internetmedia10q063013.htm

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 x No o

		Page

PART I - FINANCIAL INFORMATION:

Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 4.	Controls and Procedures	14

PART II - OTHER INFORMATION:

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15

Item 3.	Defaults Upon Senior Securities	15

Item 4.	Mine Safety Disclosures	15

Item 6.	Exhibits	15

SIGNATURES		16


INTERNET MEDIA SERVICES, INC.

CONSOLIDATED BALANCE SHEETS
As of

	June 30,			December 31,
	2013			2012
	(Unaudited)
ASSETS

Current assets:
Cash	$	16,510		$	1,262
Prepaid expenses and other assets		26,382			10,169
Current assets of discontinued operations		-			116,460
Total current assets		42,892			127,891

Non-current assets of discontinued operations		-			99,092

Total assets	$	42,892		$	226,983


LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
Accounts payable	$	23,263		$	39,026
Accrued expenses		176,424			61,340
Notes payable		185,966			280,034
Revolving note from related party		267,401			281,228
Advance on bridge financing		50,000			-
Current liabilities of discontinued operations		-			156,912
Total current liabilities		703,054			818,540

Commitments and contingencies		-			-

Stockholders' deficiency
Common stock, $.001 par value, 100,000,000 shares
authorized, 39,734,621 shares issued and outstanding
(24,637,893 at December 31, 2012)		39,735			24,638
Additional paid-in capital		863,255			770,786
Accumulated deficit		(1,563,152	)		(1,386,981	)
Total stockholders' deficiency		(660,162	)		(591,557	)

Total liabilities and stockholders' deficiency	$	42,892		$	226,983

INTERNET MEDIA SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


	Three months ended			Three months ended			Six months ended			Six months ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012

Revenue	$	-		$	-		$	-		$	-

Costs of revenue		-			-			-			-

Gross loss		-			-			-			-

Operating expenses:
General and administrative		103,115			61,575			178,991			127,909

Operating loss		(103,115	)		(61,575	)		(178,991	)		(127,909	)

Other expenses:
Loss from change in fair value of notes payable		-			(101,063	)		-			(105,009	)
Interest expense		(9,631	)		(7,998	)		(20,193	)		(14,986	)
		(9,631	)		(109,061	)		(20,193	)		(119,995	)

Loss before income taxes		(112,746	)		(170,636	)		(199,184	)		(247,904	)

Income tax provision		-			-			-			-

Loss from continuing operations		(112,746	)		(170,636	)		(199,184	)		(247,904	)

Discontinued operations:
Gain from disposal of discontinued operations		-			-			3,839			-
Net income from discontinued operations		-			9,685			19,174			17,412
		-			9,685			23,013			17,412

Net loss	$	(112,746	)	$	(160,951	)	$	(176,171	)	$	(230,492	)

Net loss from continuing operations per share - basic and diluted	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.01	)

Net income from discontinued operations per share - basic and diluted		0.00			0.00			0.00			0.00

Net loss per share - basic and diluted	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.01	)

Weighted average common shares
outstanding - basic and diluted		33,870,679			24,306,722			29,719,429			24,123,291

The accompanying notes are an integral part of the financial statements

INTERNET MEDIA SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Six months ended			Six months ended
	June 30, 2013			June 30, 2012
Cash flows from operating activities:
Net loss	$	(176,171	)	$	(230,492	)
Income from discontinued operations		(23,013	)		(17,412	)
Adjustments to reconcile net loss to net
cash used by operating activities:
Stock based compensation		11,798			12,898
Change in fair value of notes payable		-			105,009
(Increase) decrease in assets:
Prepaid expenses and other assets		(9,713	)		2,509
Increase in liabilities:
Accounts payable and accrued expenses		101,021			13,927
Net cash used by continuing operations		(96,078	)		(113,561	)
Net cash provided by discontinued operations		7,653			58,854
Net cash used by operating activities		(88,425	)		(54,707	)

Cash flows from investing activities:
Net proceeds from sale of LegalStore.com		74,000			-
Net cash provided by investing activities		74,000			-


Cash flows from financing activities:
Proceeds from sale of common stock		-			10,000
Advance on bridge financing, net		43,500
Net (repayments) borrowings from related party		(13,827	)		44,894
Net cash provided by financing activities		29,673			54,894

Net increase in cash		15,248			187

Cash - beginning of period		1,262			808

Cash - end of period	$	16,510		$	995


Cash paid for:
Income taxes	$	2,200		$	3,800

Non-cash financing activities:
Note payable and accrued interest converted to shares of common stock	$	95,768		$	16,949

The accompanying notes are an integral part of the financial statements

INTERNET MEDIA SERVICES, INC.

