conflicts of Interest





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





Director Independence





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





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





Barry M. Goldwater, Jr., is an independent directors under the above definition.  We do not list that definition on our Company website.





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








ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES.





The following is a summary of the aggregate fees billed to Registrant by its principal accountant(s) for professional services rendered for the fiscal years ended June 30, 2009 and 2008.





Fee Category

Fiscal 2009 Fees

Fiscal 2008 FeesAudit Fees (1)


$ 24,543


$ 30,500Audit-Related Fees (2)


0


0Tax Fees (3)


0


0All Other Fees (4)


0


0Total Fees


$ 24,543


$ 30,500





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, 2009 and 2008, and for review of the financial statements included in Registrant's Quarterly Reports on Form 10-QSB for those fiscal years.


34


ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES- continued





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, 2009 and 2008.





None of the "audit-related," "tax" and "all other" services in 2009, as defined above, were approved by the Audit Committee in reliance on the de minimus exception to the preapproval requirements under federal securities laws and regulations.





Pre-Approval of Services of Principal Accounting Firm





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





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





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





Non-Audit Services





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











ITEM 15. EXHIBITS





The following Exhibits are incorporated by reference:









Exhibit No.
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)   35
  ITEM 15. EXHIBITS - continued
  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)21.1
Subsidiaries of the Registrant (h)










(a)         Incorporated by reference from the Company’s registration Statement on Form SB-2 dated June 19, 2000 (Registration No. 333-30368).


(b)         Incorporated by reference from the Company’s registration Statement on Form SB-2 dated July 10, 2001 (Registration No. 333-56804).


(c)         Incorporated by reference from the Company’s Amendment No. 1 to Annual Report on Form 10-KSB, dated February 22, 2002.


(d)         Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2003, filed October 15, 2003.


(e)         Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2004, filed November 15, 2004.


(f)         Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2006, filed September 29, 2006


(g)         Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2007, filed September 28, 2007, and Form 10-K/A for the fiscal year ended June 30, 2007, filed May 27, 2008.


(h)         Incorporated by reference from the Company’s Annual Report, Form 10-KSB for fiscal year ended June 30, 2008, filed September 29, 2008.










36





ITEM 15. EXHIBITS -continued





The following Exhibits are filed herewith:





10.6
2009 Long-Term Stock Incentive Plan


10.7
Form of Directors and Officers Indemnity Agreement


23.1
Consent of Mantyla McReynolds, LLC


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


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


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


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








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 15, 2009
By:
/s/ Preston J. Shea,Preston J. Shea,Title   President








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





Signature
Title
Date/s/ Preston J. Shea

President and Director
September 15, 2009Preston J. Shea

(Principal Executive Officer)/s/ Kenneth R. Pinckard

Chief Financial Officer, Director
September 15, 2009Kenneth R. Pinckard

(Principal Financial Officer)/s/ Kenneth R. Pinckard

Chief Accounting Officer, Director
September 15, 2009Kenneth R. Pinckard

(Principal Accounting Officer)/s/ Barry M. Goldwater, Jr/

Director
September 15, 2009Barry M. Goldwater, Jr.








37





STUDIO ONE MEDIA, INC.
 (A Development Stage Company)
 
 FINANCIAL STATEMENTS
 
 INDEX TO THE FINANCIAL STATEMENTS
PAGE
NUMBERIndependent Auditor's Report
F-2Financial StatementsConsolidated Balance Sheets
F-3Consolidated Statements of Operations
F-4Consolidated Statements of Stockholders' Equity (Deficit)
F-5Consolidated Statements of Cash Flows
F-6Notes to Financial Statements
F-7 - F-22








F-1




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  
 The Board of Directors and Shareholders
 Studio One Media, Inc.
 
 We have audited the accompanying consolidated balance sheets of Studio One Media, Inc. as of June 30, 2009 and 2008, and the related consolidated statements of operations, cash flows, and stockholders’ deficit, for the years ended June 30, 2009 and 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 audit.
  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company has determined that
it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.
  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Studio One Media, Inc. as of June 30, 2009 and 2008, and the results of operations and cash flows for the years ended June 30, 2009 and 2008, in conformity with accounting principles generally accepted in the United
States of America.
  The Company has incurred losses since inception, has a working capital deficit, and has limited revenues which raise substantial doubt about its ability to continue as a going concern.  Management's plan to address these issues is included in Note 1 to the consolidated financial statements.  The financial statements
have been prepared on a going concern basis, which contemplates the realization and settlement of liabilities and commitments in the normal course of business.  The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
  As discussed in Note 13 to the consolidated financial statements, the accompanying consolidated financial statements as of and for the fiscal year ending June 30, 2008, have been restated.
  
