10-Q/A

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

 EXCHANGE ACT OF 1934

For the quarterly period ended:  September 30, 2012

[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

Commission file number

000-54662

Beamz Interactive, Inc.

(Name of registrant as specified in its charter)

Delaware	94-3399024
(State or other jurisdiction of incorporation)	(IRS employer identification no.)
15354 N. 83rd Way, Suite 102  Scottsdale, Arizona 85260	(480) 424-2053
(Address of principal executive offices)	(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. Yes x No o

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o  No x

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

Large accelerated filer o Accelerated filer o Non-accelerated filer o   Smaller reporting company x

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

Shares issued and outstanding of the registrant’s $.001 par value common stock as of November 15, 2012: 14,520,079.

EXPLANATORY NOTE

The purpose of this Amendment No. 1 to Beamz Interactive, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed with the Securities and Exchange Commission on November 19, 2012, is solely to include a corrected version of the previously filed Exhibit 10, which provides the financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language). No other substantive changes have been made to the Form 10-Q. This Amendment does not reflect events that may have occurred subsequent to the original filing date.

ITEM 6. EXHIBITS

The following documents are filed as part of this Report:

EXHIBIT INDEX

Number	Description
3(i).1	Fourth Amended and Restated Certificate of Incorporation(1)
3(i).2	Amendment to Fourth Amended and Restated Certificate of Incorporation(1)
3(ii)	Bylaws(1)
4.1	HumanBeams, Inc. 2004 Incentive Compensation Plan(1)
4.2	Beamz Interactive 2009 Incentive Compensation Plan(1)
4.3	First Amendment to Beamz Interactive 2009 Incentive Compensation Plan(1)
4.4	Second Amendment to Beamz Interactive 2009 Incentive Compensation Plan(1)
4.5	Non-Qualified Deferred Compensation Plan(1)
10.1	License Agreement by and between Cypher Entertainment Group LLC and Beamz Interactive, Inc. dated August 30, 2012 (2)
31.1	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (3)
32.1	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (3)
101	Interactive data files pursuant to Rule 405 of Regulation S-T.
(1) Previously filed as an exhibit to the Company’s Registration Statement on Form 10, filed April 19, 2012. (2) Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2012 (3) Filed herewith

SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

          Date: January 3, 2013 BEAMZ INTERACTIVE, INC.       By   /s/ Charles R. Mollo Charles R. Mollo Chief Executive Officer  

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles R, Mollo, certify that:

        (1)   I have reviewed this quarterly report on Form 10-Q of Beamz Interactive, Inc.;

        (2)   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

        (3)   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

        (4)   The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

        (a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

        (b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

        (c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

        (d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

        (5)   The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

        (a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

        (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: January 3, 2013

/s/ Charles R. Mollo

Charles R. Mollo

Chief Executive Officer

(Principal Executive Officer and Principal Financial Officer)

EX-32.1

 EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of Beamz Interactive, Inc.  (the "Company"), does hereby certify, to such officer's knowledge, that: the Quarterly Report on Form 10-Q, for the period ended September 30, 2012 (the "Form 10-Q") of the Company fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-Q.

Dated: January 3, 2013

/s/ Charles R. Mollo

Charles R. Mollo

Chief Executive Officer

(Principal Executive Officer and Principal Financial Officer)

        The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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Equity Warrants and Options (Details) (USD $)	3 Months Ended
	Sep. 30, 2012
Warrants issued	61,313
Exercise price per share, shares issued	$ 0.02
Warrants issued during August 2012	1,500,000
Exercise price per share, shares issued during August 2012	$ 1
Expected Volatility Rate	150.00%
Risk Free interest Rate	1.00%
Warrant Life	3
Expected Dividend Rate	0.00%

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Note Payable

3 Months Ended

Sep. 30, 2012

Note Payable

Note Payable

Note 4

Notes Payable 

As of September 30, 2012 and June 30, 2012, notes payable consists of the following:

	September 30, 2012			June 30, 2012
	(Unaudited)
10% Bridge Loan to an entity through May, 2013; unsecured		72,655			50,000
		72,655			50,000
Less: unamortized discount for warrants		(6,767	)		(6,868	)
	$	65,888		$	43,132

During the three months ended September 30, 2012 and the year ended June 30, 2012 the Company issued Bridge Loans to related parties (Note 6) and two unrelated parties.  The Bridge Loans also provided for the issuance of warrants at the rate of 50% of the principal amount that are exercisable at $.02 per share (Note 5).  A discount, related to the relative fair value of the warrants at the date of grant, was recorded and is being amortized to interest expenses over the term of the loans under the effective interest method.  The Bridge Loan Agreements provide that each noteholder shall have the option to convert any or all of the principal balance of, and accrued, but unpaid interest on such noteholders'  Bridge Promissory Note into securities offered in an equity financing of the Company of $2,000,000 or more consummated after the date of the Bridge Loan Agreements at a 10% discount to the terms of such financing.  The closing of such financing has not occurred as of the date of the financial statements.  If the Company does not raise $3,000,000 or more before December 31, 2012, then the maturity date of the Bridge Promissory Notes automatically extends to the sooner of December 31, 2014 or when such funds are raised.  In that case, additional warrants to purchase Common Stock at an exercise price of $0.02 per share shall be issued to each noteholder in an amount equal to 1 share of Common Stock for each $2 of principal amount of the Bridge Promissory Notes issued to the noteholders.  No principal or interest has been paid on the Bridge Promissory Notes and subsequent to September 30, 2012 the notes were amended to extend the maturity dates through March 2013 and the provisions for the 10% discount upon conversion was eliminated (Note 7).