Nature of Business - Internet Media Services, Inc. (the Company) was a digital media company created to develop, own and operate a portfolio of integrated “internet properties”, offering complementary business models and components. The Company was primarily focused on creating, acquiring and partnering with companies with customer acquisition-customer relationship management solutions, as well as information technology / content acquisition opportunities, whether the content is informational, educational, or entertainment. On October 8, 2009, the Company completed its first acquisition in the legal vertical market through the purchase of the assets and assumption of certain liabilities of LegalStore.com. LegalStore.com is an internet based company that primarily sells legal supplies and legal forms.

On March 13, 2013, the Company entered into a stock sale agreement (“Agreement”) dated March 8, 2013 with Western Principal Partners LLC (“WPP”), a California Limited Liability Company. Pursuant to the Agreement, WPP purchased from the Company all the outstanding capital stock of the Company’s wholly-owned subsidiary, LegalStore.com, a Delaware Corporation. LegalStore.com was operating the Company’s e-commerce business. The Agreement was approved by a written consent by the majority of the Company's stockholders. In consideration of the sale, WPP paid the Company $95,000 at close and assumed certain operating liabilities. Operating liabilities included, but were not limited to existing operating agreements, trade payables and certain tax obligations. At December 31, 2012, the fair value of consideration received for the stock of LegalStore.com was less than the carrying value of the assets. As a result, an impairment charge was recorded on December 31, 2012 in the amount of $35,000, net of income tax effect.

In 2011, the Company test marketed its new service named SimplyProspects.com, an auction-based Internet application that provides a marketplace for businesses seeking to find new clients. SimplyProspects.com was released in July 2011 as part of a six-month beta program. At the end of this six-month period, in December 2011, the Company, based on the feedback obtained during the beta program, decided it needed to further develop the service prior to releasing the service into production. However, the Company needs additional financing to have this service available for commercial use. Due to the uncertainty in commercial launch of SimplyPospects.com service, the Company wrote off all the software developments costs during the year ended December 31, 2012.

The accompanying consolidated financial statements have been prepared on a going concern basis. As shown in the accompanying consolidated financial statements, the Company has incurred accumulated losses totaling $1,563,152, has a stockholders’ deficiency of $660,162 and has a working capital deficit of $660,162 at June 30, 2013. These factors, among others, indicate that there is substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

To fund the Company’s operations for the next 12 months, to allow the Company to continue the development of its business plans and satisfy its obligations on a timely basis the Company needs to raise additional financing. Should additional financing not be available, the Company will have to negotiate with its lenders to extend the repayment dates of its indebtedness. There can be no assurance, however, that the Company will be able to successfully restructure its debt obligations in the event it fails to obtain additional financing.

Management's plans in this regard include, but are not limited to, current discussions and negotiations for a merger with another entity. The Company believes that such a transaction will provide it with business operations and also necessary working capital. In addition, the Company is also in discussion for raising additional financing to execute on some of its current business plans. The Company does not have a definitive agreement and there is no assurance that such a transaction will ever be consummated and that the Company will be successful in completing a transaction that will provide the financing. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Bass of Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, these statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions.

Fair Value of Financial Instruments - Financial instruments include cash, accounts receivable, accounts payable, accrued expenses, revolving note from related party and notes payable. Except for notes payable, fair values were assumed to approximate carrying values for these financial instruments, since they are short term in nature or they are receivable or payable on demand. The fair value of the revolving note from related party approximates the carrying value of the obligations based on these instruments bearing interest at variable rates consistent with the current rates available to the Company. Notes payable to third parties are measured at their fair value at each reporting period (see Note 4).

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. The Fair Value Measurement Topic of the FASB Accounting Standards Coded (“ASC") 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

Earnings Per Common Share - The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss year, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive. During the six months ended June 30, 3013, the Company recorded $23,013 ($17,412 - 2012) of income from discontinued operations, which yields a de minimis amount of earnings per share on a dilutive basis.

As of June 30, 2013, there were approximately 47,000,000 (20,000,000 - June 30, 2012) shares potentially issuable under convertible debt agreements, options and warrants that could dilute basic earnings per share in the future that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses during the period.