  /s/ Mantyla McReynolds LLC
 Mantyla McReynolds LLC
 Salt Lake City, Utah
 October 14, 2009




F-2






STUDIO ONE MEDIA, INC.Consolidated Balance SheetsJune 30,

June 30,2009

2008(Restated)ASSETSCurrent AssetsCash

$
439,474


$
392,450Prepaid Expenses


57,513



48,153Total Current Assets


496,987



440,603Property and Equipment, Net


421,980



240,784Property and Equipment, yet to be placed in service


631,169



313,565Other AssetsNotes Receivable


177,228



178,752Accrued Interest Receivable


73,811



55,701Deposits


76,400



29,630Intangible Assets, net


107,314



95,687Total Other Assets


434,753



359,770Total Assets

$
1,984,889


$
1,354,722LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current LiabilitiesAccounts Payable and Accrued Expenses

$
1,483,797


$
491,560Capital Equipment Loan


-



7,270Notes Payable - Related Party


268,788



97,285Notes Payable


436,897



25,000Total Current Liabilities


2,189,482



621,115Long-Term Liabilities


-



-Total Liabilities


2,189,482



621,115Stockholders' Equity (Deficit)Preferred Stock, authorized 10,000,000 shares, par value $0.001;issued and oustanding are 774,044  and 524,044June 30, 2009 and 2008, respectively


774



524Common Stock, authorized 100,000,000 shares, par value $0.001;issued and outstanding are 16,417,447 and 13,212,398 shares atJune 30, 2009 and 2008, respectively


16,417



13,212Additional Paid in Capital


15,039,491



9,473,679Common Shares to be issued


24,000



221,000Common Stock Issued in Advance of Services


(48,153
)


(337,052
)Accumulated Deficit


(15,237,122
)


(8,637,756
)Total Stockholders' Equity (Deficit)


(204,593
)


733,607Total Liabilities and Stockholders' Equity (Deficit)

$
1,984,889


$
1,354,722The accompanying notes are an integral part of these financial statements.
    F-3
   STUDIO ONE MEDIA, INC.Consolidated Statements of OperationsFor the Year EndedJune 30,
2009


June 30,
2008RestatedRevenuesKiosk Session Revenues

$
115,989


$
-Advertising Revenues


25,872



-Other Revenue


-



839Total Revenues


141,861



839Costs and ExpensesCost of Sales (Exclusive of Depreciation and Amortization)


136,413



-Cost of Barter Exchanges


104,261



-Advertising Expenses


389,993



150,724Depreciation Expense


138,182



40,167Professional Fees


2,415,070



3,489,323Research and Development


800,967



778,834General and Administrative Expenses


2,600,675



1,729,396Total Costs and Expenses


6,585,561



6,188,444Loss from Operations


(6,443,700
)


(6,187,605
)Other Income (Expense)Interest Expense


(173,776
)


(14,553
)Interest Income


18,110



23,166Total Other Income (Expense)


(155,666
)


8,613Loss before Income Taxes


(6,599,366
)


(6,178,992
)Income Tax Expense


-



-NET LOSS

$
(6,599,366
)

$
(6,178,992
)Basic Loss Per Share of Common Stock

$
(0.46
)

$
(0.51
)Weighted Average Number of Shares Outstanding


14,420,630



12,179,418The accompanying notes are an integral part of these financial statements.
 
    F-4
 
  STUDIO ONE MEDIA, INC.Consolidated Statements of Stockholders' Equity (Deficit)
2007-2008 RestatedCommon

TotalAdditional


Stock Issued

Stockholders'Preferred Stock

Common Stock
Paid In
Common Shares
in Advance
Accumulated
EquityShares

Amount

Shares
Amount
Capital
to be Issued
for Services
Deficit
(Deficit)Balance, June 30, 2007
524,044

$
524

11,362,739
$
11,363
$
2,963,926
$
137,600
$
-
$
(2,458,764)
$
654,649Common shares issued for services
-


-

684,322

684

2,404,412

-

-

-

2,405,096Common shares issued for cash
-


-

1,115,830

1,116

3,009,609

-

-

-

3,010,725Common shares for assets
-


-

5,000

5

24,120

-

-

-

24,125Warrants exercised for cash
-


-

44,507

44

133,476

-

-

-

133,520Fair value of warrants granted
-


-

-

-

938,136

-

-

-

938,136Common shares to be issued
-


-

-

-

-

83,400

-

-

83,400Common stock issued in advancefor services
-


-

-

-

-

-

(337,052)

-

(337,052)Net Loss for the Year EndedJune 30, 2008
-


-

-

-

-

-

-

(6,178,992)

(6,178,992)Balance, June 30, 2008
524,044


524

13,212,398

13,212

9,473,679

221,000

(337,052)

(8,637,756)

733,607Common shares issued for services
-


-

1,142,935

1,143

1,707,779

(197,000)

-

-

1,511,922Common shares issued for cash
-


-

1,505,478

1,505

2,059,569

-

-

-

2,061,074Warrants exercised for cash
-


-

349,335

349

363,068

-

-

-

363,417Common shares issued in conversionof preferred shares
(25,000)


(25)

50,000

50

(25)

