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Internetstudios Com Inc – ‘10QSB’ for 6/30/04

On:  Monday, 8/23/04, at 3:53pm ET   ·   For:  6/30/04   ·   Accession #:  1085037-4-910   ·   File #:  0-27363

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/23/04  Internetstudios Com Inc           10QSB       6/30/04    3:149K                                   Clark Wilson/FA

Quarterly Report — Small Business   —   Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB       Quarterly Report -- Small Business                  HTML    178K 
 2: EX-31       Certification per Sarbanes-Oxley Act (Section 302)  HTML      8K 
 3: EX-32       Certification per Sarbanes-Oxley Act (Section 906)  HTML      7K 


10QSB   —   Quarterly Report — Small Business


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-QSB

(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, 2004

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to __________

Commission file number  000-27387

INTERNETSTUDIOS.COM, INC.

(Exact name of small business issuer as specified in its charter)

Nevada

134009696

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

1601 Cloverfield Boulevard, 2nd Floor, South Tower, Santa Monica, CA 90404

(Address of principal executive offices)

888.784.6166

(Issuer's telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.     Yes [ ]     No  [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:  12,129,209 common shares issued and outstanding as of August 18, 2004

Transitional Small Business Disclosure Format (Check one):     Yes [ ]     No [X]

-2-

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

 

 

 

 

INTERNETSTUDIOS.COM, INC.

(A Development Stage Company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

(Unaudited)

 

 

 

 

 

 

CONSOLIDATED BALANCE SHEETS

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

-3-

INTERNETSTUDIOS.COM, INC.
(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

 

 

June 30,
2004

December 31, 2003


 

(Unaudited)

 

ASSETS

 

 

 

CURRENT ASSETS

 

 

Taxes recoverable

$ 6,036

$ 6,036

Notes receivable (Note 4)

687,500

-


 

693,536

6,036

 

 

 

DEFERRED FINANCE FEE (Notes 4 and 8)

20,000

298,750

DEPOSIT ON ACQUISITION (Note 3)

830,000

807,500


 

$ 1,553,536

$ 1,112,286


 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Bank overdraft

$ 68,696

$ 77,712

Accounts payable and accrued liabilities

609,755

623,781

Due to related parties

80,628

-

Loans payable (Note 5)

996,265

945,892


 

1,755,344

1,647,385


GOING CONCERN CONTINGENCY (Note 2)

 

 

STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY) (Note 7)

 

 

Common stock, $.0001 par value, 100,000,000 shares authorized
12,129,209 shares issued and outstanding (2003 - 10,889,209)

2,774

2,650

Additional paid in capital

67,306,631

66,496,755

Warrants

10,000

-

Obligation to issue shares

422,293

422.293

Deficit accumulated during the development stage

(67,943,506)

(67,456,797)


 

(201,808)

(535,099)


 

$ 1,553,536

$ 1,112,286


 

The accompanying notes are an integral part of these interim consolidated financial statements

-3-

INTERNETSTUDIOS.COM, INC.
(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three months
ended June
30,2004

Three months
Ended June
30, 2003

Six months ended June 30, 2004

Six months ended June 30, 2003

April 14, 1998 (inception) to
June 30, 2004


REVENUE

$ -

$ -

$ -

$ -

$ 220,291


OPERATING EXPENSES

General and administrative

44,857

268,211

115,794

348,329

28,221,611

Sales and marketing

-

-

-

-

3,129,457

Amortization of goodwill

-

-

-

-

12,737,424

Amortization of website development costs

-

-

-

-

2,779,668

Website development costs

-

-

-

-

6,327,907


44,857

268,211

115,794

348,329

53,196,067


Loss from operations

(44,857)

(268,211)

(115,794)

(348,329)

(52,975,776)

Other income (expenses)

Interest expense and finance fees

(194,562)

(7,500)

(370,915)

(7,500)

(586,526)

Minority interest in loss of subsidiary

-

-

506,250

Loss on impairment of loans receivable

-

-

(309,832)

Loss on disposal of furniture and equipment

-

-

(544,523)

Loss on impairment of goodwill

-

-

(15,462,534)

Loss on settlement of lawsuits

-

-

(80,000)

Gain on settlement of debts

-

-

269,330

Gain on write off of disputed accounts payable

-

-

1,240,105


NET LOSS FOR THE PERIOD

$ (239,419)

$ (275,711)

$ (486,709)

$ (355,829)

$ (67,943,506)


 

BASIC NET LOSS PER SHARE

$ (.02)

$ (.03)

$ (.04)

$ (.03)


WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING


11,455,798


10,233,343


11,455,798


10,222,343


 

The accompanying notes are an integral part of these interim consolidated financial statements

 

-4-

INTERNETSTUDIOS.COM, INC.
(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Six months ended June 30, 2004

Six months ended June 30, 2003

April 14, 1998 (inception) to June 30, 2004


CASH FLOWS FROM OPERATING ACTIVITIES

$ (486,709)

$ (355,829)

$ (67,943,506)

Net loss for the period

 

 

 

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

Non-cash expenses:

 

 

 

Amortization and depreciation

-

-

15,933,085

Bad debts

-

-

46,087

Loss on disposal of furniture and equipment

-

-

544,523

Loss on impairment of goodwill

-

-

15,462,534

Loss on impairment of loans

-

-

309,832

Stock based compensation, finance and other expense

318,750

10,500

13,299,300

Minority interest in loss of subsidiary

-

-

(506,250)

Stock based website development expense

-

-

3,185,882

Gain on settlement of debt

-

-

(269,330)

Gain on write-off of accounts payable

-

-

(1,240,105)

Changes in operating assets and liabilities:

 

-

 

Accounts receivable

-

-

(46,087)

Taxes recoverable

-

8,621

11,927

Prepaid expenses and deferred fees

(20,000)

-

(137,685)

Accounts payable and accrued expenses

36,347

7,695

2,192,119


CASH USED IN OPERATING ACTIVITIES

(151,612)

