AMERICAN BATTERY MATERIALS, INC. - Quarter Report: 2011 June (Form 10-Q)

internet10q063011.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 June 30, 2011

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

For the transition period from ________ to __________

Commission File Number: 000-52635

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.)

1434 6th STREET,

UNIT 9

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 o 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 23,821,000 as of August 12, 2011.

INTERNET MEDIA SERVICES, INC.

INDEX

		Page

PART I - FINANCIAL INFORMATION:

Item 1.	Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statement of Operations	4
	Consolidated Statement of Cash Flows	5
	Notes to Interim Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8

Item 4.	Controls and Procedures	11

PART II - OTHER INFORMATION:

Item 6.	Exhibits	13

SIGNATURES		14

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

INTERNET MEDIA SERVICES, INC.
CONSOLIDATED BALANCE SHEETS

	As of

	June 30, 2011			December 31, 2010
ASSETS	(Unaudited)

Current assets:
Cash	$	100,050		$	21,372
Accounts receivable		30,692			23,448
Inventory		129,310			134,174
Prepaid expenses and other		24,214			3,865
Total current assets		284,266			182,859

Property and equipment, net		2,844			3,281

Other intangibles, net		155,250			148,750

Goodwill		19,417			19,417

Other assets		2,000			2,450

Total assets	$	463,777		$	356,757

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	61,223		$	68,262
Accrued expenses		60,305			34,850
Revolving note from related party		212,768			-
Total current liabilities		334,296			103,112

Long-term revolving note from related party		-			202,185

Commitments and contingencies		-			-

Stockholders' equity
Common stock, $.001 par value, 100,000,000 shares
authorized, 23,821,000 shares issued and outstanding
(21,321,000 - December 31, 2010)		23,821			21,321
Additional paid-in capital		671,180			423,680
Accumulated deficit		(565,520	)		(393,541	)
Total stockholders' equity		129,481			51,460

Total liabilities and stockholders' equity	$	463,777		$	356,757

See accompanying notes.

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INTERNET MEDIA SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010

Revenue	$	136,698		$	134,075		$	276,924		$	283,748

Costs of revenue		56,926			62,083			134,487			134,572

Gross profit		79,772			71,992			142,437			149,176

Operating expenses:
General and administrative:
Salaries and benefits		81,272			46,848			138,928			101,760
Professional fees		11,781			37,166			34,194			69,568
Other		36,584			31,158			82,471			70,605
		129,637			115,172			255,593			241,933
Selling and marketing		25,471			26,566			51,603			51,150
		155,108			141,738			307,196			293,083

Operating loss		(75,336	)		(69,746	)		(164,759	)		(143,907	)

Other expenses:
Interest expense - related party		3,613			1,371			7,220			1,371

Net loss	$	(78,949	)	$	(71,117	)	$	(171,979	)	$	(145,278	)

Loss per share - basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)

Weighted average common shares
outstanding - basic and diluted		23,821,000			20,501,000			22,765,444			20,501,000

See accompanying notes.

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INTERNET MEDIA SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)


	Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010
Cash flows from operating activities:
Net loss	$	(171,979	)	$	(145,278	)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization		8,937			11,478
(Increase) decrease in assets:
Accounts receivable		(7,244	)		7,144
Inventory		4,864			(10,285	)
Prepaid expenses and other assets		(19,899	)		1,080
Increase in liabilities:
Accounts payable and accrued expenses		18,416			41,627
Net cash used by operating activities		(166,905	)		(94,234	)

Cash flows from investing activities:
Purchase of software development costs		(15,000	)		-
Net cash used by investing activities		(15,000	)		-

Cash flows from financing activities:
Proceeds from sale of common stock		250,000			-
Net borrowings from related party		10,583			86,457
Net cash provided by financing activities		260,583			86,457

Net increase (decrease) in cash		78,678			(7,777	)

Cash - beginning of period		21,372			7,777

Cash - end of period	$	100,050		$	-


Cash paid for :
Interest	$	-		$	-

Income taxes	$	1,999		$	-

See accompanying notes.

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INTERNET MEDIA SERVICES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. - BASIS 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 Internet Media Services, Inc. (the “Company”) accounting policies, refer to the audited consolidated financial statements and footnotes thereto for the fiscal year ended December 31, 2010 included in the Company’s 10-K annual report filed with the SEC on March 29, 2011.

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 - Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2011. The carrying amounts reported in the balance sheet as of June 30, 2011 of cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of revolving note from related party approximates the carrying value as the stated or discounted rates of the debt reflect recent market conditions.

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.

