10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q/A

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

For the quarterly period ended June 30, 2012

OR

¨ 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 000-54170

ZYTO CORP

(Exact name of registrant as specified in its charter)

Delaware	20-5534033
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

387 South 520 West, Suite 200

Lindon, UT

(Address of principal executive offices)

84042

(Zip Code)

Registrant’s telephone number, including area code: (801) 224-7199

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   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate website every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).    Yes   x   No   ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	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   ¨     No   x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 34,857,543 shares of common stock, par value $0.0001 per share, as of August 14, 2012.

EXPLANATORY NOTE

The purpose of this Amendment No. 1 (“Amendment”) to our quarterly report on Form 10-Q for the period ended June 30, 2012, originally filed with the U.S. Securities and Exchange Commission on August 20, 2012, is solely to furnish Exhibit 101 in accordance with Rule 405 of Regulation S-T.

No other changes have been made in this Amendment.  This Amendment speaks as of the original date of our Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

Under Rule 405(a)(2)(ii) of Regulation S-T, this Exhibit 101 is permitted to be furnished by amendment within 30 days of the original filing date of the Form 10-Q.

PART II – OTHER INFORMATION

Item 5.  Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

Item 6.     Exhibits

31. 1	Certification of Chief Executive Officer of ZYTO Corp, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31. 2	Certification of Chief Financial Officer of ZYTO Corp, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32. 1	Certification of Chief Executive Officer of ZYTO Corp, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32. 1	Certification of Chief Financial Officer of ZYTO Corp, 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 Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise not subject to liability under these sections.

SIGNATURES

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

	ZYTO CORP
	(Registrant)
By	/s/        Vaughn R Cook
	Chief Executive Officer
	(Principal Executive Officer)
By	/s/        Brian E. Halladay
	Chief Financial Officer (Principal Financial Officer)

Date:  August 14, 2012

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Vaughn R Cook, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ZYTO Corp (the “Registrant”);

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 we 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 changes 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.

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 controls over financial reporting.

August 14, 2012

/s/ VAUGHN R COOK

Vaughn R Cook

Chief Executive Officer

(Principal Executive 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

I, Vaughn R Cook, Chief Executive Officer of ZYTO Corp (the “Company”), certify that:

1.   the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2012, as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ VAUGHN R COOK

Vaughn R Cook

Chief Executive Officer

(Principal Executive Officer)

August 14, 2012

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian Halladay, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ZYTO Corp;

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 we 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 changes 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.

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 controls over financial reporting.

August 14, 2012

/s/ BRIAN HALLADAY

Brian Halladay

Chief Financial Officer

(principal financial and accounting officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian Halladay, Chief Financial Officer of ZYTO Corp (the “Company”), certify that:

1.   the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2012, as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ BRIAN HALLADAY

Brian Halladay

Chief Financial Officer

(Principal Financial and Accounting Officer)

August 14, 2012

XML

Note 2. Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Gain on forgivness of debt	$ 0	$ 66,897

XML

Note 12. Stock Options (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
ShareBasedCompensationUnrecognizedExpense	$ 30,211	$ 30,211
AllocatedShareBasedCompensationExpense	$ 3,580	$ 12,405

XML

Note 8. Research and Development (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
CapitalizedSoftwareDevelopmentCostsForSoftwareSoldToCustomers	$ 120,828	$ 90,753	$ 120,828	$ 90,753
CapitalizedComputerSoftwareAmortization	44,474	25,346	83,545	46,537
Research and development expenses	$ 104,514	$ 41,581	$ 163,398	$ 79,978

XML

Note 7. Related Party Note Payable (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Interest expense from the promissory note	$ 43,630	$ 43,631	$ 87,261	$ 64,379
Cash to the officer for accrued interest related to the promissory note			$ 13,264	$ 49,958

XML

Note 8. Research and Development: Future Amortization Costs Related To Capitalized Research and Development (Tables)

3 Months Ended

Jun. 30, 2012

Future Amortization Costs Related To Capitalized Research and Development:

Future Amortization Costs Related To Capitalized Research and Development

Future amortization costs related to capitalized research and development are as follows:

2012	$	91,343
2013		182,686
2014		72,727
2015		8,108
Total Amortization Costs	$	354,864

XML

Note 2. Summary of Significant Accounting Policies: Accounts Receivable (Policies)

3 Months Ended

Jun. 30, 2012

Accounts Receivable:

Accounts Receivable

Accounts Receivable – We record receivables due from our customers at the time the sale is recorded in accordance with our revenue recognition policies. These receivables consist of amounts due from the sale of products and services rendered. The future collectability of these amounts can be impacted by our collection efforts, the financial stability of our customers, and the general economic climate in which we operate. Recent economic conditions have increased the uncertainty in making these estimates. Any adverse change in these factors could have a significant impact on the collectability of these assets and could have a material impact on our consolidated financial statements.

We apply a consistent practice of establishing an allowance for accounts that we believe may become uncollectible through reviewing the historical aging of our receivables. When we become aware of the inability of a customer to meet its financial obligations (e.g., where it is in financial distress or has filed for bankruptcy), we specifically reserve for the potential bad debt to reduce the net recognized receivable to the amount we reasonably believe will be collected. The valuation of receivables is performed on a quarterly basis. Amounts considered uncollectible and shown net of an allowance for doubtful accounts were $83,337 and $128,704 at June 30, 2012, and December 31, 2011, respectively.