(28,478)

(19,157,674)


CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

Acquisition of furniture and equipment

-

-

(2,218,566)

Acquisition of ReporterTV.com, net of cash acquired

-

-

(1,532,192)

Incorporation costs

-

-

(1,000)

Deposit on acquisition

(20,000)

(475,000)

(827,500)

Acquisition of itsTV.com

-

-

(232,274)

Cash acquired on acquisition of Online Films, LLC

-

-

363,759


CASH FLOWS USED IN INVESTING ACTIVITIES

(20,000)

(50,000)

(4,447,773)


CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

Bank overdraft (repayment)

(9,016)

4,861

68,696

Loans receivable

-

-

(1,201,609)

Loans payable

-

-

1,967,638

Advances from related parties

80,628

66,000

80,628

Convertible loan payable

-

-

199,159

Net proceeds on sale of common stock

100,000

5,000

22,490,935


CASH FLOWS FROM FINANCING ACTIVITIES

171,612

75,861

23,605,447


DECREASE IN CASH AND CASH EQUIVALENTS

-

(2,617)

-

CASH, BEGINNING OF PERIOD

-

2,617

-


 

 

 

 

CASH, END OF PERIOD

$ -

$ -

$ -


The accompanying notes are an integral part of these interim consolidated financial statements

-5-

INTERNETSTUDIO.COM, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004


(Unaudited)

 

NOTE 1 - DESCRIPTION OF BUSINESS

The Company was incorporated on April 14, 1998 in the State of Nevada as The Enterprise, Inc. Effective December 14, 1998, the Company changed its name to eHealth.com, Inc., and on September 20, 1999 changed its name to InternetStudios.com, Inc. The Company is an emerging entertainment media company. Its business model has evolved to incorporate innovative structures and technology to address the marketing, sales and releasing of filmed entertainment. The current business direction includes the acquisition of existing libraries of motion pictures and television programming which will be marketed and sold internationally.

The consolidated financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At June 30, 2004 the Company had a working capital deficiency of $1,061,808 (2003 - $1,342,599) and a stockholders' deficit of $201,808 (2003 - $535,099). The Company has incurred losses since inception and further losses are anticipated in the development of its products raising substantial doubt as to the Company's ability to continue as a going concern. The Company's continued operations are dependent on the successful implementation of its business plan, its ability to obtain additional financing as needed, continued support from creditors, settling its outstanding debts and ultimately attaining profitable operations. The Company has determined that the acquisition of 100% of the membership interests of RKO Pictures LLC ("RKO") is not feasible at this time but continues to negotiate with RKO in order to come to an agreement whereby the Company could utilize the RKO brand name in the distribution of home video products. The Company has executed an agreement to acquire the Trocadero film library but has yet to complete the formal transfer of the ownership of the film titles. Management is currently seeking funding sources to implement the Company's plan for production and distribution of DVDs (digital video discs) to be derived from the Trocadero library. The Company has engaged investment advisors to assist in securing this financing (refer to Note 7).

Unaudited Interim Financial Statements

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulation S-B. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2003 included in the Company's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles Of Consolidation

The financial statements include the accounts of the Company, its active subsidiary, International Media Acquisition Group LLC ("IMAG"). During 2003 all other inactive subsidiaries were dissolved. All intercompany accounts and balances have been eliminated in consolidation.

Use Of Estimates And Assumptions

Preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

-6-

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash And Cash Equivalents

The Company considers all liquid investments with an original maturity of three months or less to be cash equivalents.

Foreign Currency Translation

The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the year. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations. Translation adjustments were immaterial for all periods presented.

Net Loss Per Common Share

Basic loss per share includes no dilution and is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution of securities that could share in the earnings of the Company. Fully diluted loss per share has not been presented as the effects of convertible securities and stock options have been excluded as they are anti-dilutive.

Prepaid Finance Fees

The Company has capitalized finance fees paid in connection with a convertible loan payable issued during 2003. These finance fees will be expensed on a straight-line basis over the term of the loan. Unamortized fees will be charged to additional paid in capital in the event of and in connection with the conversion of the loan.

Stock Based Compensation

In December 2002, the Financial Accounting Standards Board issued Financial Accounting Standard No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" ("SFAS No. 148"), an amendment of Financial Accounting Standard No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123"). The purpose of SFAS No. 148 is to: (1) provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation, (2) amend the disclosure provisions to require prominent disclosure about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation, and (3) to require disclosure of those effects in interim financial information. The disclosure provisions of SFAS No. 148 were effective for the Company for the year ended December 31, 2003.

In accordance with SFAS No. 123, the Company applies the fair value method using the Black-Scholes option-pricing model in accounting for options granted to consultants.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.

-7-

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

The Company has also adopted the provisions of the Financial Accounting Standards Board Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation - An Interpretation of APB Opinion No. 25 ("FIN 44"), which provides guidance as to certain applications of APB 25. FIN 44 is generally effective July 1, 2000 with the exception of certain events occurring after December 15, 1998.

Income Taxes

The Company follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. As at June 30, 2004 the Company had net operating loss carryforwards; however, due to the uncertainty of realization the Company has provided a full valuation allowance for the deferred tax assets resulting from these loss carryforwards.

 

NOTE 3 - DEPOSITS ON ACQUISITION

As part of our change in business direction, on February 13, 2003, we entered into a Letter of Intent with Dominique Bigle to acquire On February 13, 2003, as amended on July 30, 2003, January 19, 2004, and April 27, 2004, the Company entered into a Letter of Intent with Dominique Bigle ("Bigle") to acquire Bigle's library of over 1,500 motion pictures (the "Trocadero Library"). In consideration for acquiring the Trocadero Library, the Company agreed to issue to Bigle one million (1,000,000) common shares of its capital stock and to pay $140,000 to Bigle. The final terms for completion of this acquisition is subject to the execution of a definitive purchase agreement. As of June 30, 2004, the Company has paid a deposit of $140,000 to Bigle and issued the 1,000,000 shares which were valued at $700,000. The Company has yet to complete the formal transfer of the ownership of the film titles.

