1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Jun. 30, 2013

Notes to Financial Statements

Description of Business

Description of Business

Studio One Media, Inc. (the “Company” or “Studio One”) was originally organized in Delaware on May 12, 1988, as Dimensional Visions Group, Ltd. The name was changed on January 15, 1998 to Dimensional Visions Incorporated. On February 8, 2006, it changed its name to Elevation Media, Inc., and on March 28, 2006 the Company’s name was changed to Studio One Media, Inc. as part of its overall plan to implement its revised business plan.

In April 2006, the Company entered into an agreement to purchase MyStudio HD Recording Studios, Inc. (formerly known as Studio One Entertainment, Inc.), a privately-held Scottsdale, Arizona-based company that designed and manufactured the recording studios currently in use by the Company (the “MyStudio Agreement”).

On April 17, 2007, the Company announced that it had finalized the reverse merger of MyStudio HD Recording Studios, Inc. through an all-stock transaction. The purchase was pursuant to an agreement entered into by the companies dated March 29, 2006. The reverse merger included the exchange of 7,000,000 restricted Common Shares of Studio One Media, Inc. for 100% of the issued and outstanding shares of MyStudio HD Recording Studios, Inc. The substance of the transaction resulted in a reverse merger wherein MyStudio HD Recording Studios, Inc. became the accounting acquirer of Studio One. Therefore, historical financial data reflects the operations and accumulated deficit of MyStudio HD Recording Studios, Inc. The transaction essentially is a recapitalization of MyStudio HD Recording Studios, Inc. The reverse merger includes all right, title and interest to MyStudio HD Recording Studio, Inc.’s proprietary interactive recording studios, business plan and intellectual property, including pending patents, foreign patent rights and federal trademark applications. MyStudio, Inc. continues to operate as a wholly owned subsidiary of Studio One. Accordingly, the financial statements present on a consolidated basis the operations of Studio One and MyStudio HD Recording Studios, Inc., as well its other wholly-owned subsidiary, AfterMaster HD Audio, Inc.

Accounting Basis

Accounting Basis

The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.  The Company has elected a June 30 fiscal year end.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Studio One Media, Inc. and its subsidiaries. All significant inter-company accounts and transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The company's most significant estimates related to going consumer, fair value of warrants and accrued liabilities.

Notes and Other Receivables

Notes and Other Receivables

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

Fair Values, Inputs and Valuation Techniques for Financial Assets and Liabilities Disclosures

Fair Values, Inputs and Valuation Techniques for Financial Assets and Liabilities Disclosures

The fair value measurements and disclosure guidance defines fair value and establishes a framework for measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with this guidance, the Company has categorized its recurring basis financial assets and liabilities into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The levels of the fair value hierarchy are described below:

• Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.  

• Level 2 inputs utilize other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly, for substantially the full term of the asset. Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active and inputs other than quoted prices that are observable in the marketplace for the asset. The observable inputs are used in valuation models to calculate the fair value for the asset.

• Level 3 inputs are unobservable but are significant to the fair value measurement for the asset, and include situations where there is little, if any, market activity for the asset. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

Disclosure for Non-Financial Asssets Measured at Fair Value on a Non-Recurring Basis

Disclosures for Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis

The Company’s financial instruments mainly consist of cash, receivables, current assets, accounts payable and accrued expenses and debt.  The carrying amounts of its cash, receivables, current asserts, accounts payable, accrued expenses and current debt approximates fair value due to the Short-Term nature of these instruments.  The debt consists of lease payable and notes payables, the lease payables, which is due 18 months after June 30, 2013, therefore its carrying amount also approximates fair value.

Concentration of Risk

Concentration of Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash.  Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States.  The Company occasionally maintains amounts on deposit with a financial institution that are in excess of the federally insured limits. The risk is managed by maintaining all deposits in high quality financial institutions.

For the year ended June 30, 2013 there is one customer that accounted for a material portion of total revenues, and 2012 there were no customers that accounted for a material portion of total revenues.  

Property and Equipment

Property and Equipment

Property and equipment is recorded at cost less accumulated depreciation. Depreciation and amortization is calculated using the straight-line method over the expected useful life of the asset, after the asset is placed in service. The Company generally uses the following depreciable lives for its major classifications of property and equipment:

Description	Useful Lives
Office Equipment and Computers	5 years
Computer Software	5 years
Furniture and Office Equipment	5 years
Vehicles	5 years
Leasehold Improvements	Shorter of Useful Life or Lease Term
Studios	5 years

Expenditures associated with upgrades and enhancements that improve, add functionality, or otherwise extend the life of property and equipment are capitalized, while expenditures that do not, such as repairs and maintenance, are expensed as incurred.

Property and Equipment Yet to be Placed in Service

Property and Equipment Yet to be Placed in Service

The Company capitalizes direct costs associated with the production of a new studio as it is being built.  Depreciation of these assets does not begin until the studio is complete and placed into service.

