U.S.
SECURITIES AND EXCHANGE COMMISSION





WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)





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





For the
quarterly period ended December 31, 2009





o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from _______ to __________








Commission
file number 001-10196











STUDIO
ONE MEDIA, INC.







(Exact
name of Registrant as specified in its charter)





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





7650
E. Evans Rd., Suite C


Scottsdale,
Arizona  85260





(Address
of principal executive offices) (Zip Code)





(480)
556-9303





(Registrant’s
telephone number, including area code)








Indicate
by check mark whether the registrant (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 period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.





x
Yes     o No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).





o
 Yes     o  No  
(Not required)





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 the 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
            x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 
 oYes     x No
 At
December 31, 2009, the number of shares outstanding of common stock, $0.001 par
value, was 20,980,834 shares.







1








STUDIO
      ONE MEDIA, INC.INDEXPART
      I - FINANCIAL INFORMATIONPAGE
      NUMBERItem
      1.
              Financial
      Statements
              3Consolidated
      Balance Sheets – December 31, 2009 (unaudited) and June 30,
      2009
              3Consolidated
      Statements of Operations - For the three and six months ended December 31,
      2009 and 2008 (unaudited)
              4Consolidated
      Statements of Stockholders’ Deficiency - For the year ended June 30, 2009
      and the six months ended December 31, 2009 (unaudited)
              5Consolidated
      Statements of Cash Flows - For the six months ended December 31, 2009 and
      2008 (unaudited)
              6Notes
      to Consolidated Financial Statements (unaudited)
              7Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              11Item
      3.
              Quantitative
      and Qualitative Disclosure About Market Risks
              21Item
      4T.
              Controls
      and Procedures
              21PART
      II - OTHER INFORMATIONItem
      1.
              Legal
      Proceedings
              22Item
      1A.
              Risk
      Factors
              22Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              29Item
      3.
              Defaults
      Upon Senior Securities
              30Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              30Item
      5.
              Other
      Information
              30Item
      6.
              Exhibits
              31SIGNATURES
              31








2





PART I -
FINANCIAL INFORMATION


ITEM 1.
FINANCIAL STATEMENTS




STUDIO
      ONE MEDIA, INC.Consolidated
      Balance SheetsDecember
      31,
              
              
              June
      30,2009
              
              
              2009(Unaudited)ASSETSCurrent
      AssetsCash
              
              $
              137,867
              
              
              $
              439,474Prepaid
      Expenses
              
              
              60,885
              
              
              
              57,513Total
      Current Assets
              
              
              198,752
              
              
              
              496,987Property
      and Equipment, net
              
              
              495,905
              
              
              
              421,980Property
      and Equipment, yet to be placed in service
              
              
              528,926
              
              
              
              631,169Other
      AssetsNotes
      Receivable
              
              
              177,228
              
              
              
              177,228Accrued
      Interest Receivable
              
              
              81,872
              
              
              
              73,811Deposits
              
              
              78,854
              
              
              
              76,400Intangible
      Assets, net
              
              
              340,955
              
              
              
              107,314Total
      Other Assets
              
              
              678,909
              
              
              
              434,753Total
      Assets
              
              $
              1,902,492
              
              
              $
              1,984,889LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)Current
      LiabilitiesAccounts
      Payable and Accrued Expenses
              
              $
              1,180,053
              
              
              $
              1,483,797Notes
      Payable - Related Party
              
              
              50,000
              
              
              
              268,788Notes
      Payable
              
              
              157,065
              
              
              
              436,897Total
      Current Liabilities
              
              
              1,387,118
              
              
              
              2,189,482Long-Term
      Liabilities
              
              
              -
              
              
              
              -Total
      Liabilities
              
              
              1,387,118
              
              
              
              2,189,482Stockholders'
      Equity (Deficit)Preferred
      Stock, authorized 10,000,000 shares, par value $0.001;issued
      and outsanding are 670,473  and 774,044 at December
      31,2009,
      and June 30, 2009, respectively
              
              
              670
              
              
              
              774Common
      Stock, authorized 100,000,000 shares, par value $0.001;issued
      and outstanding are 20,980,834 and 16,417,447 shares atDecember
      31, 2009, and June 30, 2009, respectively
              
              
              20,980
              
              
              
              16,417Additional
      Paid in Capital
              
              
              18,277,181
              
              
              
              15,039,491Common
      Shares to be Issued
              
              
              243,737
              
              
              
              24,000Common
      Stock Issued in Advance of Services
              
              
              (86,575
              )
              
              
              (48,153
              )Accumulated
      Deficit
              
              
              (17,940,619
              )
              
              
              (15,237,122
              )Total
      Stockholders' Equity (Deficit)
              
              
              515,374
              
              
              
              (204,593
              )Total
      Liabilities and Stockholders' Equity (Deficit)
              
              $
              1,902,492
              
              
              $
              1,984,889The
      accompanying notes are an integral part of these financial
      statements.






3






STUDIO
      ONE MEDIA, INC.Consolidated
      Statements of Operations(Unaudited)For
      the Three Months Ended
              
              
              For
      the Six Months EndedDecember
      31,
              
              
              December
      31,
              
              
              December
      31,
              
              
              December
      31,2009
              
              
              2008
              
              
              2009
              
              
              2008(Unaudited)
              
              
              (Restated)
              
              
              (Unaudited)
              
              
              (Restated)RevenuesSession
      Revenues
              
              $
              26,385
              
              
              $
              16,439
              
              
              $
              45,085
              
              
              $
              16,439Advertising
      Revenues
              
              
              10,643
              
              
              
              10,956
              
              
              
              21,286
              
              
              
              10,956Total
      Revenues
              
              
              37,028
              
              
              
              27,395
              
              
              
              66,371
              
              
              
              27,395COSTS
      AND EXPENSESCosts
      of Sales (Exclusive of Depreciation and Amortization)
              
              
              39,973
              
              
              
              47,783
              
              
              
              81,228
              
              
              
              47,783Cost
      of Barter Exchanges
              
              
              24,643
              
              
              
              14,131
              
              
              
              46,286
              
              
              
              21,881Advertising
      Expenses
              
              
              16,470
              
              
              
              29,342
              
              
              
              108,377
              
              
              
              218,764Depreciation
      and Amortization Expenses
              
              
              45,987
              
              
              
              -
              
              
              
              84,409
              
              
              
              10,509Professional
      Fees
              
              
              623,708
              
              
              
              1,510,579
              
              
              
              1,590,350
              
              
              
              2,423,966Research
      and Development
              
              
              9,817
              
              
              
              80,609
              
              
              
              19,674
              
              
              
              448,877General
      and Administrative Expenses
              
              
              472,336
              
              
              
              466,112
              
              
              
              832,057
              
              
              
              1,012,040Total
      Costs and Expenses
              
              
              1,232,934
              
              
              
              2,148,556
              
              
              
              2,762,381
              
              
              
              4,183,820Loss
      from Operations
              
              
              (1,195,906
              )
              
              
              (2,121,161
              )
              
              
              (2,696,010
              )
              
              
              (4,156,425
              )Other
      Income (Expense)Interest
      Expense
              
              
              (5,372
              )
              
              
              (18,589
              )
              
              
              (15,548
              )
              
              
              (19,464
              )Interest
      Income
              
              
              3,739
              
              
              
              5,811
              
              
              
              8,061
              
              
              
              14,537Total
      Other Income (Expense)
              
              
              (1,633
              )
              
              
              (12,778
              )
              
              
              (7,487
              )
              
              
              (4,927
              )Loss
      before Income Taxes
              
              
              (1,197,539
              )
              
              
              (2,133,939
              )
              
              
              (2,703,497
              )
              
              
              (4,161,352
              )Income
      Tax Expense
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -NET
      LOSS
              
              $
              (1,197,539
              )
              
              $
              (2,133,939
              )
              
              $
              (2,703,497
              )
              
              $
              (4,161,352
              )Basic
      and Diluted Loss Per Share of Common Stock
              
              $
              (0.06
              )
              
              $
              (0.15
              )
              
              $
              (0.15
              )
              
              $
              (0.30
              )Weighted
      Average Number of Shares Outstanding
              
              
              19,616,270
              
              
              