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Subsequent Transactions (Details) (USD $)	Oct. 30, 2012
Issue of shares of common stock to various contractors	104,000
Bridge Loans Maximum	$ 1,500,000
Bridge Loans Minimum	$ 500,000
Discount on conversion	10.00%

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Related Party Transactions Notes Payable (Details) (USD $)	Sep. 30, 2012	Jun. 30, 2012
October, 2012; unsecured	$ 360,000	$ 260,000
Less: unamortized discount	(28,866)	(38,167)
Unsecured loan net of discount	$ 331,134	$ 221,833

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Commitments

3 Months Ended

Sep. 30, 2012

Commitments

Commitments

Note 3

Commitments 

During March 2009, the Company entered into a consulting agreement for business and product development.  The contract provided for the issuance of Series C Preferred Stock and Notes in the amount of $50,000 to be earned on a month-to-month basis through the term of the agreement.  In addition, the agreement provided for monthly payments of $4,000 beginning July 2009 and will automatically renew for successive one year periods unless terminated by the parties. During the year ended June 30, 2012 the parties agreed to an increase in the payments to $10,000 per month. The agreement may be terminated up to 60 days prior to a renewal term.

The Company is a party to various licensing agreements with regards to music and video content and the use and sale of same with its product and through its website.  The agreements have varying terms and include royalties based on the sales or use of the aforementioned licenses.  The terms range from a royalty equal to 17.5%  to 25% of the net revenues or a floor rate of $.15 to $.30 per record in each electronic transmission record.  For the three month periods ended September 30, 2012 and 2011, royalty fees under these licenses were approximately $900 and $1,800, respectively, and are included in cost of sales on the statement of operations.

During October, 2010, the Company entered into a consulting agreement for the performance of the duties of Engineering and Supply Chain Manager, terminating December 2011.  The consulting fee was at a rate of $7,729 per month commencing November 2010, plus bonuses to be paid based on the achievement of certain goals.  In addition, the consultant  received 18,034 shares of common stock and debt valued at $12,023. The agreement was subsequently extended through December 31, 2012. Future payments on the contract for the year ended  September 30, 2013 are approximately $21,000.

During May, 2011 the Company formed a partnership (the Beamz Cypher Partnership, LLC) with Cypher Entertainment, Inc. (Cypher).  Simultaneously, the Company entered into a ten (10) year license agreement with  Beamz Cypher Partnership, LLC granting  a worldwide, non-exclusive right and license to develop, modify and/or manufacture the Beamz Products and any additional products approved by the Company. On August 30, 2012 the Company restructured its licensing arrangement with Cypher by terminating its joint venture in favor of entering into a license agreement directly with Cypher (the “Cypher License Agreement”) and the release, by both parties, of any past financial obligations in addition to the issuance of 25,000 shares of Series D preferred stock (Note 5). Pursuant to the Cypher License Agreement, the Company granted Cypher a worldwide, exclusive right and license to develop and manufacture the Smart Phone Beamz Player and market it to online and in-store mass retail channels. Beamz has retained the right to market the new product to a range of other channels, including the professional, DJ, retirement, education, special needs and select internet consumer markets. The Cypher License Agreement provides for payments to Beamz for the use of the Beamz Content included on the Smart Phone Beamz Player equal to $1.50/Unit plus 100% of the out-of-pocket third-party royalties associated with such Beamz Content.  In addition, for each Unit sold by Cypher, Cypher will pay Beamz a royalty equal to thirteen (13%) of the manufacturer contract purchase price for such product. Similarly, Beamz will purchase Smart Phone Beamz Players from Cypher at cost plus thirteen percent (13%) of manufacturer cost for Beamz sales of such new product. Beamz has retained the right to develop, manufacture or license any other products or versions of the Beamz Products it desires other than the Smart Phone Beamz Player product family.The new  product will be owned 50% by Cypher and 50% by us, and will be distributed to the retail consumer channel by Cypher. We will distribute the new product to other channels, including the professional, DJ, retirement, education, special needs and select internet consumer markets.

The Company has agreed to indemnify its officers and directors for certain events or occurrences arising as a result of the officer or director serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. However, the Company has had limited operations and no pending litigation or potential claims. As a result of these items, the Company believes the estimated fair value of these indemnification agreements is minimal and has no liabilities recorded for these agreements as of September 30, 2012 and June 30, 2012.

Effective August 13, 2012, the Company entered into the Pooled Vehicle Participation Agreement.  The intent of the agreement is to raise money through a third party which was formed to acquire interests in a portfolio of business ventures.  The third party has been granted 1,500,000 warrants to purchase common stock at an exercise price of $1 per share expiring in August 2013.  In addition, the third party will receive a fee of $3,000 per month through the expiration of the warrants or a 120 day notice by either party to terminate the contract and a commission of 10% of the proceeds received for the exercise of the warrants.

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BALANCE SHEETS (USD $)	Sep. 30, 2012	Jun. 30, 2012
Current Assets:
Cash and cash equivalents	$ 22,464	$ 13,293
Accounts receivable, net	86,501	12,547
Inventory, net	121,653	139,216
Prepaid expenses and other current assets	349,667	265,448
Total Current Assets	580,285	430,504
Property and equipment, net	533	683
Deposits	2,500	2,500
Total Assets	583,318	433,687
Current Liabilities:
Accounts payable	542,426	427,045
Accrued liabilities	30,872	45,662
Advances from related party	415,646	267,392
Notes payable, net of discount	65,888	43,132
Notes payable - related parties, net of discount	331,134	221,833
Total Liabilities	1,385,966	1,005,064
Commitments and Contingencies
Stockholders' Equity (Deficit):
Preferred Stock 10,000,000 shares authorized $.001 par value: Series D Convertible Preferred; 1,300,000 authorized; 827,940 and 800,440 shares issued and outstanding	828	800
Common Stock, $.001 par value, 40,000,000 shares authorized; 14,426,082 and 14,146,082 shares issued and outstanding	14,426	14,146
Additional paid-in capital	12,160,456	11,839,928
Accumulated deficit	(12,978,358)	(12,426,251)
Total Stockholders' Equity (Deficit)	(802,648)	(571,377)
Total Liabilities and Stockholders' Equity (Deficit)	$ 583,318	$ 433,687

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Nature of Corporation

3 Months Ended

Sep. 30, 2012

Nature of Corporation

Nature of Corporation

Note 1

Nature of Corporation 

Beamz Interactive, Inc.  (the "Company") was incorporated in the State of Delaware in 2001.  The Company's operations consist of the development and sales of an interactive laser controller technology (the “Beamz”) that can be used to develop new market opportunities in a wide variety of music, game and consumer applications throughout the world.