-

-

-

-Common shares issued in conversionof debt
-


-

52,733

53

26,314

-

-

-

26,367Common shares issued as collateralfor promissory note
-


-

100,000

100

69,900

-

-

-

70,000Adjustment to account forfractional shares
-


-

4,568

5

(5)

-

-

-

-Preferred shares issued for cash
275,000


275

-

-

549,725

-

-

-

550,000Fair value of warrants granted
-


-

-

-

789,487

-

-

-

789,487Amortization of stock issued inadvance for servcies
-


-

-

-

-

-

288,899

-

288,899Net Loss for the Year EndedJune 30, 2009
-


-

-

-

-

-

-

(6,599,366)

(6,599,366)Balance, June 30, 2009
774,044

$
774

16,417,447
$
16,417
$
15,039,491
$
24,000
$
(48,153)
$
(15,237,122)
$
(204,593)The accompanying notes are an integral part of these financial statements.
 
   F-5
   
  STUDIO ONE MEDIA, INC.Consolidated Statements of Cash FlowsFor the Years EndedJune 30,2009


2008
RestatedCash Flows from Operating ActivitiesNet Loss

$
(6,599,366
)

$
(6,178,992
)Adjustments to reconcile to cash fromoperating activities:Depreciation and amortization


138,132



40,167Common stock issued for services


1,708,922



2,405,096Fair value of warrants granted


789,487



938,136Bad debt expense


1,524



-Common Shares to be issued


(197,000
)


83,400Amortization of stock issued in advance for services


288,899



(337,052
)Writeoff of intangible assets


-



112,770Changes in Operating Assets and Liabilities:Accrued interest receivable


(18,110
)


(23,166
)Prepaid expenses


(9,360
)


(23,765
)Deposits


23,230



(23,230
)Accounts payable and accrued  expenses


992,236



240,013Net Cash Used in Operating Activities


(2,881,406
)


(2,766,623
)Cash Flows from Investing ActivitiesNotes receivable


-



23,412Purchase of property and equipment


(613,344
)


(375,648
)Purchase of intangible assets


(35,215
)


(45,687
)Net Cash Used in Investing Activities


(648,559
)


(397,923
)Cash Flows from Financing ActivitiesIssuance of common stock


2,061,074



3,010,725Issuance of preferred stock


550,000



-Warrants exercised for cash


363,417



133,520Proceeds from notes payable-related party


197,871



553Repayment of notes payable


(7,270
)


(2,489
)Proceeds from notes payable


411,897



-Net Cash from Financing Activities


3,576,989



3,142,309Net Increase (Decrease) in Cash


47,024



(22,237
)Cash, Beginning of Year


392,450



414,687Cash, End of Year

$
439,474


$
392,450Supplemental Cash Flow Disclosure:Cash Paid For:Interest

$
1,898


$
-Income Taxes


-



-Non Cash Financing Activities:Common stock issued for assets

$
-


$
24,125Equipment purchased under capital lease


-



9,759Common stock issued to extinguish debt


26,367



-Common stock issued as collateral on debt


70,000



-The accompanying notes are an integral part of these financial statements.
 
 F-6
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  
 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.
 
 In April 2006, the Company entered into an agreement to purchase Studio One Entertainment, Inc., a private Scottsdale, Arizona based company that designed and manufactured 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 enables 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 reverse merger 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 reverse merger 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 substance of the transaction resulted in a reverse merge wherein SOE became the accounting acquirer of SOMD.  Therefore, historical financial data reflects the operations and accumulated deficit of SOE.  The transaction essentially is a recapitalization of SOE. The reverse merger 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. continues to 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.
 
 During fiscal year 2009, the Company is no longer considered to be a development stage company, as a result of the commencement of its principle revenue activities.
 
 GOING CONCERN
 
 The Company has incurred losses since inception of $15,237,122 and has just begun collecting revenues which raise 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) continue to 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 additional personal recording kiosks.
 
 INCOME TAXES
 
 The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
 
 In July, 2006, the FASB issued FASB Interpretations No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the accounting for uncertainty in
  F-7
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 1: Summary of Significant Accounting Policies - continued
 
 In July, 2006, the FASB issued FASB Interpretations No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a return. FIN 48 provides guidance on the measurement,
recognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties. FIN 48 became effective as of January 1, 2007 and had no impact on the Company’s financial statements.
  The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
 
 LOSS PER SHARE
 
 Basic and diluted loss per common share is calculated using the weighted average number of common shares outstanding during the period. For the year ended June 30, 2009 and 2008, the Company’s 3,045,671 and 2,473,362 warrants, 14,814 and 136,412 shares to be issued upon the conversion of the preferred stock and 6,000 and -0- shares
to be issued upon conversion of debt are excluded from the computation of diluted earnings per share as they are anti-dilutive, respectively.
 
 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, whichever is earlier
 
 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
 
 In accordance with FAS 157, 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, 2009 and 2008.
  F-8
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  
 Note 1: Summary of Significant Accounting Policies -continued
 
 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 $250,000.  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  no deposits  in excess of federally insured limits at June 30, 2009.
 
