BLTH 10-Q Quarterly Report March 31, 2013

AMERICAN BATTERY MATERIALS, INC.

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10-Q 1 internetmedia10q033113.htm INTERNET MEDIA SERVICES, INC. FORM 10-Q FOR MARCH 31, 2013 internetmedia10q033113.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the transition period from ________ to __________

Commission File Number: 333-165972

INTERNET MEDIA SERVICES, INC.

(Exact name of registrant specified in charter)

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

1507 7th STREET,

#425

SANTA MONICA, CALIFORNIA 90401

(Address of principal executive offices)

(800) 467-1496

(Issuer's telephone number)

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 o

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

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if 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 o No x

The number of shares outstanding of the registrant’s Common Stock, $0.001 par value per share, was 34,615,937 as of May 10, 2013.

INTERNET MEDIA SERVICES, INC.

INDEX

		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	10

Item 4.	Controls and Procedures	13

PART II - OTHER INFORMATION:

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14

Item 3.	Defaults Upon Senior Securities	14

Item 4.	Mine Safety Disclosures	14

Item 6.	Exhibits	14

SIGNATURES		15


INTERNET MEDIA SERVICES, INC.

CONSOLIDATED BALANCE SHEETS
As of

	March 31,			December 31,
	2013			2012
	(Unaudited)
ASSETS

Current assets:
Cash	$	40,140		$	1,262
Prepaid expenses and other assets		10,576			10,169
Current assets of discontinued operations		-			116,460
Total current assets		50,716			127,891

Non-current assets of discontinued operations		-			99,092

Total assets	$	50,716		$	226,983


LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
Accounts payable	$	10,108		$	39,026
Accrued expenses		128,379			61,340
Notes payable		266,051			280,034
Revolving note from related party		281,228			281,228
Current liabilities of discontinued operations		-			156,912
Total current liabilities		685,766			818,540

Commitments and contingencies		-			-

Stockholders' deficiency
Common stock, $.001 par value, 100,000,000 shares
authorized, 25,808,106 shares issued and outstanding
(24,637,893 at December 31, 2012)		25,808			24,638
Additional paid-in capital		789,548			770,786
Accumulated deficit		(1,450,406	)		(1,386,981	)
Total stockholders' deficiency		(635,050	)		(591,557	)

Total liabilities and stockholders' deficiency	$	50,716		$	226,983

The accompanying notes are an integral part of the financial statements



INTERNET MEDIA SERVICES, INC.

CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)


	Three months ended			Three months ended
	March 31, 2013			March 31, 2012

Revenue	$	-		$	-

Costs of revenue		-			-

Gross loss		-			-

Operating expenses:
General and administrative		75,876			66,334

Operating loss		(75,876	)		(66,334	)

Other expenses:
Loss from change in fair value of notes payable		-			(3,946	)
Interest expense		(10,562	)		(6,988	)
		(10,562	)		(10,934	)

Loss before income taxes		(86,438	)		(77,268	)

Income tax provision		-			-

Loss from continuing operations		(86,438	)		(77,268	)

Discontinued operations
Gain from disposal of discontinued operations		3,839			-
Net income from discontinued operations		19,174			7,727
		23,013			7,727

Net loss	$	(63,425	)	$	(69,541	)

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

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

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

Weighted average common shares
outstanding - basic and diluted		25,535,056			23,938,797

The accompanying notes are an integral part of the financial statements

INTERNET MEDIA SERVICES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)


	Three months ended			Three months ended
	March 31, 2013			March 31, 2012
Cash flows from operating activities:
Net loss	$	(63,425	)	$	(69,541	)
Income from discontinued operations		(23,013	)		(7,727	)
Adjustments to reconcile net loss to net
cash used by operating activities:
Stock based compensation		5,949			6,949
Change in fair value of notes		-			3,946
(Increase) decrease in assets:
Prepaid expenses and other assets		(407	)		2,178
Increase in liabilities:
Accounts payable and accrued expenses		38,121			2,604
Net cash used by continuing operations		(42,775	)		(61,591	)
Net cash provided by discontinued operations		7,653			23,293
Net cash used by operating activities		(35,122	)		(38,298	)

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		-			5,000
Net borrowings from related party		-			32,734
Net cash provided by financing activities		-			37,734

Net increase (decrease) in cash		38,878			(564	)

Cash - beginning of period		1,262			808

Cash - end of period	$	40,140		$	244


Cash paid for :
Income taxes	$	600		$	3,800

Non-cash financing activities:
Note payable and accrued interest converted to shares of common stock	$	13,983		$	16,949

The accompanying notes are an integral part of the financial statements

INTERNET MEDIA SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. NATURE OF BUSINESS AND MANAGEMENT'S PLANS

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.