On April 27, 2004, the Company entered into an Amending Agreement whereby the Company agreed that it would register for resale by June 27, 2004 the shares issued to Bigle and that Bigle would provide services under an interim Consulting Agreement. Pursuant to the Consulting Agreement, the Company agreed to pay Bigle $110,000 for an 11 month term ending March 2005 in consideration of Bigle assisting with the acquisition of RKO Pictures. The terms of the Consulting Agreement are currently being re-negotiated.

 

NOTE 4 - NOTES RECEIVABLE

Effective May 8, 2003, IMAG entered into a Letter of Intent to acquire 100% of the membership interests of RKO Pictures, LLC (the "RKO Letter of Intent"). Pursuant to the terms of the RKO Letter of Intent, the Company has agreed to acquire 100% of the membership interests of RKO Pictures, LLC in consideration for $5.5 million in cash. In addition to the purchase price, the Company is required to have a working capital reserve of $4.5 million. A warrant will also be issued to the members of RKO Pictures, LLC entitling them to acquire up to five (5%) percent of the Company's fully diluted share capital post-acquisition. The completion of this acquisition is subject to ongoing due diligence, completion of the required financing and the execution of a definitive purchase agreement. As of June 30, 2004, the Company had paid a deposit of $687,500 to RKO Pictures, LLC.

These deposits are secured by Promissory Notes, which bear interest at the California Federal Bank prime rate and are as follows:

- Promissory Note dated May 14, 2003 in the amount of $125,000, which is repayable by May 14, 2004;
- Promissory Note dated June 16, 2003 in the amount of $250,000, which is repayable by June 16, 2004;
- Promissory Note dated July 7, 2003 in the amount of $250,000, which is repayable by July 7, 2004;
- Promissory Note dated August 7, 2003 in the amount of $62,500, which is repayable by August 7, 2004.

-8-

 

NOTE 4 - NOTES RECEIVABLE (continued)

We anticipated closing the RKO acquisition on September 2, 2003 and executed final documentation between us, IMAG and RKO in anticipation of such closing. Unfortunately, the financing for this transaction did not close and accordingly the LOI expired according to its terms. Nonetheless, we continued to negotiate with RKO over the course of the last 9 months. However, the parties were unable to conclude a transaction based on the terms of the original LOI.

On July 2, 2004, RKO, IMAG, and the Company executed a Mutual Release Agreement under the terms of which, the parties agreed to refrain from taking any legal action with respect to the negotiations respecting the acquisition of RKO by the Company and IMAG. On July 2, 2004, RKO repaid the promissory note dated May 14, 2003 (in the amount of $125,000 plus accrued interest) and the promissory note dated June 6, 2003 (in the amount of $250,000 plus accrued interest). On July 9, 2004, RKO repaid the promissory note dated July 7, 2003 (in the amount of $250,000 plus accrued interest) and on August 6, 2004, RKO repaid the Promissory Note dated August 8, 2003, (in the amount of $62,500 plus accrued interest).

As of the date hereof, RKO is no longer indebted to the Company and we are no longer negotiating to acquire RKO on the terms of the RKO Letter of Intent. However, the parties have agreed, as a term of the Mutual Release Agreement, to continue to negotiate a licensing arrangement whereby the Company would create and distribute our DVD (digital video disc) products under the RKO brand name.

The Company had pledged certain of these promissory notes as security for loans payable. The Company used the proceeds received from repayment of these promissory notes by RKO to retire almost all of the loans made to us by three parties, thereby significantly reducing our corporate liabilities (refer to Note 4).

NOTE 5 - LOANS PAYABLE

By loan agreement dated July 14, 2003, the Company has a convertible loan outstanding of $300,000 which bears interest at 12% per annum, compounded monthly for a term of one year, or until seven days from the close of a proposed financing. The note is convertible by the holder into common stock at the lesser of $1.00 or a 15% discount to the five day average trading price before the date of conversion. This loan is secured by the July 7, 2003 RKO promissory note in the amount of $250,000 held against the acquisition deposits as described in Note 3. A lender's bonus of 300,000 common shares was paid on this transaction. The shares had a fair market value of $300,000 and this amount was recorded as a deferred finance fee and is being amortized over the life of the loan.

By an agreement dated July 19, 2004, the lender of this loan agreed to the repayment of $250,000 of the principal of the loan, and agreed to extend the repayment of the balance of the loan and accrued interest totaling $86,000.

By loan agreement dated June 25, 2003, and completed July 7, 2003, the Company has a convertible loan outstanding of $150,000 which bears interest at 10% per annum, compounded monthly for a term of one year. The note was convertible into common stock at the lesser of $1.00 per share or a 15% discount to the five day average trading price before the date of conversion. In January 2004 this note was amended to be convertible into common stock at a price of $0.50 per share. The Company has the right to repay all of the principal and accrued interest outstanding under this Note at any time before June 25, 2004 at one-hundred and twenty-five (125%) of the face value of this Note, plus accrued interest to the date of repayment.

By loan agreement dated June 20, 2003, the Company received a loan of $250,000 which bears interest at 12% per annum, compounded monthly for a term of one year, or until seven days from the close of a proposed financing. The loan was convertible by the holder into common stock at the lesser of $1.00 per share or a 15% discount to the five day average trading price before the date of conversion. This loan was secured by the promissory notes issued by RKO dated May 14, 2003 and June 16, 2003 in the aggregate amount of $375,000 held against the acquisition deposits as described in Note 3. A lender's bonus of 350,000 common shares was payable on this transaction. The shares had a fair market value of $297,500 and this amount was recorded as a deferred finance fee and is being amortized over the life of the loan. The Company issued 175,000 shares and has an obligation to issue an additional 175,000 common shares on this transaction. This loan was paid back on July 5, 2004 and the security on the promissory notes was released.