 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 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.
 
 Barter Transactions - Barter revenue relates to recording session services provided by Studio One to business customers in exchange for products and services that Studio One would otherwise be required to buy for cash. Barter expenses reflect the expense offset to barter revenue.
The amount of barter revenue and expense is recorded at the estimated fair value of the services received or the services provided, whichever is more objectively determinable, in the month the services and advertising are exchanged.  Studio One applies APB 29, Accounting for Non-Monetary Transactions, the provisions of EITF 93-11, “Accounting for Barter Transactions Involving Barter Credits” and EITF 99-13 “Accounting for Advertising Barter Transactions” and, accordingly, recognizes
barter revenues only to the extent that Studio One has similar cash transactions within a period not to exceed six months prior to the date of the barter transaction.
 
 To date, the amount of barter revenue to be recognized has been more objectively determinable based on the value of products or services received rather than based upon the value of advertising provided.  For revenue from recording sessions services provided for cash to be considered similar to the recording session services provided
in barter transactions, the services rendered must have been in the same media and similar term as the barter transaction.
 
 REVENUE RECOGNITION (CONTINUED)
 
 Studio One had no barter revenues for the fiscal year ended June 30, 2008.  Barter revenues for the fiscal year ended June 30, 2009 is broken out by kiosk session income and advertising income.  Of the $115,989 of kiosk session income, $78,379 was in barter and $37,610 was in cash. Of the $25,872 of total advertising
revenue, $23,872 was in barter and the remaining $2,000 was cash.
  F-9
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 1: Summary of Significant Accounting Policies -continued
 
 Studio One had no barter revenues for the fiscal year ended June 30, 2008.  Barter revenues totaled $78,379 for the fiscal year ended June 30, 2009.
 
 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 $800,967 and $778,834 during the years ended June 30, 2009 and 2008,
respectively.
 
 ADVERTISING AND MARKETING
 
 The Company expenses advertising costs in the period in which they are incurred. Advertising and marketing expense was $444,510 and $150,724 for the years ended June 30, 2009 and 2008, respectively.
 
 GOODWILL AND INTANGIBLE ASSETS
 
 The Company adopted SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets, effective June 2001 and revised in December, 2007. SFAS No. 141 requires the use of the purchase
method of accounting for any business combinations initiated after June 30, 2002, and further clarifies the criteria to recognize intangible assets separately from goodwill. Under SFAS No. 142, goodwill and indefinite−life intangible assets are no longer amortized but are reviewed for impairment annually.
 
 PROPERTY AND EQUIPMENT
 
 Property and equipment is located at the Company's headquarters in Scottsdale, Arizona and is recorded at cost less accumulated depreciation. Depreciation and amortization is calculated using the straight-line method over the expected useful life of the asset, after the asset is placed in service. The Company generally uses the following
depreciable lives for its major classifications of property and equipment:
 
 Description

Useful LivesComputer hardware

3-7 yearsComputer software

3-5 yearsFurniture and Office Equipment
7 YearsProduction Equipment

7 yearsLeasehold improvements

10 years
 
 VALUATION OF LONG-LIVED ASSETS
 
 Long-lived tangible assets and definite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses an estimate of undiscounted future net cash flows of the assets over the remaining useful lives in determining
whether the carrying value of the assets is recoverable. If the carrying values of the assets exceed the expected future cash flows of the assets, the Company recognizes an impairment loss equal to the difference between the carrying values of the assets and their estimated fair values. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets. The evaluation of long-lived assets requires the Company to use estimates
of future cash flows. However, actual cash flows may differ from the estimated future cash flows used in these impairment tests. As of June 30, 2009, management does not believe any of the Company’s assets were impaired.
  F-10
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 1: Summary of Significant Accounting Policies -continued
 
 PRINCIPLES OF CONSOLIDATION
 
 The consolidated financial statements include the accounts of Studio One Media, Inc. and its subsidiaries. All significant inter-company accounts and transactions have been eliminated. The Company operates on a June 30 fiscal year.
 
 COST OF SALES
 
 The Company’s cost of sales includes kiosk lease expense, kiosk employee costs, and other nominal amounts.
 
 
 Note 2: Accounts Payable and Accrued Expenses
 
 A summary of Accounts Payable and Accrued Expenses Follows:
 
 June 30, 2009

June 30, 2008Accounts Payable
$
1,232,807

$
433,353Accrued Interest

38,344


35,438Other Accrued Expenses

212,646


22,769Total
$
1,483,797

$
491,560
 
 
 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, 2009, the Company owes $268,788 for funds borrowed from an entity owned by one of the Company’s officers.  The loans are unsecured, accrue interest at 10% per annum and are due upon demand.
 
 The Company has a convertible note payable to Howard Hill which is a convertible note.  The terms of the conversion allow the noteholder to convert the debt into equity of the Company in the form of shares of common stock of the Company at the rate of $0.50 per share.
 