On March 13, 2013, the Company entered into a stock sale agreement (“Agreement”) dated March 8, 2013 with Western Principal Partners LLC (“WPP”), a California Limited Liability Company. Pursuant to the Agreement, WPP purchased from the Company all the outstanding capital stock of the Company’s wholly-owned subsidiary, LegalStore.com, a Delaware Corporation. LegalStore.com was operating the Company’s e-commerce business. The Agreement was approved by a written consent by the majority of the Company's stockholders. In consideration of the sale, WPP paid the Company $95,000 at close and assumed certain operating liabilities. Operating liabilities included, but are not limited to existing operating agreements, trade payables and certain tax obligations. At December 31, 2012, the fair value of consideration received for the stock of LegalStore.com was less than the carrying value of the assets. As a result, an impairment charge was recorded on December 31, 2012 in the amount of $35,000, net of income tax effect. The Company used the proceeds for payment of its payables and for working capital purposes.

As a result of the board of directors committing to a plan to sell LegalStore.com prior to December 31, 2012, the related assets and liabilities are considered to be held for sale and are presented as discontinued operations on the balance sheets as December 31, 2012. In accordance with ASC 205-20 “Discontinued Operations” the Company has presented the results of LegalStore.com operations as discontinued operations in the accompanying statements of operations and statements of cash flows as of and for the three months ended March 31, 2013 and 2012.

	December 31,
	2012

Cash	$	379
Accounts receivable, net		26,641
Inventory		89,440
Current assets of discontinued operations	$	116,460

Property and equipment, net	$	1,532
Other intangibles, net		97,560
Non current assets of discontinued operations	$	99,092

Accounts payable	$	92,684
Accrued expenses		64,228
Current liabilities of discontinued operations	$	156,912

During 2011, the Company issued three Convertible Promissory Notes (“Note”) in the aggregate principal amount of $117,500. The Notes, which were due on various dates between May and September 2012, bear interest at the rate of 8% per annum, with a provision for additional interest under certain circumstances, are unsecured and are convertible into shares of the Company's common stock at the election of lender at any time after 180 days from the date of the Note issuance at a conversion price equal to a 41% discount (for two Notes) or 42% discount (for one Note) to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The conversion price is subject to certain anti-dilution protection; for example, if the Company issues shares for a consideration less than the applicable conversion price, the conversion price is reduced to such amount. The lender agreed to restrict its ability to convert the Note and receive shares of the Company if the number of shares of common stock beneficially held by the lender and its affiliates in the aggregate after such conversion exceeds 4.99% of the then outstanding shares of common stock. However, this limitation does not preclude the holder from converting notes payable into common stock after selling shares owned into the market.

Subsequent to June 30, 2013, the lender elected to partially convert another Note in the original principal amount of $11,000 into shares of the Company stock and was issued an aggregate of 10,232,761 shares of common stock by the Company pursuant to the terms of the Note. The fair value of the debt converted was approximately $38,000 as of June 30, 2013 and the date of conversion. The holder also converted a portion of accrued interest into 41,667 shares.

On November 7, 2012, the Company received a demand notice requesting payment for the Default Sum owed together with all unpaid interest. If the Company fails to comply with this demand notice within five days from receipt of the demand notice the investor may exercise the rights under the convertible promissory notes. This includes, but is not limited to, conversion of the Default Sum owed into equity as provided for in the convertible promissory notes or bringing an action against the Company for all amounts due under the convertible promissory notes.

As of June 30, 2013, the outstanding original principal of the two remaining Notes amounted to $72,500 ($109,500 - three notes at December 31, 2012). The convertible promissory notes have become due and payable along with any unpaid interest on various dates between May and September 2012. The aggregate outstanding principal, plus unpaid interest, was not paid on the maturity dates. As a result, the outstanding convertible promissory notes are considered to be in default and therefore, due and payable in an amount equal to the Default Sum as defined in the agreement. The Default Sum is equal to 150% of the sum of the unpaid principal, unpaid interest and unpaid default interest, which amounted to approximately $140,000 in aggregate as of June 30, 2013 ($193,954 - December 31, 2012). Further, the default interest rate for the outstanding convertible notes during the default period has increased to 22%.

As of June 30, 2013, based on the average of the three lowest stock prices for the last ten days preceding June 30, 2013, the maximum number of common shares the Notes and accrued interest could be converted into is approximately 42,000,000 shares (31,000,000 - December 31, 2012). When taking account the 4.99% limitation on ownership as of June 30, 2013, the number of shares the holder could covert to at one time is 1,982,758 shares (1,229,431 - December 31, 2012). An increase in the Company's stock price will result in a decreased number of shares the Company would be obligated to issue.