              14,190,417
              
              
              
              18,475,203
              
              
              
              13,839,083


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






4




STUDIO
      ONE MEDIA, INC.Consolidated
      Statements of Stockholders' Equity (Deficit)CommonStock
              
              
              
              
              
              TotalAdditional
              
              
              Common
              
              
              Issued
              
              
              
              
              
              Stockholders'Preferred
      Stock
              
              
              Common
      Stock
              
              
              Paid
      In
              
              
              Shares
              
              
              in
      Advance
              
              
              Accumulated
              
              
              EquityShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              to
      be Issued
              
              
              for
      Services
              
              
              Deficit
              
              
              (Deficit)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
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,708,922Common
      shares issued for cash
              
              
              -
              
              
              
              -
              
              
              
              1,505,478
              
              
              
              1,505
              
              
              
              2,059,569
              
              
              
              (197,000
              )
              
              
              -
              
              
              
              -
              
              
              
              1,864,074Warrants
      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 services
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              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
              )Common
      shares issued in conversionof
      preferred shares (unaudited)
              
              
              (200,000
              )
              
              
              (200
              )
              
              
              377,051
              
              
              
              377
              
              
              
              (36,652
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (36,475
              )Common
      shares issued for assets(unaudited)
              
              
              -
              
              
              
              -
              
              
              
              250,000
              
              
              
              250
              
              
              
              249,750
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              250,000Common
      shares issued for services(unaudited)
              
              
              -
              
              
              
              -
              
              
              
              751,693
              
              
              
              752
              
              
              
              569,977
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              570,729Common
      shares issued for cash(unaudited)
              
              
              -
              
              
              
              -
              
              
              
              1,721,000
              
              
              
              1,720
              
              
              
              853,780
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              855,500Warrants
      exercised for cash(unaudited)
              
              
              -
              
              
              
              -
              
              
              
              238,084
              
              
              
              238
              
              
              
              162,804
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              163,042Common
      shares issued in conversionof
      debt  (unaudited)
              
              
              -
              
              
              
              -
              
              
              
              1,125,559
              
              
              
              1,126
              
              
              
              665,686
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              666,812Fair
      value of warrants granted(unaudited)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              605,041
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              605,041Common
      shares to be issued(unaudited)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              219,737
              
              
              
              -
              
              
              
              -
              
              
              
              219,737Amortization
      of stock issued inadvance
      for services  (unaudited)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              61,578
              
              
              
              -
              
              
              
              61,578Common
      shares issued in advance forservices
      (unaudited)
              
              
              -
              
              
              
              -
              
              
              
              100,000
              
              
              
              100
              
              
              
              99,900
              
              
              
              -
              
              
              
              (100,000
              )
              
              
              -
              
              
              
              -Preferred
      shares issued for cash(unaudited)
              
              
              96,429
              
              
              
              96
              
              
              
              -
              
              
              
              -
              
              
              
              67,404
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              67,500Net
      Loss for the Six MonthsEnded
      December 31, 2009 (unaudited)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,703,497
              )
              
              
              (2,703,497
              )Balance,
      December 31, 2009 (unaudited)
              
              
              670,473
              
              
              $
              670
              
              
              
              20,980,834
              
              
              $
              20,980
              
              
              $
              18,277,181
              
              
              $
              243,737
              
              
              $
              (86,575
              )
              
              $
              (17,940,619
              )
              
              $
              515,374The
      accompanying notes are an integral part of these financial
      statements.




5




STUDIO
      ONE MEDIA, INC.Consolidated
      Statements of Cash Flows(Unaudited)For
      the Six Months EndedDecember
      31,2009
              
              
              2008(Restated)Cash
      Flows from Operating ActivitiesNet
      Loss
              
              $
              (2,703,497
              )
              
              $
              (4,161,352
              )Adjustments
      to reconcile to cash fromoperating
      activities:Depreciation
      and amortization
              
              
              84,409
              
              
              
              21,018Common
      stock issued for services
              
              
              885,297
              
              
              
              1,238,963Fair
      value of warrants granted
              
              
              605,041
              
              
              
              568,596Gain
      on conversion of preferred shares
              
              
              (36,475
              )
              
              
              -Loss
      on conversion of debt
              
              
              9,939
              
              
              
              -Changes
      in Operating Assets and Liabilities:Accrued
      interest receivable
              
              
              (8,061
              )
              
              
              (14,537
              )Prepaid
      expenses
              
              
              (3,372
              )
              
              
              (57,762
              )Deposits
              
              
              (2,454
              )
              
              
              10,000Accounts
      payable and accrued  expenses
              
              
              (303,744
              )
              
              
              532,077Net
      Cash Used in Operating Activities
              
              
              (1,472,917
              )
              
              
              (1,862,997
              )Cash
      Flows from Investing ActivitiesPurchase
      of Other Assets
              
              
              -
              
              
              
              (32,890
              )Notes
      Receivable
              
              
              -
              
              
              
              354Purchase
      of property and equipment
              
              
              (39,732
              )
              
              
              (650,943
              )Net
      Cash Used in Investing Activities
              
              
              (39,732
              )
              
              
              (683,479
              )Cash
      Flows from Financing ActivitiesIssuance
      of common stock
              
              
              855,500
              
              
              
              1,875,000Issuance
      of preferred stock
              
              
              67,500
              
              
              
              325,000Warrants
      exercised for cash
              
              
              163,042
              
              
              
              -Repayment
      of notes payable
              
              
              -
              
              
              
              (29,847
              )Proceeds
      from notes payable
              
              
              125,000
              
              
              
              179,307Net
      Cash from Financing Activities
              
              
              1,211,042
              
              
              
              2,349,460Net
      Increase (Decrease) in Cash
              
              
              (301,607
              )
              
              
              (196,916
              )Cash,
      Beginning of Year
              
              
              439,474
              
              
              
              392,450Cash,
      End of Year
              
              $
              137,867
              
              
              $
              195,534Supplemental
      Cash Flow Disclosure:Cash
      Paid For:Interest
      Expense
              
              $
              696
              
              
              $
              1,389Income
      Taxes
              
              
              -
              
              
              
              -Non
      Cash Financing Activities:Common
      stock issued for intangible assets
              
              $
              250,000
              
              
              $
              -Common
      stock issued to extinguish debt
              
              $
              666,812
              
              
              $
              -The
      accompanying notes are an integral part of these financial
      statements.








6
 
 STUDIO
ONE MEDIA, INC.
 Notes to
Consolidated Financial Statements (Unaudited)
 December
31, 2009 and June 30, 2009





Note
1: Summary of Significant Accounting Policies





DESCRIPTION
OF BUSINESS, FINANCING AND BASIS OF FINANCIAL STATEMENT
PRESENTATION





Studio
One Media, Inc., (the “Company”, “Studio One” 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 privately-held
Scottsdale, Arizona-based company that designed and manufactured a proprietary
(patents pending), self-contained interactive audio/video recording studio
designed for installation in shopping malls and other high traffic areas (the
“Studio One Entertainment Agreement”).  MyStudio®enables the public, for a fee, to
record their video and audio images in a 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 was pursuant to an agreement entered into by the companies dated March
29, 2006. The reverse merger included the exchange of 7,000,000 restricted
common shares of Studio One Media, Inc. for 100% of the issued and outstanding
shares of Studio One Entertainment, Inc.   The substance of the
transaction resulted in a reverse merger wherein SOEI became the accounting
acquirer of SOMD.  Therefore, historical financial data reflects the
operations and accumulated deficit of SOEI.  The transaction
essentially is a recapitalization of SOEI. The reverse merger included all
rights, 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.





The
Company is no longer considered to be a development stage company, as a result
of the commencement of its principle revenue activities beginning in September
2008.