-9-

NOTE 5 - LOANS PAYABLE (continued)

 

By loan agreement dated May 28, 2003, the Company has a convertible loan outstanding of $100,000 which bears interest at 10% per annum, compounded monthly for a term of one year. The note is convertible by the holder into common stock at the lesser of $1.00 per share or a 15% discount to the five day average trading price before the date of conversion. The Company has the right to prepay all of the principal and accrued interest outstanding under this Note at any time before May 28, 2004 at one-hundred and twenty-five (125%) of the face value of this Note, plus accrued interest to the date of pre-payment.

During the quarter, $298,750 of the deferred finance fee was charged to operations and is included in general and administrative expenses. In addition, interest of $50,373 was accrued on the above loans. At June 30, 2004 a total of $96,265 of interest is owing.

The Company also has a loan payable outstanding of $100,000, which is unsecured, and has no specific terms of repayment

 

NOTE 6 - RELATED PARTY TRANSACTIONS

For the six month period ended June 30, 2004, the Company incurred $23,000 pursuant to consulting agreements with its officers and directors.

NOTE 7 - CAPITAL STOCK

During January 2002 the Directors approved a resolution to issue a maximum of 5,720,000 shares of common stock to certain directors, officers and employees in settlement of outstanding obligations that totaled $393,684. These obligations were settled at a price of $0.0571 per share resulting in a gain on settlement of debt of $67,072. These shares were issued on August 15, 2002. On December 11, 2002 the Company registered these shares for trading on a Form S-8 Registration Statement.

During February and March 2002 the Company issued a total of 3,487,863 shares of common stock on conversion of the outstanding convertible loans of $199,159.

During December, 2002 the Company completed a private placement of 171,000 common shares at a price of $.50 per share for net proceeds of $76,950 after a finder's fee of $8,550. In addition, 17,100 common shares were issued to the finder on this private placement.

During July 2003 the Company issued 300,000 common shares at a price of $1.00 per share, to a lender for payment of a lender's bonus (refer to Note 4).

During July 2003 the Company issued 15,000 common shares at a price of $1.00 per share to Capstone Investment Inc. for payment on an engagement contract.

During August 2003 the Company issued 45,000 common shares at a price of $1.00 per share to Capstone Investment Inc. for payment on an engagement contract.

During August 2003 the Company issued 175,000 common shares at a price of $0.85 per share and has an obligation to issue a further 175,000 common shares valued at $148,750 to a lender for payment of a lender's bonus (refer to Note 4).

During October 2003 the Company agreed to issue 547,086 common shares at a deemed price of $0.50 per share to a lender in settlement of a loan in the amount of $273,543. To date these shares have not been issued.

-10-

NOTE 7 - CAPITAL STOCK (continued)

 

During January 2004, the Company completed a private placement of 200,000 units at a price of $.50 per unit for net proceeds of $100,000 with a lender who had previously entered into a convertible loan dated June 25, 2003. Each unit consists of one common share and one share purchase warrant. Three share purchase warrants entitle the holder to acquire an additional common share at a price of $1.00 for a period of two years. The estimated fair value of the warrants of $13,000 has been recorded as a separate component of stockholders' equity. As part of this transaction, the Company agreed to amend the convertible loan so that it is now convertible into common stock at $0.50 per share (refer to Note 4).

During February 2004 the Company issued 1,000,000 common shares at a price of $0.70 per share to Dominique Bigle for payment on acquisition of a media library. The Company also issued 20,000 common shares at a deemed prices of $0.70 per share to InCap Group, Inc for payment on a contract to provide financing services.

During March 2004 the Company issued 20,000 common shares at a deemed prices of $0.55 per share to InCap Group, Inc for payment on a contract to provide financing services. Refer to Note 7.

Statement of Financial Accounting Standards No. 123, "Accounting For Stock Based Compensation", encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in previously issued standards. Accordingly, compensation cost for employee stock options is measured as the excess, if any, of the fair market value of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. Compensation cost or deferred compensation for stock options issued to employees has been recognized to the extent market value of the stock at the grant date exceeded the option price.

The following table summarizes information about stock option transactions.

 

Shares

Weighted
Average
Exercise Price

Expiry Date


Options outstanding

 

 

 

December 31, 2001

13,300

$100.00

November 30, 2004

Granted

-

-

 

Exercised

 

-

 

Expired

-

-

 


December 31, 2002

13,300

$100.00

November 30, 2004

Granted

-

-

 

Exercised

-

-

 

Expired

-

-

 


December 31, 2003

13,300

$100.00

November 30, 2004

Granted

-

-

 

Exercised

-

-

 

Expired

-

-

 


June 30, 2004

13,300

$100.00

November 30, 2004


Warrants:

As at June 30, 2004 the Company has 200,000 share purchase warrants outstanding; providing the right to acquire 200,000 common shares at a price of $1.00 per share to February 19, 2006. The estimated fair value of the warrants of $10,000 has been recorded as a separate component of stockholders' equity.

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NOTE 8 - FINANCING AGREEMENT

During January 2004 the Company entered into an agreement with Incap Group, Inc. whereby Incap Group, Inc. was engaged to act as agent and use its best efforts in connection with the private placement of one or more debt or equity-related securities offerings to raise between $5,000,000 and $8,000,000. In consideration, Incap Group, Inc. was issued 40,000 common shares valued at $20,000 as a non-refundable retainer and will receive a placement fee on funds raised of 7.5% on the first $5,000,000 raised and 5.5% on the balance. This amount was recorded as a deferred finance fee. As the financing did not complete it was written off to operations in the current quarter.

During June, 2004 the Company entered into an agreement with WestLB Securities Inc. whereby WestLB was engaged to act as agent and use its best efforts in connection with the private placement of one or more debt or equity-related securities offerings to raise up to $10,000,000. In consideration, WestLB was paid a fee of $20,000 and will receive a placement fee on funds. This amount has been recorded as a deferred finance fee and will be offset against the proceeds of the financing or written off to operations if the financing does not complete.