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Note Payable Table (Details) (USD $)	Sep. 30, 2012	Jun. 30, 2012
10% Bridge Loan to an entity due October, 2012; unsecured	$ 72,655	$ 50,000
Bridge Loan Total	72,655	50,000
Less: unamortized discount for warrants	(6,767)	(6,868)
Bridge Loan, Net	$ 65,888	$ 43,132

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Equity Stock (Details) (USD $)	Sep. 30, 2012
Authorized Shares	50,000,000
Common stock authorized shares	40,000,000
Common stock issued shares	14,426,082
Common stock outstanding shares	12,802,080
Common stock shares issued to various contractors, officers and directors	255,000
Common stock per share value of shares issued	$ 0.001
Preferred stock shares authorized'	10,000,000
Preferred stock par value	$ 0.001
Series D convertible preferred stock shares authorized	1,300,000
Series D convertible preferred stock shares issued	827,940
Series D convertible preferred stock shares outstanding	827,940
Series D convertible preferred stock converted into common shares	10
Per share value of liquidation preference	$ 10

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Summary of Significant Accounting Policies and Use of Estimates

3 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies and Use of Estimates

Summary of Significant Accounting Policies and Use of Estimates

Note 2 Summary of Significant Accounting Policies and Use of Estimates 

Presentation of Interim Information

The condensed financial statements included herein have been prepared by Beamz Interactive, Inc. (“we”, “us”, “our” or “Company”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements as of June 30, 2012 and 2011. 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, as permitted by the SEC, although we believe the disclosures, which are made, are adequate to make the information presented not misleading. Further, the condensed financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly our financial position at September 30, 2012, and the results of our operations and cash flows for the periods presented. The June 30, 2012 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Interim results may be subject to seasonal variations and the results of operations for the three months ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to establish accounting policies and make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements. These financial statements include estimates and assumptions that are based on informed judgments and the experience of management. Significant estimates include, but are not limited to, collectability of accounts receivable, the allowance for obsolete inventory, and valuation of stock issuances, stock-based compensation and warrants.  We evaluate our policies and estimates on an on-going basis and discuss the development, selection and disclosure of critical accounting policies with the Company's Audit Committee. Predicting future events is inherently an imprecise activity and as such requires the use of judgment. Our financial statements may differ materially based upon different estimates and assumptions.

We discuss our significant accounting policies to our financial statements below. Our significant accounting policies are subject to judgments and uncertainties that affect the application of such policies. We believe these financial statements include the most likely outcomes with regard to amounts that are based on our judgment and estimates. Our financial position and results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from the actual amounts, adjustments are made in subsequent periods to reflect more current information. We believe the following accounting policies are critical to the preparation of our financial statements due to the estimation process and business judgment involved in their application.

Fair Value of Financial Instruments

In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing as of each balance sheet date. The Company’s financial instruments include cash and cash equivalents, deposits, and debt and approximate fair value based on their short maturities or the effective interest rate. All methods of measuring fair value are based on Level 3 inputs, and result in a general approximation of value since valuations are inherently not precise.

Stock-Based Compensation and Warrants

We use the Black-Scholes pricing model as a method for determining the estimated fair value for all stock options and warrants awarded to employees, officers, directors, investors, and consultants. We apply judgment in estimating key assumptions that are important elements in the model and in expensing stock options and warrants, such as the expected stock-price volatility, expected term, stock value on the date of grant, and expected forfeiture rates. Our estimates of these important assumptions are based on historical data and judgment regarding market trends and factors.If actual results are not consistent with our assumptions and judgments used in estimating these factors,  we may be required to record additional stock-based compensation expense, which could be material to our results of operations.  We have not historically issued any dividends and we do not expect to in the future.  We  use the graded vesting attribution method to recognize compensation costs over the requisite service period for grants to employees and directors.

Cash and Cash Equivalents

Cash equivalents are considered to be all highly liquid investments purchased with an initial maturity, at time of purchase, of three (3) months or less.

Accounts Receivable, Net

Accounts receivable represents amounts earned but not collected in connection with the Company's sales. Trade receivables are carried at their estimated collectible amounts and are generally unsecured. Trade credit is generally extended on a short-term basis, thus trade receivables do not bear interest.

The Company provides an allowance for doubtful accounts based upon an individual review of the accounts outstanding, as well as the prior history of bad debts.  Accounts are considered past due or delinquent based on contractual terms, recent payment activity, and our judgment of collectability. As of September 30, 2012 and June 30, 2012, an allowance has been provided for potentially uncollectible accounts receivable and product returns in the amounts of $51,818 and $44,425, respectively.  Bad debt expense for the three months ended September 30, 2012 and 2011 was $2,964 and $5,919, respectively.

Prepaid Expenses

Prepaid expenses represent payments for consulting, development, and director fees and are being amortized to expense on a straight-line basis over the related contract periods.

Inventory, Net

Inventory consists primarily of finished products and materials and supplies.  Inventory is stated at the lower of cost or market.  Cost is determined by using the first-in, first-out method.  The Company periodically reviews its inventory and makes provisions for damaged or obsolete inventory.

At September 30, 2012 and June 30, 2012 inventory is comprised of the following:

	September 30, 2012			June 30, 2012
	(Unaudited)
Finished goods	$	113,211		$	131,372
Marketing and media		14,728			14,130
		127,939			145,502
Less: allowance for obsolescence		(6,286	)		(6,286	)
Net inventory	$	121,653		$	139,216

Research and Development

Expenditures for research activities relating to product development and improvement are charged to expense as incurred. Such expenditures amounted to $113,648 and $59,680 for the three months ended September 30, 2012 and 2011, respectively.