UNAUDITED
INTERIM FINANCIAL INFORMATION





The
accompanying Consolidated Balance Sheet as of December 31, 2009, the
Consolidated Statements of Operations for the three and six months ended
December 31, 2009 and 2008, the Consolidated Statements of Stockholders’ Equity
(Deficit) for the six months ended December 31, 2009, and the Consolidated
Statements of Cash Flows for the six months ended December 31, 2009 and 2008 are
unaudited. These unaudited interim consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles. In
our opinion, the unaudited interim Consolidated Financial Statements include all
adjustments of a normal recurring nature necessary for the fair presentation of
our financial position as of December 31, 2009, our results of operations for
the three and six months ended December 31, 2009 and 2008, and our cash flows
for the six months ended December 31, 2009 and 2008. The results of operations
for the three and six months ended December 31, 2009 are not necessarily
indicative of the results to be expected for the year ending June 30, 2010.
These unaudited interim Consolidated Financial Statements should be read in
conjunction with the consolidated financial statements and related notes
included in our Annual Report on Form 10-K filed on October 15,
2009.





GOING
CONCERN





The
Company has incurred losses since inception of $17,855,368 and has generated
limited 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) ultimately achieve
substantial revenues from the MyStudio 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
MyStudios.





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.




7
 
 STUDIO
ONE MEDIA, INC.
 Notes to
Consolidated Financial Statements (Unaudited)
 December
31, 2009 and June 30, 2009


Note
1: Summary of Significant Accounting Policies - continued
 
 REVENUE
RECOGNITION
 
 The
Company applies the provisions of SEC Staff Accounting Bulletin No. 104,
“Revenue Recognition in Financial Statements” (“SAB 104”), which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB 104 outlines the basic criteria that must be
met to recognize revenue and provides guidance for disclosure related to revenue
recognition policies. In general, the Company recognizes revenue related to
goods and services provided when (i) persuasive evidence of an arrangement
exists, (ii) delivery has occurred or services have been rendered, (iii) the fee
is fixed or determinable, and (iv) collectability is reasonably
assured.
 
 The
Company’s revenues are generated from studio sessions, on-studio advertising and
website advertising.  The Company collects money from studio users via
online prepaid sessions or at the time of performance at the
studios.  Activation and gift cards are valid for 180 days from the
date of purchase. The Company defers recognition of such revenues until the
session is performed or upon expiration, whichever comes first. In addition, the
Company sells advertising on the exterior monitors on each individual recording
studio and the MyStudio.net
website.
 
 Barter Transactions -Barter
revenue relates to recording session services provided by the Company to
business customers in exchange for products and services that the Company would
otherwise be required to buy for cash.  Barter expenses reflect the
offsetting  expense to the 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.  The Company
recognizes barter revenues only to the extent that the Company 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.
 
 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.
 
 RECENT
ACCOUNTING PRONOUNCEMENTS
 
 In
January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation
(Topic 810): Accounting and Reporting for Decreases in Ownership of a
Subsidiary. This amendment to Topic 810 clarifies, but does not change, the
scope of current US GAAP. It clarifies the decrease in ownership provisions of
Subtopic 810-10 and removes the potential conflict between guidance in that
Subtopic and asset derecognition and gain or loss recognition guidance that may
exist in other US GAAP. An entity will be required to follow the amended
guidance beginning in the period that it first adopts FAS 160 (now included in
Subtopic 810-10). For those entities that have already adopted FAS 160, the
amendments are effective at the beginning of the first interim or annual
reporting period ending on or after December 15, 2009. The amendments should be
applied retrospectively to the first period that an entity adopted FAS 160. The
Company does not expect the provisions of ASU 2010-02 to have a material effect
on the financial position, results of operations or cash flows of the
Company.
 
 In
January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic
505): Accounting for Distributions to Shareholders with Components of Stock and
Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to
Topic 505 clarifies the stock portion of a distribution to shareholders that
allows them to elect to receive cash or stock with a limit on the amount of cash
that will be distributed is not a stock dividend for purposes of applying Topics
505 and 260. Effective for interim and annual periods ending on or after
December 15, 2009, and would be applied on a retrospective basis. The Company
does not expect the provisions of ASU 2010-01 to have a material effect on the
financial position, results of operations or cash flows of the
Company.
 
 In
October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting
for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance
or Other Financing. This Accounting Standards Update amends the FASB Accounting
Standard Codification for EITF 09-1. (See EITF 09-1 effective date
below.)
 
 In
October 2009, the FASB issued Accounting Standards Update 2009-14, Software
(Topic 985): Certain Revenue Arrangements That Include Software Elements. This
update changed the accounting model for revenue arrangements that include both
tangible products and software elements. Effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010. Early adoption is permitted. The Company does not expect
the provisions of ASU 2009-14 to have a material effect on the financial
position, results of operations or cash flows of the Company.
  8
 
 STUDIO
ONE MEDIA, INC.
 Notes to
Consolidated Financial Statements (Unaudited)
 December
31, 2009 and June 30, 2009
  Note
1: Summary of Significant Accounting Policies - continued
 
 RECENT
ACCOUNTING PRONOUNCEMENTS - continued
 
 In
October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue
Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update
addressed the accounting for multiple-deliverable arrangements to enable vendors
to account for products or services (deliverables) separately rather than a
combined unit and will be separated in more circumstances that under existing US
GAAP. This amendment has eliminated that residual method of allocation.
Effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. The Company does not expect the provisions of ASU 2009-13 to have a
material effect on the financial position, results of operations or cash flows
of the Company.
 
 In
September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value
Measurements and Disclosures (Topic 820): Investments in Certain Entities That
Calculate Net Asset Value per Share (or Its Equivalent). This update provides
amendments to Topic 820 for the fair value measurement of investments in certain
entities that calculate net asset value per share (or its equivalent). It is
effective for interim and annual periods ending after December 15, 2009. Early
application is permitted in financial statements for earlier interim and annual
periods that have not been issued. The Company does not expect the provisions of
ASU 2009-12 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 168, “The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles” (SFAS 168 or ASC
105-10). SFAS 168 (ASC 105-10) establishes the codification as the sole source
of authoritative accounting principles recognized by the FASB to be applied by
all nongovernmental entities in the preparation of financial statements in
conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for
financial statements issued for fiscal years ending on or after September 15,
2009 and interim periods within those fiscal years. The adoption of SFAS 168
(ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations
or financial condition. The codification did not change GAAP, however, it did
change the way GAAP is organized and presented. As a result, these changes
impact how companies reference GAAP in their financial statements and in their
significant accounting policies. The Company implemented the codification in
this Report by providing references to the codification topics alongside
references to the corresponding standards.
 
 With the
exception of the pronouncements noted above, no other accounting standards or
interpretations issued or recently adopted are expected to have a material
impact on the Company’s financial position, operations or cash
flows.
 
 Note
2: Accounts Payable and Accrued Expenses
 
 A summary
of accounts payable and accrued expenses follows:
 
 December
      31,
              
              
              June
      30,2009
              
              
              2009Accounts Payable
              
              $
              1,063,983
              
              
              $
              1,232,807Accrued
      Interest
              
              
              33,870
              
              
              
              38,344Other
      Accrued Expenses
              
              
              82,200
              
              
              
              212,646Total
              
              $
              1,180,053
              
              
              $
              1,483,797
 
 Note
3: Short-Term Borrowings
 
 The
Company entered into two additional notes during the six months ended December
31, 2009.  The Company signed a $50,000 note payable to a related
party that bears 8% annual interest.  The Company also signed notes with
unrelated parties totaling $75,000 bearing 8% annual interest.
 
 In June
2009, the Company borrowed $200,000 from three individuals and signed a Senior
Convertible Promissory Note in that amount, bearing interest at 6%, with a
maturity on December 30, 2009.  The holders of that Note, when it
became due, agreed to convert $150,000 of the principal, and the accrued
interest on that amount, to common stock of the Company according to the terms
provided therein.  The Company issued 308,916 shares in extinguishment
of debt totaling $154,458.  The maturity date with respect to the
remaining principal balance, together with accrued interest thereon, has been
extended to February 28, 2010.
 
 Note
4: Common Stock
 
 During
the six months ended December 31, 2009, the Company issued 1,721,000 common
shares for $855,500 in cash and 851,693 shares of the Company’s common
stock for consulting services rendered to the Company valued at
$670,729.  The Company also issued 238,084 shares of common stock for
warrants exercised for cash for a total of $163,042. The Company also issued
250,000 shares of common stock for technology valued at $250,000 and 1,125,559
shares for $666,812 of debt.
 