 

NOTE 9 - INCOME TAXES

Income taxes are provided pursuant to SFAS No. 109, Accounting for Income Taxes. The statement requires the use of an asset and liability approach for financial reporting for income taxes. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. Accordingly, as the realization and use of the net operating loss carryforward is not probable, the tax benefit of the loss carryforward has been offset by a valuation allowance of the same amount.

 

NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments. The estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies. The fair value of financial instruments, including cash and cash equivalents and notes and accounts receivable and payable, approximate carrying value due to the short-term maturity of the instruments.

Management has also determined that the fair value of the loans payable and deposits on acquisitions approximates their carrying values.

 

NOTE 11 - SUBSEQUENT EVENTS

The Company recovered all the advances made to RKO and repaid the majority of outstanding loans payable as described in Notes 3 and 4.

 

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Item 2.  Management's Discussion and Analysis or Plan of Operation.

FORWARD LOOKING STATEMENTS

This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our", and "InternetStudios.com" mean InternetStudios.com, Inc. and our wholly owned subsidiaries, unless otherwise indicated.

Corporate Overview

You should read the following discussion of our financial condition and results of operations together with the consolidated unaudited financial statements and the notes to consolidated unaudited financial statements included elsewhere in this filing prepared in accordance with accounting principles generally accepted in the United States. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements.

We are a company focused on distribution and marketing of filmed entertainment products, including theatrical motion pictures, television programs, home video products, and digitally delivered entertainment and media.

Our business model has evolved toward a greater focus on the control of our own filmed entertainment properties. Our shift in focus has been motivated by opportunities management believes have arisen due to recent structural changes in the entertainment sector. The motion picture industry has entered an unusual phase in its history, where the confluence of two trends has created a unique investment opportunity. The first of these is a consumer technology trend - the introduction and mass penetration of DVD (digital video disc) players in homes - that has led to a record surge in consumer purchases of movies for home viewing. The second trend is a cyclical market downturn that has driven media asset valuations to recent historic lows, particularly for films and film libraries.

Taken together, these trends have resulted in an environment where valuable, cash-generating assets like production companies and home video distribution rights can be acquired at prices below their ultimate market value. We plan to exploit this situation by assembling a world-class film production and DVD (digital video disc) distribution company and management team. To this end, we have executed a final agreement to acquire the Trocadero film library but have yet to complete the formal transfer of the ownership of the film titles. Management is currently seeking funding sources to implement the Company's plan for production and distribution of DVDs (digital video

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discs) to be derived from the Trocadero library. We continue to negotiate to obtain a recognizable brand under which this content can be distributed.

As part of our change in business direction, on February 13, 2003, we entered into a Letter of Intent with Dominique Bigle to acquire Bigle's library of over 1,500 motion pictures (the "Trocadero Library"). In consideration for acquiring the library of motion pictures, we initially agreed to issue to Bigle 1,000,000 shares of our common stock and to pay $300,000 to Bigle. The closing of this agreement was extended by agreements dated July 30, 2003 and January 19, 2004. On April 27, 2004, we entered into an Amending Agreement whereby we agreed that the cash consideration for the purchase of these assets would be reduced to $140,000. As of the date hereof, we have paid $140,000 to Bigle and issued 1,000,000 shares of common stock. As part of this transaction, we also agreed to register for resale the shares issued to Bigle and that Bigle would provide us services under a Consulting Agreement. We have yet to complete the formal transfer of the ownership of the film titles.

Additionally, as part of this new business strategy, in the second quarter of 2003 we entered into formal negotiations to acquire RKO Pictures, LLC, ("RKO") one of the classic Hollywood studios. In furtherance of this proposed acquisition, we formed a wholly owned subsidiary called International Media Acquisition Group, a Delaware LLC ("IMAG") to be the acquiring corporate entity.

During the quarter ended June 30, 2003, IMAG entered into a letter of intent (the "LOI") with RKO, whereby IMAG agreed to acquire 100% of the membership interests of RKO. During the three months after the execution of the LOI, we paid deposits of $687,500 toward the purchase price. These deposits were secured by promissory notes issued by RKO, each with a one-year term.

We anticipated closing the RKO acquisition on September 2, 2003 and executed final documentation between us, IMAG and RKO in anticipation of such closing. Unfortunately, the financing for this transaction did not close and accordingly the LOI expired according to its terms. Nonetheless, we continued to negotiate with RKO over the course of the last nine months. However, the parties were unable to conclude a transaction based on the terms of the original LOI.

On July 2, 2004, RKO, IMAG, and the Company executed a Mutual Release Agreement under the terms of which, the parties agreed to refrain from taking any legal action with respect to the negotiations respecting the acquisition of RKO by us. On July 2, 2004, RKO repaid the promissory note dated May 14, 2003 (in the amount of $125,000 plus accrued interest) and the promissory note dated June 6, 2003 (in the amount of $250,000 plus accrued interest). On July 9, 2004, RKO repaid the promissory note dated July 7, 2003 (in the amount of $250,000 plus accrued interest) and on August 6, 2004, RKO repaid the Promissory Note dated August 8, 2003, (in the amount of $62,500 plus accrued interest).

As of the date hereof, RKO is no longer indebted to the Company and we are no longer negotiating to acquire RKO on the terms of the RKO Letter of Intent. However, the parties have agreed, as a term of the Mutual Release Agreement, to continue to negotiate a new arrangement whereby RKO could participate in the proposed production and distribution of DVD (digital video disc) products.

We had pledged certain of these promissory notes as security for loans payable. We used a portion of the proceeds received from repayment of these promissory notes by RKO to retire almost all of the loans made to us by three parties, thereby significantly reducing our corporate liabilities.

