AFTERMASTER, INC. - FORM 10-Q - November 14, 2014

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - AFTERMASTER, INC.	Financial_Report.xls
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934, RULES 13A-14 AND 15D-14, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - AFTERMASTER, INC.	exhibit_31-1.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934, RULES 13A-14 AND 15D-14, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - AFTERMASTER, INC.	exhibit_31-2.htm
EX-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 - AFTERMASTER, INC.	exhibit_32-1.htm

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 September 30, 2014

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

For the transition period from _______ to __________

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).

x 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	o
Non-accelerated filer	o	Smaller reporting company	x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

At November 14, 2014, the number of shares outstanding of Common Stock, $0.001 par value, was 80,042,087 shares.

	STUDIO ONE MEDIA, INC.

	INDEX
	PART I - FINANCIAL INFORMATION
		PAGE NUMBER
Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets - September 30, 2014 (unaudited) and June 30, 2014	3

	Condensed Consolidated Statements of Operations - For the three months ended September 30, 2014 and 2013 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows - For the three months ended September 30, 2014 and 2013 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosure About Market Risks	26

Item 4T.	Controls and Procedures	26
	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Submission of Matters to a Vote of Security Holders	28

Item 5.	Other Information	28

Item 6.	Exhibits	28

	SIGNATURES	29

STUDIO ONE MEDIA, INC.
Consolidated Balance Sheets

	September 30,				June 30,
	2014				2014
	(Undaudited)
ASSETS

Current Assets
Cash		$	323,680		$	77,876
Other receivable			785			3,400
Other current assets			9,111			20,499

Total Current Assets			333,576			101,775

Property and equipment, net			104,388			133,730
Property and equipment, yet to be placed in service			62,500			31,250

Intangible assets, net			16,976			11,990

Other Assets
Deposits			115,557			107,057
Other assets			185,658			-

Total Other Long-term Assets			301,215			107,057

Total Assets		$	818,655		$	385,802

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
Accounts payable and other accrued expenses		$	845,022		$	951,563
Accrued interest			91,253			74,483
Deferred revenue			206,000			3,500
Consulting services - related party			133,568			278,568
Lease payable			30,768			30,768
Notes payable - related party			610,000			610,000
Notes payable			40,488			40,488
Convertible notes payable - related party, net of discount of $0 and $1,761, respectively			3,930,000			3,932,239
Convertible notes payable, net of discount of $272,943 and $161,043, respectively			634,805			764,705

Total Current Liabilities			6,521,904			6,686,314

Long-Term Liabilities
Lease Payable, net of current portion			46,854			55,374
Convertible related party notes payable, net of discount of $0 and $561, respectively			-			-

Total Liabilities			6,568,758			6,741,688

Stockholders' Deficit
Convertible preferred stock, Series A; $0.001 par value; 100,000 shares authorized, 15,500 shares issued and outstanding			16			16
Convertible preferred stock, Series A-1; $0.001 par value; 3,000,000 shares authorized, 696,000 shares issued and outstanding			696			696
Convertible preferred stock, Series B; $0.001 par value; 200,000 shares authorized, 3,500 shares issued and outstanding			3			3
Convertible preferred stock, Series C; $0.001 par value; 1,000,000 shares authorized, 13,404 shares issued and outstanding			13			13
Convertible preferred stock, Series D; $0.001 par value; 375,000 shares authorized, 130,000 shares issued and outstanding			130			130
Convertible preferred stock, Series E; $0.001 par value; 1,000,000 shares authorized, 275,000 shares issued and outstanding			275			275
Convertible preferred stock, Series P; $0.001 par value; 600,000 shares authorized, 86,640 shares issued and outstanding			87			87
Convertible preferred stock, Series S; $0.001 par value; 50,000 shares authorized, -0- shares issued and outstanding			-			-
Common stock, authorized 100,000,000 shares,
par value $0.001; 79,447,357 and 70,296,203 shares issued
and outstanding, respectively			79,450			70,297
Additional paid In capital			42,700,519			40,557,726
Accumulated Deficit			(48,531,292	)		(46,985,129	)

Total Stockholders' Deficit			(5,750,103	)		(6,355,886	)

Total Liabilities and Stockholders' Deficit		$	818,655		$	385,802

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

STUDIO ONE MEDIA, INC.
Consolidated Statements of Operations

	For the Three Months Ended
	September 30,
	2014				2013
	(Unaudited)				(Unaudited)
REVENUES
Session Revenues		$	1,420		$	20,682
AfterMaster Revenues			27,740			34,434
Total Revenues			29,160			55,116

COSTS AND EXPENSES
Cost of Revenues (Exclusive of Depreciation and Amortization)			83,177			84,942
Depreciation and Amortization Expense			34,356			27,914
General and Administrative Expenses			900,925			788,080

Total Costs and Expenses			1,018,458			900,936

Loss from Operations			(989,298	)		(845,820	)

Other Expense
Interest Expense			(528,348	)		(403,191	)
Gain (Loss) on Extinguishment of Debt			(28,517	)		-
Impairment of assets			-			(45,676	)

Total Other Expense			(556,865	)		(448,867	)

Loss Before Income Taxes			(1,546,163	)		(1,294,687	)

NET LOSS		$	(1,546,163	)	$	(1,294,687	)

Preferred Stock Accretion and Dividends			(17,016	)		(17,016	)

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS		$	(1,563,179	)	$	(1,311,703	)

Basic and Diluted Loss Per Share of Common Stock		$	(0.02	)	$	(0.02	)

Weighted Average Number of Shares Outstanding			74,870,162			52,803,773

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

STUDIO ONE MEDIA, INC.
Consolidated Statements of Cash Flows

	For the Three Months Ended
	September 30,
	2014				2013
	(Unaudited)				(Unaudited)
OPERATING ACTIVITIES

Net Loss		$	(1,546,163	)	$	(1,294,687	)
Adjustments to reconcile net loss to cash from operating activities:
Depreciation and amortization			33,072			27,914
Share-based compensation - Common Stock			285,745			167,139
Share-based compensation - warrants			510,662			47,469
Common stock issued for services and rent			63,015			86,771
Common stock issued as incentive with Convertible debt			10,261			-
Common stock issued to extend the maturity dates on debt			15,750			-
Amortization of debt discount and issuance costs			221,860			113,494
(Gain)/Loss on extinguishment of debt			28,517			-
Impairment on long lived assets and intangibles			-			45,676
Changes in Operating Assets and Liabilities:
Other receivables			2,615			(3,625	)
Other assets			(182,770	)		75,578
Accounts payable and accrued expenses and deferred revenue			203,226			291,826