Software development costs are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. To date, the Company’s software has been available for general release to customers and, accordingly, no development costs have been capitalized.

Software development costs incurred and included in research and development expense noted above totaled $2,430 and $18,608 for the three months ended September 30, 2012 and 2011, respectively.

Advertising Costs

Advertising costs are expensed as incurred and are included in sales and marketing expenses on the accompanying statements of operations. Advertising expense totaled $60,835 and $28,082 for the three months ended September 30, 2012 and 2011, respectively.

Revenue Recognition

Revenues are recognized when a contract has been entered into or an order placed, the price is fixed, shipment of the products to the customer has occurred, or the transfer of title, if later, and collection is reasonably assured.  Amounts billed to a customer related to shipping or handling charges are included in revenues. 

Provisions for sales discounts and rebates to customers are recorded, based upon the terms of sales contracts, in the same period the related sales are recorded, as a reduction to the sale. Sales discounts and rebates are offered to certain customers to promote customer loyalty and encourage greater product sales.  The Company also provides an allowance for sales returns, that is estimated based upon prior experience.  As of September 30, 2012 and 2011, the allowance was $4,919 and $19,289, respectively.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided for on the straight-line method over the following estimated useful lives:

Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred.  Betterments or renewals are capitalized when incurred.  For the three months ended September 30, 2012 and 2011 depreciation expense was $150 and $207, respectively.

Concentration of Credit Risk

Management maintains the Company’s cash and cash equivalents in bank accounts, which at times may exceed federally insured limits.  The Company has not experienced any losses in such accounts, and Management believes the Company is not exposed to any significant credit risk on cash and cash equivalents. As of September 30, 2012 there are no balances that exceeded federally insured limits.

During the three months ended September 30, 2012 the Company had one customer that represented approximately 82% of net sales.  The Company had approximately $84,200 in accounts receivable at September 30, 2012 from this customer.  During the three months ended September 30, 2011, the Company had one customer representing approximately 69% of net sales.  The Company had accounts receivable of approximately $106,400 at September 30, 2011 from this customer.

During the three months ended September 30, 2012, the Company had no significant vendors, although we still rely on one principal supplier.  During the three months ended September 30, 2011, the Company had one vendor representing approximately 21% of purchases.  If purchases from this vendor was disrupted, particularly at certain critical times during the year, our sales could be adversely affected in the short term until alternative supply arrangements could be established.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended September 30, 2012, that are of significance, or potential significance, to us.

Per Share Data

Net loss per share (EPS) of common stock is computed based upon the weighted-average number of common shares outstanding during the year. Net loss equates to loss available to common stockholders as there is no dividend accrued for preferred stock. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  Basic and diluted EPS were the same for the three months ended September 30, 2012 and 2011, as the Company had losses from operations during both periods and therefore the effect of all potential common stock equivalents is anti-dilutive (reduces loss per share).  Stock options and warrants representing 1,754,337 and 63,024 shares of Common Stock were outstanding at September 30, 2012 and 2011, respectively, with exercise prices ranging from $.02 to $1.00 per share. Additionally, there were 827,940 and 800,440 shares of Series D preferred stock outstanding at September 30, 2012 and 2011, respectively, that were convertible into common stock on a 1 for 10 basis.

Income Taxes

Deferred tax assets and liabilities arise from temporary timing differences between the book and tax basis of accounting for assets, liabilities, and income as well as from timing in the recognition of net operating losses. Deferred income tax assets primarily arise from net operating loss carryforwards and deferred income tax liabilities are based on the different depreciation and amortization methods used for tax reporting and financial accounting purposes. The Company assesses its ability to realize deferred tax assets based on the current earnings performance and on projections of future taxable income in the relevant tax jurisdictions.  These projections do not include taxable income from the reversal of deferred tax liabilities and do not reflect a general growth assumption but do consider known or pending events, such as the passage of legislation.  The Company’s estimates of future taxable income are reviewed annually.  All tax positions are first analyzed to determine if the weight of available evidence indicates that it is more likely than not that the position will be sustained under audit, including resolution of any related appeals or litigation processes.  After the initial analysis, the tax benefit is measured as the largest amount that is more than 50% likely of being realized upon ultimate settlement.  Our income tax returns are subject to adjustment under audit for approximately the last four years.

If the Company is required to pay interest on the underpayment of income taxes, the Company recognizes interest expense in the first period the interest becomes due according to the provisions of the relevant tax law.

If the Company is subject to payment of penalties, the Company recognizes an expense for the amount of the statutory penalty in the period when the position is taken on the income tax return.  If the penalty was not recognized in the period when the position was initially taken, the expense is recognized in the period when the Company changes its judgment about meeting minimum statutory thresholds related to the initial position taken.

Liquidity

The accompanying unaudited condensed financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs, which raises doubts about the ability of the Company to continue as a going concern. In order to continue as a going concern, the Company will need to generate additional revenue and obtain additional capital to fund its operating losses and service its obligations. Management of the Company has developed a strategy, which it believes will accomplish this objective through additional equity funding and long term financing, which will enable the Company to operate for the coming year, though there can be no assurance that the Company’s efforts will be successful. The condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties.