We continue to explore other available business opportunities whereby we can build our library of filmed entertainment assets and build a niche-oriented DVD (digital video disc) releasing and merchandising company. As part of these explorations, we have retained West LB Securities Inc. in connection with identifying complementary acquisition targets.

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Results of Operations for the three months ended June 30, 2004 and June 30, 2003

The discussion set forth below relating to results of operations pertains to the comparison of the three months ended June 30, 2004 and 2003. For June 30, 2003, we filed a quarterly report on Form 10-Q.

Revenues

We recognized $nil revenues in the three months ended June 30, 2004 as compared to $nil for the three months ended June 30, 2003. Historically we have recognized revenue from our internet-based activities. Revenues ceased in 2001 as we focused all of our resources on raising capital, reorganizing and streamlining operations and developing a self sustaining business model that would see us focus on more traditional film and television marketing efforts.

Cost of Revenues

We have currently not recognized significant revenues to date, and therefore have not allocated any significant amounts to cost of revenues. Once our revenues increase, costs of revenues will primarily consist of costs associated with marketing, customer service activities and allocation of overhead.

Advertising and Marketing Expenses

For the three months ended June 30, 2004 and June 30, 2003, we had no expenses related to advertising and marketing as a result of the implementation of the restructuring plan.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries and related costs for general and corporate functions, including finance, accounting, facilities and fees for legal and other professional services. Our general and administrative expenses, for the three months ended June 30, 2004 were $44,857, as compared to the three months ended June 30, 2003 were $268,211. Our general and administrative expenses, for the period from inception to the period ended June 30, 2004 were $28,221,611 of which $ 10,925,152 were non-cash related to stock based compensation. The decrease of general and administrative expenses is primarily a result of the implementation of a restructuring plan that resulted in a reduction in personnel costs, lease and office costs, and a reduction in legal and accounting fees.

Net Loss

Our net loss was $239,419 and $275,711 for the three months ended June 30, 2004 and 2003 respectively. The primary reason for the increase in net loss is due to an increase in the interest income expense. Management feels that restructuring plan is now complete and that ongoing net loss will be a result from operations.

Results of Operations for the six months ended June 30, 2004 and June 30, 2003

The discussion set forth below relating to results of operations pertains to the comparison of the six months ended June 30, 2004 and 2003. For June 30, 2003, we filed a quarterly report on Form 10-Q.

Revenues

We recognized $nil revenues in the six months ended June 30, 2004 as compared to $nil for the six months ended June 30, 2003. Historically we have recognized revenue from our internet-based activities. Revenues ceased in 2001 as we focused all of our resources on raising capital, reorganizing and streamlining operations and developing a self sustaining business model that would see us focus on more traditional film and television marketing efforts.

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Cost of Revenues

We have currently not recognized significant revenues to date, and therefore have not allocated any significant amounts to cost of revenues. Once our revenues increase, costs of revenues will primarily consist of costs associated with marketing, customer service activities and allocation of overhead.

Advertising and Marketing Expenses

For the six months ended June 30, 2004 and June 30, 2003, we had no expenses related to advertising and marketing as a result of the implementation of the restructuring plan.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries and related costs for general and corporate functions, including finance, accounting, facilities and fees for legal and other professional services. Our general and administrative expenses, for the six months ended June 30, 2004 were $115,794, as compared to the six months ended June 30, 2003 were $348,329. Our general and administrative expenses, for the period from inception to the period ended June 30, 2004 were $28,221,611 of which $ 10,925,152 were non-cash related to stock based compensation. The decrease of general and administrative expenses is primarily a result of the implementation of a restructuring plan that resulted in a reduction in personnel costs, lease and office costs, and a reduction in legal and accounting fees.

Net Loss

Our net loss was $486,709 and $355,829 for the six months ended June 30, 2004 and 2003 respectively. The primary reason for the increase in net loss is due to an increase in the interest income expense. Management feels that restructuring plan is now complete and that ongoing net loss will be a result from operations.

Summary

Presently, we have no significant sources of revenue. We have incurred operating losses since inception. The continuation of our business is dependent upon the continuing financial support of our creditors and stockholders, obtaining further financing, and our acquiring additional filmed entertainment assets, There are, however, no assurances we will be able to generate funds required for these transaction. Accordingly, our consolidated financial statements contain note disclosures describing the circumstances that lead there to be doubt over our ability to continue as a going concern.

Liquidity and Capital Resources

From inception, we have financed our operations entirely from private placements of equity and loans. As at June 30, 2004, we had a bank overdraft of $68,696 compared to a bank overdraft of $77,712 at December 31, 2003. Since inception, we have had negative cash flows from operating activities in each fiscal and quarterly period to date.

Net cash used in operating activities was $151,612 for the six months ended June 30, 2004 as compared to $28,478 for the six months ended June 30, 2003. The net cash was used primarily for expenses related to the RKO and Trocadero transactions.

As shown in our financial statements, we have sustained substantial losses from operations since inception. As of the date of this quarterly report, we have utilized substantially all of our available funding and at June 30, 2004 had a working capital deficiency of $1,061,808. Our continuation as a going concern will depend on our ability to raise additional capital. No assurance can be given that we will be able to raise additional funds. In the absence of such funds, we will be required to cease operations.

Our management has taken steps to revise and reduce our operating requirements, which we believe will be sufficient to assure continued operations and implementation of our plans. These steps include expense reduction in

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staffing, marketing and consulting, We are also in the process of securing additional capital through debt/equity transactions, which will be required in order to continue operations.

Given our limited operating history, operating losses and other factors set out above, there can be no assurance that we will be able to achieve our goals and develop a self sustaining business model. Management intends to raise debt and equity capital as needed on a private placement basis to finance the operating and capital requirements of our company. We have engaged investment bankers to act as placement agent for any debt and equity offerings. It is management's intention to continue to continue to modify our company's business plan to focus on more traditional film and television marketing. These factors raise substantial doubt about our company's ability to continue as a going concern as described in Note 1 to the Financial Statements. The future operations of our company will depend upon our ability to obtain adequate financing and continuing support from creditors. To the extent that we cannot achieve our financing and acquisition plans and generate revenues, which exceed expenses on a consistent basis and in a timely manner, our business, results of operations, financial condition and prospects could be materially adversely affected.