Net Cash Used in Operating Activities			(354,210	)		(442,445	)

INVESTING ACTIVITIES

Purchase of property and equipment			(39,966	)		(9,035	)

Net Cash Used in Investing Activities			(39,966	)		(9,035	)

FINANCING ACTIVITIES

Common Stock issued for cash, net of offering costs of $9,500 and $15,935, respectively			290,500			276,065
Proceeds from notes payable - related party			-			-
Proceeds from convertible notes payable - related party			-			-
Proceeds from convertible notes payable			362,000			160,000
Repayments of convertible notes payable			(8,520	)		(6,000	)
Lease Payable			(4,000	)		-

Net Cash Provided by Financing Activities			639,980			430,065

NET INCREASE (DECREASE) IN CASH			245,804			(21,415	)
CASH AT BEGINNING OF PERIOD			77,876			165,258

CASH AT END OF PERIOD		$	323,680		$	143,843

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

CASH PAID FOR:
Interest		$	918		$	612

NON CASH FINANCING ACTIVITIES:
Conversion of Notes and Interest into common stock		$	585,496			-
Common Stock and warrants issued for prepaid services		$	-		$	28,000
Common Stock and warrants issued for interest		$	362,000		$	201,265
Warrants and beneficial conversion feature on issuance of convertible debt		$	-		$	126,000

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

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 1 – CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2014, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 2014 audited financial statements. The results of operations for the periods ended September 30, 2014 and 2013 are not necessarily indicative of the operating results for the full years.

NOTE 2 – GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred losses since inception of $48,531,292 and currently has revenues which are insufficient to cover its operating costs which raises substantial doubt about its ability to continue as a going concern. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.

The future of the Company as an operating business will depend on its ability to (1) obtain sufficient capital contributions and/or financing as may be required to sustain its operations and (2) to achieve adequate revenues from its MyStudio and AfterMaster businesses. Management's plan to address these issues includes, (a) continued exercise of tight cost controls to conserve cash, (b) obtaining additional financing, and (c) place in service additional personal recording kiosks.

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

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates are made in relation to the allowance for doubtful accounts and the fair value of certain financial instruments.

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.

Notes and Other Receivables

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

Loss Per Share

Basic earnings (loss) per Common Share is computed by dividing losses attributable to Common shareholders by the weighted-average number of shares of Common Stock outstanding during the period. The losses attributable to Common shareholders was increased for accrued and deemed dividends on Preferred Stock during the periods ended September 30, 2014 and 2013 of $17,016 and $17,016, respectively.

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

For the periods ended September 30, 2014 and 2013, all of the Company’s potentially dilutive securities (warrants, options, convertible preferred stock, and convertible debt) were excluded from the computation of diluted earnings per share as they were anti-dilutive. The total number of potentially dilutive Common Shares that were excluded were 17,313,190 and 11,776,155 at September 30, 2014 and 2013, respectively.

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Fair Value Instruments

Cash is the Company’s only financial asset or liability required to be recognized at fair value and is measured using quoted prices for active markets for identical assets (Level 1 fair value hierarchy). The carrying amounts reported in the balance sheets for notes receivable and accounts payable and accrued expenses approximate their fair market value based on the short-term maturity of these instruments.

The fair value of the Company’s notes payable at September 30, 2014 is approximately $5,488,236. Market prices are not available for the Company’s loans due to related parties or its other notes payable, nor are market prices of similar loans available. The Company determined that the fair value of the notes payable based on its amortized cost basis due to the short term nature and current borrowing terms available to the Company for these instruments.

Income Taxes

There is no income tax provision for the three months ended September 30, 2014 and 2013 due to net operating losses for which there is no benefit currently available.

At September 30, 2014, the Company had deferred tax assets associated with state and federal net operating losses. The Company has recorded a corresponding full valuation allowance as it is more likely than not that some portion of all of the deferred tax assets will not be realized.

Recent Accounting Pronouncements

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

Reclassification

Certain amounts disclosed in prior periods have been reclassified to conform to current presentation. Such reclassifications are for presentation purposes only and have no effect on the Company’s net loss or financial position in any of the periods presented. The Company has made adjustments to the Income Statement and Cash flows Statement in impairment of assets and disposal of assets, respectively.

NOTE 4 – NOTES PAYABLE

Convertible Notes Payable

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

Convertible Notes Payable – Related Parties

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

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

$250,000 face value, issued in February 2010, interest rate of 12%, matures in February 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		$	250,000		$	250,000
$250,000 face value, issued in May 2010, interest rate of 12%, matures in May 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.			250,000			250,000
$250,000 face value, issued in August 2010, interest rate of 12%, matures in August 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.			250,000			250,000
$250,000 face value, issued in December 2010, interest rate of 12%, matures in December 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.			250,000			250,000

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30,

NOTE 4 – NOTES PAYABLE - continued

Convertible Notes Payable – Related Parties - continued

$250,000 face value, issued in November 2011, interest rate of 15%, matures in November 2012, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	250,000	250,000
$250,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	250,000	250,000
$100,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	100,000	100,000
$300,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	300,000	300,000
$100,000 face value, issued in February 2012, interest rate of 15%, matures in August 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	100,000	100,000
$100,000 face value, issued in February 2012, interest rate of 15%, matures in August 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	100,000	100,000
$150,000 face value, issued in March 2012, interest rate of 15%, matures in September 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	150,000	150,000
$200,000 face value, issued in March 2012, interest rate of 15%, matures in September 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	200,000	200,000
$200,000 face value, issued in April 2012, interest rate of 10%, matures in October 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	200,000	200,000
$150,000 face value, issued in May 2012, interest rate of 10%, matures in November 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	150,000	150,000
$125,000 face value, issued in June 2012, interest rate of 10%, matures in December 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	125,000	125,000
$125,000 face value, issued in June 2012, interest rate of 10%, matures in December 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	125,000	125,000
$50,000 face value, issued in August 2012, interest rate of 10%, matures in February 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	50,000	50,000
$50,000 face value, issued in September 2012, interest rate of 10%, matures in March 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	50,000	50,000
$100,000 face value, issued in October 2012, interest rate of 10%, matures in April 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	100,000	100,000
$100,000 face value, issued in October 2012, interest rate of 10%, matures in April 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	100,000	100,000
$50,000 face value, issued in October 2012, interest rate of 10%, matures in April 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	50,000	50,000
$75,000 face value, issued in November 2012, interest rate of 10%, matures in May 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	75,000	75,000
$25,000 face value, issued in November 2012, interest rate of 10%, matures in May 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	25,000	25,000
$50,000 face value, issued in November 2012, interest rate of 10%, matures in May 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	50,000	50,000