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BALANCE SHEETS PARENTHETICALS (USD $)	Sep. 30, 2012	Jun. 30, 2012
Preferred Stock, par or stated value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	10,000,000	10,000,000
Convertible Preferred Stock, shares series D authorized	1,300,000	1,300,000
Convertible Preferred Stock, shares series D issued	827,940	800,440
Convertible Preferred Stock series D, shares outstanding	827,940	800,440
Common Stock, par or stated value	$ 0.001	$ 0.001
Common Stock, shares authorized	40,000,000	40,000,000
Common Stock, shares issued	14,426,082	14,146,082
Common Stock, shares outstanding	14,426,082	14,146,082

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Notes payable to related parties (Tables)

3 Months Ended

Sep. 30, 2012

Notes payable to related parties

Notes payable to related parties

As of September 30, 2012 and June 30, 2012, notes payable to related parties consists of the following:

	September 30, 2012			June 30, 2012
	(Unaudited)
10% Bridge Loan to an entity through April, 2013; unsecured		360,000			260,000
		360,000			260,000
Less: unamortized discount for warrants		(28,866	)		(38,167	)
	$	331,134		$	221,833

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Document and Entity Information	3 Months Ended
	Sep. 30, 2012	Nov. 15, 2012
Document and Entity Information
Entity Registrant Name	BEAMZ INTERACTIVE INC
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Entity Central Index Key	0001423357
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding		14,520,082
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

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Summary of Significant Accounting Policies (Details) (USD $)	Sep. 30, 2012	Jun. 30, 2012
Allowance for uncollectible accounts receivable	$ 51,818	$ 44,425
Finished goods	113,211	131,372
Marketing and media supplies	14,728	14,130
Inventory Gross	127,939	145,502
Less: allowance for obsolescence	(6,286)	(6,286)
Inventory, net,	121,653	139,216
Allowance for sales returns	4,919	19,289
Accounts receivable from One customer	$ 84,200	$ 106,400
Stock options and warrants outstanding	1,754,337	209,924
Exercise price minimum range	$ 0.02	$ 0.02
Exercise price maximum range	$ 1.00	$ 1.25
Series D Preferred Stock shares outstanding.	827,940	800,440

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STATEMENTS OF OPERATIONS (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Sales, net	$ 103,124	$ 120,462
Cost of goods sold	35,872	121,245
Gross profit (loss)	67,252	(783)
Depreciation and amortization	150	5,556
Research and development expenses	113,648	59,680
Sales and marketing expenses	129,522	109,147
General and administrative expenses	187,714	127,349
Registration costs	126,405	0
Loss from Operations	(490,187)	(302,515)
Other Income (Expense):
Interest income	0	1
Interest expense	(61,920)	(2,137)
Net Loss	$ (552,107)	$ (304,651)
Loss per share
Basic and diluted loss per common share	$ (0.04)	$ (0.02)
Weighted average common shares outstanding - basic and diluted	14,349,886	12,802,080

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Subsequent Events

3 Months Ended

Sep. 30, 2012

Subsequent Events

Subsequent Events

Note 7

Subsequent Events 

During October, 2012 the Board of Directors approved the issuance of 104,000 shares of common stock to various contractors of which 94,000 were issued as of November 14, 2012.

Subsequent to September 30, 2012 the Company amended the Bridge Loans to increase the maximum offering amount from $500,000 to $1,500,000, extend the maturity dates through March 2013 and to eliminate the provision allowing a 10% discount on conversion.

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Related Party Transactions

3 Months Ended

Sep. 30, 2012

Related Party Transactions

Related Party Transactions

Note 6

 Related Party Transactions 

As of September 30, 2012 and June 30, 2012, notes payable to related parties consists of the following:

	September 30, 2012			June 30, 2012
	(Unaudited)
10% Bridge Loan to an entity through April, 2013; unsecured		360,000			260,000
		360,000			260,000
Less: unamortized discount for warrants		(28,866	)		(38,167	)
	$	331,134		$	221,833

At September 30, 2012 and June 30, 2012 the Company had a payable to entities controlled by the chief executive officer in the amounts of $415,646 and $267,392, respectively.  The payables are non-interest bearing, uncollateralized, and due on demand.

During the three months ended September 30, 212 the Company received $100,000 in bridge loans from an entity controlled by the chief executive officer.  The entity received 50,000 warrants to purchase common stock at $.02 per share, expiring in April 2013.

During the three months ended September 30, 2012 the Company issued 25,000 shares of common stock to the audit committee chair for services and 100,000 shares of common stock to an officer for services to be performed through July 2013.

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Note Payable Bridge Loan (Details) (USD $)	Sep. 30, 2012
Issuance of warrants percentage on bridge loans	50.00%
Warrants exercise price for the issuance of warrants to bridge loans	$ 0.02
Bridge promissory notes into securities	$ 2,000,000
Discount to finance	10.00%

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Summary of Accounting Policies (Details) (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Bad debt expense.	$ 2,964	$ 5,919
Research activities related to product development and improvement	113,648	59,680
Software development costs included in research and development expense	2,430	18,608
Advertising expense'	60,835	28,082
Percentage of one customer on net sales	82.00%	69.00%
Percentage of vendors on purchases	0.00%	21.00%
Depreciation expense.'	$ 150	$ 207

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Bridge Loan (Tables)

3 Months Ended

Sep. 30, 2012

Bridge Loan {1}

Bridge Loan

As of September 30, 2012 and June 30, 2012, notes payable consists of the following:

	September 30, 2012			June 30, 2012
	(Unaudited)
10% Bridge Loan to an entity through May, 2013; unsecured		72,655			50,000
		72,655			50,000
Less: unamortized discount for warrants		(6,767	)		(6,868	)
	$	65,888		$	43,132

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Summary of Significant Accounting Policies and Use of Estimates (Policies)

3 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies and Use of Estimates (Policies)

Presentation of Interim Information

Presentation of Interim Information

The condensed financial statements included herein have been prepared by Beamz Interactive, Inc. (“we”, “us”, “our” or “Company”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements as of June 30, 2012 and 2011. 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, as permitted by the SEC, although we believe the disclosures, which are made, are adequate to make the information presented not misleading. Further, the condensed financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly our financial position at September 30, 2012, and the results of our operations and cash flows for the periods presented. The June 30, 2012 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Interim results may be subject to seasonal variations and the results of operations for the three months ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to establish accounting policies and make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements. These financial statements include estimates and assumptions that are based on informed judgments and the experience of management. Significant estimates include, but are not limited to, collectability of accounts receivable, the allowance for obsolete inventory, and valuation of stock issuances, stock-based compensation and warrants.  We evaluate our policies and estimates on an on-going basis and discuss the development, selection and disclosure of critical accounting policies with the Company's Audit Committee. Predicting future events is inherently an imprecise activity and as such requires the use of judgment. Our financial statements may differ materially based upon different estimates and assumptions.

