8. COMMITMENTS AND CONTINGENCIES

3 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

8. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

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

Lease Agreements

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

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

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

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

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

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

Other

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

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