 
  9
 STUDIO
ONE MEDIA, INC.
 Notes to
Consolidated Financial Statements (Unaudited)
 December
31, 2009 and June 30, 2009
  Note 5: Preferred Stock





During
the six months ended December 31, 2009, the Company issued 96,429 shares of
Series A-1 preferred stock for $67,500 in cash and converted 200,000 share of
Series A-1 preferred stock for 377,051 shares of common
stock.





Note
6:  Restatement of Financial Statements
 
 The
Company’s Annual Report, Form 10-K, for the fiscal year ended June 30, 2009,
filed October 15, 2009, included re-audited, restated financial statements for
the fiscal year ended June 30, 2008 that supersede all prior reports containing
financial statements for this period and may be relied upon by the investing
public.
 
 The
Company, in its Form 10-Q for the period ending March 31, 2009, filed May 18,
2009, had previously restated its financial statements for fiscal year ended
June 30, 2008, to reflect a write-off of goodwill in the amount of $719,839 in
connection with the April 17, 2007 acquisition of Studio One Entertainment, Inc.
(SOEI) through an all-stock transaction.  In our previously issued
financial statements this business combination between the Company and SOEI was
not appropriately accounted for as a reverse merger.  The purchase of
SOEI was pursuant to an agreement entered into by the companies dated March 29,
2006.  The reverse merger included the exchange of 7,000,000
restricted common shares of Studio One Media, Inc. for 100% of the issued and
outstanding shares of Studio One Entertainment, Inc.   The substance
of the transaction resulted in a reverse merger wherein SOEI became the
accounting acquirer of SOMD.  Therefore, historical financial data
reflects the operations and accumulated deficit of SOEI.  The
transaction essentially is a recapitalization of SOEI.  The reverse merger
included 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.
  As a
result  of the audit for the fiscal year ended June 30, 2009 and the
re-audit for the fiscal year ended June 30, 2008, the Company concluded that
further adjustments to the financial statements for the fiscal year ended June
30, 2008, were required, the most significant of which was a recalculation of
warrant expense for the period resulting in the reduction in operating expenses
and a corresponding reduction in net loss in the amount of
$2,073,916.  These additional changes were reflected in the Form 10-K
for the fiscal year ended June 30, 2009.
 
 For more
information concerning the restatement of financial statements for fiscal year
ended June 30, 2008 and see our Form 8-K filed December 4, 2009.
 
 Note
7: Subsequent Events
 
 In
accordance with FAS 165, management evaluated the subsequent events as of
February 16, 2010.  The Company has not entered into any material
subsequent events as of the date noted, except as
follows.
 
 Since
December 31, 2009, the Company has raised in excess of $500,000 from the sale of
restricted common stock.
 
 The
Company leases space at Scottsdale Fashion Square for its MyStudio recording
studio.  This Specialty Lease Agreement is terminated effective March
11, 2010.  The Company has signed a new agreement for space in a
different mall in the greater Phoenix area that offers higher visitor traffic,
better demographics (for MyStudio) and substantially lower monthly lease
costs.










10










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





The
discussion and financial statements contained herein are for the three and six
months ended December 31, 2009 and 2008. The following discussion regarding the
financial statements of the Company should be read in conjunction with the
financial statements of the Company included herewith.





FORWARD-LOOKING
AND CAUTIONARY STATEMENTS





In
addition to historical information, this 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 growth and  growth rate of our operations,
      business, revenues, operating margins, costs, expenses, and acceptance of
      any products or services;





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





·
            our
      future stock-based compensation
charges;





·
            our
      dilution related to all equity grants to
  employees;





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





·
            that
      we will continue to make investments and
  acquisitions;





·
            the
      sufficiency of our existing cash, cash equivalents, marketable securities
      and cash generated from operations;





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





·
            that
      growth in advertising revenues from our web sites and studios will be
      achievable and sustainable;





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





·
            general
      economic conditions.








Although we
believe the expectations reflected in these forward-looking statements are
reasonable, such expectations cannot guarantee future results, levels of
activity, performance or achievements.  We urge you not to place undue
reliance on these forward-looking statements.  We undertake no
obligation to revise or publicly release the results of any revision to these
forward-looking statements.





11





ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued





Available
Information





The
Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a)
and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)
are filed with the SEC. The public may read and copy any materials filed by the
Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,
Room 1580, Washington, DC 20549.  The public may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.  The SEC maintains an Internet site that contains
reports, proxy, and information statements and other information regarding
issuers that file electronically with the SEC at http://www.sec.gov. The
contents of these websites are not incorporated into this
filing.  Further, the Company’s references to the URLs for these
websites are intended to be inactive textual references only.





The
following discussion and analysis of our financial condition and results of
operations should be read together with our Consolidated Financial Statements
and related notes included elsewhere in this Report.





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 publicly-traded company on the Over-The-Counter Bulletin Board
(ticker symbol: SOMD).  As of December 31, 2009, there were 20,980,834
shares issued and outstanding.  Insiders and affiliates control
approximately 40% of the issued and outstanding shares.  Since April
2006, the Company has raised approximately $9.8 million in the form of equity
for purposes of research and development and the launch of
MyStudio.





Commencement
of Operations





Since
2004, 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 in the Scottsdale Fashion Square mall in
Scottsdale, Arizona on September 29, 2008.





Quarterly
Update





Following
is a summary of significant recent activities:





In August
2009, the Company launched its second MyStudio, which is located at 8560 W.
Sunset Boulevard on the Sunset Strip in Los Angeles, California.  The
location is one of the most prominent addresses in Hollywood, having served as
the former headquarters for Playboy Enterprises and is currently home to several
of the leading entertainment companies.   Since its opening in
Los Angeles, the studio has been used to showcase MyStudio to music and
entertainment executives.  The feedback from the entertainment
industry has been very positive as they see the potential for numerous uses for
the studio.  The Hollywood studio is credited with allowing the
Company to form some very valuable business relationships.   The
Hollywood studio is available for use by appointment only and is thus not a
source of revenues to date.  The Company expects to open the LA
studio to the public when it has completed its strategic and promotional
initiatives.





Management
is constantly evaluating its business model to maximize revenues, profitability
and shareholder value. In the Phoenix area, the Company has signed a new mall
lease in a location that offers higher visitor traffic, better demographics (for
MyStudio) and substantially lower monthly lease costs.  The relocation
will occur on or before March 15, 2010.  The former Specialty Lease
Agreement at Scottsdale Fashion Square has been terminated effective March 11,
2010.





The
Company has completed the assembly of a MyStudio for installation in either the
New York or Miami area.   We are currently working to negotiate a
lease for one of these two areas and will install that studio subject to the
satisfaction of the location within the mall and economic lease
terms.





In
addition to the above studios, the Company is in the final stages of completing
a fourth studio for installation in the Nashville area during the next fiscal
quarter.  The Company has negotiated a lease on favorable terms for a
high-profile location in a mall. Based on the significance of music to the
Nashville area and strong feedback from music executives, we believe this is a
very good choice for our fourth studio.





12





ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued





Quarterly Update - continued





We are
also in the process of acquiring two additional studio structures from the
original manufacturer.   Subject to the further availability of
capital, these two studios can be completed and installed within 90
days.  As the worldwide recession has begun to ebb, the Company has
found its fundraising activities gaining traction and we expect to be able to
deploy a greater number of studios at a greater velocity than has occurred to
date.  Since December 31, 2009, the Company has raised in excess of
$500,000 from the sale of restricted common stock.  The Company
continues to operate with a lean overhead structure and remains focused on using
its capital to deploy MyStudios throughout the United States.





As noted
above, the Hollywood studio has allowed us to develop a number of strong
relationships with potential users of MyStudio for casting and music
purposes.  As an example of such relationships formed, we have
partnered with entertainment moguls Simon Fuller, Perez Hilton and Jamie King
for the auditions for their new Boy Band project, a contest
to identify five males between the ages of 13 and 21 with outstanding dance and
vocal talent to form a high profile band.  Mr. Fuller is the producer
of the hit show American
Idol.  Mr. Hilton is a famous celebrity gossip columnist with a
very extensive following.  Mr. King is a world renowned
choreographer.