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30,

NOTE 4 – NOTES PAYABLE - continued

Convertible Notes Payable – Related Parties - continued

$50,000 face value, issued in December 2012, interest rate of 10%, matures in June 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		50,000		50,000
$75,000 face value, issued in January 2013, interest rate of 10%, matures in July 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		75,000		75,000
$25,000 face value, issued in January 2013, interest rate of 10%, matures in July 2014, net of unamortized discount of $0 and $1 as of September 30, 2014 and June 30, 2014, respectively.		25,000		24,999
$35,000 face value, issued in January 2013, interest rate of 10%, matures in July 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		35,000		35,000
$5,000 face value, issued in February 2013, interest rate of 10%, matures in August 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		5,000		5,000
$10,000 face value, issued in February 2013, interest rate of 10%, matures in August 2014, net of unamortized discount of $0 and $1 as of September 30, 2014 and June 30, 2014, respectively.		10,000		9,999
$50,000 face value, issued in February 2013, interest rate of 10%, matures in August 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		50,000		50,000
$50,000 face value, issued in March 2013, interest rate of 10%, matures in September 2014, net of unamortized discount of $0 and $13 as of September 30, 2014 and June 30, 2014, respectively.		50,000		49,987
$75,000 face value, issued in April 2013, interest rate of 10%, matures in October 2014, net of unamortized discount of $0 and $546 as of September 30, 2014 and June 30, 2014, respectively.		75,000		74,454
$9,000 face value,of which $4,000 has been paid back, issued in June 2014, interest rate of 0%, matures in July 2014, net of unamortized discount of $0 and $1,200 as of September 30, 2014 and June 30, 2014, respectively.		5,000		7,800
Total convertible notes payable – related parties		3,930,000		3,932,239
Less current portion		3,930,000		3,932,239
Convertible notes payable – related parties, long-term	$	-	$	-

The notes were amended on June 30, 2014 to extend the maturity date to September 30, 2014 and amended again on September 30, 2014 to December 31, 2014. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 4 – NOTES PAYABLE - continued

Convertible Notes Payable - Non-Related Parties

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

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

$100,000 face value, issued in September 2011, interest rate of 0%, originally matured in December 2011, extended to November 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.	$	100,000	$	100,000
$15,000 face value, issued in October 2011, interest rate of 10%, matures in June 2012, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		15,000		15,000
$75,000 face value, issued in January 2012, interest rate of 12%, originally matured in June 2013, extended to November 2014, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		75,000		75,000
$50,000 face value, issued in August 2012, interest rate of 10%, matures in February 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		50,000		50,000
$10,000 face value, issued in September 2012, interest rate of 10%, matures in March 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		10,000		10,000
$50,000 face value of which $9,600 was converted leaving a $40,400 face value, issued in November 2012, interest rate of 10%, matures in November 2013 and an additional penalties were added to the principal of $120,348 bringing the face value to $160,748, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		160,748		160,748
$30,000 face value, issued in February 2013, interest rate of 0%, matures in November 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		30,000		30,000
$20,000 face value, issued in April 2013, interest rate of -0-%, matures in October 2013, net of unamortized discount of $0 and $0 as of September 30, 2014 and June 30, 2014, respectively.		20,000		20,000
$100,000 face value, of which $100,000 has been converted.		-		100,000
$50,000 face value, of which $50,000 has been converted.		-		50,000
$50,000 face value, of which $50,000 has been.		-		50,000
$50,000 face value, of which $50,000 has been converted.		-		46,132
$30,000 face value, issued in March 2014, interest rate of 0%, matures in September 2014, net of unamortized discount of $0 and $7,011 as of September 30, 2014 and June 30, 2014, respectively.		30,000		22,989
$20,000 face value, of which $20,000 has been converted.		-		20,000
$25,000 face value, of which $25,000 has been converted.		-		9,563
$15,000 face value, issued in June 2014, interest rate of 6%, matures December 2014, net unamortized discount of $6,557 and $14,098 as of September 30, 2014 and June 30, 2014, respectively.		8,443		902
$20,000 face value, issued in June 2014, interest rate of 6%, matures December 2014, net unamortized discount of $8,743 and $18,798 as of September 30, 2014 and June 30, 2014, respectively.		11,257		1,202
$30,000 face value, of which $30,000 has been converted.		-		1,967
$20,000 face value, issued in June 2014, interest rate of 6%, matures December 2014, net unamortized discount of $8,743 and $18,798 as of September 30, 2014 and June 30, 2014, respectively.		11,257		1,202
$25,000 face value, issued in June 2014, interest rate of 6%, matures September 2014, net unamortized discount of $0 and $25,000 as of September 30, 2014 and June 30, 2014, respectively.		25,000		-

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 4 – NOTES PAYABLE - continued

