BOXSCORE BRANDS, INC. - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - BOXSCORE BRANDS, INC.	Financial_Report.xls
EX-32.1 - BOXSCORE BRANDS, INC.	ex32-1.htm
EX-31.1 - BOXSCORE BRANDS, INC.	ex31-1.htm
EX-10.16 - BOXSCORE BRANDS, INC.	ex10-16.htm
EX-10.18 - BOXSCORE BRANDS, INC.	ex10-18.htm
EX-10.17 - BOXSCORE BRANDS, INC.	ex10-17.htm
EX-10.15 - BOXSCORE BRANDS, INC.	ex10-15.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 September 30, 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 132,305,614 as of November 8, 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	13

Item 4.	Controls and Procedures	16

PART II - OTHER INFORMATION:

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17

Item 3.	Defaults Upon Senior Securities	17

Item 4.	Mine Safety Disclosures	17

Item 6.	Exhibits	17

SIGNATURES		18

INTERNET MEDIA SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

As of

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

Current assets:
Cash	$	33,434		$	1,262
Prepaid expenses and other assets		49,109			10,169
Current assets of discontinued operations		-			116,460
Total current assets		82,543			127,891

Deferred financing costs, net		10,833			-

Non-current assets of discontinued operations		-			99,092

Total assets	$	93,376		$	226,983

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
Accounts payable	$	17,021		$	39,026
Accrued expenses		211,115			61,340
Convertible notes payable		98,678			280,034
Revolving note from related party		181,016			281,228
Senior convertible notes, net of discount of $83,333		16,667			-
Note payable - director		50,000			-
Current liabilities of discontinued operations		-			156,912
Total current liabilities		574,497			818,540

Warrant liabilities		89,570			-

Commitments and contingencies (Note 8)		-			-

Stockholders' deficiency
Common stock, $.001 par value, 300,000,000 shares authorized, 107,444,654 shares issued and outstanding (24,637,893 at December 31, 2012)		107,445			24,638
Additional paid-in capital		985,803			770,786
Accumulated deficit		(1,663,939	)		(1,386,981	)
Total stockholders' deficiency		(570,691	)		(591,557	)

Total liabilities and stockholders' deficiency	$	93,376		$	226,983

The accompanying notes are an integral part of the financial statements

INTERNET MEDIA SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended			Three months ended			Nine months ended			Nine months ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012

Revenue	$	-		$	-		$	-		$	-

Costs of revenue		-			-			-			-

Gross loss		-			-			-			-

Operating expenses:
General and administrative		72,855			48,381			251,846			176,290

Operating loss		(72,855	)		(48,381	)		(251,846	)		(176,290	)

Other expenses:
Loss from change in fair value of notes payable		-			-			-			(105,009	)
Amortization of debt discount and deferred financing costs		(18,834	)		-			(18,834	)		-
Interest expense		(9,098	)		(11,960	)		(29,291	)		(26,946	)
		(27,932	)		(11,960	)		(48,125	)		(131,955	)

Loss before income taxes		(100,787	)		(60,341	)		(299,971	)		(308,245	)

Income tax provision		-			-			-			-

Loss from continuing operations		(100,787	)		(60,341	)		(299,971	)		(308,245	)

Discontinued operations:
Gain from disposal of discontinued operations		-			-			3,839			-
Net (loss) income from discontinued operations		-			(14,281	)		19,174			3,131
		-			(14,281	)		23,013			3,131

Net loss	$	(100,787	)	$	(74,622	)	$	(276,958	)	$	(305,114	)

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

Net (loss) 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	)	$	(0.00	)	$	(0.01	)	$	(0.01	)

Weighted average common shares outstanding - basic and diluted		59,091,710			24,402,620			39,617,780			24,217,418