We have
partnered with Boy Band
to provide for convenient and easy auditions for Boy Band.  In
addition, MyStudio was responsible for developing the website for the contest,
which can be accessed at www.boybandsearch.com.





In
November 2009, the Company announced its groundbreaking strategic partnership
with RealityWanted.com.  RealityWanted.com is the
leading source for reality TV casting calls in the U.S.  The
partnership provides opportunities for members of both companies to create
audition videos for hundreds of top reality television shows.  Most
reality TV applicants are missing one of the most critical components to being
selected – the video. This partnership creates a turnkey reality TV casting
platform to help complete the casting process. Users can easily supplement their
RealityWanted.com
profiles with a high-quality video that better conveys their talents and unique
personality traits giving them a greater chance of being selected for a reality
television show.  As MyStudio offers over 1,000 high definition
backgrounds, users can pick an environment to best suit their audition. The
RealityWanted.com
partnership complements our existing multi-year agreement with reality TV
producer Mark Burnett Productions.  This is another example of the
Company forming strategic partnerships to drive traffic to our studios and
website.





Since
June 2009, the Company has announced a number of contests which have driven
traffic to the studio and increased brand awareness, including The Comedy Store,
Project Ethos in conjunction with The House of Blues, and the Gotham Comedy
Club.   The Company has enjoyed success with its partner, the
GRAMMY Foundation, including the GRAMMY Jazz Ensemble and GRAMMY
Camp.  All of these events drive additional traffic to the
studios.





MyStudio
Radio first aired on KWSS 106.7 FM in November 2009. The radio show is designed
to feature artists who have recorded videos at MyStudio and posted them online
at MyStudio.net. This
low-cost radio show is another example of a way management is providing
additional opportunities for users of the studio to gain the recognition for
their talents. We believe that such radio and potential future television
opportunities will drive additional traffic to the studios as artists discover
the power of MyStudio’s “Step In, Stand Out” campaign.





In
October 2009, the Company announced its revolutionary MyStudio Masters and
AfterMaster® products. 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.





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
Company continues to have favorable discussions with several major record labels
to Master and AfterMaster new and existing catalog music.  The first
commercial music release utilizing MyStudio’s AfterMaster technology was Janet
Jackson’s new single, “Make
Me,” produced by nationally recognized producer Rodney
Jerkins.  This song was released by Universal Music and produced by
nationally recognized record producer Rodney Jerkins.  The Company
expects to announce other significant musical releases using our technology in
the very near future.











13





ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued





Business





Studio
One Media, Inc. is a diversified media and technology company based in
Scottsdale, Arizona.  Studio One subsidiaries and divisions include
MyStudio, Inc. (formerly, 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 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
or Miami area in the near future.





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 UGC by MyStudio customers and advertising. MyStudio revenue is
derived from paid session revenue, on-studio monitor advertising and traditional
website advertising.





In
addition, the Company expects additional future revenue to be generated by its
MyStudio Masters and Aftermasters products, as well as 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.





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 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 for viewing within minutes of completion of the recording
at MyStudio.net.  Videos
are protected with a privacy pass-code, and uses can decide whether to make
their 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 DVDs of their videos, download MP3 audio files
(restrictions apply), access embedded codes or print high resolution photos from
their video.








14





ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued





MyStudio Recording Studios - continued





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





Current
MyStudio locations include Scottsdale, Arizona and Los Angeles, California. The
Company expects to install its next studio in the New York or Miami area in the
near future followed by additional studios in the United States.





MyStudio
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 incidents where users’ videos have allowed them to be
discovered by talent agents.





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





The
Company announced a groundbreaking strategic partnership with RealityWanted.com in November
2009.  RealityWanted.com is the
leading source for reality TV casting calls in the U.S.  The
partnership provides opportunities for members of both companies to create
audition videos for hundreds of top reality television shows.  Most
reality TV applicants are missing one of the most critical components to being
selected – the video. This partnership creates a turnkey reality TV casting
platform to help complete the casting process. Users can easily supplement their
RealityWanted.com
profiles with a high-quality video that better conveys their talents and unique
personality traits giving them a greater chance of being selected for a reality
television show. As MyStudio offers over 1,000 high definition backgrounds,
users can pick an environment to best suit their audition. This is another
example of the Company forming strategic partnerships to drive traffic to our
studios and website.





We have
partnered with entertainment moguls Simon Fuller, Perez Hilton and Jamie King in
the casting for Boy
Band, a contest to identify five males between the ages of 13 and 21 with
outstanding dance and vocal talent to form a high profile band.  Mr.
Fuller is the producer of the hit show American Idol.  Mr.
Hilton is a famous celebrity gossip columnist with a very extensive
following.  Mr. King is a world renowned choreographer.





We have
partnered with Boy Band
to provide for convenient and easy auditions.  They understand how
MyStudio can be successfully utilized for auditions without spending hundreds of
thousands of dollars and months on the road auditioning large numbers of
potential entertainers.  In addition, MyStudio was responsible for
developing the website for the contest, which can be accessed at www.boybandsearch.com.





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 to develop future
partnerships for content and users with recruiting, dating and greeting card
companies among others.











15





ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued





MyStudio Business
Model





The
Company’s “bricks and clicks” business model is currently based upon three
primary sources of revenue: recording session fees from MyStudio 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 with new and
repeat users, as well as the installation of additional
studios.  Additional 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.





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





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.  These payment options increase throughput for 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 currently offers
thousands of songs licensed from EMI Music Publishing for karaoke usage and
expects to have additional licensing agreements in the future.  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.





MyStudio.net has continued to
experience substantial website traffic, especially considering that the content
for the site is primarily driven by a single studio.  Further, we
expect web traffic to grow substantially as additional studios are launched.
Such traffic further confirms our thesis that the web property has and is
creating significant value for our shareholders.  The leading social
media websites, such as Facebook, have created
substantial valuations for themselves based on website
advertising.  Unlike a number of other social media and Internet
companies, the Company is not solely dependent upon website advertising to
generate revenues. Our more diverse “bricks and clicks” business model allows
our shareholders to benefit from multiple revenue streams, with the website
being just one of the Company’s valuation drivers.





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.





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 levels with talent seekers (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 television 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.





16





ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued





MyStudio Marketing and Promotion
Strategy





Studio
One’s agreement with Mark Burnett Productions provides for the use of MyStudio
video recording studios to augment the casting of Mark Burnett television
shows such as Are You
Smarter Than a 5thGrader.   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.  The Company expects to enter into
similar agreements with other television production companies in the
future.





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 Music Publishing (“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 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.





Since
June 2009, the Company has announced a number of contests which have driven
traffic to the studio and increased brand awareness, including The Grammy
Foundation, The Comedy Store, Project Ethos in conjunction with The House of
Blues, and the Gotham Comedy Club.





Talent
agents are using the MyStudio.netas a resource
for identifying talent due to the high quality of the audio and video. Several
artists have recently been discovered by talent agents since using MyStudio
including:   Guy Lundy who was signed by R&B label Allmighty
Entertainment and Diamond Hollaway who earned the chance to perform at the
legendary Apollo Theater in New York where she won the youth competition from
which hundreds of kids from across the country auditioned.  We believe
that success stories like these will continue and provide additional traffic to
MyStudio.





MyStudio
Radio first aired on KWSS 106.7 FM on November 14, 2009. The radio show is
designed to feature artists who have recorded videos at MyStudio and posted them
online at MyStudio.net.
This low-cost radio show is another example of a way management is providing
additional opportunities for users of the studio to gain the recognition for
their talents they are seeking. We believe that such radio and potential future
television opportunities will drive additional traffic to the studios as artists
discover the power of MyStudio’s “Step In, Stand Out” campaign.





In
November 2009,  the Company announced its groundbreaking strategic
partnership with RealityWanted.com.  RealityWanted.com is the
leading source for reality TV casting calls in the U.S.  The
partnership will open opportunities for members of both companies to create
audition videos for hundreds of top reality television shows.  This
partnership creates a turnkey reality TV casting platform to help complete the
casting process. This is another example of the Company forming strategic
partnerships to drive traffic to our studios and website.





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.





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.