 During the year ended June 30, 2009, the noteholder converted the note into 52,733 shares of common stock in exchange for entire outstanding balance of the note, totaling $26,367.
 
 The notes payable due to Sundance Financial Corp., Allan Kaplan, Chad Boeding, Divesh Makan, and Larry Buresh are convertible with the following terms.  All or any of the principle amount of the note, together with the accrued interest, may be converted at the option of the investor at any time after four (4) months into
fully paid and nonassessable shares of restricted common stock of the company.  The number of shares eligible to be converted will equal the note amount to be converted divided by the per share price after applying a 25% discount to the average closing price of the Company’s stock for the previous ten (10) trading days prior to the date such payment is due.
  F-11
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 3: Short-Term Borrowings -continued
 
 The Company has analyzed these notes in accordance with EITF 98-5 and has determined that a beneficial conversion feature exists. The value of this conversion feature has been estimated at $133,000 (400,000 shares / $0.25).
 
 The difference between the $400,000 face value and the $533,000 carrying value has been recognized as interest expense, with $133,000 being recognized in fiscal year 2009.
 
 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:
 
 Outstanding Notes Payable at 6-30-09Total

TotalAccrued
Interest
InterestDate of
Principal
Interest
Interest
Accrued
Accrued


TotalNote Holder
Note
Amount
Rate
06/30/08
6/30/2009
To Date
Converted

DueGlenn Crotts
07/13/01
25,000.00
14.00%
24,384.93
3,500.00
27,884.93
-

52,884.93Sundance Financial Corp.
12/31/08
100,000.00
10.00%
-
4,958.90
4,958.90
-

104,958.90Sundance Financial Corp.
12/31/08
101,590.52
10.00%
-
5,037.77
5,037.77
-

106,628.29Acoma, LLC
05/22/09
45,230.49
12.00%
-
446.11
446.11
-

45,676.60Allan Kaplan
06/29/09
100,000.00
6.00%
-
16.44
16.44
-

100,016.44Chad Boeding
06/30/09
50,000.00
6.00%
-
-
-
-

50,000.00Divesh Makan
06/30/09
50,000.00
6.00%
-
-
-
-

50,000.00Larry/Georgette Buresh
06/30/09
100,000.00
8.00%
-
-
-
-

100,000.00Beneficial Converstion Feature

133,863.99
0.00%
-
-
-
-

133,863.99Totals

705,685.00

24,384.93
13,959.22
38,344.15
0.00

744,029
 
 
 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, 2009 were approximately $183,057.
 
 Pursuant to a lease originally dated January, 2006, the Company currently occupies approximately 5,400 square feet of office space located at 7650 E. Evans Rd., Suite C, Scottsdale, Arizona 75260.  On June 15, 2008, the Company expanded into and also occupies approximately 5,400 square feet adjoining the original premises
on a month-by month basis.  Under the terms of the extended, expanded lease, the Company occupies the premises on a month-to-month basis.  The total lease expense is $6,650 per month, payable in cash, common stock of the Company and on-studio advertising.
 
 In anticipation of implementation of its business plan, the Company 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.   The Company have never occupied this space and in May 2009, entered into a termination agreement
with the landlord pursuant to which the Company will pay the sum of $50,000 over a period of ten months in exchange for terminating future obligations under the lease.
  F-12
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 4: Commitments and Contingencies - continued
 
 The Company leases space at Scottsdale Fashion Square for its MyStudio recording studio pursuant to a two-year lease.   The monthly rent for this space is at a market rate commensurate with other kiosk operations.  As the Company expands, it will continue to secure space for its recording studios at various venues
and locations around the country.
 
 
 Note 5: Common Stock
 
 During the year ended June 30, 2008, the Company issued 1,160,337 shares for $3,144,245 in cash, 684,322 shares of the Company’s common stock for consulting services rendered to the Company valued at $2,405,096. The Company also issued 5,000 shares for a vehicle valued at $29,125 with $5,000
being paid in cash.
 
 During the year ended June 30, 2008, the Company exchanged 44,507 warrants for 44,507 shares of the Company’s Common Stock for $133,520 in cash.
 
 During the year ended June 30, 2009, the Company issued 1,505,478 common shares for $2,061,074 in cash and 1,142,935 shares of the Company’s common stock for consulting services rendered to the Company valued at $1,511,922.  The Company issued an additional 100,000 shares of its common stock as collateral for a
promissory note, for $70,000.
 
 During the year ended June 30, 2009, the Company exchanged 349,335 warrants for 349,335 shares of the Company’s Common Stock for $363,417 in cash.
 
 
 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 A-1 Convertible Preferred


275,000



250,000Series 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


2,925,000



774,044
 
 The activity surrounding the issuances of the preferred stock is as follows.  Prior to the year ended June 30, 2008 the Company issued 524,044 total shares of preferred stock made up of 15,500 Series A, 3,500 Series B, 13,404 Series C, 130,000 Series D, 275,000 Series E, and 86,640 Series P.
 