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 with any entity and there is no assurance that such a transaction will ever be consummated.

In accordance with ASC 205-20 “Discontinued Operations-Other Presentation Matters” results of LegalStore.com operations are presented as discontinued operations on the consolidated balance sheets, statements of operations and statements of cash flows.

Management's Plans - As discussed above, the Company sold LegalStore.com in 2013. After the sale, the Company does not have any operations. The Company intends to explore strategic alternatives including merger with another entity. Currently, the Company does 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, the Company has incurred accumulated losses totaling $1,450,406, has a stockholders’ deficiency of $635,050 and has a working capital deficit of $635,050 at March 31, 2013. These factors, among others, indicate that the Company may be unable 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 any agreement with any entity 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.

NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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.

In the opinion of management, the accompanying balance sheets and related interim statements of operations and cash flows include all adjustments, consisting only of normal recurring items necessary for their fair presentation in accordance with U.S. generally accepted accounting principles. All significant intercompany transactions have been eliminated.

Interim results are not necessarily indicative of results expected for a full year. For further information regarding the Company’s accounting policies, please refer to the audited consolidated financial statements and footnotes thereto for the fiscal year ended December 31, 2012 included in the Company’s 10-K annual report filed with the SEC on April 15, 2013.

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:

- Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

- Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

- Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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 three months ended March 31, 3013, the Company recorded $23,013 ($7,727 - 2012) of income from discontinued operations, which yields a de minimis amount of earnings per share on a dilutive basis.

As of March 31, 2013, there were 36,742,815 (10,443,894 - 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. Included in this amount are 31,416,148 (4,667,227 - 2012) shares that could be obtained by a third-party note holder, which are limited to 1,287,824 (1,208,078 - 2012) shares potentially issuable under convertible note agreements after considering the 4.99% ownership limitation (see Note 4). Given the limitation on ownership by the third-party notes holder, the total shares issuable that could dilute basic earnings per share as of March 31, 2013 are 6,614,491 (6,984,745 - 2012).

NOTE 3. DISCONTINUED OPERATIONS

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.

The following table presents information regarding calculation of gain from the sale of LegalStore.com:


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

The following table sets forth the carrying amounts of the major classes of assets and liabilities aggregated in discontinued operations in the consolidated balance sheet were as follows:

	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

Discontinued operations was as follows:

	For the three months ended
	March 31,		March 31,
	2013		2012

Revenue	$	95,241	$	135,862
Costs of revenue		40,535		70,889
Gross profit		54,706		64,973
Operating expenses:
Selling, general and administrative		35,532		57,246
Income from discontinued operations		19,174		7,727
Gain on disposal of discontinued operations		3,839		-
	$	23,013	$	7,727

NOTE 4. NOTES PAYABLE

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.

On March 2, 2012, the lender elected to partially convert one Note in the principal amount of $8,000 into shares of the Company stock and was issued 338,983 shares of common stock by the Company pursuant to the terms of the Note. The fair value of the note converted and shares issued was $16,949.

In January 2013, the lender elected to partially convert one Note in the principal amount of $5,500 into shares of the Company stock and was issued 1,170,213 shares of common stock by the Company pursuant to the terms of the Note. The fair value of the note converted was $13,983.

Subsequent to March 31, 2013, the lender elected to partially convert one Note in the aggregate principal amount of $35,900 into shares of the Company stock and was issued an aggregate of 8,807,831 shares of common stock by the Company pursuant to the terms of the Note. The fair value of the debt converted was approximately $61,000 as of March 31, 2013 and the date of conversion.

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 March 31, 2013, the outstanding principal of the three Notes amounted to $104,000 ($109,500 - December 31, 2012). The three 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 three 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 $196,991 in aggregate as of March 31, 2013 ($193,954 - December 31, 2012). Further, the default interest rate for the three convertible notes during the default period has increased to 22%.

The maximum number of common shares the Notes and accrued interest could be converted into based on 4.99% of the outstanding shares as of March 31, 2013 is 1,287,824 shares (1,229,431 - December 31, 2012). When not taking into account the 4.99% limit on the number of shares the holder may own, the three Notes and accrued interest could be convertible into 31,416,148 shares (31,377,758 - December 31, 2012), based on the average of the three lowest stock prices for the last ten days preceding March 31, 2013. 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:

Fair value at December 31, 2012	$	280,034
Adjustment for conversion		(13,983	)
Fair value at March 31, 2013	$	266,051

NOTE 5. REVOLVING NOTE FROM RELATED PARTY

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, this credit agreement now has a maturity date of June 30, 2013. The outstanding balance on the credit agreement bears interest at an annual rate of 6% above one year LIBOR (6.8% as of March 31, 2013), and is secured by all of the assets of the Company. For the three months ended March 31, 2013 and 2012, interest expense under this note amounted to $4,871 and $3,917, respectively. As of March 31, 2013, accrued interest amounted to $43,983 ($39,112 - December 31, 2012), which is included in accrued expenses in the accompanying balance sheet. As of March 31, 2013 the revolving credit line had an outstanding balance of $281,228 ($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 March 31, 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.