There can be no assurance that such additional financing would be available to us, or if available, that the terms of such additional financing will be acceptable to us.

Future Cash Requirements

We expect that the implementation of our new business strategy will lead to the generation of revenues in fiscal 2005. We are attempting to secure a $10 million operating line of credit in order to commence production of DVD (digital video disc)'s for distribution and to implement our DVD (digital video disc) sales and marketing program. We have entered into negotiations with a financier to establish this line of credit with the assistance of our investment bankers, West LB Securities Inc..

Plan of Operations

Our primary objective over the twelve months ending June 30, 2005 will be to build a niche distribution platform to maximize revenues from filmed entertainment content in all formats through the building a brand, the re-labelling of classic content and strict asset management. We intend to focus on creating efficiencies through technology and innovative systems to address the marketing and sales of filmed entertainment globally.

Additionally, we intend to assemble a major library of filmed content by expanding the number of copyrights and distribution rights that we own, represent or broker, which will generate growth and annuity income.

Sales and Marketing

We intend to capitalize on the demand for DVDs (digital video discs) by providing mainstream entertainment with commercial appeal in a low-risk, cost-efficient manner. We plan to exploit any films that we acquire in DVD (digital video disc) format from featuring special features and to acquire high quality assets that will be exploitable from a video and ancillary media perspective.

As part of this plan, we intend to distribute or sell directly to mass merchandisers, such as Wal-Mart Stores Inc., Costco Wholesale Corporation, Target Corporation and Best Buy Co. Inc., and others who buy large volumes of DVD (digital video disc)'s to sell directly to the consumer in international markets.

RECENT ACCOUNTING PRONOUNCEMENTS

In April 2003, the Financial Accounting Standards Board issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", which clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003.

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The adoption of SFAS 149 did not have a material effect on the Company's financial position or results of operations.

In May 2003, SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", was issued. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. Generally, a financial instrument, whether in the form of shares or otherwise, that is mandatorily redeemable, i.e. that embodies an unconditional obligation requiring the issuer to redeem it by transferring its shares or assets at a specified or determinable date (or dates) or upon an event that is certain to occur, must be classified as a liability (or asset in some circumstances). In some cases, a financial instrument that is conditionally redeemable may also be subject to the same treatment. This Statement does not apply to features that are embedded in a financial instrument that is not a derivative (as defined) in its entirety. For public entities, this Statement is effective for financial instruments entered into or modified after May 31, 2003. The adoption of SFAS 150 did not affect the Company's financial position or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting for Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34, Disclosure of Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 clarifies the requirements for a guarantor's accounting for, and disclosure of, certain guarantees issued and outstanding. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. This interpretation also incorporates without reconsideration the guidance in FASB Interpretation No. 34, which is being superseded. The adoption of FIN 45 did not affect the Company's financial position or results of operations.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletins ("ARB") No. 51, Consolidated Financial Statements ("FIN 46"). Fin 46 applies immediately to variable interest entitles created after January 31, 2003, and in the first interim period beginning after June 15, 2003 for variable interest entities created prior to January 31, 2003. The interpretation explains how to identify variable interest entities and how an enterprise assesses its interest in a variable interest entity to decide whether to consolidate that entity. The interpretation requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. Variable interest entities that effectively disperse risks will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed. The adoption of FIN 46 did not affect the Company's financial position or results of operations.

RISK FACTORS

Much of the information included in this annual report includes or is based upon estimates, projections or other "forward-looking statements". Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Such estimates, projections or other "forward-looking statements" involve various risks and uncertainties as outlined below. We caution readers of this annual report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward-looking statements". In evaluating us, our business and any investment in our business, readers should carefully consider the following factors.

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RISKS SPECIFIC TO OUR COMPANY

We have a limited operating history

We are an early stage company and have not earned any significant revenues, which makes it difficult to evaluate whether we will operate profitably. Investors must consider the risks and difficulties frequently encountered by early stage companies. Such risks include:

Given our limited operating history, operating losses and other factors set out in this document, there can be no assurance that we will be able to achieve our goals and be profitable. In the event that we do not successfully address these risks, our business, prospects, financial condition and results of operations will be materially and adversely affected.

We may incur future losses

We may incur net losses for the foreseeable future. The extent of these losses, if any, will depend, in part, on the amount and rates of growth in our net revenue from DVD (digital video disc) sales, filmed entertainment distribution and related activities. As a result of our early stage of development, we believe that period-to-period comparisons of our operating results are not meaningful and that our operating results for any period should not be relied upon as an indication of future performance. To the extent that (a) net revenue does not grow at anticipated rates, (b) increases in our operating expenses precede or are not subsequently followed by commensurate increases in net revenue or (c) we are unable to adjust operating expense levels accordingly, our business, prospects, financial condition and results of operations will be materially and adversely affected. There can be no assurance that our operating losses will not increase in the future or that we will ever achieve or sustain profitability.

Our future operating results are unpredictable

As a result of our lack of operating history, we cannot forecast accurately our revenues, operating expenses and operating results. Accordingly, we may be unable to adjust our expenditures in a timely manner to compensate for any unexpected revenue shortfall. We may also be unable to increase our spending and expand our operations in a timely manner to compensate for any unexpected revenue shortfall.

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Our annual and quarterly operating results may fluctuate significantly as a result of numerous factors, many of which are outside of our control. These factors include, but are not limited to:

Due to the foregoing factors, we believe that quarter-to-quarter comparisons of our operating results are not an accurate indication of our future performance. It is likely that our operating results for any period may fail to meet or exceed the expectations of our investors. In that event, the value of our common stock would likely be materially adversely affected.