The accompanying notes are an integral part of the financial statements

INTERNET MEDIA SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months ended			Nine months ended
	September 30, 2013			September 30, 2012
Cash flows from operating activities:
Net loss	$	(276,958	)	$	(305,114	)
Income from discontinued operations		(23,013	)		(3,131	)
Adjustments to reconcile net loss to net cash used by operating activities:
Stock based compensation		17,647			18,847
Change in fair value of notes payable		-			105,009
Amortization of debt discount and deferred financing costs		18,834			-
(Increase) decrease in assets:
Prepaid expenses and other assets		9,661			(1,566	)
Increase in liabilities:
Accounts payable and accrued expenses		129,570			27,244
Net cash used by continuing operations		(124,259	)		(158,711	)
Net cash provided by discontinued operations		7,653			86,515
Net cash used by operating activities		(116,606	)		(72,196	)

Cash flows from investing activities:
Advances related to a possible business combination		(48,601	)		-
Net proceeds from sale of LegalStore.com		74,000			-
Net cash provided by investing activities		25,399			-

Cash flows from financing activities:
Proceeds from sale of common stock		-			10,000
Proceeds from Senior Convertible Notes, net		87,000			-
Proceeds from note payable, director		50,000			-
Net (repayments) borrowings from related party		(13,621	)		63,159
Net cash provided by financing activities		123,379			73,159

Net increase in cash		32,172			963

Cash - beginning of period		1,262			808

Cash - end of period	$	33,434		$	1,771

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

Non-cash financing activities:
Note payable and accrued interest converted to shares of common stock	$	183,156		$	50,990
Related party borrowings repaid in shares of common stock	$	86,591		$	-
Debt discount related to warrant liability and beneficial conversion feature	$	100,000		$	-

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 a definitive agreement 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 a definitive agreement 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 $1,663,939, has a stockholders’ deficiency of $570,691 and has a working capital deficit of $491,954 at September 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 has an agreement with an Investor for $350,000 of debt financing pursuant to a Senior Convertible Note and has borrowed $100,000 out of this arrangement as of September 30, 2013. In October 2013, the Company borrowed another $50,000 from the Investor. The Company anticipates borrowing additional amounts under this agreement to fund its working capital requirements, however, there is no assurance that it be successful in borrowing such amount. 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, notes payable - director, convertible notes payable, senior convertible notes payable and warrant liabilities. Except for senior convertible and convertible notes payable and warrant liabilities, 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 and note payable - director approximate the carrying value of these obligations based on these instruments bearing interest at variable rates consistent with the current rates available to the Company. Convertible notes payable and derivative liabilities are measured at their fair value at each reporting period (see Note 4 and Note 6, respectively). As of September 30, 2013, the fair value of the senior convertible notes payable with a face amount of approximately $100,000 had an estimated fair value of approximately $10,000 based on the assumption the notes will not be repaid in cash, and instead were valued based on the amount of equity attainable through conversion to common stock in relation to the investment. Since the underlying assumptions in the fair value measurement are unobservable, the measurement constitutes as a Level 3 input.

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.

Debt Discounts - When a convertible feature of conventional convertible debt is issued, the embedded conversion feature is evaluated to determine if bifurcation and derivative treatment is required and whether there is a beneficial conversion feature. When the convertible debt provides for an effective rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). Prior to the determination of the BCF, the proceeds from the debt instrument were first allocated between the convertible debt and any embedded or detachable free standing instruments that were included (common stock warrants). The proceeds allocated to common stock warrants were recorded as a debt discount.

For the Convertible Notes, bifurcation of the embedded conversion feature was not required and the Company recorded the debt discount related to the common stock warrants and the BCF related to senior convertible notes as a debt discount and recorded the senior convertible notes net of the discount related to both the common stock warrants issued and the BCF. Debt discount is amortized to interest expense over the life of the debt. In the case of any conversion prior to the maturity date there will be an unamortized amount of debt discount that relates to such conversion. The pro rata amount of unamortized discount at the time of such conversion is charged to interest expense as accelerated amortization of the discount.

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 nine months ended September 30, 2013, the Company recorded $23,013 ($3,131 - 2012) of income from discontinued operations, which yields a de minimis amount of earnings per share on a dilutive basis.