Intangible Assets

Intangible Assets

Intangible assets consist of intellectual property, website costs, video backgrounds, and patterns and molds. The Company’s intellectual property includes purchased patents and trademarks as well as other proprietary technologies.  Website costs are costs incurred to develop the Company’s website. Video backgrounds are the costs incurred to develop video backgrounds for use in the Company’s recording studios. Patterns and molds are for the design and construction of the studios. The Company amortizes intangible assets over the following useful lives:

Description	Weighted-Average Amortization Period
Intellectual Property	5 years
Website Costs	5 years
Video Backgrounds	5 years
Patterns and Molds	5 years

Valuation of Long-Lived Assets

Valuation of Long-Lived Assets

Long-lived tangible assets and definite-lived intangible assets are reviewed for possible impairment annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses both an estimate of undiscounted future net cash flows of the assets over the remaining useful lives and a replacement cost method when determining their fair values. If the carrying values of the assets exceed the fair value of the assets, the Company recognizes an impairment loss equal to the difference between the carrying values of the assets and their fair values. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets. The evaluation of long-lived assets requires the Company to use estimates of future cash flows. However, actual cash flows may differ from the estimated future cash flows used in these impairment tests.

Revenue Recognition

Revenue Recognition

The Company applies the provisions of FASB ASC 605, Revenue Recognition in Financial Statements, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. ASC 605 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue related to goods and services provided when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured.

The Company's revenues are generated from the studio sessions, on-studio advertising, website advertising and fees from the AfterMaster services.  Studio sessions are included in revenues as cash sales or barter transactions.  Cash sales are recognized as revenue upon the use of the session.  Barter revenues are recognized as stated below.

Barter Transactions - Barter revenue relates to recording session services provided by Studio One to business customers in exchange for products and services that Studio One would otherwise be required to buy for cash. Barter expenses reflect the expense offset to barter revenue. The amount of barter revenue and expense is recorded at the estimated fair value of the services received or the services provided, whichever is more objectively determinable, in the month the services and advertising are exchanged.  Studio One applies ASC 845, Accounting for Advertising Barter Transactions and, accordingly, recognizes advertising barter revenues only to the extent that Studio One has similar cash transactions within a period not to exceed six months prior to the date of the barter transaction.

To date, the amount of barter revenue to be recognized has been more objectively determinable based on the value of products or services received rather than based upon the value of advertising provided.  For revenue from recording sessions services provided for cash to be considered similar to the recording session services provided in barter transactions, the services rendered must have been in the same media and similar term as the barter transaction.

During the years ended June 30, 2013 and 2012, the Company recognized $-0- and $23,500, respectively, of revenue from barter transactions.  

Cost of Sales

Cost of Sales

The Company’s cost of sales includes studio lease expense, employee costs, and other nominal amounts.  Depreciation is not included within cost of sales.

Research and Development

Research and Development

The Company follows the policy of expensing its research and development costs in the period in which they are incurred in accordance with ASC 730, Accounting for Research and Development Costs. The Company incurred research and development expenses of $643 and $3,052 during the years ended June 30, 2013 and 2012, respectively.

Advertising Expenses

Advertising Expenses

The Company expenses advertising costs in the period in which they are incurred. Advertising expenses were $8,064 and $44,173 for the years ended June 30, 2013 and 2012, respectively, and have been included within general and administrative expenses.  During the same periods, the Company incurred approximately $-0- and $23,500 in advertising expenses which the Company paid for in barter.  These costs are included in its cost of barter expenses, respectively.

Share-Based Compensation

Share-Based Compensation

The Company follows the provisions of ASC 718, Share-Based Payment, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.  The Company uses the Black-Scholes pricing model for determining the fair value of share-based compensation.

Equity instruments issued to non-employees for goods or services are accounted for at fair value and are marked to market until service is complete or a performance commitment date is reached, whichever is earlier.

Loss Per Share

Loss Per Share

Basic earnings (loss) per Common Share is computed by dividing losses attributable to Common shareholders by the weighted-average number of shares of Common Stock outstanding during the period. The losses attributable to Common shareholders was increased for accrued and deemed dividends on Preferred Stock during the years ended June 30, 2013 and 2012 of $68,066 and $392,138, respectively.

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

For the years ended June 30, 2013 and 2012, all of the Company’s potentially dilutive securities (warrants, options, convertible preferred stock, and convertible debt) were excluded from the computation of diluted earnings per share as they were anti-dilutive.  The total number of potentially dilutive Common Shares that were excluded were 11,591,124 and 16,217,848 at June 30, 2013 and 2012, respectively.

Income Taxes

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

In July, 2006, the FASB issued ASC 740, Accounting for Uncertainty in Income Taxes, which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a return. ASC 740 provides guidance on the measurement, recognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties.  Under this pronouncement, the Company recognizes the financial statement benefit of a tax position only after determining that a position would more likely than not be sustained based upon its technical merit if challenged by the relevant taxing authority and taken by management to the court of the last resort. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon settlement with the relevant tax authority.

The Company’s policy is to recognize both interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties on unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest and penalties since its inception.

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The tax years for 2009 to 2013 remain open for federal and/or state tax jurisdictions.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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