Under ASC 480, Distinguishing Liabilities from Equity, the Company determined the notes payable are liabilities reported at fair value because the notes payable will be convertible into a variable number of common shares at fixed monetary amount, known at inception. The notes payable are to be subsequently measured at fair value at each reporting period, with changes in fair value being recognized in earnings. The fair value of the notes payable is measured by calculating possible outcomes of conversion to common shares and repayment of the notes payable, then weighting the probability of each possible outcome according to management’s estimates. Management has determined that the most likely outcome will be conversion at the default sum and the fair value of the notes payable is equal to the estimated fair value of equity securities the Company will issue upon conversion. The fair value measurement is classified as a Level 3 in the valuation hierarchy. The following table is a roll forward of the notes payable fair value:

The Company has a revolving credit agreement with Mr. Raymond Meyers, a shareholder and chief executive officer of the Company. As effectively amended on September 30, 2012, this credit agreement is in the amount of $282,000, and as further amended on April 3, 2013 and August 6, 2013, this credit agreement now has a maturity date of September 30, 2013. The outstanding balance on the credit agreement bears interest at an annual rate of 6% above one year LIBOR (6.7% as of June 30, 2013), and is secured by all of the assets of the Company. For the three months ended June 30, 2013 and 2012, interest expense under this note amounted to $4,666 and $4,399, respectively. For the six months ended June 30, 2013 and 2012, interest expense under this note amounted to $9,537 and $8,346, respectively. As of June 30, 2013, accrued interest amounted to $48,649 ($39,112 - December 31, 2012), which is included in accrued expenses in the accompanying balance sheet. As of June 30, 2013 the revolving credit line had an outstanding balance of $267,401 ($281,228 - December 31, 2012). Under the terms of the agreement the Company is required to comply with various covenants. In the event of default and upon the expiration of any applicable cure period, Mr. Meyers, in his sole discretion may request repayment in the form of newly issued common stock of the Company. As of June 30, 2013, the Company was in default of the credit agreement due to a failure to pay interest when due. Mr. Meyers has waived this default through the maturity date.

In June 2013, the Company received $50,000 cash in advance of a bridge financing arrangement intended to provide the Company financing to execute a business combination transaction. The financing arrangement anticipates that the Company will enter into a merger agreement and the financing terms are expected to include contingent conversion features, as well as detachable warrants. However, terms of the financing arrangement have not been finalized and as of the date of this filing, no executed definitive agreement is in place for either a merger or the financing arrangement.

Certain statements contained herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Reform Act”). Internet Media Services, Inc. desires to avail itself of certain “safe harbor” provisions of the 1995 Reform Act and is therefore including this special note to enable us to do so. Except for the historical information contained herein, this report contains forward-looking statements (identified by the words "estimate," "project," "anticipate," "plan," "expect," "intend," "believe," "hope," "strategy" and similar expressions), which are based on our current expectations and speak only as of the date made. These forward-looking statements are subject to various risks, uncertainties and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements, including, without limitation, those discussed under Part I, Item 1A “Risk Factors” in this Annual Report, and those described herein that could cause actual results to differ materially from the results anticipated in the forward-looking statements, and the following:

●	Our limited operating history with our business model.
●	The low cash balance and limited financing currently available to us. We may in the near future have a number of obligations that we will be unable to meet without generating additional income or raising additional capital.
●	Further cost reductions or curtailment in future operations due to our low cash balance and negative cash flow
●	Our ability to effect a financing transaction to fund our operations which could adversely affect the value of our stock.
●	Our limited cash resources may not be sufficient to fund continuing losses from operations.

We were incorporated in March 2007 as a Delaware corporation and refer to ourself herein as “we”, “us”, the “Company” or “IMS.” We conduct our operations in Santa Monica, California and through March 13, 2013 used an independent warehouse and product fulfillment center in Western New York state. Our corporate office is located at 1507 7th Street, #425, Santa Monica, CA 90401 and our telephone number is (800) 467-1496. Our corporate website address is www.internetmediaservices.com. Information contained on our websites is not a part of this annual report.