We discuss our significant accounting policies to our financial statements below. Our significant accounting policies are subject to judgments and uncertainties that affect the application of such policies. We believe these financial statements include the most likely outcomes with regard to amounts that are based on our judgment and estimates. Our financial position and results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from the actual amounts, adjustments are made in subsequent periods to reflect more current information. We believe the following accounting policies are critical to the preparation of our financial statements due to the estimation process and business judgment involved in their application.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing as of each balance sheet date. The Company’s financial instruments include cash and cash equivalents, deposits, and debt and approximate fair value based on their short maturities or the effective interest rate. All methods of measuring fair value are based on Level 3 inputs, and result in a general approximation of value since valuations are inherently not precise.

Stock Based Compensation and Warrants

Stock-Based Compensation and Warrants

We use the Black-Scholes pricing model as a method for determining the estimated fair value for all stock options and warrants awarded to employees, officers, directors, investors, and consultants. We apply judgment in estimating key assumptions that are important elements in the model and in expensing stock options and warrants, such as the expected stock-price volatility, expected term, stock value on the date of grant, and expected forfeiture rates. Our estimates of these important assumptions are based on historical data and judgment regarding market trends and factors.If actual results are not consistent with our assumptions and judgments used in estimating these factors,  we may be required to record additional stock-based compensation expense, which could be material to our results of operations.  We have not historically issued any dividends and we do not expect to in the future.  We  use the graded vesting attribution method to recognize compensation costs over the requisite service period for grants to employees and directors.

Cash and Cash Equivalent

Cash and Cash Equivalents

Cash equivalents are considered to be all highly liquid investments purchased with an initial maturity, at time of purchase, of three (3) months or less.

Accounts Receivable, Net

.

Accounts Receivable, Net

Accounts receivable represents amounts earned but not collected in connection with the Company's sales. Trade receivables are carried at their estimated collectible amounts and are generally unsecured. Trade credit is generally extended on a short-term basis, thus trade receivables do not bear interest.

The Company provides an allowance for doubtful accounts based upon an individual review of the accounts outstanding, as well as the prior history of bad debts.  Accounts are considered past due or delinquent based on contractual terms, recent payment activity, and our judgment of collectability. As of September 30, 2012 and June 30, 2012, an allowance has been provided for potentially uncollectible accounts receivable and product returns in the amounts of $51,818 and $44,425, respectively.  Bad debt expense for the three months ended September 30, 2012 and 2011 was $2,964 and $5,919, respectively.

Prepaid Expenses

Prepaid Expenses

Prepaid expenses represent payments for consulting, development, and director fees and are being amortized to expense on a straight-line basis over the related contract periods.

Inventory, Net

Inventory, Net

Inventory consists primarily of finished products and materials and supplies.  Inventory is stated at the lower of cost or market.  Cost is determined by using the first-in, first-out method.  The Company periodically reviews its inventory and makes provisions for damaged or obsolete inventory.

At September 30, 2012 and June 30, 2012 inventory is comprised of the following:

	September 30, 2012			June 30, 2012
	(Unaudited)
Finished goods	$	113,211		$	131,372
Marketing and media		14,728			14,130
		127,939			145,502
Less: allowance for obsolescence		(6,286	)		(6,286	)
Net inventory	$	121,653		$	139,216

Research and Development

Research and Development

Expenditures for research activities relating to product development and improvement are charged to expense as incurred. Such expenditures amounted to $113,648 and $59,680 for the three months ended September 30, 2012 and 2011, respectively.

Software development costs are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. To date, the Company’s software has been available for general release to customers and, accordingly, no development costs have been capitalized.

Software development costs incurred and included in research and development expense noted above totaled $2,430 and $18,608 for the three months ended September 30, 2012 and 2011, respectively.

Advertising Costs

Advertising Costs

Advertising costs are expensed as incurred and are included in sales and marketing expenses on the accompanying statements of operations. Advertising expense totaled $60,835 and $28,082 for the three months ended September 30, 2012 and 2011, respectively.

Revenue Recognition

Revenue Recognition

Revenues are recognized when a contract has been entered into or an order placed, the price is fixed, shipment of the products to the customer has occurred, or the transfer of title, if later, and collection is reasonably assured.  Amounts billed to a customer related to shipping or handling charges are included in revenues. 

Provisions for sales discounts and rebates to customers are recorded, based upon the terms of sales contracts, in the same period the related sales are recorded, as a reduction to the sale. Sales discounts and rebates are offered to certain customers to promote customer loyalty and encourage greater product sales.  The Company also provides an allowance for sales returns, that is estimated based upon prior experience.  As of September 30, 2012 and 2011, the allowance was $4,919 and $19,289, respectively.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided for on the straight-line method over the following estimated useful lives:

Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred.  Betterments or renewals are capitalized when incurred.  For the three months ended September 30, 2012 and 2011 depreciation expense was $150 and $207, respectively.

Concentration of Credit Risk

Concentration of Credit Risk

Management maintains the Company’s cash and cash equivalents in bank accounts, which at times may exceed federally insured limits.  The Company has not experienced any losses in such accounts, and Management believes the Company is not exposed to any significant credit risk on cash and cash equivalents. As of September 30, 2012 there are no balances that exceeded federally insured limits.

During the three months ended September 30, 2012 the Company had one customer that represented approximately 82% of net sales.  The Company had approximately $84,200 in accounts receivable at September 30, 2012 from this customer.  During the three months ended September 30, 2011, the Company had one customer representing approximately 69% of net sales.  The Company had accounts receivable of approximately $106,400 at September 30, 2011 from this customer.

During the three months ended September 30, 2012, the Company had no significant vendors, although we still rely on one principal supplier.  During the three months ended September 30, 2011, the Company had one vendor representing approximately 21% of purchases.  If purchases from this vendor was disrupted, particularly at certain critical times during the year, our sales could be adversely affected in the short term until alternative supply arrangements could be established.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended September 30, 2012, that are of significance, or potential significance, to us.