17





ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued





MyStudio Audio Labs, Inc. and
MyStudio Masters® - continued





The
Company is in discussions with several major record labels to Master and
AfterMaster new and existing catalog music.   The first
commercial music release utilizing MyStudio’s AfterMaster technology was Janet
Jackson’s new single, “Make
Me.”  This song was released by Universal Music and produced by
nationally recognized record producer Rodney Jerkins.  This song
recently rose to #1 on the Billboard’sDance/Club Play
Chart.





The
Company remains focused on identifying significant revenue opportunities with
the major record labels using these technologies.





Manufacturing





The
studios are currently outsourced for manufacture to an Arizona-based
manufacturing company.





Intellectual
Property and Licensing





The
Company has embarked on an aggressive intellectual property program including
the filing of 25 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
December 31, 2009, we employed sixteen full-time employees and five part-time
employees at the MyStudio recording studio.  We expect to hire additional
employees in the next year to handle anticipated growth.  We believe
that our relationship with our employees is good.  None of our
employees are members of any union, nor have they entered into any collective
bargaining agreements.





Facilities





Pursuant
to a lease originally dated January, 2006, we currently occupy approximately
5,400 square feet of office space located at 7650 E. Evans Rd., Suite C,
Scottsdale, Arizona 75260.  On June 15, 2008, we expanded into
and also occupy approximately 5,400 square feet adjoining the original premises
on a month-by month basis.  Under the terms of the extended, expanded
lease, we occupy the premises on a month-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
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.    This Specialty Lease Agreement is terminated effective
March 11, 2010.  The Company has signed a new agreement for space in a
different mall in the greater Phoenix area that offers higher visitor traffic,
better demographics (for MyStudio) and substantially lower monthly lease
costs.
 
 The
Company also leases space at 8650 West Sunset Boulevard, Los Angeles, California
for its MyStudio recording studio pursuant to a short-term lease.  The
monthly rent for the space in both locations is at a market rate commensurate
with other kiosk operations.









18





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





RESULTS
OF OPERATIONS





Revenues


Three
      Months Ended
            
            
            Six
      Months EndedDecember
      31,
            
            
            December
      31,
            
            
            December
      31,
            
            
            December
      31,2009
            
            
            2008
            
            
            2009
            
            
            2008Session
      Revenues
            
            $
            26,385
            
            
            $
            16,439
            
            
            $
            45,085
            
            
            $
            16,439Advertising
      Revenues
            
            
            10,643
            
            
            
            10,956
            
            
            
            21,286
            
            
            
            10,956Total
      Revenues
            
            $
            37,028
            
            
            $
            7,395
            
            
            $
            66,371
            
            
            $
            27,395





The
Company generated revenues of $37,028 for the second quarter ended December 31,
2009, compared to $27,395 for the comparable period in fiscal
2009.  The increase in revenue is attributable to an increase in the
number of studio sessions sold.  All revenues were earned from the
Scottsdale studio.


Barter
revenues are broken out between studio session income and advertising
income.  Of the $26,385 of studio session income for the three months
ended December 31, 2009, $12,385 was cash and the remaining $14,000 was in
barter.  The entire $10,643 of advertising revenue for the quarter
ended December 31, 2009 was in barter.  For the comparable three
months ended December 31, 2008, of the $16,439 in studio session income, $13,264
was cash and $3,175 was in barter.  All of the advertising income for
the three months ended December 31, 2008, $10,956, was in barter.





While the
Hollywood studio opened in August 2009, that studio has generally not been open
to the public during the quarter but was instead used to showcase MyStudio to
the music and entertainment industry in Los Angeles. The Company expects to
begin generating revenues from this studio at a future date.





The
Company launched its first studio on September 29, 2008.  The Company
began generating revenues during October 2008, hence there were no revenues in
the first quarter of fiscal 2009.





The Company’s business model currently generates revenues from three primary
sources:





·
            Paid
      user fees from customers who utilize the studios to create an audio/video
      recording;·
            Advertising
      revenue from the external monitors located on each MyStudio facility;
      and·
            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.   The revenue from advertising on the website will
depend on the number and length of visits to our website by MyStudio users and
other viewers.





Cost of Sales


Three
      Months Ended
            
            
            Six
      Months EndedDecember
      31,
            
            
            December
      31,
            
            
            December
      31,
            
            
            December
      31,2009
            
            
            2008
            
            
            2009
            
            
            2008Cost
      of Sales
            
            $
            39,973
            
            
            $
            47,783
            
            
            $
            81,228
            
            
            $
            47,783





Cost of
sales consists primarily of studio rent, attendant labor and Internet
connectivity and excludes deprecation and amortization on the studios. The
Company launched its first studio on September 29, 2008.  The Company
began generating revenues during in October 2008, hence there were no cost of
sales in the first quarter of fiscal 2009.





Research
& Development Expenses





Three
      Months Ended
            
            
            Six
      Months EndedDecember
      31,
            
            
            December
      31,
            
            
            December
      31,
            
            
            December
      31,2009
            
            
            2008
            
            
            2009
            
            
            2008Research
      & Development Expenses
            
            $
            9,817
            
            
            $
            80,609
            
            
            $
            19,674
            
            
            $
            448,877





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.





19





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





Research & Development Expenses -
continued





Studio
One completed the research and development of MyStudio in the first quarter of
2008, which is responsible for the significant decrease in the research and
development expenses.  The Company continues to make additional
investments in research and development to further enhance the customer
experience for both the studios and website.





Other Costs and Expenses


Three
      Months Ended
            
            
            Six
      Months EndedDecember
      31,
            
            
            December
      31,
            
            
            December
      31,
            
            
            December
      31,2009
            
            
            2008
            
            
            2009
            
            
            2008Advertising
      Expenses
            
            $
            16,470
            
            
            $
            29,342
            
            
            $
            108,377
            
            
            $
            218,764Cost
      of Barter Exchanges
            
            
            24,643
            
            
            
            14,131
            
            
            
            46,286
            
            
            
            21,881Depreciation
      and Amortization Expenses
            
            
            45,987
            
            
            
            -
            
            
            
            84,409
            
            
            
            10,509Professional
      Fees
            
            
            623,708
            
            
            
            1,510,579
            
            
            
            1,590,350
            
            
            
            2,423,966General
      and Administrative Expenses
            
            
            472,336
            
            
            
            466,112
            
            
            
            832,057
            
            
            
            1,012,040Other
      Costs and Expenses
            
            $
            1,183,144
            
            
            $
            2,020,164
            
            
            $
            2,661,479
            
            
            $
            3,687,160





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





Total
other costs and expenses decreased in the three-month period ended December 31,
2009 by $837,020 compared to the three months ended December 31, 2008 primarily
due a decline in the professional fees.  The decrease in professional
fees is primarily attributable to non-cash expenses from shares and
warrants/options issued to various employees and consultants for services
rendered during the period.





Due to
the Company’s cash position, it uses its stock as currency to pay many
employees, vendors and consultants.  Once the Company has raised
additional capital from outside sources, as well as generated cash flows from
operations, it expects to reduce the use of stock as a primary means of
compensation. We elected to use the Black-Scholes option-pricing model to
determine the fair value of stock option based awards under FASB ASC 718 (SFAS
123R), consistent with that used for pro-forma disclosures under (FASB ASC 718
(SFAS No. 123), Accounting for
Stock-Based Compensation.





Net
Income/(Loss)


Three
      Months Ended
            
            
            Six
      Months EndedDecember
      31,
            
            
            December
      31,
            
            
            December
      31,
            
            
            December
      31,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      Income/(Loss)
            
            $
            (1,197,539)
            
            
            $
            (2,133,939)
            
            
            $
            (2,703,497)
            
            
            $
            (4,161,352)





The
decrease in the net loss for the three and six months ended December 31, 2009 as
compared to the comparable periods in the prior fiscal year was primarily due to
lower professional and general and administrative costs associated with the
completion of the development of the studio as well as continued cost
containment efforts.





NET
OPERATING LOSSES





We have
accumulated approximately $15,237,122 of federal net operating loss carry
forwards as of June 30, 2009, which expire in various years through
2029.  In addition, the Company has state carry forwards of
approximately $14,931,000, 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 or the three and six months ended
December 31, 2009 and 2008, because the potential tax benefits of the loss
carryforward are offset by a valuation allowance of the same
amount.