Through March 13, 2013, we were primarily focused on creating, acquiring and partnering with companies with customer acquisition- customer relationship management solutions; however, we are also interested in information technology / content acquisition opportunities -- whether the content is informational, educational, or entertaining. On October 8, 2009, we completed our first acquisition in the legal vertical market through the purchase of the assets and assumption of certain liabilities of LegalStore.com. LegalStore.com is an Internet based company that primarily sells legal supplies and legal forms. Our business plan was to leverage this acquisition with the creation and development of SimplyProspects.com -- a proprietary “auction-based marketplace” that could revolutionize the lead-sale industry in the legal field, and in numerous other key niche markets, including: elective medical; home reconstruction; health and medicine; leisure and travel; et al.

SimplyProspects.com was released in July 2011 as part of a six-month beta program. At the end of this six-month period in December 2011, we, based on the feedback obtained during the beta program, decided to further develop the service during 2012 prior to releasing the service into production. In 2012, we were unsuccessful in raising investment capital to launch the service and, at this time, we are uncertain about raising sufficient investment capital to support the national release and operational needs of the service and have suspended our pursuit of SimplyProspects.com until we have sufficient funds to continue development.

On March 13, 2013, the Company entered into a stock sale agreement (“Agreement”) dated March 8, 2013 with Western Principal Partners LLC (“WPP”), a California Limited Liability Company. Pursuant to the Agreement, WPP purchased from the Company all the outstanding capital stock of the Company’s wholly-owned subsidiary, LegalStore.com, a Delaware Corporation. LegalStore.com was operating the Company’s e-commerce business. The Agreement was approved by a written consent by the majority of the Company's stockholders. In consideration of the sale, WPP paid the Company $95,000 at close and assumed certain operating liabilities. Operating liabilities included, but are not limited to existing operating agreements, trade payables and certain tax obligations. At December 31, 2012, the fair value of consideration received for the stock of LegalStore.com was less than the carrying value of the assets. As a result, an impairment charge was recorded on December 31, 2012 in the amount of $35,000, net of income tax effect. The Company used the proceeds for payment of its payables and for working capital purposes.

After the sale of LegalStore.com and the suspension of SimplyProspects.com, the Company does not have any operations. The Company intends to explore strategic alternatives including a merger with another entity. Currently, the Company does not have any agreement or understanding with any entity and there is no assurance that such a transaction will ever be consummated.

During the three months ended June 30, 2013, we incurred general and administrative expenses of $103,115 compared to $61,575 incurred during the three months ended June 30, 2012. Our general and administrative expenses during the three months June 30, 2013 increased by $41,540 or 67.5% from the comparable period in 2012. The increase was principally due to executive salaries of $45,000 mainly accrued during the three months ended June 30, 2013. During the six months ended June 30, 2013, we incurred general and administrative expenses of $178,991 compared to $127,909 incurred during the six months ended June 30, 2012. Our general and administrative expenses during the six months June 30, 2013 increased by $51,082 or 39.9% from the comparable period in 2012. The increase was principally due to executive salaries of $90,000 mainly accrued during the six months ended June 30, 2013. Our executives did not receive salaries during 2012. This increase was offset by a decrease in other administrative expenses that primarily related to SimplyProspects.com.

Interest expense for the three months ended June 30, 2013 increased by $1,633 or 20.4% compared to interest expense incurred during the three months ended June 30, 2012. Interest expense for the six months ended June 30, 2013 increased by $5,207 or 34.7% compared to our interest expense incurred during the six months ended June 30, 2012. The increases were due to the increased levels of borrowings outstanding during 2013 and due to higher interest rates resulting from defaults of convertible promissory notes. During the three and six months ended June 30, 2012, we also incurred a loss of $101,063 and $105,009, respectively, associated with the change in the fair value of our convertible promissory notes. There was no change in the fair value of outstanding notes during the three and six months ended June 30, 2013.

During the three months ended June 30, 2013, we did not have our income from discontinued operations compared to $9,685 during the three months ended June 30, 2012. During the six months ended June 30, 2013, our income from discontinued operations was $23,013, including a gain from disposal of discontinued operations $3,839, compared to an income of $17,412 in 2012. We do not anticipate income from discontinued operations in future periods.

At June 30, 2013, we had a working capital deficiency of $660,162 compared to working capital deficiency of $690,649 at December 31, 2012. The decrease in working capital deficiency was due to sale proceeds received from the sale of LegalStore.com and the elimination of working capital deficiency of LegalStore.com upon its sale. During the six months ended June 30, 2013, our operating activities from continuing operations used cash of approximately $96,000 compared to approximately $114,000 used during the six months ended June 30, 2012.