$15,000 face value, issued in July 2014, interest rate of 6%, matures October 2014, net unamortized discount of $1,613 as of September 30, 2014.		13,387		-
$10,000 face value, issued in July 2014, interest rate of 6%, matures October 2014, net unamortized discount of $1,087 as of September 30, 2014.		8,913		-
$10,000 face value, issued in July 2014, interest rate of 6%, matures October 2014, net unamortized discount of $1,522 as of September 30, 2014.		8,478		-
$7,000 face value, issued in July 2014, interest rate of 6%, matures October 2014, net unamortized discount of $1,065 as of September 30, 2014.		5,935		-
$5,000 face value, issued in July 2014, interest rate of 6%, matures October 2014, net unamortized discount of $978 as of September 30, 2014.		4,022		-
$10,000 face value, issued in August 2014, interest rate of 6%, matures November 2014, net unamortized discount of $5,326 as of September 30, 2014.		4,674		-
$25,000 face value, of which $25,000 was converted.		-		-
$10,000 face value, issued in August 2014, interest rate of 6%, matures December 5 2014, net unamortized discount of $7,253 as of September 30, 2014.		2,747		-
$30,000 face value, issued in August 2014, interest rate of 6%, matures December 5 2014, net unamortized discount of $23,023 as of September 30, 2014.		6,977		-
$100,000 face value, issued in August 2014, interest rate of 6%, matures December 5 2014, net unamortized discount of $79,121 as of September 30, 2014.		20,879		-
$100,000 face value, issued in August 2014, interest rate of 6%, matures December 5 2014, net unamortized discount of $87,912 as of September 30, 2014.		12,088		-
$40,000 face value, issued in August 2014, interest rate of 6%, matures December 5 2014, net unamortized discount of $40,000 as of September 30, 2014.		-		-
Total convertible notes payable – non-related parties		634,805		764,705
Less current portion		634,805		764,705
Convertible notes payable – non-related parties, long-term	$	-	$	-

On August 15, 2014, the Company amended the convertible notes dated September 29, 2011 for $100,000 and January 6, 2012 for $75,000 to extend the maturity date to November 15, 2014 and issued 50,000 shares of the Company’s common stock valued at $15,750, as well as 50,000 warrants valued at $12,767. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did result in significant and consequential changes to the economic substance of the debt. The Company recorded a loss on extinguishment of debt of $28,517.

On September 30, 2013, the Company issued a convertible note to an unrelated individual for $100,000 that matures on February 28, 2014. The note bears an interest rate of 0% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was $100,000. On August 14, 2014, the note holder elected to convert the entire note of $100,000.

On October 17, 2013, the Company issued a convertible note to an unrelated individual for $50,000 with an original maturity date of November 17, 2013, the note bears an interest rate of 0% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the original BCF recorded was $50,000. The note was amended on November 17, 2013 to extend the maturity date to May 17, 2014 and issued 25,000 common stock and 25,000 warrants as incentive to extending the maturity date. Under ASC 470-60-55-12, the debt was deemed to be extinguished and the company recognized a loss on extinguishment of debt $25,787. On August 14, 2014, the note holder elected to convert the entire note of $50,000.

On February 3, 2014, the Company issued a convertible note to an unrelated individual for $50,000 that matures on April 10, 2014. The note bears an interest rate of 10% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. On July 19, 2014, the note holder elected to convert the entire note of $50,000 and $3,041 in accrued interest.

On February 21, 2014, the Company issued a convertible note to an unrelated individual for $50,000 that matures on August 21, 2014. The note bears an interest rate of 6% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. On August 14, 2014, the note holder elected to convert the entire note of $50,000.

On March 31, 2014, the Company issued a convertible note to an unrelated individual for $20,000 that matures on June 28, 2014. The note bears an interest rate of 10% per annum and is convertible into shares of the Company’s Common Stock at $0.10 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. On July 19, 2014, the note holder elected to convert the entire note of $20,000 and $603 in accrued interest.

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 4 – NOTES PAYABLE - continued

On April 21, 2014, the Company issued a convertible note to an unrelated individual for $25,000 that matures on October 21, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share. On August 14, 2014, the note holder elected to convert the entire note of $25,000.

On June 18, 2014, the Company issued a convertible note to an unrelated individual for $30,000 that matures on December 18, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share. On August 14, 2014, the note holder elected to convert the entire note of $30,000.

On July 9, 2014, the Company issued a convertible note to an unrelated individual for $15,000 that matures on October 10, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

In conjunction with the note, the Company issued to the holder 7,500 shares of restricted Common Stock. The value of the BCF recorded was $13,333 and the debt discount related to the attached relative fair value of the restricted Common Stock was $1,667, for a total debt discount of $15,000.

On July 10, 2014, the Company issued a convertible note to an unrelated individual for $10,000 that matures on October 10, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

In conjunction with the note, the Company issued to the holder 5,000 shares of restricted Common Stock. The value of the BCF recorded was $8,889 and the debt discount related to the attached relative fair value of the restricted Common Stock was $1,111, for a total debt discount of $10,000.

On July 14, 2014, the Company issued a convertible note to an unrelated individual for $10,000 that matures on October 14, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

In conjunction with the note, the Company issued to the holder 5,000 shares of restricted Common Stock. The value of the BCF recorded was $8,929 and the debt discount related to the attached relative fair value of the restricted Common Stock was $1,071, for a total debt discount of $10,000.

On July 14, 2014, the Company issued a convertible note to an unrelated individual for $7,000 that matures on October 14, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

In conjunction with the note, the Company issued to the holder 3,500 shares of restricted Common Stock. The value of the BCF recorded was $6,222 and the debt discount related to the attached relative fair value of the restricted Common Stock was $778, for a total debt discount of $7,000.

On July 18, 2014, the Company issued a convertible note to an unrelated individual for $5,000 that matures on October 18, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

In conjunction with the note, the Company issued to the holder 2,500 shares of restricted Common Stock. The value of the BCF recorded was $4,444 and the debt discount related to the attached relative fair value of the restricted Common Stock was $556, for a total debt discount of $5,000.

On August 18, 2014, the Company issued a convertible note to an unrelated individual for $10,000 that matures on November 18, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share.

In conjunction with the note, the Company issued to the holder 5,000 shares of restricted Common Stock. The value of the BCF recorded was $8,529 and the debt discount related to the attached relative fair value of the restricted Common Stock was $1,471, for a total debt discount of $10,000.

On August 22, 2014, the Company issued a convertible note to an unrelated individual for $25,000 that matures on September 22, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.15 per share. On September 30, 2014, the note holder elected to convert the entire note of $25,000 and $160 in accrued interest.

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 4 – NOTES PAYABLE - continued

In conjunction with the note, the Company issued to the holder 12,500 shares of restricted Common Stock. The value of the BCF recorded was $21,393 and the debt discount related to the attached relative fair value of the restricted Common Stock was $3,607, for a total debt discount of $25,000.

On September 5, 2014, the Company issued a convertible note to an unrelated individual for $10,000 that matures on December 5, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.20 per share. The company valued a BCF related to the note valued at $10,000.

On September 10, 2014, the Company issued a convertible note to an unrelated individual for $30,000 that matures on December 5, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.20 per share. The company valued a BCF related to the note valued at $30,000.