As of June 30, 2011 there were 2,500,000 of shares potentially issuable under a warrant agreement 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 in the respective periods. There were no dilutive or potentially dilutive instruments outstanding as of June 30, 2010.

Reclassifications - Certain prior period amounts in the accompanying consolidated financial statements have been reclassified to current period presentation. These classifications had no effect on the results of operations or cash flows for the periods presented.

NOTE 2. – 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. This credit agreement is in the amount of $225,000 and expires on April 8, 2012. The outstanding balance on the credit agreement bears interest at an annual rate of 6% above LIBOR (6.73% as of June 30, 2011), and is secured by all of the assets of the Company. As of June 30, 2011, the revolving credit line had outstanding balance of $212,768 ($202,185 - December 31, 2010). 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. Under the terms of the agreement the Company is required to comply with various covenants. As of June 30, 2011, the Company was in default of the credit agreement due to a failure to pay interest when due. As of June 30, 2011, accrued interest amounted to $13,938 ($7,306 - December 31, 2010). Mr. Meyers has waived this default through the maturity date.

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NOTE 3. – STOCKHOLDERS’ EQUITY

On February 25, 2011, the Company received a notice of clearance letter to have its stock listed on the OTC Bulletin Board pursuant to FINRA Rule 6432 and Rule 15c2-11 under the Securities and Exchange act of 1934. The Company was assigned the stock ticker symbol “ITMV”.

On March 17, 2011, the Company entered into a subscription agreement with one (1) accredited investor. Under this subscription agreement, the Company issued a total of 2,500,000 shares of common stock and a seven year (7) warrant to purchase 2,500,000 shares of stock at an exercise price of $.30 in consideration of $250,000 in cash.

NOTE 4. – SUBSEQUENT EVENTS

On June 27, 2011, the Company entered into an agreement with an investment bank to raise funds through a financing transaction. Beginning, July 2011, the Company will pay a monthly engagement fee of $6,000 to the investment bank for a period of four months, and on a month to month basis after the initial four months. All engagement fees paid by the Company will be deducted from the financing transaction cash fee of 6% of the total consideration. The Company will also issue a warrant equal to 5% of the securities issued in a financing transaction. The warrant will be immediately exercisable for a period of five years and convertible into the same securities issued in the financing transaction.

On July 1, 2011, the Company released its new service named SimplyProspects.com, an auction-based Internet application that provides a marketplace for businesses seeking to find new clients. The service is currently servicing the legal marketplace, however the Company expects to expand to marketplace to service additional verticals (contractors, elective medical, insurance, etc.) in coming months.

On July 18, 2011, the Company entered into a 12 month lease, effective August 1, 2011, for approximately 1,500 square feet of additional office space in Santa Monica, CA, at a monthly rate of $3,350 per month. The Company currently leases 1,000 square feet in Santa Monica, CA, on a month-to-month lease at a rate of $2,000 per month.

On July 22, 2011, the Board of Directors of the Company approved the Company’s 2011 Equity Incentive Plan (the “Plan”) and on July 26, 2011, shareholders holding a majority of shares of the Company approved, by written consent, the Plan. Also on July 22, 2011, the Company issued 2,950,000 options under the Plan to eleven employees, directors and outside consultants. The options vest equally over three years, with terms ranging from five years to ten years, and exercise prices ranging from $.10 to $.30.

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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 contained in our annual report as filed on Form 10-K dated March 29, 2011 as filed with the Securities and Exchange Commission, 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 failure of our products and services to achieve market acceptance.

· The inability to compete in our market, especially against established industry competitors with greater market presence and financial resources.

General

Internet Media Services, Inc. (referred to in this report as “Internet Media,” “IMS,” “we,” “us,” “our” or “Company”) is an Internet media company that acquires, builds, markets, and monetizes branded Web-based businesses. We are building our business around the identification, evaluation and cost-effective acquisition of under-valued Websites. We primarily seek to acquire Web businesses that serve the small and mid-sized businesses since we feel that market segment offers the best opportunity for cost-effective revenue growth. We operate our branded Websites within discrete vertical business channels allowing us to utilize cross-promotion marketing activities between our Websites within a channel.

We believe our Company has progressed beyond the development stage but that our limited revenue causes us to consider our operations to be in an earlier stage of development. We did not have any operations until our first acquisition in October, 2009 when we acquired our first Web-based business that fit our criteria, LegalStore.com. LegalStore.com offers legal supplies, legal forms, and related legal products to the professional community. On July 1, 2011 we released our second commerce website, SimplyProspects.com, an auction-based Internet application that provides a marketplace for businesses seeking to find new clients. We continue to look for acquisitions of other under-valued Web-based businesses, both within the Legal channel and outside of that channel.