As of September 30, 2013, there were approximately 465,000,000 (36,000,000 - September 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.

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 nine months ended September 30, 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 were as follows:

	Three Months Ended
	September 30,		September 30,
	2013		2012

Revenue	$	-	$	120,526
Cost of revenue		-		64,295

Gross Profit		-		56,231

Operating expenses:
Selling, general and administrative		-		70,512

Loss from discontinued operations	$	-	$	(14,281	)

	Nine Months Ended
	September 30,		September 30,
	2013		2012

Revenue	$	95,241	$	380,243
Cost of revenue		40,535		198,578

Gross Profit		54,706		181,665

Operating expenses:
Selling, general and administrative		35,532		178,534

Income from discontinued operations		19,174		3,131

Gain on disposal of discontinued operations		3,839		-
	$	23,013	$	3,131

NOTE 4. CONVERTIBLE 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. However, this limitation does not preclude the holder from converting notes payable into common stock after selling shares owned into the market.

During the nine months ended September 30, 2012, the lender elected to partially convert one Note in the original 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.

During the nine months ended September 30, 2013, the lender elected to convert one Note fully and another Note partially in the original principal amount of $71,333 and accrued interest of $1,800 into shares of the Company stock and was issued 46,546,165 shares of common stock by the Company pursuant to the terms of the Note. The fair value of the note converted was $181,356.

Subsequent to September 30, 2013, the lender elected to partially convert two Notes in the original principal amount of $13,373 into shares of the Company stock and was issued an aggregate of 23,432,388 shares of common stock by the Company pursuant to the terms of the Note. The fair value of the debt converted was approximately $35,000 as of September 30, 2013 and the date of conversion. The holder also converted a portion of accrued interest into 1,428,572 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 September 30, 2013, the outstanding original principal of the two remaining Notes amounted to $38,167 ($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 $104,000 in aggregate as of September 30, 2013 ($194,000 - December 31, 2012). Further, the default interest rate for the outstanding convertible notes during the default period has increased to 22%.

As of September 30, 2013, based on the average of the three lowest stock prices for the last ten days preceding September 30, 2013, the maximum number of common shares the Notes and accrued interest could be converted into is approximately 79,000,000 shares (31,000,000 - December 31, 2012). When taking account the 4.99% limitation on ownership as of September 30, 2013, the number of shares the holder could covert to at one time is 5,361,488 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:

Fair value at December 31, 2012	$	280,034
Adjustment for conversion		(181,356	)
Fair value at September 30, 2013	$	98,678

NOTE 5. RELATED PARTY TRANSACTIONS

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 November 5, 2013, this credit agreement now has a maturity date of December 31, 2013. The outstanding balance on the credit agreement bears interest at an annual rate of 6% above one year LIBOR (6.7% as of September 30, 2013), and is secured by all of the assets of the Company. 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.

In September 2013, Mr. Meyers requested repayment of $86,591 of the outstanding revolving credit line balance in newly issued common stock of the Company, which the Company’s Board of Directors unanimously approved. The terms of conversion were established and approved by the Company’s Board of Directors to be the average lowest bid price of the Company’s common stock for the prior ten business days, August 29 through September 12, 2013. On September 17, 2013, the repayment amount of $86,591 was converted to 36,260,596 shares of common stock.

As of September 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. As of September 30, 2013 the revolving credit line had an outstanding balance of $181,016 ($281,228 - December 31, 2012).

For the three months ended September 30, 2013 and 2012, interest expense under this note amounted to $4,456 and $4,641, respectively. For the nine months ended September 30, 2013 and 2012, interest expense under this note amounted to $13,993 and $12,987, respectively. As of September 30, 2013, accrued interest amounted to $53,105 ($39,112 - December 31, 2012), which is included in accrued expenses in the accompanying balance sheet.

Additionally, the Company has begun to record salary expense for Mr. Meyers in the amount of $15,000 per month. As of September 30, 2013, $109,110 of Mr. Meyers’ salary was unpaid and recorded as accrued expenses on the balance sheet. Mr. Meyers did not receive a salary in fiscal year 2012, and no amount was accrued as of December 31, 2012.