On September 11, 2014, the Company issued a convertible note to an unrelated individual for $100,000 that matures on December 11, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.20 per share. The company valued a BCF related to the note valued at $100,000.

On September 19, 2014, the Company issued a convertible note to an unrelated individual for $100,000 that matures on December 19, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.20 per share. The company valued a BCF related to the note valued at $100,000.

On September 30, 2014, the Company issued a convertible note to an unrelated individual for $40,000 that matures on December 29, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.20 per share. The company valued a BCF related to the note valued at $40,000.

Notes Payable – Related Parties

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

Notes Payable – Related Parties

	September 30,			June 30,
	2014			2014

Face value of $200,000, issued in April 2011, original maturity date of August 2011 extended to September 2014, 30,000 warrants per month were granted in lieu of interest through June 2011, warrants increased to 50,000 shares per month through August 2011, from September until maturity, the note bears interest at 12%.		$	200,000		$	200,000
Face value of $250,000, issued in September 2011, matures in September 2012 extended to September 2014, 25,000 warrants per month issued for first 90 days, note bears interest at 15% from December 2011 through maturity.			250,000			250,000
Face value of $125,000, issued in October 2011, matures in October 2012 extended to September 2014, 30,000 warrants issued in lieu of interest through December 2011, note bears interest at 0% from December 2011 through maturity.			125,000			125,000
Face value of $35,000, issued in January 2014, matures in February 2014 extended to September 2014, note bears interest at 10%, interest is accrued monthly and paid quarterly by issuing restricted stock until the January 2015 and thereafter interest to be paid in cash.			35,000			35,000
Total notes payable – related parties			610,000			610,000
Less current portion			610,000			610,000
Notes payable - related parties, long term		$	-		$	-

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 4 – NOTES PAYABLE - continued

Notes Payable – Non-Related Parties

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

Notes Payable – Non-Related Parties
	September 30,			June 30,
	2014			2014
Various term notes with total face value of $40,488 due upon demand, interest rates range from 12% to 14%.		$	40,488		$	40,488
Total note payable – non-related parties			40,488			40,488
Less current portion			40,488			40,488
Notes payable – non-related parties, long-term		$	-		$	-

NOTE 5 – CONVERTIBLE PREFERRED STOCK

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

	Shares		Shares		Liquidation
	Allocated		Outstanding		Preference
Series A Convertible Preferred		100,000		15,500		-
Series A-1 Convertible Preferred		3,000,000		696,000		773,115
Series B Convertible Preferred		200,000		3,500		79,099
Series C Convertible Preferred		1,000,000		13,404		-
Series D Convertible Preferred		375,000		130,000		130,000
Series E Convertible Preferred		1,000,000		275,000		275,000
Series P Convertible Preferred		600,000		86,640		-
Series S Convertible Preferred		50,000		-		-
Total Preferred Stock		6,325,000		1,195,044	$	1,257,214

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

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

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

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 5 – CONVERTIBLE PREFERRED STOCK - continued

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

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

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

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

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

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

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

During the three months ended September 30,2014 and the fiscal year ended June 30, 2014, the Company issued -0- shares of Series A-1 Preferred Stock for $-0- in cash, net of $-0- of issuance costs, respectively.

During the three months ended September 30, 2014, the outstanding Preferred Stock accumulated $17,016 in dividends; in three months ended September 30, 2013 it accumulated $17,016 in dividends on outstanding Preferred Stock. The cumulative dividends in arrears through September 30, 2014 were approximately $669,889.

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 6 – COMMON STOCK

The Company has authorized 100,000,000 shares of $0.001 par value per share Common Stock, of which 79,447,357 and 70,296,203 were issued outstanding as of September 30, 2014 and June 30, 2014, respectively. The activity surrounding the issuances of the Common Stock is as follows:

For the Three Months Ended September 30, 2014

The Company issued 2,752,000 common shares for net cash proceeds of 300,000. The Company paid as offering costs $9,500 in cash offering costs. Offering costs have been recorded as reductions to additional paid-in capital from common stock proceeds and an increase in professional fees. Attached to the Common Shares, the Company issued 196,804 warrants to purchase shares of the Company’s Common Stock. The Company recognized $510,662 for the amortization of warrants issued in prior periods.

The Company also issued 43,500 shares of Common Stock as incentive to notes valued at $10,261 to extend terms on two convertible notes payable and recorded $362,000 in beneficial conversion features related to new issuances of debt.

The Company also issued 3,484,074 shares of Common Stock for the conversion of notes and accrued interest valued at $356,794.

The Company issued 217,536 shares of Common Stock as payment for services and rent valued at $63,015.

As share-based compensation to employees and non-employees, the Company issued 2,019,456 shares of common stock valued at $285,745, based on the market price of the stock on the date of issuance. As interest expense on outstanding notes payable, the Company issued 584,588 shares of common stock valued at $257,219 based on the market price on the date of issuance.

For the Three Months Ended September 30, 2013

The Company issued 2,920,000 common shares for net cash proceeds of 276,065. The Company paid as offering costs $15,935 in cash offering costs. Offering costs have been recorded as reductions to additional paid-in capital from common stock proceeds and an increase in professional fees. Attached to the Common Shares, the Company issued 196,804 warrants to purchase shares of the Company’s Common Stock. The Company recognized $47,469 in employee stock option expense and for the amortization of warrants issued in prior periods.

The Company also issued 122,500 shares of Common Stock as incentive to notes valued at $32,425 to extend terms on two convertible notes payable and recorded $126,000 in beneficial conversion features related to new issuances of debt.

The Company issued 211,318 shares of Common Stock as payment for services and rent valued at $54,346 and issued 100.000 shares in advance for services valued at $28,000.

As share-based compensation to employees and non-employees, the Company issued 622,563 shares of common stock valued at $167,139, based on the market price of the stock on the date of issuance. As interest expense on outstanding notes payable, the Company issued 731,871 shares of common stock valued at $201,265 based on the market price on the date of issuance.

NOTE 7 – STOCK PURCHASE OPTIONS AND WARRANTS

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

Stock Purchase Options

During the three months ended September 30, 2014, the Company did not issue any stock purchase options.

During the fiscal year ended June 30, 2014, the Company issued 25,000 stock purchase options for a value of $6,045. The Company did recognize $10,713 in employee stock option expense during the fiscal year ended June 30, 2014 for options vested during the period that were issued in prior periods.