Results of Operations

For the Three and Six Months Ended June 30, 2011 Compared to the Three and Six Months Ended June 30, 2010

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. The discussion should be read in conjunction with the financial statements and footnotes in this quarterly report and in our annual report on Form 10-K for the year ended December 31, 2010.

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Revenue

For the three months ended June 30, 2011, all revenue was derived from the sale of legal products through our web property, Legalstore.com. Revenue for this period totaled $136,698 versus $134,075 for the three month period ended June 30, 2010. This increase of revenue of $2,623 is primary due to a 5.7% increase in overall customer orders in the three month period ended June 30, 2011 and 2010. The average sale per order decreased approximately 3.1%, from $97 for the three month period ended June 30, 2010 to $94 for the three month period ended June 30, 2011. A customer order is defined as an order that has been shipped to the customer within the period. As we continue to market our products on a national level, we are attracting new customers that typically have a lower first sale average sale per order than established customers. We expect that as these new customers place subsequent orders the average sale per order will increase, thereby increasing overall revenue and overall average sale per order.

For the six months ended June 30, 2011, all revenue was derived from the sale of legal products through our web property, Legalstore.com. Revenue for this period totaled $276,924 versus $283,748 for the six month period ended June 30, 2010. This decrease of approximately 2.4% ($6,824) was due to a decrease in the average sale per order of 9.8%, from $102 for the six month period ended June 30, 2010 to $92 for the six month period ended June 30, 2011. However, overall customer orders increased 7.5% from 2,783 for the six month period ended June 30, 2010 to $2,993 for the period ended June 30, 2011.

Cost of Revenue and Gross Profit

Cost of revenue include supplies associated with the sale of products through our LegalStore.com website. For the three month period ended June 30, 2011, cost of revenue totaled $56,926 resulting in a gross profit of $79,772 or 58%. This compares to cost of revenue of $62,083 and gross profit of $71,992 or 54% for the three month period ended June 30, 2010. The majority of the increase in the gross profit was due to lower cost of revenue for our print orders as a result of our fourth quarter 2010 decision to outsource the print operations.

For the six month period ended June 30, 2011, cost of revenue totaled $134,487 resulting in a gross profit of $142,437 or 51%. This compares to cost of revenue of $134,572 and gross profit of $149,176 or 53% for the six month period ended June 30, 2010. This slight decrease in gross margin, from 53% to 51%, was primarily due lower sales in the first quarter of 2011.

Operating Expenses

General and Administrative

During the three month period ended June 30, 2011, we incurred general and administrative operating expenses of $129,637, an increase of $14,465 (13%) from the three month period ended June 30, 2010. Of this total, salaries and benefits were increased by $34,424 (73%) as a result of hiring several positions for our new offering SimplyProspects.com during the three month period ended June 30, 2011. We expect to incur higher salaries and benefits expense as we grow SimplyProspects.com and introduce other new product lines. We experienced a reduction of $25,385 (68%) in professional fees as a direct result of lower legal fees and accounting associated with our 2010 Securities and Exchange Commission filings. We had an increase of $5,426 in the Other category during the three month periods ended June 30, 2011 and 2010.

During the six month period ended June 30, 2011, we incurred general and administrative operating expenses of $255,593, an increase of $13,660 from the six month period ended June 30, 2010. Of this total salaries and benefits increased $37,168 (37%), professional fees decreased 35,374 (51%), and other expense increased $11,866 from the six month period ended June 30, 2011 and 2010. We expect an overall increase in general and administrative expenses in subsequent periods and we continue to execute our business plan.

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Selling and marketing

For the three month period ended June 30, 2011, selling and marketing expenses, consisting of search engine and web marketing expenses, credit card processing fees, and customer delivery fees totaled $25,471 for the period, an increase from $26,566 for the three months ended June 30, 2010. We anticipate search engine marketing expense associated with our LegalStore.com web property will remain at this level for the near future. However, we expect to incur higher search engine and web marketing expenses in the future associated with our new service SimplyProspects.com and as we introduce new product lines.

For the six month period ended June 30, 2011, selling and marketing expenses, consisting of search engine and web marketing expenses, credit card processing fees, and customer delivery fees were relatively flat compared to the six months ended June 30, 2010 (June 30, 2011 - $51,603, June 30, 2010 - $51,150). We expect an increase in selling and marketing fees in the future as we introduce new product lines.