Note Payable - Director - On August 29, 2013, the Company borrowed from an individual who is a director of the Company, $50,000 pursuant to a promissory note. The promissory note matures in one year from the date of borrowing and bears interest at 8% per annum.

NOTE 6. SENIOR CONVERTIBLE NOTES

In August 2013, the Company entered into a Securities Purchase Agreement ("SPA") dated June 18, 2013 with Cobrador Multi-Strategy Partners, LP ("Investor") pursuant which the Investor will provide an aggregate of $350,000 financing through senior convertible notes and warrants. The financing and the related terms are dependent on several conditions including the Company's merger with another unaffiliated entity (see Note 8) and the Company effecting certain changes in its capital structure.

With each $50,000 tranche of financing, the Company issues the Investor a Senior Convertible Note for $50,000 (“Senior Note”), a Series A warrant and a Series B warrant (“Warrants”). The borrowing under the Senior Notes are for a term of one year and bear interest at 7% payable in cash or shares of the Company's common stock and provide for an increased in the rate of interest if there is a default as defined in the agreement. The Series A warrant is convertible into 75,000,000 shares of common stock at an exercise price of $0.001 and has a term to expiration of 15 months, and the Series B warrant is convertible into 75,000,000 shares of common stock at an exercise price of $0.0012 and has a term to expiration of 5 years.

The Investor can convert the outstanding principal amount into share of the Company's common stock at a conversion price of $0.001 per share, or 50,000,000 share of common stock for each $50,000 Senior Note issued. 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 Investor agreed to restrict its ability to convert the Senior Convertible 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. The warrants issued have a “down round provision” and therefore will be accounted for as derivatives, measured at fair value at each reporting date, and classified as liabilities on the balance sheet.

The Company completed two tranches of financing, on June 18, 2013 (advance made in June 2013, financing formalized in August 2013) and on August 21, 2013. In exchange of $87,000 net proceeds, the Company issued two $50,000 Senior Notes and two sets of Warrants to the Investor. As of September 30, 2013, the Senior Notes had a principal balance of $100,000 and Series A warrants outstanding to purchase 150,000,000 shares of common stock and Series B warrants outstanding to purchase 150,000,000 shares of common stock. As a result of the two financing transaction an issuance of related instruments, the Company does not have adequate share authorized to accommodate conversion or exercise of all outstanding equity instruments.

The Company allocated the $100,000 of proceeds received from the Senior Convertible Notes based on the computed fair values of the debt and warrants issued. The management valued the warrants at fair value of $89,570, representing additional debt discount and warrant liability. Accordingly, the resulting fair value allocated to the debt component of $10,430 was used to measure the intrinsic value of the embedded conversion option of the Senior Convertible Notes Debentures which resulted in a beneficial conversion feature of $10,430 recorded to additional paid-in capital. The value of the beneficial conversion feature was limited to the amount of the proceeds allocated to the debt component of the Senior Notes. The conversion feature was not considered to be a derivative because it does not have a net cash settlement provision as a result of the limited market and trading activity for the underlying stock. The aggregate amounts allocated to the warrants and beneficial conversion feature of $100,000 were recorded as a debt discount at the date of issuance and are being amortized over the respective term of each Senior Note. The initial carrying value was $0 after the debt discounts. During the three and nine months ended September 30, 2013, $16,667 of discount has been amortized and recorded as an expense resulting in a carrying value of $16,667 on the Senior Notes at September 30, 2013.

The fair value of the derivate warrant liabilities amounted to $89,750 upon issuance and as of September 30, 2013. The fair value of the Warrants were determined based on the consideration of the enterprise value of the Company, the limited market of the shares issuable under the agreement, and the proceeds received for the issuance of the instruments issued in the transaction with an unrelated party. Due to certain unobservable inputs used in the fair value calculation of the warrants, derivative warrant liabilities are classified as Level 3.