During 2011, we began to offer long-term financing to our customers. As a result, we have classified receivables that are reasonably expected to be realized outside of our normal operating cycle as long-term. These long-term receivables are recognized when a customer executes a financing contract for hardware purchases over $5,000.  The financing contracts require a down payment of 20% of the purchase price and an ongoing monthly subscription service to enable the use of the hardware.  The long-term contracts are payable for terms between 3 and 5 years, and bear interest at an annual rate of 24%. In the event the customer defaults, the annual long-term interest increases to 34%. A default occurs when payment according to the contract is not received within 30 days of being due. Once a customer defaults, we may discontinue the subscription until full payment is received.  We recognize interest income from these receivables monthly as it is earned. Interest income is recorded as a component of revenues in our condensed consolidated statement of operations.

XML

Note 9. Commitments and Contingencies (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
OperatingLeasesRentExpense	$ 46,957	$ 45,578	$ 92,534	$ 81,524

XML

Note 4. Property and Equipment: Schedule of Property and Equipment (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Computer Equipment	$ 188,511	$ 182,678
FurnitureAndFixturesGross	98,966	98,966
Production equipment	62,681	62,681
CapitalizedComputerSoftwareNet	50,034	48,115
PropertyPlantAndEquipmentGross	400,192	392,440
Accumulated depreciation	(293,263)	(259,747)
Property and Equipment, net of accumulated depreciation of $293,263 and $259,747, respectively	$ 106,929	$ 132,693

XML

Note 1. Organization and Business Activity: Business Condition (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Accumulated deficit	$ 8,010,567		$ 8,010,567		$ 8,107,421
Net Income (Loss)	31,270	(66,238)	96,854	(397,390)
Net Income (Loss)	(31,270)	66,238	(96,854)	397,390
Net Income (Loss)	31,270	(66,238)	96,854	(397,390)
Current liabilities in excess of current assets	$ 823,054		$ 823,054		$ 1,016,852

XML

Note 10. Capital Lease (Details)	Jun. 30, 2012
Capital Lease Term	60 monthly payments
Capital Lease Interest Rate	7.00%

XML

Note 7. Related Party Note Payable: Related Party Note Payable Schedule (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Unsecured note payable to shareholder, interest at 7%, net of discount of $64,380 and $128,759, respectively	$ 2,435,620	$ 2,371,241
Related Party Note Payable	2,435,620	2,371,241
Long-term portion	$ 2,435,620	$ 2,371,241

XML

Note 4. Property and Equipment

3 Months Ended

Jun. 30, 2012

Note 4. Property and Equipment:

Note 4. Property and Equipment

Note 4. Property and Equipment 

Property and equipment consisted of the following as of June 30, 2012 and December 31, 2011:

	June 30,	December 31,
	2012	2011
Computer equipment	$     188,511	$     182,678
Furniture and fixtures	98,966	98,966
Production equipment	62,681	62,681
Software	50,034	48,115
Property and Equipment, Gross	400,192	392,440
Accumulated depreciation	(293,263)	(259,747)
Property and Equipment, Net	$     106,929	$     132,693

Depreciation expense for the three months ended June 30, 2012 and 2011 was $16,660 and $19,344, respectively. Depreciation expense for the six months ended June 30, 2012 and 2011 was $33,516 and $37,949, respectively.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, as follows:

	Life
Computer equipment	2-3 years
Software	2-3 years
Furniture and fixtures	5-7 years
Production equipment	3-20  years

XML

Note 4. Property and Equipment (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Depreciation	$ 16,660	$ 19,344	$ 33,516	$ 37,949

XML

Note 4. Property and Equipment: Schedule of Property and Equipment (Tables)

3 Months Ended

Jun. 30, 2012

Schedule of Property and Equipment:

Schedule of Property and Equipment

Property and equipment consisted of the following as of June 30, 2012 and December 31, 2011:

	June 30,	December 31,
	2012	2011
Computer equipment	$     188,511	$     182,678
Furniture and fixtures	98,966	98,966
Production equipment	62,681	62,681
Software	50,034	48,115
Property and Equipment, Gross	400,192	392,440
Accumulated depreciation	(293,263)	(259,747)
Property and Equipment, Net	$     106,929	$     132,693

XML

Note 3. Inventory: Schedule of Inventory, Current (Tables)

3 Months Ended

Jun. 30, 2012

Schedule of Inventory, Current:

Schedule of Inventory, Current

	June 30,	December 31,
	2012	2011
Raw Materials	$         8,413	$          4,631
Finished Goods	25,912	12,927
Inventory	$       34,325	$        17,558

XML

Note 5. Line of Credit (Details) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011	Jun. 30, 2012		Jun. 30, 2011	Dec. 31, 2011
LineOfCreditFacilityCurrentBorrowingCapacity	$ 100,000			$ 100,000
LineOfCreditFacilityAmountOutstanding	0	[1]		0	[1]		100,000	[1]
Interest expense on line of credit	$ 1,223		$ 1,295	$ 2,532		$ 2,589

[1] Interest rate at 5.25% per annum

XML

Note 4. Property and Equipment: Schedule of Useful Lives (Tables)

3 Months Ended

Jun. 30, 2012

Schedule of Useful Lives:

Schedule of Useful Lives

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, as follows:

	Life
Computer equipment	2-3 years
Software	2-3 years
Furniture and fixtures	5-7 years
Production equipment	3-20  years

XML

Note 6. Notes Payable: Maturities of the long-term promissory note (Tables)

3 Months Ended

Jun. 30, 2012

Maturities of the long-term promissory note:

Maturities of the long-term promissory note

Maturities of the long-term promissory note are as follows:

	Long-term Debt
2012	$              7,132
2013	17,768
2014	18,727
2015	19,737
2016	20,802
2017	12,228

XML

Note 3. Inventory

3 Months Ended

Jun. 30, 2012

Note 3. Inventory:

Note 3. Inventory

Note 3. Inventory 

Inventory consisted of the following as of June 30, 2012 and December 31, 2011:

	June 30,	December 31,
	2012	2011
Raw Materials	$         8,413	$          4,631
Finished Goods	25,912	12,927
Inventory	$       34,325	$        17,558

XML

Note 7. Related Party Note Payable: Related Party Note Payable Schedule (Tables)

3 Months Ended

Jun. 30, 2012

Related Party Note Payable Schedule:

Related Party Note Payable Schedule

Related party note payable consisted of the following as of June 30, 2012, and December 31, 2011:

		June 30,		December 31,
		2012		2011
Unsecured note payable to shareholder, interest at 7%, net of discount of $64,380 and $128,759, respectively	$	2,435,620	$	2,371,241
Total related party notes payable		2,435,620		2,371,241
Less current portion		-		-
Long-term portion	$	2,435,620	$	2,371,241

XML

Note 2. Summary of Significant Accounting Policies: Schedule of Earnings Per Share Basic and Diluted (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net Income (Loss)	$ 31,270	$ (66,238)	$ 96,854	$ (397,390)
Basic Weighted Average Shares Outstanding	34,857,543	34,824,776	34,857,543	34,683,924
WeightedAverageNumberDilutedSharesOutstandingAdjustment	1,997,172		1,976,085
Diluted Weighted-Average Shares Outstanding	36,854,715	34,824,776	36,833,628	34,683,924
Basic Income (Loss) Per Share				$ (0.01)
IncomeLossFromContinuingOperationsPerBasicAndDilutedShare	$ 0.00	$ 0.00	$ 0.00	$ (0.01)

XML

Note 10. Capital Lease: ScheduleOfFutureMinimumLeasePaymentsForCapitalLeasesTableTextBlock (Details) (USD $)	3 Months Ended
	Jun. 30, 2012
CapitalLeasesFutureMinimumPaymentsRemainderOfFiscalYear	$ 2,147
CapitalLeasesFutureMinimumPaymentsDueInTwoYears	4,296
CapitalLeasesFutureMinimumPaymentsDueInThreeYears	4,296
CapitalLeasesFutureMinimumPaymentsDueInFourYears	14
CapitalLeasesFutureMinimumPaymentsDue	10,753
InterestExpenseLesseeAssetsUnderCapitalLease	(884)
CapitalLeasesFutureMinimumPaymentsPresentValueOfNetMinimumPayments	9,869
CapitalLeasesFutureMinimumPaymentsDueCurrent	(4,296)
Capital lease, less current portion	$ 5,573

XML

CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2012	Dec. 31, 2011
Cash and cash equivalents	$ 106,914	$ 87,364
Accounts receivable, net of allowance for doubtful accounts of $38,903 and $115,633, respectively	354,973	217,712
Prepaid expenses	23,490	32,245
Inventories	34,325	17,558
Other current assets	7,518	7,525
Total current assets	527,220	362,404
Long-term accounts receivable, net of allowance for doubtful accounts of $44,434 and $13,071, respectively	162,514	117,647
Property and Equipment, net of accumulated depreciation of $293,263 and $259,747, respectively	106,929	132,693
Technology, net of accumulated amortization of $193,195 and $109,650, respectively	354,864	317,581
Total assets	1,151,527	930,325
Accounts payable	471,764	488,967
Accrued expenses	201,534	178,121
Accrued interest related party	480,276	406,003
Line of credit		100,000
Short-term notes payable	96,942	96,942
Deferred revenue	79,563	104,927
Current portion of note payable	15,899
Current portion of capital lease	4,296	4,296
Total current liabilities	1,350,274	1,379,256
Warranty Reserve	8,476	8,476
Note Payable, net of current portion	80,495
Related Party Note Payable	2,435,620	2,371,241
Capital lease, net of current portion		9,522
Total liabilities	3,880,438	3,768,495
Common stock, par value $.0001 per share, 200,000,000 shares authorized and 34,857,543 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively	3,486	3,486
Additional paid-in capital	5,280,170	5,267,765
Subscriptions receivable	(2,000)	(2,000)
Accumulated deficit	(8,010,567)	(8,107,421)
Total stockholders' deficit	(2,728,911)	(2,838,170)
Total liabilities and stockholders' deficit	$ 1,151,527	$ 930,325

XML

Note 6. Notes Payable (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Unsecured note payable to InteMedica, LLC, interest at 12%, monthly payments of $8,000, in default	$ 46,942		$ 46,942		$ 46,942
Secured note payable to financial institution, interest at 5.27%,	96,394		96,394
Unsecured note payable to shareholder, interest at 10%, interest payments due monthly, principal due at July 31, 2013	50,000		50,000		50,000
NotesPayable	193,336		193,336		96,942
Short-term notes payable	(112,841)		(112,841)		(96,942)
NotesPayableToBankNoncurrent	80,495		80,495
Interest Expense on Notes Payable	$ 2,770	$ 2,254	$ 5,444	$ 4,957

XML

Note 1. Organization and Business Activity

3 Months Ended

Jun. 30, 2012

Note 1. Organization and Business Activity:

Note 1. Organization and Business Activity

Note 1.      Organization and Business Activity

Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of ZYTO Corp and subsidiary (the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles. These accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 as filed with the SEC on March 31, 2012.

Operating results for the six months ended June 30, 2012, are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2012, or any portion thereof.

Unless the context otherwise requires, all references to “we,” “us,” “our,” the “Company” and “ZYTO” are to ZYTO Corp and subsidiary.

Organization – Our Company consists of ZYTO Corp (a Delaware corporation) and its wholly owned subsidiary, ZYTO Technologies, Inc. (a Nevada corporation)(the “Subsidiary”).