Other Expenses

Interest expense for the period associated with our $225,000 revolving line of credit agreement with our CEO totaled $3,613 for the three month period ended June 30, 2011. For the three month period ended June 30, 2010 we incurred an expense $1,371. This increase of $2,242 was due to the increase in the amount borrowed from the revolving line of credit. We will continue to incur interest expenses associated with the revolving line of credit agreement until the line is paid off and retired.

Interest expense for the six month period ended June 30, 2011 associated with our $225,000 revolving line of credit agreement with our CEO totaled $7,220, an increase of $5,849 from the six month period ended June 30, 2010. This increase was due to the increase in the amount borrowed from the revolving line of credit. We will continue to incur interest expenses associated with the revolving line of credit agreement until the line is paid off and retired.

Net Loss

We had a net loss of $78,949 and $71,117 for the three month period ended June 30, 2011 and 2010, respectively. The increase in net loss of $7,832 was primarily a result of increased cost of revenue and general and administrative expenses, as outlined above.

For the six month period ended June 30, 2011 and 2010, we had a net loss of $171,979 and $145,278, respectively. The increase in net loss of $26,701 was primarily a result of increased cost of revenue and general and administrative expenses, as outlined above.

Liquidity and Capital Resources

At June 30, 2011, we had cash totaling $100,050, an increase of $78,678 from our $21,372 cash balance at December 31, 2010, accounts receivable of $30,692, an increase from $23,448 at December 31, 2010, inventory of $129,310, a decrease from $134,174 at December 31, 2010, and prepaid expenses and other of $24,214, an increase from $3,865 at December 31, 2010. This increase of $20,349 includes $14,469 of deferred financing costs associated with an expected third quarter 2011 fund raising effort. Current assets totaled $284,266, an increase from $182,859 at December 31, 2010. The increase in our cash position, current assets, and total assets was directly correlated with our March 2011 raise of $250,000 from one accredited investor.

At June 30, 2011, we had accounts payable of $61,223, a decrease from $68,262 at December 31, 2010, accrued expenses of $60,305, an increase from $34,850 at December 31, 2010, and revolving note from a related party balance of $212,768. As of December 31, 2010, the revolving note from a related party balance of $202,185 was considered long-term, therefore was not included in current liabilities. As of June 30, 2011, total current liabilities were $334,296, an increase from $103,112 from December 31, 2010.

At June 30, 2011, we had a working capital deficit of $50,030, a decrease from a working capital surplus of $79,747 at December 31, 2010.

In April, 2010, the Company entered in to a $200,000 revolving line of credit agreement with our chief executive officer. This credit agreement matured on April 8, 2011, with interest at an annual rate of 6% above LIBOR, and secured by all of our assets. On March 16, 2011, the line of credit agreement was increased to $225,000, effective December 31, 2010, and the term was extended for one additional year. The revolving line of credit agreement now matures on April 8, 2012. As of June 30, 2011, $212,768 is outstanding under this agreement leaving $12,232 available for future cash flow needs.

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For the first six months of 2011, we used $166,905 in operations. As of June 30, 2011, our available cash totaled $100,000. We believe we have the ability to fund our current 2011 operational requirements out of our available cash, cash generated from operations, and revolving line of credit. However, future events, including the continued expansion of our newly released service SimplyProspects.com, problems, delays, expenses and difficulties frequently encountered by similarly situated companies, as well as changes in economic, regulatory or competitive conditions, may lead to unforeseen expenditures that could have a material adverse effect on us and our plans. Therefore, in reviewing our operational plans and associated risks, we have determined it will be necessary to raise additional financing during the last six months of 2011. In July, we engaged an Investment Bank and entered into an investment banking agreement to assist us in this effort. No assurances can be given that we can obtain additional working capital through the sale of common stock or other securities, the issuance of indebtedness or otherwise or on terms acceptable to us. Further, no assurances can be given that any such equity financing will not result in a further substantial dilution to the existing stockholders or will be on terms satisfactory to us.

To facilitate our future growth through the acquisition or development of Internet web properties we may be required to raise substantial amounts of new financing in the form of additional equity investments, loan financings, or from strategic partnerships. There can be no assurance that we will be able to obtain additional financing on terms that are acceptable to us and at the time required by us, or at all. Further, any financing may cause dilution of the interests of our current stockholders. If we are unable to obtain additional equity or loan financing, our financial condition and results of operations will be materially adversely affected.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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, 2011. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on this evaluation, of our disclosure controls and procedures as of June 30, 2011, 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 to ensure 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.

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There can be no assurance, however, that our disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiary to disclose material information otherwise required to be set forth in our periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.

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 June 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

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.)

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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: August 12, 2011	By:	/s/ Raymond Meyers
		Raymond Meyers Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

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Exhibit Index


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.)

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