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 7 – STOCK PURCHASE OPTIONS AND WARRANTS - continued

The following table summarizes the changes in options outstanding of the Company during the three months ended September 30, 2014.

Date Issued	Number of Options			Weighted Average Exercise Price			Weighted Average Grant Date Fair Value		Expiration Date (yrs)		Value if Exercised
Balance June 30, 2014		381,429		$	0.55		$	0.12		0.62	$	209,643
Granted		-			-			-		-		-
Exercised		-			-			-		-		-
Cancelled/Expired		(301,429	)		(0.52	)		-		-		(156,743	)
Outstanding as of September 30, 2014		80,000		$	0.66		$	0.59		1.94	$	52,900

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

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

Stock Purchase Warrants

During the three months ended September 30, 2014, the Company issued warrants to purchase a total of 3,300,000. The Company issued 50,000 warrants in conjunction to extended two convertible note payables and issued 2,250,000 warrants in conjunction to a consulting agreement entered into in July 2014. The Company also issued 1,000,000 warrants related to the B Booth agreements which were expensed during the current year. The warrants were valued using the Black-Scholes pricing model under the assumptions noted below. The Company apportioned value to the warrants based on the relative fair market value of the Common Stock and warrants.

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

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

	September 30,			June 30,
	2014			2014
Expected volatility		109-125	%		113-132	%
Expected dividends		0	%		0	%
Expected term	2-5 Years			2-10 Years
Risk-free interest rate		0.47-1.66	%		0.35-1.75	%

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30,

NOTE 7 – STOCK PURCHASE OPTIONS AND WARRANTS - continued

The following table summarizes the changes in warrants outstanding issued to employees and non-employees of the Company during the three months ended September 30, 2014.

Date Issued	Number of Warrants		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Expiration Date (yrs)		Value if Exercised
Balance June 30, 2014		8,332,579	$	0.76	$	0.70		2.96	$	6,370,432
Granted		3,300,000		0.53		0.15		2.20		712,500
Exercised		-		-		-		-		-
Cancelled/Expired		-		-		-		-		-
Outstanding as of September 30, 2014		11,632,579	$	0.61	$	0.55		2.54	$	7,082,932

The following table summarizes the changes in warrants outstanding issued to employees and non-employees of the Company during the fiscal year ended June 30, 2014.

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

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

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

Lease Agreements

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

We are leasing office space on a month-to-month basis in West Hollywood, California. We also lease an office in Los Angeles for use by our audio team in connection with our AfterMaster product under a lease expiring on August 31, 2013. The total lease expense for both facilities is approximately $4,305 per month, after which, the Company has agreed to lease on a month to month basis, and the total remaining obligations under these leases at September 30, 2014 were approximately $0.

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

Rent expense for the three months ended September 30, 2014 was $74,847, of which $47,510 was paid in cash and $27,337 was paid in Common Stock. Rent expense for the three months ended September 30, 2013 was $39,640, of which $16,684 was paid in cash and $20,128 was paid in Common Stock.

STUDIO ONE MEDIA, INC.

Notes to Consolidated Financial Statements

December 31, 2013 and September 30, 2014

NOTE 8 – COMMITMENTS AND CONTINGENCIES - continued

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

Year	Lease Payments
2015	$	26,055
Thereafter		-
Total	$	26,055

Other

The Company has not declared dividends on Series A or B Convertible Preferred Stock or its Series A-1 Convertible Preferred Stock. The cumulative dividends in arrears through September 30, 2014 were approximately $669,889.

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

NOTE 9 - SUBSEQUENT EVENTS

In accordance with ASC 855, Company management reviewed all material events through the date of this filing and determined that there were the following material subsequent events to report.

On November 6, 2014, the Company issued 16,133 warrants in conjunction default clause on convertible. The warrants are have a term of five years, which vest immediately, exercisable at a price of $0.50 valued at $10,850. The warrants were valued using the Black-Scholes pricing model under the assumptions noted below. The Company apportioned value to the warrants based on the relative fair market value of the Common Stock and warrants.

On October 3, 2014, the Company issued a convertible note to an unrelated individual for $40,000 that matures on December 29, 2014. The note bears an interest rate of 6% per annum and is convertible into shares of the Company’s Common Stock at $0.20 per share. The company valued a BCF related to the note valued at $40,000.

On October 6, 2014, the Company issued a convertible note to an unrelated individual for $40,000 that matures on January 6, 2015. The note bears an interest rate of 6% per annum and is convertible into shares of the Company’s Common Stock at $0.20 per share. The company valued a BCF related to the note valued at $40,000.

On October 17, 2014, the Company issued a convertible note to an unrelated individual for $25,000 that matures on January 16, 2015. The note bears an interest rate of 6% per annum and is convertible into shares of the Company’s Common Stock at $0.20 per share. The company valued a BCF related to the note valued at $25,000.

On October 20, 2014, the Company issued a convertible note to an unrelated individual for $25,000 that matures on April 20, 2015. The note bears an interest rate of 6% per annum and is convertible into shares of the Company’s Common Stock at $0.20 per share. The company valued a BCF related to the note valued at $25,000. On October 24, 2014, the note holder elected to convert the entire note of $25,000.

During the subsequent period, the Company issued 388,000 common shares for net cash proceeds of 97,000. The Company also issued 125,000 shares of Common Stock for the conversion of $25,000 principal of the October 20, 2014 note.

The Company issued 81,730 shares of Common Stock as payment for services and rent valued at $48,455.

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

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

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

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

●

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

●

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

●

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

●

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

●

that we will continue to make significant capital expenditure investments;

●

that we will continue to make investments and acquisitions;

●

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

●

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

●

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

●

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

●

general economic conditions.

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

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

ITEM 2.

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

Corporate Background

We are a Delaware public company traded on the Over-The-Counter Bulletin Board (ticker symbol: SOMD). As of September 30, 2014, there were 79,447,357 shares of Common Stock issued and outstanding. From April 2006 to June 2014, we have raised approximately $21.5 million in the form of equity for purposes of research and development, the launch of AfterMaster and MyStudio and general corporate purposes. The Company's office and principal place of business is located at 7650 E. Evans Road, Suite C, Scottsdale, Arizona 85260 USA, and its telephone number is (480) 556-9303. The Company also operates research, recording and mastering studios located at 6671 Sunset Blvd., Suite 1520, Hollywood, CA 90028, and its telephone number is (310) 657-4886.