Business Activity – Our operations consist of the manufacturing and distribution of biocommunication devices and software designed to facilitate communication between computers and the human body.

Business Condition – As of June 30, 2012, and December 31, 2011, we had an accumulated deficit of $8,010,567 and $8,107,421 respectively.

During the three months ended June 30, 2012 and 2011, we recognized net income of $31,270 and a net loss of $66,238, respectively. During the six months ended June 30, 2012 and 2011, we recognized net income of $96,854 and a net loss of $397,390, respectively.

As of June 30, 2012, and December 31, 2011, our current liabilities exceeded our current assets by $823,054 and $1,016,852, respectively.

These factors raise substantial doubt about our ability to continue as a going concern.  The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.  To increase revenue, we intend to focus on customer retention and expanding our customer base.

XML

Note 10. Capital Lease: ScheduleOfFutureMinimumLeasePaymentsForCapitalLeasesTableTextBlock (Tables)

3 Months Ended

Jun. 30, 2012

ScheduleOfFutureMinimumLeasePaymentsForCapitalLeasesTableTextBlock:

ScheduleOfFutureMinimumLeasePaymentsForCapitalLeasesTableTextBlock

For the six months ended December 31, 2012	$	2,147
For the year ended December 31, 2013		4,296
For the year ended December 31, 2014		4,296
For the year ended December 31, 2015		14
Total future minimum lease payments		10,753
Amount representing interest		(884)
Present value of future minimum lease payments		9,869
Current portion of capital lease		(4,296)
Capital lease, less current portion	$	5,573

XML

Note 2. Summary of Significant Accounting Policies: Principles of Consolidation (Policies)

3 Months Ended

Jun. 30, 2012

Principles of Consolidation:

Principles of Consolidation

Principles of Consolidation – The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, and its subsidiary in which we have a controlling financial interest. The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiary at June 30, 2012, and for the three months and six months ended June 30, 2012 and 2011, reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the consolidated financial position and results of operations for the periods presented. All significant intercompany transactions and accounts are eliminated in consolidation.

XML

Note 12. Stock Options: Schedule of Share Based Compensation (Tables)

3 Months Ended

Jun. 30, 2012

Schedule of Share Based Compensation:

Schedule of Share Based Compensation

				Weighted
			Weighted	Average
	Shares		Average	Remaining		Aggregate
	Under Option		Exercise	Contractual		Intrinsic
	or Warrant		Price	Life		Value
Outstanding at December 31, 2011	1,954,998	$	0.03	9.63	$	-
Granted or issued	130,000		0.04	9.80		-
Forfeited	121,340		0.03	-		-
Outstanding at June 30, 2012	1,963,658		0.03	9.18		-
Exercisable at June 30, 2012	-		-	-		-

XML

Note 2. Summary of Significant Accounting Policies: Revenue Recognition (Policies)

3 Months Ended

Jun. 30, 2012

Revenue Recognition:

Revenue Recognition

Revenue Recognition – We recognize revenue from customers upon the delivery of the system hardware.  At the time payment is received, the system hardware is shipped and the customer receives an e-mail which includes a link to download the software.  Upon shipment, the customer has no right of return and the transaction is final.  Thirty days from the date of purchase, the customer is required to pay a monthly subscription fee in order for the software to remain active.  Subscription revenue is recognized upon the performance of services.  In the event the customer cancels his or her monthly subscription or the monthly subscription fee is not received, the software automatically deactivates and the equipment is no longer functional.

We recognize revenue when persuasive evidence of an arrangement exits, delivery has occurred, the customer no longer has the right of return, the fee is fixed or determinable and collection has been made or is reasonably assured.

Revenues are shown net of any related sales or use taxes for sales transactions where applicable.

XML

Note 2. Summary of Significant Accounting Policies

3 Months Ended

Jun. 30, 2012

Note 2. Summary of Significant Accounting Policies:

Note 2. Summary of Significant Accounting Policies

Note 2.      Summary of Significant Accounting Policies  

This summary of significant accounting policies is presented to assist in understanding our condensed consolidated financial statements.  The condensed consolidated financial statements and notes are representations of Management, which is responsible for their integrity and objectivity.  These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Principles of Consolidation – The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, and its subsidiary in which we have a controlling financial interest. The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiary at June 30, 2012, and for the three months and six months ended June 30, 2012 and 2011, reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the consolidated financial position and results of operations for the periods presented. All significant intercompany transactions and accounts are eliminated in consolidation.

Use of Estimates – In preparing our unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods.  Actual results could differ from those estimates.

Revenue Recognition – We recognize revenue from customers upon the delivery of the system hardware.  At the time payment is received, the system hardware is shipped and the customer receives an e-mail which includes a link to download the software.  Upon shipment, the customer has no right of return and the transaction is final.  Thirty days from the date of purchase, the customer is required to pay a monthly subscription fee in order for the software to remain active.  Subscription revenue is recognized upon the performance of services.  In the event the customer cancels his or her monthly subscription or the monthly subscription fee is not received, the software automatically deactivates and the equipment is no longer functional.

We recognize revenue when persuasive evidence of an arrangement exits, delivery has occurred, the customer no longer has the right of return, the fee is fixed or determinable and collection has been made or is reasonably assured.

Revenues are shown net of any related sales or use taxes for sales transactions where applicable.

Accounts Receivable – We record receivables due from our customers at the time the sale is recorded in accordance with our revenue recognition policies. These receivables consist of amounts due from the sale of products and services rendered. The future collectability of these amounts can be impacted by our collection efforts, the financial stability of our customers, and the general economic climate in which we operate. Recent economic conditions have increased the uncertainty in making these estimates. Any adverse change in these factors could have a significant impact on the collectability of these assets and could have a material impact on our consolidated financial statements.