LIQUIDITY
AND CAPITAL RESOURCES





The
Company had revenues of $66,371 during the six months ended December 31, 2009 as
compared to $27,395 for the comparable period in the prior year.  The
Company has incurred losses since inception of $17,940,619.  At
December 31, 2009, the Company has a working capital deficit of $1,188,366,
which is animprovement of $504,129 from June 30, 2009.  The decrease
in the working capital deficit was primarily due to lower accounts payable, as
well as the conversion of various notes payable to common stock of
the





20





ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued





LIQUIDITY AND CAPITAL RESOURCES -
continued





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





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





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





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





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





As of
December 31, 2009, the existing capital and anticipated funds from operations
were not sufficient to sustain Company operations or the business plan over the
next twelve months.  We anticipate substantial increases in our cash
requirements which will require additional capital be generated from the sale of
common stock, the sale of preferred stock, equipment financing, debt financing
and bank borrowings, to the extent available, or other forms of financing to the
extent necessary to augment our working capital.  In the event we
cannot obtain the necessary capital to pursue our strategic business plan, we
may have to significantly curtail our operations.  This would
materially impact our ability to continue operations. There is no assurance that
the Company will be able to obtain additional funding when needed, or that such
funding, if available, can be obtained on terms acceptable to the Company.





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





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





ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
required.





ITEM 4T.  CONTROLS AND PROCEDURES





(a)
            Evaluation
      of Disclosure Controls and
Procedures





Our
management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of
the period covered by this Quarterly Report on Form 10-Q.  In designing and
evaluating the disclosure controls and procedures, our management recognized
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives.
 In addition, the design of disclosure controls and procedures must reflect
the fact that there are resource constraints and that management is required to
apply its judgment in evaluating the benefits of possible controls and
procedures relative to their costs.  The design of any disclosure controls
and procedures also is based in part upon certain assumptions about the
likelihood of future events and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions.
  Based on
that evaluation, our chief executive officer and chief financial
officer concluded that, as of December 31, 2009, our disclosure controls
and procedures were, subject to the limitations noted above, effective to
provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in Securities and Exchange
Commission rules, regulations and forms, and that such information is
accumulated and communicated to our management, including our chief executive
officer (and acting chief financial officer), as appropriate, to allow timely
decisions regarding required disclosure.


(b)         
     Changes in internal control over financial
reporting
  Our
management, with the participation of the chief executive officer and chief
financial officer, has concluded there were no significant changes in our
internal controls over financial reporting that occurred during our last fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.


21





PART II - OTHER INFORMATION





ITEM 1.  LEGAL PROCEEDINGS





The
Company is an interpleaded 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
1A - RISK FACTORS





Risks
Related to Our Business and Industry





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. Because of the following factors, as well as other factors
affecting the Company’s financial condition and operating results, past
financial performance should not be considered to be a reliable indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods.





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.  The Company
ceased all marketing and sales activity during the last quarter of
2002.





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. (“SOEI”) of Scottsdale, Arizona, in a one-for-one,
stock-for-stock transaction.  SOEI 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 high traffic areas.  The studios enable the public, for a
fee, to record their video and audio 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 SOEI 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
SOEI common stock constituting 100% of the issued and outstanding shares of
SOEI.  SOEI 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 and
airport terminals – both domestically and
internationally.  Ultimately, Studio One intends to be a one-stop
accessible facility that acts as a link between aspiring entertainers and the
acting, fashion and music industries.  Revenues for the Company are
generated by both services provided by the studio, such as session revenues, as
well as through on-studio and website 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 raising additional
capital, deploying studios and creating strategic partnerships that drive
traffic to the studios.





22





ITEM 1A - RISK FACTORS - continued




History of Operations and Dependence
on Future Developments - continued





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 are 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.





The
Company requires substantial capital to manufacture its recording
studios.  Although the Company intends to engage in subsequent debt
and/or 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, potentially 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.




Facebook, YouTube MySpace





23





ITEM 1A - RISK FACTORS - continued





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.





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
25 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.  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.











24





ITEM 1A - RISK FACTORS - continued





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 are subject to various risks include political, religious and
economic instability, local labor market conditions, the imposition of foreign
tariffs and other trade restrictions, the impact of foreign government
regulations, and the effects of income and withholding tax, governmental
expropriation, and differences in business practices.  We may incur
increased costs and experience delays or disruptions in product deliveries and
payments in connection with international manufacturing and sales that could
cause loss of revenue. Unfavorable changes in the political, regulatory, and
business climate could have a material adverse effect on our financial
condition, results of operations, and cash flows.





Exposure
to Product Liability Lawsuits.





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





Dependency
on Key Suppliers and Product Availability.





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





Dependency
on Long Supply Chains.





In some
cases we are dependent on long supply chains, which may subject us to
interruptions in the supply of many of the products used in the manufacture of
MyStudios.  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.





25





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
history makes it difficult to accurately predict 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.





The
shares of common stock of the Company are traded on the Over-The-Counter
Bulletin Board System (“OTCBB”) under the ticker symbol SOMD.  Our
common stock is subject to regulations of the SEC relating to the market for
penny stocks.  These regulations generally require that a disclosure
schedule explaining the penny stock market and the risks associated therewith be
delivered to purchasers of penny stocks and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors.  The regulations
applicable to penny stocks may severely affect the market liquidity for our
common stock and could limit your ability to sell your securities in the
secondary market.





Uncertainty
as a Going Concern.





Our
future existence remains uncertain and the report of our 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.





26





ITEM 1A - RISK FACTORS - continued


Dilution;
Dilutive Effect of Future Transactions.





As of
December 31, 2009, the Company had 20,980,834 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 670,473 shares of various classes of
Convertible Preferred Stock outstanding, which can be converted to 307,672
shares of common stock.  In addition, the Company had warrants
outstanding that would permit, if exercised, the issuance of 3,684,717
additional shares of common stock at an average exercise price of $1.91 and
stock options to various employees and consultants granting the right to
purchase 437,529 shares at an average price of $0.56.  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.





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
such stock is restricted, the stock is sold at a greater discount to market
prices compared to a public stock offering, and the exercise price of the
warrants sometimes can be at or even lower than market prices.  These
transactions cause dilution to existing stockholders.  Also, from time
to time, stock options are issued to officers, directors, or employees, with
exercise prices equal to the market price.  Exercises of stock 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 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 issued under Section 4(2) of the Act and
Rule 506 of Regulation D promulgated under the Act.





Expect
to Incur Losses for the Foreseeable Future.





We expect
to incur losses for the foreseeable future, and we may never become
profitable.   Our business model requires that additional
MyStudios 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.








27





ITEM
1A - RISK FACTORS - continued
 
 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 team and therefore will recruit





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 stock 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 stock options granted to employees, officers and directors and two years
in the case of stock options and warrants 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.





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.





28





ITEM 1A - RISK FACTORS - continued





Voting
Control.





As a
result of the acquisition of SOEI, 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 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS





(a)
            On
      May 6, 2004, the Registrant amended its Articles of Incorporation to
      authorize the Registrant to reverse its issued and outstanding shares,
      giving one (1) new share for each sixty (60) existing shares issued and
      outstanding. The Registrant now has 20,980,834 post-reverse shares of
      common stock outstanding. In addition, the Company has 670,473 shares of
      preferred stock issued and outstanding as of December 31,
      2009.  The preferred shares are convertible into 307,672 shares
      of restricted common stock.