Business Update

Business

Studio One Media, Inc. ("the Company") is a diversified media and technology company. The Company's wholly-owned subsidiaries include AfterMaster HD Audio Labs, Inc. and MyStudio, Inc.

The Company and its subsidiaries are engaged in the development and commercialization of proprietary (patents issued and pending), leading-edge audio and video technologies for professional and consumer use, including AfterMasterTM HD Audio, ProMaster HDTM and MyStudio® HD Recording Studios.

Business Update

Summary

During the quarter ended September 30, 2014, the Company began an important transition from operating two diverse subsidiary businesses to focusing its resources solely on its audio technology subsidiary, AfterMaster Audio Labs, Inc.

On September 30, 2014, the Company entered into an agreement to license its proprietary MyStudio related technologies and merge its MyStudio operations with bBooth, Inc. The agreement represents the largest licensing agreement for the Company to date, providing for a minimum of $1,550,000 in revenues over 18 months. The Company's MyStudio HD recording studios will be re-branded as bBooth's and MyStudio related operating costs will be transitioned to bBooth.

Through its joint development agreement with ON Semiconductor, the Company's AfterMaster technology has been successfully converted to an algorithm which can be loaded into semiconductor chips or utilized in software applications. ON Semiconductor is in the process of loading the algorithm into a proprietary semiconductor chip which can greatly enhance the audio in consumer and industrial electronics products such as cell phones, headphones, TV's, stereos and speakers. The chips are expected to be available for consumer electronics product manufacturers in early 2015.

AfterMaster HD Audio

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

AfterMaster is an internally-developed, proprietary (patents-pending) mastering, remastering and audio processing technology which makes music and other audio files sound significantly louder, fuller and clearer. The technology can be applied to virtually all audio sources including music, radio, motion pictures, television and VoIP. The technology has been used to enhance music created by such artists as Lady Gaga, Nick Cannon, Ray J, Akon, Diddy, Janet Jackson, and many others. Further information on AfterMaster Audio Labs and AfterMaster products can be found at www.AfterMasterHD.com.

ITEM 2.

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

ON Semiconductor/AfterMaster Audio Chip

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

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

In conjunction with ON Semi, we recently completed the development of the AfterMaster software algorithm designed to be used in semiconductor chips, or as a standalone software package to be injected into existing systems. We believe the sound quality from our algorithm/semiconductor chip will provide a superior audio experience relative to other products on the market.

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

The Consumer Audio Products Market

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

The algorithm and chips will allow consumer product manufacturers an opportunity to offer a significantly improved and differential audio experience in their products without having to significantly change hardware and form factor designs. Through the combined relationships of Studio One and ON, we hope to generate significant revenues for both parties through the sale of the AfterMaster chips and software licensing in 2015.

ProMasterHD

ProMaster HD is an online music mastering, streaming, and storage service designed for independent artists which utilizes proprietary audio technologies developed by AfterMaster. ProMaster HD will master the user’s uploaded music and allow them to compare up to 90 seconds of their original and mastered songs so they can make a decision to purchase.

The Independent Music Market

Millions of songs are produced, distributed, played on the internet each month around the world by independent artists. However, many of these artists lack the financial and technical means to master, or “finish” their composition, as a professional mastering can cost over $500 per song. Now, with the ProMaster online platform, musicians can transmit their music directly to our www.ProMasterHD.com website, where it can be mastered with AfterMaster Technology for $34.99 per song. ProMaster creates a compelling offering for those seeking to significantly enhance the quality of their music for personal use, or with intent to showcase their music in hopes of advancing their career aspirations. Based on the enormous addressable market for this product, we believe that ProMaster has the potential to generate significant revenues for the Company.

AfterMaster Audio Labs/ReverbNation Agreement

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

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

ITEM 2.

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

MyStudio HD Recording Studios

On September 30th, 2014, the Company entered into a licensing and option agreement to merge its MyStudio operations with bBooth, Inc. for a total consideration of $1,550,000 consisting of cash and stock in bBooth, as well as a financial interest in the Company's television development project. bBooth is a privately held Los Angeles-based company which intends to install interactive recording booths in the U.S. and internationally and capitalize on the content created therein.

The key financial consideration consists of the following:

·	The Company will be paid $1,250,000 in cash over 18 months for a conditional perpetual license of its MyStudio-related intellectual property (including related patents); of the total cash consideration, $200,000 has been paid to the Company.

·	Upon full payment of the $1,250,000, bBooth will have the option to purchase six freestanding MyStudio's and one mobile MyStudio for a nominal fee.

·	The Company will also receive approximately 600,000 shares of bBooth, Inc., which are currently valued at $300,000.

·	Additionally, the Company will retain half of any profits earned from a proposed MyStudio television show.

The transaction represents the Company's largest technology licensing agreement to date and will allow the Company to focus exclusively on its leading edge AfterMaster audio technologies.

Corporate

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

Employees

As of September 30, 2014 we employed ten full-time and five part-time employees. We expect to seek additional employees in the next year to handle anticipated potential growth.

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

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

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

Facilities

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

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

Results of Operations

Revenues
	Three Months Ended
	September 30,
	2014		2013
Session Revenues	$	1,420	$	20,682
AfterMaster Revenues		27,740		34,434
Total Revenues	$	29,160	$	55,116

ITEM 2.

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

Our business model currently generates revenues from three primary sources:

ProMaster HD online music mastering service designed for independent artists.

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

Revenues from AfterMaster Services resulted primarily from audio services provided to producers and artists on a contract basis. This source of revenue is expected to grow in coming years, and the Company is expecting to generate additional revenues from pay-per-play downloads.

The revenue for the three months ended September 30, 2014 decreased to $29,160 from $55,116 over the comparable three month period ended September 30, 2013 due primarily to decrease use of the MyStudio Studios and model studio to prepare for the Bbooth merger of the MyStudio operations.

Cost of Sales

	Three Months Ended
	September 30,
	2014		2013
Cost of Sales (excluding depreciation and amortization)	$	83,177	$	84,942

Cost of sales consists primarily of studio rent, and Internet connectivity and excludes depreciation and amortization on the studios. The decrease in cost of sales for the three months ended September 30, 2014, over the comparable period for the prior fiscal year, is attributable, primarily, to the Company opening fewer studios in the current year.