We apply a consistent practice of establishing an allowance for accounts that we believe may become uncollectible through reviewing the historical aging of our receivables. When we become aware of the inability of a customer to meet its financial obligations (e.g., where it is in financial distress or has filed for bankruptcy), we specifically reserve for the potential bad debt to reduce the net recognized receivable to the amount we reasonably believe will be collected. The valuation of receivables is performed on a quarterly basis. Amounts considered uncollectible and shown net of an allowance for doubtful accounts were $83,337 and $128,704 at June 30, 2012, and December 31, 2011, respectively.

During 2011, we began to offer long-term financing to our customers. As a result, we have classified receivables that are reasonably expected to be realized outside of our normal operating cycle as long-term. These long-term receivables are recognized when a customer executes a financing contract for hardware purchases over $5,000.  The financing contracts require a down payment of 20% of the purchase price and an ongoing monthly subscription service to enable the use of the hardware.  The long-term contracts are payable for terms between 3 and 5 years, and bear interest at an annual rate of 24%. In the event the customer defaults, the annual long-term interest increases to 34%. A default occurs when payment according to the contract is not received within 30 days of being due. Once a customer defaults, we may discontinue the subscription until full payment is received.  We recognize interest income from these receivables monthly as it is earned. Interest income is recorded as a component of revenues in our condensed consolidated statement of operations.

Other Income – During the three and six months ended June 30, 2012, other income included a gain on forgiveness of debt of $0 and $66,897.

Basic and Diluted Income (Loss) per Share – Basic income (loss) per share is computed on the basis of the weighted-average number of common shares outstanding during the year. Diluted income (loss) per share is computed on the basis of the weighted-average number of common shares and all dilutive potentially issuable common shares outstanding during the year.

		For the Three Months Ended				For the Six Months Ended
		June 30,				June 30,
		2012		2011		2012		2011
Net Income (loss)	$	31,270	$	(66,238)	$	96,854	$	(397,390)
Basic Weighted-Average Common Shares Outstanding		34,857,543		34,824,776		34,857,543		34,683,924
Effect of dilutive-securities
Options		1,997,172		-		1,976,085		-
Diluted Weighted-Average Common Shares Outstanding		36,854,715		34,824,776		36,833,628		34,683,924
Basic Income (loss) Per Common Share
Net Income (loss)		0.00		(0.00)		0.00		(0.01)
Diluted Income (loss) Per Common Share
Net Income (loss)		0.00		(0.00)		0.00		(0.01)

XML

BALANCE SHEETS PARENTHETICAL (USD $)	Jun. 30, 2012	Dec. 31, 2011
Allowance for doubtful accounts	$ 38,903	$ 115,633
Allowance for doubtful accounts long term	44,434	13,071
Accumulated depreciation	293,263	259,747
Accumulated amortization	$ 193,195	$ 109,650
Common stock par value	$ 0.0001	$ 0.0001
Common stock shares authorized	200,000,000	200,000,000
Common stock shares issued	34,857,543	34,857,543
Common stock shares outstanding	34,857,543	34,857,543

XML

Note 12. Stock Options

3 Months Ended

Jun. 30, 2012

Note 12. Stock Options:

Note 12. Stock Options

Note 12. Stock Options

On July 8, 2011, the Board of Directors approved the ZYTO Corp 2011 Equity Incentive Plan (“the 2011 Plan”). On December 6, 2011, the stockholders also approved the 2011 Plan.

The 2011 Plan permits the granting of equity awards to purchase up to 5,000,000 shares of common stock. Persons eligible to participate in the 2011 Plan include members of the Board of Directors, our consultants, all of our employees, and our subsidiary, as determined by our Board of Directors.

As of June 30, 2012, there were 3,036,342 shares available for issuance under the 2011 Plan.

On April 2, 2012 we granted options to acquire 100,000 shares of common stock to an employee, valued at $3,899. These options are exercisable at $0.04 per share, based on the closing price of our common stock on the date of issue. These options vest yearly over three years starting April 2, 2013, and expire on April 2, 2022.

On June 1, 2012, we granted stock options to acquire 30,000 shares of common stock to a member of our scientific advisory board for service valued at $640. These options are exercisable at $0.02 a share, based on the closing price of our common stock on the date of issue. These options vest on June 1, 2014, and expire June 1, 2024.

The grant-date fair value of the options above was based on the grant-date closing market price per share and on the following weighted-average assumptions: risk free interest rate of 0.93%, expected dividend yield of 0%, expected volatility of 166.99% and an expected life of 6 years from the respective date of issuance.

A summary of the status of stock options at June 30, 2012, and changes during the six months then ended, is presented in the following table:

				Weighted
			Weighted	Average
	Shares		Average	Remaining		Aggregate
	Under Option		Exercise	Contractual		Intrinsic
	or Warrant		Price	Life		Value
Outstanding at December 31, 2011	1,954,998	$	0.03	9.63	$	-
Granted or issued	130,000		0.04	9.80		-
Forfeited	121,340		0.03	-		-
Outstanding at June 30, 2012	1,963,658		0.03	9.18		-
Exercisable at June 30, 2012	-		-	-		-

The fair value of stock options is estimated on the date of grant or issuance using the Black-Scholes option pricing model. The expected life of stock options represents the period of time that the stock options granted are expected to be outstanding prior to exercise. The expected volatility is based on the historical price volatility of our common stock. The risk-free interest rate represents the U.S. Treasury constant maturities rate for the expected life of the related stock options. The dividend yield represents anticipated cash dividends to be paid over the expected life of the stock options. The intrinsic values are based on a June 30, 2012, closing price of $0.03 per share.