Financing costs of $13,000 paid or payable to third parties associated with the Senior Notes are included in other assets and amortized over the term of the respective debt.

The Company and the Investor have entered into a registration rights agreement covering the registration of common stock underlying the Senior Notes and the Warrants. This agreement imposes a 1% penalty per month after the registration deadline. Management will evaluate this obligation upon final funding of the note but does not expect the amount to be material.

In October 2013, the Company completed a third tranche of financing for net proceeds of $43,500. As a result the Company issued a Senior Note with a principal balance of $50,000, convertible at $0.001 per share, and a Series A warrant to purchase 75,000,000 shares of common stock and Series B warrant to purchase 75,000,000 share of common stock. All terms are consistent with previous financing transactions discussed above.

NOTE 7. STOCKHOLDERS’ DEFICIENCY

On September 12, 2013, the majority of the shareholders of the Company approved by written consent, an amendment to the Company’s Certificate of Incorporation, increasing the number of authorized shares of common stock from 100,000,000 to 300,000,000. The increase in authorized shares was affected pursuant to a Certificate of Amendment to the Certificate of Incorporation filed with the Secretary of State of the State of Delaware on, and effective as of September 17, 2013.

As of September 30, 2013 there were not adequate shares authorized to satisfy the current obligations upon conversion or exercise issued by the Company. Due to the fact there is not an adequate number of shares authorized, all warrants not previously accounted for as derivate warrant liabilities, now become derivative liabilities. However, warrants issued in 2012 and 2011 are significantly out of the money and diluted, therefore, the fair value of these warrants is de minimis.

Outstanding warrant securities consist of the following at September 30, 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 to April 2015
2013 Senior Convertible Note A Warrants		150,000,000	$	0.001	September to November 2014
2013 Senior Convertible Note B Warrants		150,000,000	$	0.0012	June to August 2018

		302,666,667

NOTE 8. COMMITMENTS AND CONTINGENCIES

The Company is in discussions to acquire an unaffiliated entity (“Target”) through exchange of shares and equity instruments. After the closing of the acquisition, Target's business will be the Company's operations. As of September 2013, the Company has advanced the Target approximately $49,000, which is classified as other current assets in the accompanying balance sheet. The advance is non-interest bearing and does not have a defined maturity date. The transaction is subject to negotiation of a definitive agreement and customary closing conditions, and there is no assurance that the transaction will be completed. In connection with this transaction, the Company expects to recapitalize its equity structure to provide for adequate shares authorized.

The Company and the Target have jointly entered into a term sheet with a financing company (“Lessor”) to provide for equipment lease financing in the aggregate amount of $1 million. The Company and the Target will use this financing to acquire equipment that will be used in direct income producing activities to the Company and the Target.

On about November 1, 2013, the Company and the Target have leased equipment worth approximately $197,000 pursuant to financing by the Lessor. As per the terms of the agreement with the Lessor, the Company and the Target will be obligated to pay $57,202 annually including interest at 9% per annum and also buy the equipment from the Lessor for approximately $86,790 in November 2016. In addition, the Lessor will receive 50% warrant coverage of the funding provided by the Lessor. The warrants will have a term of three years, and the exercise price and number of warrants will be determined by the market price of the Company’s common stock on the date of the transaction with the Target.

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 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.

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. The Company is in discussions to acquire an unaffiliated entity ("Target') through exchange of shares and equity instruments. After the closing of the acquisition, Target's business will be the Company's operations. The transaction is subject to negotiation of a definitive agreement and customary closing conditions, and there is no assurance that the transaction will be completed.

Results of Operations

For the Three and Nine Months Ended September 30, 2013 Compared to the Three and Nine Months Ended September 30, 2012

Operating Expenses

General and Administrative

During the three months ended September 30, 2013, we incurred general and administrative expenses of $72,855 compared to $48,381 incurred during the three months ended September 30, 2012. Our general and administrative expenses during the three months September 30, 2013 increased by $24,474 or 50.6% from the comparable period in 2012. The increase was principally due to executive salaries of $45,000 mainly accrued during the three months ended September 30, 2013. During the nine months ended September 30, 2013, we incurred general and administrative expenses of $251,846 compared to $176,290 incurred during the nine months ended September 30, 2012. Our general and administrative expenses during the nine months ended September 30, 2013 increased by $75,556 or 42.9% from the comparable period in 2012. The increase was principally due to executive salaries of $135,000 mainly accrued during the nine months ended September 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.