 During the fiscal year ended June 30, 2009, the Company issued an additional 275,000 Series A-1 shares and converted 25,000 of those shares for 50,000 shares of common stock.
 
 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.
  F-13
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 6: Preferred Stock-continued
 
 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.
 
 
 Note 7: Stock Purchase Options and Warrants
 
 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. Amaximum 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, 2009, 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, 2009, the Company has issued all shares covered by the 2004 Stock Incentive Plan.
 
 The Board of Directors on June 10, 2009, approved the 2009 Long-Term Stock Incentive Plan.  The purpose of the 2009 Long-term Stock Incentive Plan is to advance the interests of the Company by encouraging and enabling acquisition of a financial interest in the Company by employees and other key individuals.  The 2009
Long-Term Stock Incentive Plan is intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company.  A maximum of 1,500,000 shares of the Company's common stock is reserved for issuance under stock options to be issued under the 2009 Long-Term Stock Incentive Plan.  The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options and Restricted Stock Awards.  The
2009 Long-Term Stock Incentive Plan is administered by the Board of Directors or, at its direction, the Compensation Committee comprised of officers of the Company.   As of June 30, 2009, the Company had granted such options to two employees to purchase, in the aggregate, 85,000 shares of the Company’s common stock. The Exercise Period for each of the grants is two years from the date of grant and the exercise price in each instance is $0.80.
 
 
  F-14
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 7: Stock Purchase Options and Warrants - continued
 
 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.  The assumptions used for the model are the following:  the stock price on the date of issuance, the exercise price of each specific warrant ($0.50 to $5.95), the expected life of the warrant (1 to 2 years and as high as 10),  the annualized volatility (31% to 237%), and the risk free rate (1.350% to 5.350%).
 
 During the year ended June 30, 2009, 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 1.35% to 2.35%, a
dividend yield of 0% and volatility of 55% to 237%. The amount of the expense charged to operations for compensatory options and warrants granted in exchange for services was $789,487.
 
 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 $938,136.
 
 The following table summarizes the changes in warrants 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 Warrants


Weighted Average Exercise PriceOutstanding as of June 30, 2007


850,163


$
3.18Granted


1,667,706



0.00Exercised


(44,507)



3.67Cancelled


-



0.00Outstanding as of June 30, 2008


2,473,362



3.50Granted


1,823,057



2.38Exercised


(349,335)



1.21Cancelled


(810,163)



3.17Outstanding at June 30, 2009


3,136,921


$
3.10
 
 
 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 $15,237,122. The total valuation allowance is equal to the total deferred tax asset.
   F-15
 
 Note 8: Income Taxes - continued
 
 The tax effects of significant items comprising the Company's net deferred taxes as of June 30, 2009 and 2008 were as follows:
  6-30-09


6-30-08Deferred tax assets:Net operating loss carry forwards


5,332,993



3,023,215Valuation allowance


(5,332,993
)


(3,023,215
)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, 2009 and 2008 due to the following:
 
 6-30-09



6-30-08Book loss from operations

$
(2,309,778
)

$
(2,162,647
)Options and warrants issued for services


276,320



328,348Common stock issued for services


598,123



841,784Valuation allowance


1,435,335



992,515$
--


$
--
 
 The federal net operating loss carry forwards of approximately $15,237,122 expire in various years through 2029. In addition the Company has state carry forwards of approximately $14,931,000.
 
 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.
 
 In July, 2006, the FASB issued FASB Interpretations No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the related interest and penalties. FIN 48 became effective as of January 1, 2007 and had no impact on the Company’s financial statements.
 
 
 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 know how and intellectual property.
 
 
  F-16
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 9.  Intangible Assets - continued
 
 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 on June
30, 2009:
 
 2009
2008Patterns and Molds


18,071
-0-Website costs


77,699
91,375Video backgrounds


11,547
4,312Accumulated amortization


(23,588)
-0-Net Intangible Assets

$
107,314
95,687
 
 The Company’s estimated amortization for the above intangible assets are as follows:
 
 2010


2011


2012


2013


2014


ThereafterPatterns and Molds


6,024



6,024



6,024



-0-



-0-



-0-Website costs


13,706



13,706



13,706



13,706



13,706



9,138Video backgrounds


3,858



3,858



3,858



-0-



-0-



-0-
 
 
 Note 10.  Property and Equipment
 
 The Company’s property and equipment are comprised of the following on June 30, 2009:
 
 2009


2008Furniture and equipment

$
25,012


$
15,708Office equipment and computers


209,984



191,794Kiosks


264,586



-0-Vehicles


29,125



29,125Leasehold improvements


5,196



2,260Computer Software


50,879



46,251Accumulated depreciation


(162,802
)


(44,354
)Net Property and Equipment

$
421,980



240,784
 
 The Company also has $631,169 and $313,565 in equipment that is yet to be placed in service as of June 30, 2009 and 2008, respectively.
 
 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, 2009 and 2008 was $138,182 and $40,167, respectively.
 