Generally accepted accounting principles for stock options require the recognition of the cost of services received in exchange for an award of equity instruments in the financial statements, is measured based on the grant date fair value of the award, and requires the compensation expense to be recognized over the period during which an employee or other service provider is required to provide service in exchange for the award (the vesting period). No income tax benefit has been recognized for share-based compensation arrangements and no share-based compensation cost has been capitalized in the accompanying condensed consolidated balance sheets at June 30, 2012 and December 31, 2011.

As of June 30, 2012, there was $30,211 of unrecognized compensation cost related to stock options that will be recognized over a weighted average period of approximately 1.98 years. For the three months ended June 30, 2012, we recorded compensation expense related to stock options of $3,580 as a general and administrative expense in our condensed consolidated statement of operations. For the six months ended June 30, 2012, we recorded compensation expense related to stock options of $12,405 as a general and administrative expense in our condensed consolidated statement of operations. There was no compensation expense related to stock options for the three and six months ended June 30, 2011.

XML

Document and Entity Information	3 Months Ended
	Jun. 30, 2012	Aug. 14, 2012
Document and Entity Information
Entity Registrant Name	ZYTO CORP
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Entity Central Index Key	0001406796
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		34,857,543
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	2012
Document Fiscal Period Focus	Q2

XML

Note 13. Concentrations

3 Months Ended

Jun. 30, 2012

Note 13. Concentrations:

Note 13. Concentrations

Note 13. Concentrations

During the six months ended June 30, 2012, we purchased approximately 75% of our inventory from two suppliers. During the year ended December 31, 2011, we purchased approximately 83% of our inventory from the same two suppliers. We currently purchase all of our Hand Cradle boards and Hand Cradle shells, important components of our products, from two suppliers. Although there are a limited number of manufacturers of these components, management believes that other suppliers could provide similar components on comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which would affect operating results adversely.

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenues, net	$ 1,397,785	$ 1,175,176	$ 2,484,126	$ 1,983,290
Cost of Sales	115,737	54,014	156,918	123,850
Gross Profit	1,282,048	1,121,162	2,327,208	1,859,440
Selling and marketing expenses	559,039	631,977	902,742	1,087,330
General and administrative expenses	499,105	432,024	1,051,634	921,528
Research and development expenses	104,514	41,581	163,398	79,978
Total operating expenses	1,162,658	1,105,582	2,117,774	2,088,836
Income (Loss) from operations	119,390	15,580	209,434	(229,396)
Other income			66,897
Interest expense	(88,120)	(81,818)	(179,477)	(167,994)
Total other income (expense)	(88,120)	(81,818)	(112,580)	(167,994)
Net Income (Loss)	$ 31,270	$ (66,238)	$ 96,854	$ (397,390)
Basic Income (Loss) Per Share				$ (0.01)
Basic Weighted Average Shares Outstanding	34,857,543	34,824,776	34,857,543	34,683,924
Net Income (Loss) per Common Share				$ (0.01)
Diluted Weighted-Average Shares Outstanding	36,854,715	34,824,776	36,833,628	34,683,924

XML

Note 7. Related Party Note Payable

3 Months Ended

Jun. 30, 2012

Note 7. Related Party Note Payable:

Note 7. Related Party Note Payable

Note 7. Related Party Note Payable

On March 26, 2012 we executed an amended and restated unsecured promissory note with an officer for intellectual property and other related technologies, extending the maturity date to December 31, 2013, bearing interest at 7% per annum. During the three months ended June 30, 2012 and 2011 we recognized interest expense from the promissory note of $43,630 and $43,631, respectively. During the six months ended June 30, 2012 and 2011 we recognized interest expense from the promissory note of $87,261 and $64,379, respectively. During the six months ended June 30, 2012 and 2011 we paid $13,264 and $49,958 in cash to the officer for accrued interest related to the promissory note, respectively.

Related party note payable consisted of the following as of June 30, 2012, and December 31, 2011:

		June 30,		December 31,
		2012		2011
Unsecured note payable to shareholder, interest at 7%, net of discount of $64,380 and $128,759, respectively	$	2,435,620	$	2,371,241
Total related party notes payable		2,435,620		2,371,241
Less current portion		-		-
Long-term portion	$	2,435,620	$	2,371,241

XML

Note 6. Notes Payable

3 Months Ended

Jun. 30, 2012

Note 6. Notes Payable:

Note 6. Notes Payable

Note 6. Notes Payable

On August 1, 2009, we amended and restated the terms of a note payable with InteMedica, LLC. This note bears interest at 12% per annum, with $8,000 due monthly until paid in full. As of June 30, 2012, the note payable was in default. As of June 30, 2012, the note payable balance was $46,942 and accrued interest totaled $8,716. 

On June 25, 2012, we exchanged our line of credit (see Note 5) for a promissory note with the same financial institution. This note is secured, bears interest at 5.27% per annum and required monthly payments of principal and interest of $1,837 until the maturity date of July 5, 2017. The note is personally guaranteed by one of our principal officers.

Maturities of the long-term promissory note are as follows:

	Long-term Debt
2012	$              7,132
2013	17,768
2014	18,727
2015	19,737
2016	20,802
2017	12,228

On January 28, 2011, we received $50,000 in exchange for a promissory note.  The 18-month note matured on June 28, 2012 and bears interest at 10% per annum. As part of the agreement, we issued the lender 25,000 shares of common stock (see Note 11). We were required to make interest-only payments until the maturity date of June 28, 2012, at which time the full principal amount was payable. This note was amended and restated on July 11, 2012 (see Note 14.)

