11. COMMITMENTS AND CONTINGENCIES

12 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

The Company was an interpleader party to a lawsuit in the Southern District of Georgia, Savannah Division, pursuant to which the Comapny sought to prevent the release of 100,000 shares of its Common Stock to a third-party and asked the court to return those shares to the Company.   During the fiscal year ended June 30, 2012 the Company elected to relinquish claim to the shares and the matter was dismissed.

The Company was a defendant in a suit brought by one if its suppliers.  The Company has defended the claim alleging that the vendor failed to deliver the goods and services contracted for.  Subsequent to June 30, 2012, a tentative settlement agreement has been negotiated pursuant to which, if executed, will result in the Company paying the vendor approximately $75,000 in equal payments, without interest, over a period of eighteen months.

Except as described in the preceding paragraph, to the best knowledge of the Company’s management, at June 30, 2012, there are no legal proceedings which the Company believes will have a material adverse effect on its business, results of operations, cash flows or financial condition.

Lease Agreements

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

We are leasing office space on a month-to-month basis in West Hollywood, California.  We also lease an office in Los Angeles for use by our audio team in connection with our AfterMaster product under a lease expiring on August 31, 2013.  The total lease expense for both facilities is approximately $4,305 per month, and the total remaining obligations under these leases at June 30, 2012 were approximately $8,725.

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

Rent expense for the year ended June 30, 2012 was $658,761, of which $572,611 was paid in cash and $86,150 was paid in Common Stock.  Rent expense for the year ended June 30, 2011 was $483,112, of which $397,487 was paid in cash $85,626 was paid in Common Stock.

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

Year	Lease Payments
2013	$	36,805
Thereafter		-
Total	$	36,805

Other

The Company has not declared dividends on Series A or B Convertible Preferred Stock or its Series A-1 Convertible Preferred Stock. The cumulative dividends in arrears through June 30, 2012 were approximately $586,000.

As of the date of this filing, the Company has not filed its tax return for the fiscal year ended 2012.