 
 Note 11.  Recent Accounting Pronouncements
 
 June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140” (“SFAS 166”).  The provisions of SFAS 166, in part, amend the derecognition guidance in FASB Statement No. 140, eliminate the exemption from consolidation for qualifying special-purpose
entities and require additional disclosures. SFAS 166 is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. The Company does not expect the provisions of SFAS 166 to have a material effect on the financial position, results of operations or cash flows of the Company.
  F-17
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 11.  Recent Accounting Pronouncements- continued
 
 In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 amends the consolidation guidance applicable to variable interest entities. The provisions of SFAS 167 significantly affect the overall consolidation analysis under FASB Interpretation No. 46(R). SFAS 167
is effective as of the beginning of the first fiscal year that begins after November 15, 2009. SFAS 167 will be effective for the Company beginning in 2010. The Company does not expect the provisions of SFAS 167 to have a material effect on the financial position, results of operations or cash flows of the Company.
 
 In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162” (“SFAS No. 168”).  Under SFAS No. 168 the “FASB Accounting Standards Codification” (“Codification”)
will become the source of authoritative U. S. GAAP to be applied by nongovernmental entities.  Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009.  On the effective date, the Codification will supersede all then-existing non-SEC
accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. SFAS No. 168 is effective for the Company’s interim quarterly period beginning July 1, 2009. The Company does not expect the adoption of SFAS No. 168 to have an impact on the financial statements.
 
 In June 2009, the Securities and Exchange Commission’s Office of the Chief Accountant and Division of Corporation Finance announced the release of Staff Accounting Bulletin (SAB) No. 112. This staff accounting bulletin amends or rescinds portions of the interpretive guidance included in the Staff Accounting Bulletin Series in order
to make the relevant interpretive guidance consistent with current authoritative accounting and auditing guidance and Securities and Exchange Commission rules and regulations. Specifically, the staff is updating the Series in order to bring existing guidance into conformity with recent pronouncements by the Financial Accounting Standards Board, namely, Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations, and Statement of Financial Accounting Standards No. 160, Non-controlling
Interests in Consolidated Financial Statements. The statements in staff accounting bulletins are not rules or interpretations of the Commission, nor are they published as bearing the Commission's official approval. They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the Federal securities laws.
 
 In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This FSP shall be effective for interim reporting periods ending after June 15, 2009. The Company does not have any fair value of financial instruments to disclose.
 
 In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments
on debt and equity securities in the financial statements.
 
 The FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. The FSP shall be effective for interim and annual reporting periods ending after June 15, 2009. The Company currently does not have any financial assets that are other-than-temporarily impaired.
 
 
  F-18
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 11.  Recent Accounting Pronouncements- continued
 
 In April 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, to address some of the application issues under SFAS 141(R). The FSP deals with the initial recognition and measurement of an asset acquired or a liability assumed in a
business combination that arises from a contingency provided the asset or liability’s fair value on the date of acquisition can be determined. When the fair value can-not be determined, the FSP requires using the guidance under SFAS No. 5, Accounting for Contingencies, and FASB Interpretation (FIN) No. 14, Reasonable Estimation of the Amount of a Loss. This FSP will be effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after July
1, 2009. The adoption of this FSP is not expected to have a material impact on our financial position, results of operations, or cash flows during the six months ended June 30, 2009.
 
 In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”).  FSP FAS 157-4 provides guidance on estimating fair value when market
activity has decreased and on identifying transactions that are not orderly.  Additionally, entities are required to disclose in interim and annual periods the inputs and valuation techniques used to measure fair value.  This FSP is effective for interim and annual periods ending after June 15, 2009.  The Company does not expect the adoption of FSP FAS 157-4 will have a material impact on its financial condition or results of operation.
 
 In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active,” (“FSP FAS 157-3”), which clarifies application of SFAS 157 in a market that is not active.  FSP FAS 157-3 was effective upon issuance, including prior periods
for which financial statements have not been issued.  The adoption of FSP FAS 157-3 had no impact on the Company’s results of operations, financial condition or cash flows.
 
 In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.”  This disclosure-only FSP improves the transparency of transfers of financial assets and an enterprise’s involvement
with variable interest entities, including qualifying special-purpose entities.  This FSP is effective for the first reporting period (interim or annual) ending after December 15, 2008, with earlier application encouraged.  The Company adopted this FSP effective January 1, 2009.  The adoption of the FSP had no impact on the Company’s results of operations, financial condition or cash flows.
 
 In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”).  FSP FAS 132(R)-1 requires additional fair value disclosures about employers’ pension and postretirement benefit plan assets consistent with guidance
contained in SFAS 157.  Specifically, employers will be required to disclose information about how investment allocation decisions are made, the fair value of each major category of plan assets and information about the inputs and valuation techniques used to develop the fair value measurements of plan assets. This FSP is effective for fiscal years ending after December 15, 2009.  The Company does not expect the adoption of FSP FAS 132(R)-1 will have a material impact on its financial
condition or results of operation.
 