Notes payable consisted of the following as of June 30, 2012, and December 31, 2011:

		June 30,		December 31,
		2012		2011
Unsecured note payable to InteMedica, LLC, interest at 12%, monthly payments of $8,000, in default	$	46,942	$	46,942
Secured note payable to financial institution, interest at 5.27%, monthly payments of $1,837, matures July 5, 2017		96,394		-
Unsecured note payable to shareholder, interest at 10%, interest payments due monthly, principal due at July 31, 2013		50,000		50,000
Total notes payable		193,336		96,942
Less current portion		(112,841)		(96,942)
Long-term portion	$	80,495	$	-

During the three months ended June 30, 2012 and 2011 we recognized interest expense on  notes payable of $2,770 and $2,254, respectively. During the six months ended June 30, 2012 and 2011 we recognized interest expense on notes payable of $5,444 and $4,957, respectively.

XML

Note 2. Summary of Significant Accounting Policies: Use of Estimates (Policies)

3 Months Ended

Jun. 30, 2012

Use of Estimates:

Use of Estimates

Use of Estimates – In preparing our unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods.  Actual results could differ from those estimates.

XML

Note 14. Subsequent Event

3 Months Ended

Jun. 30, 2012

Note 14. Subsequent Event:

Note 14. Subsequent Event

Note 14. Subsequent Event

On July 11, 2012 we amended and restated a promissory note (see Note 6). The 12-month note matures on July 31, 2013, and bears interest at 10% per annum. We are required to make interest-only payments until the maturity date, at which time the principal amount is payable.

XML

Note 10. Capital Lease

3 Months Ended

Jun. 30, 2012

Note 10. Capital Lease:

Note 10. Capital Lease

Note 10. Capital Lease

In October 2010, we entered into a lease agreement for the purpose of financing capital equipment. The lease agreement is payable in 60 monthly payments and bears interest at a rate of 7.00% per annum. The loan amount is collateralized by the equipment leased.

Future minimum lease payments under our non-cancelable capital lease are as follows:

For the six months ended December 31, 2012	$	2,147
For the year ended December 31, 2013		4,296
For the year ended December 31, 2014		4,296
For the year ended December 31, 2015		14
Total future minimum lease payments		10,753
Amount representing interest		(884)
Present value of future minimum lease payments		9,869
Current portion of capital lease		(4,296)
Capital lease, less current portion	$	5,573

XML

Note 8. Research and Development

3 Months Ended

Jun. 30, 2012

Note 8. Research and Development:

Note 8. Research and Development

Note 8. Research and Development

During the six months ended June 30, 2012 and 2011 we capitalized $120,828 and $90,753, respectively, of costs relating to significant enhancements and upgrades to our proprietary software. We capitalize certain software development costs incurred subsequent to the establishment of technological feasibility and amortize those costs over the estimated lives of the related products.

During the three months ended June 30, 2012 and 2011 amortization of these costs was $44,474 and $25,346 respectively. During the six months ended June 30, 2012 and 2011 amortization of these costs was $83,545 and $46,537, respectively.  

During the three months ended June 30, 2012 and 2011 we expensed $104,514 and $41,581 of research and development costs, respectively. During the six months ended June 30, 2012 and 2011 we expensed $163,398 and $79,978 of research and development costs, respectively. This is recorded in research and development expenses on our condensed consolidated statement of operations.

Amortization is computed on a straight-line basis over the estimated useful lives of the assets. All capitalized software development costs have been amortized over their estimated useful life of 3 years.

Future amortization costs related to capitalized research and development are as follows:

2012	$	91,343
2013		182,686
2014		72,727
2015		8,108
Total Amortization Costs	$	354,864

XML

Note 9. Commitments and Contingencies

3 Months Ended

Jun. 30, 2012

Note 9. Commitments and Contingencies:

Note 9. Commitments and Contingencies

Note 9. Commitments and Contingencies

Operating Leases – The Company is obligated under certain non-cancelable operating leases for the rental of office space.  Total lease expense for the three months ended June 30, 2012 and 2011 was $46,957 and $45,578, respectively. Total lease expense for the six months ended June 30, 2012 and 2011 was $92,534 and $81,524, respectively.

Future minimum lease payments under non-cancelable operating leases are as follows:

2012	$	93,891
2013		192,477
2014		32,236
Total minimum payments	$	318,604

Lawsuits –

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

XML

Note 11. Common Stock

3 Months Ended

Jun. 30, 2012

Note 11. Common Stock:

Note 11. Common Stock

Note 11. Common Stock

There were no issuances of common stock during the six months ended June 30, 2012.

XML

Note 9. Commitments and Contingencies: ScheduleOfFutureMinimumRentalPaymentsForOperatingLeasesTableTextBlock (Tables)

3 Months Ended

Jun. 30, 2012

ScheduleOfFutureMinimumRentalPaymentsForOperatingLeasesTableTextBlock:

ScheduleOfFutureMinimumRentalPaymentsForOperatingLeasesTableTextBlock

2012	$	93,891
2013		192,477
2014		32,236
Total minimum payments	$	318,604

XML

Note 9. Commitments and Contingencies: ScheduleOfFutureMinimumRentalPaymentsForOperatingLeasesTableTextBlock (Details) (USD $)	Jun. 30, 2012
OperatingLeasesFutureMinimumPaymentsDueCurrent	$ 93,891
OperatingLeasesFutureMinimumPaymentsDueInTwoYears	192,477
OperatingLeasesFutureMinimumPaymentsDueInThreeYears	32,236
OperatingLeasesFutureMinimumPaymentsDue	$ 318,604

XML

Note 1. Organization and Business Activity: Business Condition (Policies)

3 Months Ended

Jun. 30, 2012

Business Condition:

Business Condition

Business Condition – As of June 30, 2012, and December 31, 2011, we had an accumulated deficit of $8,010,567 and $8,107,421 respectively.