NOTE 6. STOCKHOLDERS’ DEFICIENCY

Outstanding warrant securities consist of the following at March 31, 2013:

			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

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

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.

The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our results of operations and financial condition and should be read in conjunction with the financial statements and footnotes that appear elsewhere in this report.

General

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 7 th 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.

Discontinued Operations

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.

Results of Operations

For the Three Months Ended March 31, 2013 Compared to the Three Months Ended March 31, 2012

Operating Expenses

General and Administrative

During the three months ended March 31, 2013, we incurred general and administrative expenses of $75,876 compared to $66,334 incurred during the three months ended March 31, 2012. Our general and administrative expenses during the three months March 31, 2013 increased by $9,542 or 14.5% from comparable period in 2012. The increase was principally due to executive salaries of $45,000 accrued during the three months ended March 31, 2013. Our executives did not receive salaries during 2012. This increase was offset by a decrease in professional fees due to the timing of our annual audit and other administrative expenses that primarily related to SimplyProspects.com.

Other Expenses

Interest expense for the three months ended March 31, 2013 increased by $3,574 or 51.1% compared to our interest expense incurred during the three months ended March 31, 2012. The increase was due to the increased levels of borrowings outstanding during 2013 and due to additional interest resulting from defaults of convertible promissory notes. During the three months ended March 31, 2012, we also incurred a loss of $3,946 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 months ended March 31, 2013.

Discontinued Operations

During the three months ended March 31, 2013, our income from discontinued operations was $23,013, including a gain from disposal of discontinued operations $3,839, compared to an income of $7,727 in 2012. We do not anticipate income from discontinued operations in future periods.

Net Loss

As a result of the foregoing, our net loss for the three months ended March 31, 2013 decreased by $6,116 or 8.8% to $63,425 compared to a net loss of $69,541 incurred in 2012.

Liquidity and Capital Resources

At March 31, 2013, we had a working capital deficiency of $635,050 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 three months ended March 31, 2013, our operating activities from continuing operations used cash of approximately $43,000 compared to approximately $62,000 used during the three months ended March 31, 2012.

During the three months ended March 31, 2013, our operating losses from continuing operations, after adjusting for non-cash items, utilized approximately $81,000 of cash, and working capital items provided approximately $38,000 of cash. The principal component of these working capital changes was an increase in our accounts payable and accrued expenses. During the three months ended March 31, 2012, our operating losses from continuing operation, after adjusting for non-cash items, utilized approximately $67,000 of cash, and working capital items provided approximately $5,000 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 $1,450,406, had a stockholders’ deficiency of $635,050 and had a working capital deficit of $635,050 at March 31, 2013. These factors, among others, indicate that we may be unable 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. We do not have any agreement with any entity 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.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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 March 31, 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.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

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

During January 2013 the Company issued 1,170,213 shares of common stock through the conversion of Convertible Promissory Note pursuant to the terms of the Convertible Promissory Note.

During April and May 2013 the Company issued 8,807,831 shares of common stock through the conversion of Convertible Promissory Note pursuant to the terms of the Convertible Promissory Note.

The shares of common stock to be issued in this transaction have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and were issued and sold in reliance upon the exemption from registration contained in Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

Item 3. Defaults Upon Senior Securities.

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. At the time of this filing, the principal amount due at the default rate, plus accrued interest at the default rate, aggregated to $166,183. Further, the default interest rate during the default period has increased to 22%.

Item 4. Mine Safety Disclosures

None.

Item 6. Exhibits

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.)

SIGNATURES

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

	INTERNET MEDIA SERVICES, INC.


Dated: May 15, 2013	By: /s/ Raymond Meyers
	Raymond Meyers Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

TABLE OF CONTENTS

Part I - Financial Information:Item 1. Financial Statements (unaudited)Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations 10 Item 4. Controls and Procedures 13 Part II - Other Information:Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds 14 Item 3. Defaults Upon Senior Securities 14 Item 4. Mine Safety Disclosures 14 Item 6. Exhibits 14 Note 1. Nature Of Business and Management's Plans Note 2. Basis Of Presentation and Significant Accounting Policies Note 3. Discontinued Operations Note 4. Notes Payable Note 5. Revolving Note From Related Party Note 6. Stockholders Deficiency Item 2 - Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 4. Controls and Procedures Part II - Other Information Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 6. Exhibits

BLTH 10-Q Quarter ended March 31, 2013