Per Share Data

Per Share Data

Net loss per share (EPS) of common stock is computed based upon the weighted-average number of common shares outstanding during the year. Net loss equates to loss available to common stockholders as there is no dividend accrued for preferred stock. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  Basic and diluted EPS were the same for the three months ended September 30, 2012 and 2011, as the Company had losses from operations during both periods and therefore the effect of all potential common stock equivalents is anti-dilutive (reduces loss per share).  Stock options and warrants representing 1,754,337 and 63,024 shares of Common Stock were outstanding at September 30, 2012 and 2011, respectively, with exercise prices ranging from $.02 to $1.00 per share. Additionally, there were 827,940 and 800,440 shares of Series D preferred stock outstanding at September 30, 2012 and 2011, respectively, that were convertible into common stock on a 1 for 10 basis.

Income Taxes

Income Taxes

Deferred tax assets and liabilities arise from temporary timing differences between the book and tax basis of accounting for assets, liabilities, and income as well as from timing in the recognition of net operating losses. Deferred income tax assets primarily arise from net operating loss carryforwards and deferred income tax liabilities are based on the different depreciation and amortization methods used for tax reporting and financial accounting purposes. The Company assesses its ability to realize deferred tax assets based on the current earnings performance and on projections of future taxable income in the relevant tax jurisdictions.  These projections do not include taxable income from the reversal of deferred tax liabilities and do not reflect a general growth assumption but do consider known or pending events, such as the passage of legislation.  The Company’s estimates of future taxable income are reviewed annually.  All tax positions are first analyzed to determine if the weight of available evidence indicates that it is more likely than not that the position will be sustained under audit, including resolution of any related appeals or litigation processes.  After the initial analysis, the tax benefit is measured as the largest amount that is more than 50% likely of being realized upon ultimate settlement.  Our income tax returns are subject to adjustment under audit for approximately the last four years.

If the Company is required to pay interest on the underpayment of income taxes, the Company recognizes interest expense in the first period the interest becomes due according to the provisions of the relevant tax law.

If the Company is subject to payment of penalties, the Company recognizes an expense for the amount of the statutory penalty in the period when the position is taken on the income tax return.  If the penalty was not recognized in the period when the position was initially taken, the expense is recognized in the period when the Company changes its judgment about meeting minimum statutory thresholds related to the initial position taken.

Liquidity

Liquidity

The accompanying unaudited condensed financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs, which raises doubts about the ability of the Company to continue as a going concern. In order to continue as a going concern, the Company will need to generate additional revenue and obtain additional capital to fund its operating losses and service its obligations. Management of the Company has developed a strategy, which it believes will accomplish this objective through additional equity funding and long term financing, which will enable the Company to operate for the coming year, though there can be no assurance that the Company’s efforts will be successful. The condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties.

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Schedule of Inventory (Tables)

3 Months Ended

Sep. 30, 2012

Schedule of Inventory

Schedule of Inventory

At September 30, 2012 and June 30, 2012 inventory is comprised of the following:

	September 30, 2012			June 30, 2012
	(Unaudited)
Finished goods	$	113,211		$	131,372
Marketing and media		14,728			14,130
		127,939			145,502
Less: allowance for obsolescence		(6,286	)		(6,286	)
Net inventory	$	121,653		$	139,216

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Summary of options and warrants issued (Tables)

3 Months Ended

Sep. 30, 2012

Summary of options and warrants issued

Summary of options and warrants issued

A summary of the options and warrants for the quarter ended September 30, 2012are presented in the table below:

	Weighted Average Exercise Price		Number of Options and Warrants			Weighted Average Remaining Contractual Term		Aggregate Fair Value
Outstanding at June 30, 2012	$	0.04		209,924			3.16	$	151,955
Granted	$	0.96		1,569,413			0.93		33,730
Exercised		-		(25,000	)		-		-
Outstanding at September 30, 2012 (Unaudited)	$	0.87		1,754,337			1.14	$	185,685

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Commitments Future payments Consulting Fees (Details) (USD $)	3 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2013
Future payments of consulting fees			$ 21,000
Royalty Fees	$ 900	$ 1,800

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Equity Incentive Compensation Plan (Details)	Sep. 30, 2012
Common stock shares reserved for issuance under Incentive Compensation Plan 2004	750,000
Number of options under Incentive Compensation Plan are outstanding	29,825
Series C Preferred stock shares issued.	765,906
Common stock shares reserved for issuance under Incentive Compensation Plan 2009	1,150,000

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STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Reconciliation of Net Loss to Net Cash Provided (Used) by Operating Activities
Net Loss for the period	$ (552,107)	$ (304,651)
Cash flows from operating activities:
Depreciation and amortization.	150	5,556
Equity issued for services and liabilities	280,000	0
Accounts receivable allowance	7,393	0
Amortization of debt discount	49,737	0
Changes in Assets and Liabilities
Changes in Accounts receivable	(81,347)	43,372
Changes in Inventory	17,563	5,116
Changes in Prepaid expenses and other assets	(84,219)	116,377
Changes in Accounts payable	286,291	39,097
Changes in Accrued liabilities	(14,790)	(510)
Net cash provided (used) by operating activities	(91,329)	(95,643)
Cash flows from financing activities:
Proceeds from related party bridge loans	100,000	0
Proceeds from exercise of warrants	500	0
Net cash provided by financing activities	100,500	0
Increase (decrease) in cash and cash equivalents	9,171	(95,643)
Cash and cash equivalents, beginning of year	13,293	118,528
Cash and cash equivalents, end of year	22,464	22,885
Non-cash activity
Related party payments of accounts payable	148,254	37,235
Warrants issued with bridge loans	40,336	0
Issuance of bridge loan for payment of services	22,655	0
Equity issued for services and liabilities.	280,000	0
Cash paid for:
Income taxes paid	0	0
Interest paid	$ 1,997	$ 2,137

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Equity

3 Months Ended

Sep. 30, 2012

Equity

Equity

Note 5

Equity 

Common Stock

As of September 30, 2012, the Company has 50,000,000 shares of stock authorized, 40,000,000 of which have been designated as common stock, $.001 par value.There were14,426,082 common shares issued and outstanding at September 30, 2012.