During the three months ended June 30, 2012 and 2011, we recognized net income of $31,270 and a net loss of $66,238, respectively. During the six months ended June 30, 2012 and 2011, we recognized net income of $96,854 and a net loss of $397,390, respectively.

As of June 30, 2012, and December 31, 2011, our current liabilities exceeded our current assets by $823,054 and $1,016,852, respectively.

These factors raise substantial doubt about our ability to continue as a going concern.  The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.  To increase revenue, we intend to focus on customer retention and expanding our customer base.

XML

Note 8. Research and Development: Amortization Policy (Policies)

3 Months Ended

Jun. 30, 2012

Amortization Policy:

Amortization Policy

Amortization is computed on a straight-line basis over the estimated useful lives of the assets. All capitalized software development costs have been amortized over their estimated useful life of 3 years.

XML

Note 8. Research and Development: Future Amortization Costs Related To Capitalized Research and Development (Details) (USD $)	3 Months Ended
	Jun. 30, 2012
FutureAmortizationExpenseYearOne	$ 2,012
FutureAmortizationExpenseYearTwo	2,013
FutureAmortizationExpenseYearThree	2,014
FutureAmortizationExpenseYearFour	$ 2,015

XML

Note 3. Inventory: Schedule of Inventory, Current (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
InventoryRawMaterials	$ 8,413	$ 4,631
InventoryFinishedGoods	25,912	12,927
Inventories	$ 34,325	$ 17,558

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Net Income (Loss)	$ 96,854	$ (397,390)
Depreciation and amortization	117,061	84,486
Amortization of debt discount	64,380	64,379
Provision for bad debt	31,837	13,544
Share-based compensation	12,405	55,538
Change in accounts receivable	(213,967)	15,470
Change in inventories	(16,767)	6,862
Change in prepaid expenses	8,755	528
Change in other current assets	(25)	6,743
Change in accounts payable	(17,203)	149,232
Change in accounts payable related party		(428)
Change in accrued expenses	23,413	64,815
Change in accrued interest related party	74,273	40,313
Change in deferred revenue	(25,364)	5,245
Net cash provided by operating activities	155,685	99,788
Purchase of equipment	(7,752)	(17,177)
Capitalization of software development costs	(120,828)	(90,753)
Net cash used in investing activities	(128,580)	(107,930)
Principal payments on notes payable	(3,948)	(1,849)
Principal payments on line of credit	(3,607)
Proceeds from notes payable		50,000
Net cash provided by (used in) financing activities	(7,555)	48,151
Net Increase in Cash and Cash Equivalents	19,550	40,009
Cash and Cash Equivalents, Beginning of Period	87,364	39,360
Cash and Cash Equivalents, End of Period	106,914	79,369
Cash paid for interest	102,857	126,706
Converted line of credit to promissory note	96,393
Write-off of uncollectible accounts	$ 77,204

XML

Note 5. Line of Credit

3 Months Ended

Jun. 30, 2012

Note 5. Line of Credit:

Note 5. Line of Credit

Note 5. Line of Credit

On December 14, 2010, we renegotiated and amended our existing line of credit with a financial institution. Under this revolving line of credit, as amended, we had $100,000 of available borrowings with a maturity date of December 5, 2011. As of December 31, 2011 the amount drawn on the line totaled $100,000.  The interest rate applied to the unpaid principal balance was 5.25% per annum.  During the three months ended June 30, 2012 and 2011 we recognized interest expense from the line of credit of $1,223 and $1,295, respectively. During the six months ended June 30, 2012 and 2011 we recognized interest expense from the line of credit of $2,532 and $2,589, respectively.

Borrowings under the line were collateralized by a security interest in all of our assets. The line of credit was personally guaranteed by one of our principal officers. The bank had extended our line of credit until April, 2012.

On June 25, 2012 we exchanged our existing line of credit with a financial institution for a promissory note (see Note 6). As of June 30, 2012 and December 31, 2011 the amount drawn on the line totaled $0 and $100,000, respectively.  

XML

Note 2. Summary of Significant Accounting Policies: Schedule of Earnings Per Share Basic and Diluted (Tables)

3 Months Ended

Jun. 30, 2012

Schedule of Earnings Per Share Basic and Diluted:

Schedule of Earnings Per Share Basic and Diluted

		For the Three Months Ended				For the Six Months Ended
		June 30,				June 30,
		2012		2011		2012		2011
Net Income (loss)	$	31,270	$	(66,238)	$	96,854	$	(397,390)
Basic Weighted-Average Common Shares Outstanding		34,857,543		34,824,776		34,857,543		34,683,924
Effect of dilutive-securities
Options		1,997,172		-		1,976,085		-
Diluted Weighted-Average Common Shares Outstanding		36,854,715		34,824,776		36,833,628		34,683,924
Basic Income (loss) Per Common Share
Net Income (loss)		0.00		(0.00)		0.00		(0.01)
Diluted Income (loss) Per Common Share
Net Income (loss)		0.00		(0.00)		0.00		(0.01)

«

XML

Note 2. Summary of Significant Accounting Policies: Accounts Receivable (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
AllowanceForDoubtfulOtherReceivablesCurrent	$ 83,337	$ 128,704

XML

Note 1. Organization and Business Activity: Basis of Presentation (Policies)

3 Months Ended

Jun. 30, 2012

Basis of Presentation:

Basis of Presentation

Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of ZYTO Corp and subsidiary (the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles. These accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 as filed with the SEC on March 31, 2012.