During the six months ended June 30, 2013, our operating losses from continuing operations, after adjusting for non-cash items, utilized approximately $187,000 of cash, and working capital items provided approximately $91,000 of cash. The principal component of these working capital changes was an increase in our accounts payable and accrued expenses. During the six months ended June 30, 2012, our operating losses from continuing operation, after adjusting for non-cash items, utilized approximately $130,000 of cash, and working capital items provided approximately $16,000 of cash.

In March 2013, we sold LegalStore.com and received $95,000 ($74,000 net of brokerage fees) cash at close and transferred to the buyer certain operating liabilities. After the sale, we do not have any operations. We intend to explore strategic alternatives including a merger with another entity. Currently, we do not have any agreement with any entity and there is no assurance that such a transaction will ever be consummated.

The accompanying consolidated financial statements have been prepared on a going concern basis. As shown in the accompanying consolidated financial statements, we had incurred accumulated losses totaling $1,563,152, had a stockholders’ deficiency of $660,162 and had a working capital deficit of $660,162 at June 30, 2013. These factors, among others, indicate that there is substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

To allow us to continue the development of our business plans and satisfy obligations on a timely basis, we will need to raise additional financing to fund our operations for the next 12 months. Should additional financing not be available, we will have to negotiate with our lenders to extend the repayment dates of its indebtedness. There can be no assurance, however, that we will be able to successfully restructure our debt obligations in the event we fail to obtain additional financing.

Management's plans in this regard include, but are not limited to, current discussions and negotiations for a merger with another entity. We believe that such a transaction will provide it with business operations and also necessary working capital. In addition, we are also in discussions for raising additional financing to execute on some of our current business plans. As of June 30, 2013, we received a cash advance on bridge financing; however, we have not executed a financing agreement. Further, we do not have a definitive agreement and there is no assurance that such a transaction will ever be consummated and that we will be successful in completing a transaction that will provide the financing. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s chief executive officer also acting as chief financial officer , as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our chief executive officer, also acting as chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2013. Based on this evaluation, management concluded that, as of such date, that our disclosure controls and procedures were not effective and that material weaknesses exists in our internal control over financial reporting. The material weaknesses consist of an insufficient complement of qualified accounting personnel and controls associated with segregation of duties and ineffective controls associated with identifying and accounting for complex and non-routine transactions in accordance with U.S. generally accepted accounting principles. To address the material weaknesses we performed additional analyses and other post-closing procedures and retained the services of a consultant to ensure that our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Notwithstanding these material weaknesses, management believes that the financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, result of operations and cash flows for the periods presented.

The Company did not have the resources to satisfy the demand notice and defaulted on three convertible promissory notes maturing on May 29, 2012, July 5, 2012 and September 5, 2012. The Company has repaid one of the notes through conversion to equity. At the time of this filing, the principal amount due on the two notes at the default rate, plus accrued interest at the default rate, aggregated to $120,856. Further, the default interest rate during the default period has increased to 22%.

Delaware	22-3956444
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if smaller reporting company)	Smaller reporting company x


Net cash proceeds after brokerage fee of $21,000	$	74,000
LegalStore.com liabilities assumed		136,241
Total purchase price		210,241

LegalStore.com assets		206,402
Gain on sale	$	3,839

Fair value at December 31, 2012	$	280,034
Adjustment for conversion		(94,068	)
Fair value at June 30, 2013	$	185,966

			Exercise
	Warrants		Price		Expiration
2011 Common share private placement warrants		2,500,000	$	0.30	March 2018
2011 Convertible Notes warrants		16,667	$	0.30	June 2014
2012 Private Placements warrants		150,000	$	0.15	March - April 2015
		2,666,667

	For the three months ended
	June 30,		June 30,
	2013		2012

Revenue	$	-	$	123,855
Costs of revenue		-		63,394
Gross profit		-		60,461
Operating expenses:
Selling, general and administrative		-		50,776
Income from discontinued operations	$	-	$	9,685

	For the six months ended
	June 30,		June 30,
	2013		2012

Revenue	$	95,241	$	259,717
Costs of revenue		40,535		134,283
Gross profit		54,706		125,434
Operating expenses:
Selling, general and administrative		35,532		108,022
Income from discontinued operations		19,174		17,412
Gain on disposal of discontinued operations		3,839		-
	$	23,013	$	17,412

31.1	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14(a) and15d-14(a) (filed herewith.)
32.1	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. 1350 (furnished herewith.)

	INTERNET MEDIA SERVICES, INC.


Dated: August 14, 2013	By: /s/ Raymond Meyers
	Raymond Meyers Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)