During the three months ended September 30, 2012, the Company issued 255,000 shares of common stock to various contractors and officers and directors for services that were valued at $.57 per share based on a third party valuation.  In addition, 25,000 shares of common stock were issued for proceeds of $500, pursuant to the exercise of 25,000 warrants.

Preferred Stock

As of September 30, 2012 the Company has 10,000,000 shares of preferred stock, $.001 par value, authorized of which 1,300,000 shares are Series D Convertible Preferred Stock (“Series D”). There are 827,940 shares of Series D issued and outstandingat September 30, 2012.  Each Series D share is convertible into 10 shares of common stock and has a liquidation preference of $10 per share.

During the three months ended September 30, 2012 the Company issued 25,000 shares of Series D preferred stock to Cypher pursuant to the renegotiated license agreement (Note 3).  The shares were valued at $142,500 based on a third party valuation. In addition, the Company has corrected the outstanding Series D shares to include 2,500 Series D shares issued in 2008 with a deminimis value.

Commitment

Pursuant to the July 2011  Bridge Loan Stock Purchase and Security Agreement, each cash Lender under the Loan Document, simultaneously with the consummation of a Sale Event, shall be entitled to a fee in an amount equal to two hundred (200%) of the original principal amount loaned by such Lender to the Company, regardless whether such Lender's Note is outstanding at that time, and such fee shall be paid to the Lenders in preference above any amounts owed by the Company to its other stockholders.  The aggregate amount of such preference payments equals $2,815,850 as of September 30, 2012.

Warrants & Options

Pursuant to the Bridge Loan Financing Agreement, as additional consideration for each of the Loans, the Company granted the Lenders warrants with the right to purchase a number of shares of the Company's common stock equal to fifty percent (50%) of the principal amount of the Lender's Notes.During the three months ended September 30, 2012, 61,313 warrants were issued pursuant to the Bridge Loan Financing Agreement.  The warrants are exercisable at $.02 per share and expire through January 2015.As the warrants were issued with the bridge loans, the relative fair value of same, in the amount of $40,336 for the three months ended September 30, 2012, was allocated between the debt proceeds and the warrants and the warrant relative value reflected as a discount on the debt that will be amortized over the term of the debt.

During August 2012 the Company granted 1,500,000 warrants pursuant to a Pooled Vehicle Participation Agreement (Note 3).  The warrants expire in August 2013 and have an exercise price of $1 per share.

2004 Incentive Compensation Plan

The Company has adopted the 2004 Incentive Compensation Plan (the “2004 Plan”).  The 2004 Plan provides for the issuance of incentive and non-incentive stock options.  The Company has reserved 750,000 shares of common stock for issuance underlying the grants under the 2004 Plan. As of September 30, 2012, 29,825 options under the plan are outstanding. Options under the 2004 Plan generally become exercisable over vesting periods of up to four years and expire ten years from the date of grant.

2009 Incentive Compensation Plan

In January 2009, the Company adopted the 2009 Incentive Compensation Plan (the "2009 Plan") that permits the issuance of options or shares to selected employees and directors of, and consultants to, the Company.  The Plan was amended in January 2012 to reserve 1,150,000 shares of Series C Preferred Stock for issuance underlying the grants of stock, stock options and warrants.  As of September 30, 2012, 765,906 shares of Series C Preferred Stock were issued pursuant to the Plan and were converted to common stock in June, 2011.  Options under the 2009 Plan generally become exercisable over vesting periods of up to four years and expire ten years from the date of grant.

A summary of the options and warrants for the quarter ended September 30, 2012are presented in the table below:

	Weighted Average Exercise Price		Number of Options and Warrants			Weighted Average Remaining Contractual Term		Aggregate Fair Value
Outstanding at June 30, 2012	$	0.04		209,924			3.16	$	151,955
Granted	$	0.96		1,569,413			0.93		33,730
Exercised		-		(25,000	)		-		-
Outstanding at September 30, 2012 (Unaudited)	$	0.87		1,754,337			1.14	$	185,685

For purposes of determining the fair values of warrants issued during the three months ended September 30, 2012 using the Black-Scholes option pricing model, the Company used the following assumptions in the three months ended September 30, 2012; expected volatility 150%, risk-free interest rate 1%, warrant life of 3 years, estimated market price of $.57 per share and expected dividend rate of 0%.

Included in the table above are 29,825 options outstanding at September 30, 2012 and June 30, 2012.  The options are subject to various vesting periods up to thirty three months and all were fully vested as of December 2011.   The options expire on various dates between January, 2014 and October, 2018. Additionally, the options and warrants had an intrinsic value of $110,054 as of September 30, 2012.  Intrinsic value arises when the exercise price is lower than the market, which was estimated to be $.57 per share at September 30, 2012.

The options outstanding at September 30, 2012 had a no unrecognized compensation costs.

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Equity summary of options and warrants issued (Details)	Weighted Average Exercise Price	Number of Options and Warrants	Remaining contractual term	Aggregate Fair Value
Outstanding at Jun. 30, 2012	0.04	209,924	3.16	151,955
Granted	0.96	1,569,413	0.93	33,730
Expired	0	(25,000)	0	0
Outstanding' at Sep. 30, 2012	0.87	1,754,337	1.14	185,685

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Commitments Consulting Fees and Royalty (Details) (USD $)	Sep. 30, 2012
Issuance of preferred stock and notes as per consulting agreement	$ 50,000
Monthly payment of consulting fees beginning from July 2009	4,000
Increase of consulting fees per month	10,000
Royalty minimum rate	17.50%
Royalty maximum rate	25.00%
Monthly payment of consulting fees beginning from November, 2010	7,729
Number of shares paid to consultant	18,034
Value of debt of consultant	$ 12,023