Other Operating Expenses

		Three Months Ended
		September 30,
	2014			2013
Depreciation and Amortization Expense		$	34,356		$	27,914
General and Administrative Expenses			900,925			788,080
Total		$	935,281		$	900,936

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

The overall increase in general and administrative expenses are primarily a result of increase of Consultant Fees.

Consultant Fees increased by $90,000 during the quarter ended September 30, 2014. The increase in professional fees is primarily attributable the development of AfterMaster HD and ProMaster HD.

ITEM 2.

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

Other Income and Expenses

	Three Months Ended
	September 30,
	2014				2013
Interest Expense		$	(528,348	)		$	(403,191	)
Loss on Extinguishment of Debt			(28,517	)			-
Impairment of assets			-				(45,676	)
Total		$	(556,865	)		$	(448,867	)

The other income and expenses during the quarter ended September 30, 2014, totaling $(556,865) of net expenses, which consists of interest expense. During the comparable period in 2013, other income and expenses totaled $(448,867). Interest has increased due to additional borrowings used to develop AfterMaster HD and ProMaster HD.

Net Loss

		Three Months Ended
		September 30,
		2014			2013
Net Loss	$	(1,546,163	)	$	(1,294,687	)

Due to the Company’s cash position, we use our Common Stock as currency to pay many employees, vendors and consultants. Once we have raised additional capital from outside sources, as well as generated cash flows from operations, we expect to reduce the use of Common Stock as a significant means of compensation. Under FASB ASC 718, “ Accounting for Stock-Based Compensation” , these non-cash issuances are expensed at the equity instruments fair market value.

LIQUIDITY AND CAPITAL RESOURCES

The Company had revenues of $29,160 during the three months ended September 30, 2014 as compared to $55,116 in the comparable quarter of 2013. The Company has incurred losses since inception of $48,531,292. At September 30, 2014, the Company has negative working capital of $5,750,103, which was a decrease in working capital of $242,546 from June 30, 2014. The decrease in the working capital was primarily due to lower cash balances and additional short-term borrowings.

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

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

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

As of September 30, 2014, the existing capital and anticipated funds from operations were not sufficient to sustain Company operations or the business plan over the next twelve months. We anticipate substantial increases in our cash requirements which will require additional capital to be generated from the sale of Common Stock, the sale of Preferred Stock, equipment financing, debt financing and bank borrowings, to the extent available, or other forms of financing to the extent necessary to augment our working capital. In the event we cannot obtain the necessary capital to pursue our strategic business plan, we may have to significantly curtail our operations. This would materially impact our ability to continue operations. There is no assurance that the Company will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to the Company.

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

ITEM 2.

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

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

Evaluation of Disclosure Controls and Procedures

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

The Certifying Officers responsible for establishing and maintaining adequate internal control over financial reporting for the Company used the “Internal Control over Financial Reporting Integrated Framework” issued by Committee of Sponsoring Organizations (“COSO”) to conduct an extensive review of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act, Rules 13a-15(e) and 15-d-15(e)) as of the end of each of the periods covered by this Report (the “Evaluation Date”). Based upon that evaluation, the Certifying Officers concluded that, as of September 30, 2014 and June 30, 2014, our disclosure controls and procedures were not effective in ensuring that the information we were required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission (“SEC”) rules and forms.

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

Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management used the “Internal Control over Financial Reporting Integrated Framework” issued by COSO to conduct an extensive review of the Company’s internal controls over financial reporting to make that evaluation. As of June 30, 2015 and June 30, 2014, the Company had identified deficiencies in internal controls that constituted material weaknesses in internal controls. Due to these material weaknesses, management concluded that internal controls over financial reporting as of September 30, 2014 and June 30, 2015 were ineffective, based on COSO’s framework.

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

Management has concluded that these control deficiencies constitute a material weakness that continued throughout fiscal year 2014. In order to reduce the impact of these weaknesses to an acceptable level, we have contracted with consultants with expertise in U.S. GAAP and SEC financial reporting standards to review and compile all financial information prior to filing that information with the SEC. However, even with the added expertise of these consultants, we still expect to be deficient in our internal controls over disclosure and procedures until sufficient capital is available to hire the appropriate internal accounting staff and individuals with requisite GAAP and SEC financial reporting knowledge. There were no significant changes in our internal control over financial reporting or in other factors that occurred during our most recent fiscal year that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Legal Proceedings

In 2012, the Company signed promissory notes totally $100,000 ("Notes") on behalf of the Company in favor of JMJ Financial or its Assignees. The Notes provided, among other things, for the right on the part of the Lender to convert part of the debt to stock. Subsequently, the parties have disagreed on the validity and terms of the agreement. The Lender has filed suit in the state court in Dade County, Florida, seeking to enforce the agreement. The Company disputes the Lender's position on the grounds that (1) the Note contains provisions that violate Florida's usury laws, (2) there has been no default by Company under the Note, and (3) some provisions of the Note are void and unenforceable. The Company expects the matter to be resolved to its satisfaction. Except as described in the preceding paragraph, to the best knowledge of our management, there are no material litigation matters pending or threatened against us.

ITEM 1A - RISK FACTORS

Not required.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

During the three months ended September 30, 2014, no matters were submitted to the shareholders for a vote.

ITEM 5. OTHER INFORMATION

Subsequent Events

None

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

101.INS*	XBRL Instance Document

101.SCH*	XBRL Taxonomy Extension Schema

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase

101.DEF*	XBRL Taxonomy Extension Definition Linkbase

101.LAB*	XBRL Taxonomy Extension Label Linkbase

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	STUDIO ONE MEDIA, INC.

Date: November 14, 2014	By:	/s/ Preston J. Shea
		Preston J. Shea,
		Title: 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: November 14, 2014	By:	/s/ Preston J. Shea
		Preston J. Shea,
		Title: Director, President, Chief Executive Officer, Secretary


	STUDIO ONE MEDIA, INC.

Date: November 14, 2014	By:	/s/ Mirella Chavez
		Mirella Chavez
		Title: Chief Financial Officer

AFTERMASTER, INC. - FORM 10-Q - November 14, 2014

Attached files

AFTERMASTER, INC. Reports