(b)
            During
      the six months ended December 31, 2009, the Company accepted subscriptions
      for 1,721,000 shares of unregistered restricted shares of common stock at
      an average price per share of $0.50 for a total of $855,500 and agreed to
      issue 400,000 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
      $0.50.  The Company also agreed to issue 1,175,750 shares
      pursuant to stock options and 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 $0.53 per share.  In
      addition, the Company issued 377,051 shares in conversion of preferred
      shares and 1,125,559 shares in conversion of debt valued at $666,812 
      During the six months ended December 31, 2009, warrantholders exercised
      various warrants for 238,084 shares for a total of $163,042, an average of
      $0.68 per share.  All shares issued were subject to the
      restrictions set forth in Section 144 of the Securities Exchange Act of
      1933.  We believe that the sale of the unregistered restricted
      common stock (the “Units”) noted above was exempt from registration and
      prospectus delivery requirements of the Securities Act of 1933 by virtue
      of Sections 4(2), and/or Regulation D, Rule 506. The Units were sold
      directly by us to accredited investors and did not involve a public
      offering or general solicitation. The purchasers of the Units were
      afforded an opportunity for effective access to files and records of our
      Company that contained the relevant information needed to make their
      investment decision, including our financial statements and 34 Act
      reports. We reasonably believed that the purchasers, immediately prior to
      purchasing the shares, had such knowledge and experience in our financial
      and business matters that they were capable of evaluating the merits and
      risks of their investment. The purchasers had the opportunity to speak
      with our management on several occasions prior to their investment
      decision.  All proceeds from the sale of these securities were
      used to continue the Company’s capital expenditures related to MyStudio,
      as well as for working capital and general corporate
    purposes.





(c)
            During
      the six months ended December 31, 2009, the Company also issued 851,693
      shares of the Company’s common stock for consulting, legal and other
      services rendered to the Company valued at $670,729.  We believe
      the issuance of the shares listed in this Item 2(a) are exempt from the
      registration and prospectus delivery requirement of the Securities Act of
      1933 by virtue of Section 4(2). The shares were issued directly by us and
      did not involve a public offering or general solicitation. The recipients
      of the shares were afforded an opportunity for effective access to our
      files and records that contained the relevant information needed to make
      their investment decision, including our financial statements
      and reports filed under the Securities Exchange Act of 1934. We
      reasonably believed that the recipients had such knowledge and experience
      in the Company’s financial and business matters that they were capable of
      evaluating the merits and risks of their investment.(d)
            In
      June 2009, the Company adopted the 2009 Long-Term Incentive Plan intended
      to aid the Company in attracting and retaining key employees and
      consultants, to stimulate the efforts of such individuals and to
      strengthen their desire to remain with the Company.   As of
      December 31, 2009, the Company had granted stock options under this Plan
      to fourteen eligible participants to purchase, in the aggregate, 466,000
      shares of the Company’s common stock.  The exercise period for
      each of the grants ranges from two to three years from the date of grant
      and the average exercise price in each instance is $0.56.  One
      individual has exercised her rights under the stock option grant and the
      Company issued 28,571 shares for
$10,000.











29





ITEM 3. DEFAULTS UPON SENIOR SECURITIES





None.








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





(a)
            On
      May 6, 2004, the Registrant (formerly known as Dimensional Visions
      Incorporated) filed a Certificate of Amendment of Certificate of
      Incorporation with the Secretary of State for the State of Delaware. The
      number of shares common stock of the Registrant outstanding and entitled
      to vote on an amendment to the Articles of Incorporation was 61,771,510.
      The May 6, 2004 amendment was consented to and approved by a majority vote
      of the stockholders holding a majority of the stock entitled to vote
      thereon. The amendment authorized the Registrant to reverse its issued and
      outstanding shares, giving one (1) new share for each sixty (60) existing
      shares issued and outstanding. The Registrant now has 20,980,834
      post-reverse shares outstanding.





(b)
            On
      April 17, 2007, the Company announced that it had finalized the purchase
      of Studio One Entertainment, Inc., through an all-stock transaction. The
      purchase was pursuant to an agreement entered into by the companies dated
      March 29, 2006. The purchase included the exchange of 7,000,000 restricted
      common shares of Studio One Media, Inc. for 100% of the issued and
      outstanding shares of Studio One Entertainment, Inc. The purchase includes
      all right, title and interest to Studio One Entertainment’s proprietary
      interactive recording studios, business plan and intellectual property,
      including pending patents, foreign patent rights and federal trademark
      applications. Studio One Entertainment, Inc. operates as a wholly owned
      subsidiary of Studio One Media, Inc. The transaction was approved by
      consent of a majority of the shareholders of Studio One Media, Inc. and
      Studio One Entertainment, Inc.





(c)
            During
      the three months ended December 31, 2009, no matters were submitted to the
      shareholders for a vote.








ITEM 5. OTHER INFORMATION





Shell
Company Status





Studio
One Media, Inc. (the “Company”) ceased being a shell company on April 17,
2007 when it finalized the purchase of Studio One Entertainment,
Inc.   Form 10-KSB filed by the Company for the year ended
June 30, 2007, and the Company’s Form 10-QSB for the quarterly periods
ended September 30, 2008 and December 31, 2007, incorrectly indicated that the
Company remained a shell company after April 17, 2007.





On
September 28, 2007, upon filing of its Form 10-KSB for the fiscal year
ended June 30, 2007, the Company filed all of its “Form 10
Information” with the SEC. The disclosure made under the above mentioned
Form 10-KSB is incorporated by reference herein.





On
November 14, 2008, the Company filed a Form 8-K concerning the change of its
status as a shell company. The disclosure made under that Form 8-K is
incorporated by reference herein.





Change
of Independent Accountants





On August
11, 2009, the Board of Directors of the Registrant dismissed Moore &
Associates Chartered (“Moore”), its independent registered public accounting
firm.  On the same date, August 11, 2009, the accounting firm of Seale
and Beers, CPAs was engaged as the Registrant’s new independent registered
public accounting firm. The Board of Directors of the Registrant and the
Registrant’s Audit Committee approved of the dismissal of Moore & Associates
Chartered and the engagement of Seale and Beers, CPAs as its independent
auditor.





On August
27, 2009, the Public Company Accounting Oversight Board (“PCAOB”) revoked the
registration of Moore because of violations of PCAOB rules and auditing
standards in auditing financial statements, PCAOB rules and quality controls
standards, and Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 thereunder, and noncooperation with a Board
investigation.  Notice of such revocation was received by the
Registrant on September 7, 2009, from the SEC.  Prior to receipt of
such notice, the Registrant had no knowledge of any issues involving Moore and
the PCAOB or the SEC.





On
September 11, 2009, the Registrant dismissed Seale and Beers, LLC as its
independent registered public accounting firm and engaged Mantyla McReynolds,
LLC, an Independent Member of the BDO Seidman Alliance.  The Board of
Directors of the Registrant approved of the dismissal of Seale and Beers and the
engagement of Mantyla McReynolds as its independent auditor.  During
the period prior to the engagement of Mantyla McReynolds, neither the Registrant
nor anyone on its behalf consulted Mantyla McReynolds regarding the application
of accounting principles to a specific completed or contemplated transaction,
the type of audit opinion that might be rendered on the Registrant’s financial
statements, or any matter that was either the subject of a disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event as
described in Item 304(a)(1)(v) of Regulation S-K.  Further, Mantyla
McReynolds has not provided written or oral advice to the Registrant that was an
important factor considered by the Registrant in reaching a decision as to any
accounting, auditing or financial reporting issues.





30





ITEM 5. OTHER
INFORMATION continued





Subsequent
Events:





Since
December 31, 2009, the Company has raised in excess of $500,000 from the sale of
restricted common stock.




The
Company leases space at Scottsdale Fashion Square for its MyStudio recording
studio.  This Specialty Lease Agreement is terminated effective March
11, 2010.  The Company has signed a new agreement for space in a
different mall in the greater Phoenix area that offers higher visitor traffic,
better demographics (for MyStudio) and substantially lower monthly lease
costs.





ITEM
6. EXHIBITS





a) The
following Exhibits are filed herein:





NO.
            TITLE







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 and of
      Chief Financial officer pursuant to 18 U.S.C. Section 1350, 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: February
      16, 2010
            By:
            /s/ Preston
      J. SheaPreston
      J. SheaTitle:  
      President and Chief Executive
Officer








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








STUDIO
      ONE MEDIA, INC.Date: February
      16, 2010
            By:
            /s/ Preston
      J. SheaPreston
      J. SheaTitle:
       Director, President, Chief Executive,
  Secretary





STUDIO
      ONE MEDIA, INC.Date: February
      16, 2010
            By:
            /s/ Kenneth
      R. PinckardKenneth
      R. PinckardTitle: 
      Director, Vice President, Chief Financial Officer, Chief Accounting
      Officer











31