Other Expenses

Interest expense for the three months ended September 30, 2013 decreased by $2,862 or 23.9% compared to interest expense incurred during the three months ended September 30, 2012. The decrease was due to the decreased levels of borrowings pursuant to conversion of debt to common stock. Interest expense for the nine months ended September 30, 2013 increased by $2,345 or 8.7% compared to our interest expense incurred during the nine months ended September 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 nine months ended September 30, 2012, we also incurred a loss of $105,009 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 nine months ended September 30, 2013.

During the three months ended September 30, 2013, we had $18,834 of amortization of debt discount and deferred financing costs related to Senior Convertible Notes and there were no such charge in the comparable period of 2012.

Discontinued Operations

During the three months ended September 30, 2013, we did not have our loss from discontinued operations compared to a loss of $14,281 during the three months ended September 30, 2012. During the nine months ended September 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 $3,131 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 September 30, 2013 increased by $26,165 or 35.1% to $100,787 compared to a net loss of $74,622 incurred in 2012. Our net loss for the nine months ended September 30, 2013 decreased by $28,156 or 9.2% to $276,958 compared to a net loss of $305,114 incurred in 2012

Liquidity and Capital Resources

At September 30, 2013, we had a working capital deficiency of $491,954 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 and reduction in the borrowings pursuant to conversion of debt into shares of common stock . During the nine months ended September 30, 2013, our operating activities from continuing operations used cash of approximately $124,000 compared to approximately $159,000 used during the nine months ended September 30, 2012.

During the nine months ended September 30, 2013, our operating losses from continuing operations, after adjusting for non-cash items, utilized approximately $263,000 of cash, and working capital items provided approximately $139,000 of cash. The principal component of these working capital changes was an increase in our accounts payable and accrued expenses. During the nine months ended September 30, 2012, our operating losses from continuing operation, after adjusting for non-cash items, utilized approximately $184,000 of cash, and working capital items provided approximately $25,000 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 $1,663,939, had a stockholders’ deficiency of $570,691 and had a working capital deficit of $491,954 at September 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. We have an agreement with an Investor for $350,000 of debt financing pursuant to a Senior Convertible Note have borrowed $100,000 out of this arrangement as of September 30, 2013. In October 2013, we borrowed another $50,000 from the Investor. We anticipate borrowing additional amounts under this agreement to fund our working capital requirements, however, there is no assurance that we be successful in borrowing such amount. 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 September 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.

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 September 30, 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 the three months ended September 30, 2013 the Company issued 67,710,033 shares of common stock through the conversion of Convertible Promissory Note and Revolving Note from Related Party pursuant to their terms. During the three months ended September 30, 2013, the Company borrowed $100,000 through the sale of Senior Convertible Notes that can be converted to shares of the Company's common shares at a conversion price of $0.001 and also issued with it an aggregate of 300,000,000 warrants to shares of the Company's common stock at an exercise price ranging between $0.001 and $0.112.

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. The Company has repaid two of the notes through conversion to equity. At the time of this filing, the principal amount due on one remaining note at the default rate, plus accrued interest at the default rate, aggregated to approximately $58,000. Further, the default interest rate during the default period has increased to 22%.

Item 4. Mine Safety Disclosures

None.

Item 6. Exhibits

10.15	Form of Senior Convertible Note
10.16	Securities Purchase Agreement
10.17	Form of Equipment Lease
10.18	Form of Warrant
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: November 19, 2013	By: /s/ Raymond Meyers
	Raymond Meyers Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

BOXSCORE BRANDS, INC. - FORM 10-Q - November 19, 2013

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