 In September 2008, the FASB issued exposure drafts that eliminate qualifying special purpose entities from the guidance of SFAS No. 140, “Accounting for Transfers and Servicing of Financial  Assets and  Extinguishments of Liabilities,” and  FASB  Interpretation 46 (revised December 2003), “Consolidation
of  Variable  Interest Entities − an interpretation of ARB  No. 51,” as well as other modifications.  While the proposed revised pronouncements have not been finalized and the proposals are subject to further public  comment, the Company anticipates the changes will not have a significant impact on the Company’s financial statements.  The changes would be effective March 1, 2010, on a prospective basis.
 
 In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our consolidated financial
position and results of operations if adopted.
  F-19
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 11.  Recent Accounting Pronouncements- continued
 
 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.
 
 
 Note 12,  Subsequent Events
 
 In accordance with FAS 165, management evaluated the subsequent events as of October 14, 2009.  Subsequent to June 30, 2009, the two Convertible Promissory Notes have been converted to common shares according to the terms of the respective notes.
 
 
 Note 13.  Restatement of Financial Statements
 
 On August 27, 2009 the Company was informed that the Public Company Accounting Oversight Board ("PCAOB") revoked the registration of Moore & Associates who was serving as the Company’s independent registered public accounting firm.  The revocation was a result of Moore’s violation of PCAOB rules and auditing standards.  This
revocation of Moore’s registration required the Company to have reaudited the financial statements previously issued for the fiscal years ended June 30, 2007 and 2008.
 
 This reaudit produced material differences from the previously filed versions.  Included in this filing are the restated 2008 fiscal year financial statements.  For comparative purposes, the table below presents the reaudited balance sheets and income statements compared to the original filing.
 
 
 
 
  F-20
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  Note 12.  Restatement of Financial Statements (continued)
 
 Consolidated Balance SheetsJune 30,

June 30,2008

2008(Original)

(Restated)ASSETSCurrent AssetsCash

$
391,109


$
392,450Prepaid Expenses


48,153



48,153Total Current Assets


439,262



440,603Property and Equipment, Net


548,070



554,349Other AssetsNotes Receivable- Non Current


178,752



178,752Accrued Interest Receivable


55,701



55,701Deposits


29,630



29,630Intangible Assets, net


138,084



95,687Total Other Assets


402,167



359,770Total Assets

$
1,389,499


$
1,354,722LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current LiabilitiesAccounts Payable and Accrued Expenses

$
358,359


$
491,560Capital Equipment Loan


-



7,270Notes Payable - Related Party


108,319



97,285Notes Payable


49,385



25,000Total Current Liabilities


516,063



621,115Long-Term Liabilities


-



-Total Liabilities


516,063



621,115Stockholders' Equity (Deficit)Preferred Stock, authorized 10,000,000 shares, par value $0.001;issued and oustanding are 774,044  and 524,044June 30, 2009 and 2008, respectively


524



524Common Stock, authorized 100,000,000 shares, par value $0.001;issued and outstanding are 16,417,447 and 13,212,398 shares atJune 30, 2009 and 2008, respectively


13,212



13,212Additional Paid in Capital


14,463,184



9,473,679Common Shares to be issued


-



221,000Common Stock Issued in Advance of Services


-



(337,052
)Accumulated Deficit - Development Stage


(13,603,484
)


-Accumulated Deficit


-



(8,637,756
)Total Liabilities and Stockholders' Equity (Deficit)

$
1,389,499


$
1,354,722
 
  F-21
 
 STUDIO ONE MEDIA, INC.
 Notes to Consolidated Financial Statements
 June 30, 2009 and 2008
  
 Note 12.  Restatement of Financial Statements (continued)
 
 
 Consolidated Statements of OperationsFor the Year EndedJune 30,


June 30,2008


2008(Original)


(Restated)RevenuesKiosk Advertising Revenues

$
-


$
-Kiosk Barter Revenue


-



-Advertising Revenues


-



-Other Revenue


-



839Total Revenues


-



839COST OF SALES(Exclusive of Depreciation and Ammortization)


-



-GROSS PROFIT (LOSS)


-



839Operating ExpensesAdvertising Expenses


-



150,724Depreciation Expense


-



40,167Professional Fees


-



3,489,323Research and Development


1,065,168



778,834General and Administrative Expenses


7,561,257



1,729,396Total Operating Expenses


8,626,425



6,188,444Loss from Operations


(8,626,425
)


(6,187,605
)Other Income (Expense)Interest Expense


(14,553
)


(14,553
)Intersest Income


24,005



23,166Total Other Income (Expense)


9,452



8,613Loss before Income Taxes


(8,616,973
)


(6,178,992
)Income Tax Expense


-



-NET LOSS

$
(8,616,973
)

$
(6,178,992
)Basic Loss Per Share of Common Stock

$
(0.71
)

$
(0.51
)Weighted Average Number of Shares Outstanding


12,179,418



12,179,418
  F-22