We may need significant additional funds, which we may not be able to obtain

If we raise the financing necessary to implement our DVD production and marketing plan , we believe that we will be able to meet our anticipated cash needs for working capital, capital expenditures and normal business expansion for the next 24 months. If we do not manage to raise the full amount necessary, or if our business model should prove to be based on assumptions that prove to have been incorrect, our financial resources may not be sufficient to satisfy our capital requirements for this period. If this occurs, we will probably need to raise additional funds in order to achieve the goals we set for ourselves in our business plan. If our financial resources are insufficient we will require additional financing in order to execute our plans for expansion. If we raise additional funds through the issuance of equity, equity-related or debt securities, such securities may have rights, preferences or privileges senior to those of the rights of our common stock and our stockholders may experience additional dilution. We cannot be certain that additional financing will be available to us on favorable terms, when required, or that additional financing will be available to us at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to fund our expansion, promote our brand as we desire, take advantage of unanticipated acquisition opportunities, develop or enhance services or respond to competitive pressures.

We depend on our ability to attract key personnel

We depend on the continued services and performance of our senior management and other key personnel. The loss or unavailability of any of these individuals for any significant period of time could have a material effect on our business, prospects, financial condition and results of operations. Our performance also depends on our ability to attract, hire, train, retain and motivate other highly-skilled technical, managerial, editorial, merchandising, marketing and customer service personnel. Competition for such personnel is intense, and there can be no assurance that we will be able to successfully attract, integrate or retain sufficiently qualified personnel. The failure to attract, retain, and integrate such personnel could have a material adverse effect on our business, prospects, financial condition and results of operations.

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Failure to manage future growth may adversely affect our business.

If our management is unable to manage growth effectively, then our operations could be adversely affected. We will need to add staff to market our new library and website, manage operations, and perform finance and accounting functions. We will be required to hire a broad range of additional personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational resources. The failure to develop and implement effective systems, or to hire and retain sufficient personnel for the performance of all of the functions necessary to effectively service and manage our potential business or the failure to manage growth effectively, could have a materially adverse effect on our business and financial condition.

Our management owns a significant percentage of our company and will be able to exercise control over our company

Our management holds a significant voting block which can be used to elect directors and/or approve or block significant corporate transactions. Such share ownership may also have the effect of delaying or preventing a change in control of our company, impeding a merger, consolidation, takeover or other business combination involving our company or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company, thereby having a material adverse effect on the value of our company's common stock. In addition, investors may have difficulty obtaining the necessary stockholder vote required for corporate actions contrary to the wishes of the management.

RISKS RELATED TO INDUSTRY

Our markets are competitive

The sale and distribution of filmed entertainment is a highly competitive business. The entertainment industry is currently comprised of seven major film distributors/studios: Sony Pictures, Paramount, Twentieth Century Fox, Warner Brothers, The Walt Disney Company, MGM/UA and Universal. Today, the major studios are multi-national, multi-media and mass marketing communication complexes with wholly owned distribution operations throughout the world. In addition to these major seven, there are numerous independent production and distribution companies. Many of our competitors are larger and better capitalized than our company is and have existing distribution channels. In addition, the number of films or television products released in any given period may create an oversupply of product in the market, and that may reduce our share of potential sales and make it more difficult for the films in our library to succeed.

We believe that the principal competitive factors in our market are:

Success depends on external factors in the film and television industry.

Operating in the television and film distribution industry involves a substantial degree of risk. Each television program and motion picture is a unique piece of art that depends on unpredictable audience reaction to determine commercial success. There can be no assurance that our television programs and feature films will be favorably received and even if our products are initially successful, the popularity of any given program may diminish over time.

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We face inherent international trade risks.

Selling and distributing filmed entertainment around the world results in a percentage of our revenue coming from sources outside of North America. Consequently, our business is subject to certain risks inherent in international trade, many of which are beyond our control. These risks include:

These factors can adversely affect our business and result of operations.

We must develop a marketing program to generate any significant revenues.

We will be required to develop a marketing campaign that will effectively make buyers aware of our catalog of DVD's and filmed entertainment library. We may also elect to enter into agreements or relationships with third parties regarding the promotion or marketing of our DVD's and library. There can be no assurance that we will be able to establish adequate marketing capabilities, that we will be able to enter into marketing agreements or relationships with third parties on financially acceptable terms or that any third parties with whom we enter into such arrangements will be successful in marketing and promoting our services.

Risks associated with brand development

We believe that establishing and maintaining an accepted brand of filmed entertainment product is critical to attracting buyers to our DVD (digital video disc) sales and to expanding our commerce relationships. In order to attract and retain purchasers, advertisers and commerce partners, and to promote and maintain our brand in response to competitive pressures, we intend to increase substantially our financial commitment to creating and maintaining distinct brand loyalty among these groups. We expect our efforts to include advertising and marketing and traditional media advertising campaigns directed at the filmed entertainment rights industry. In addition, we may need to expend additional resources to build the brand. If we do not generate a corresponding increase in net revenue as a result of our branding efforts or otherwise fail to promote our brand successfully, or if we incur excessive expenses in an attempt to promote and maintain our brand, our business, prospects, financial condition and results of operations, will be materially and adversely affected.

We have not implemented sophisticated managerial, operational and financial systems, which could effect our ability to manage growth effectively

We have not implemented sophisticated managerial, operational and financial systems and controls. We are required to manage multiple relationships with various strategic partners, technology licensors, users, advertisers and other third parties. Our ability in this regard will be strained in the event of rapid growth of our company or in the number of third party relationships, and there can be no assurance that our systems, procedures or controls will be adequate to support our operations or that our management will be able to manage any growth effectively. To manage the expected growth of our operations and personnel, we will be required to significantly improve or replace existing managerial, financial and operational systems, procedures and controls, and to expand, train and manage our growing employee base. We also will be required to expand our finance, administrative and operations staff. Some key members of management have other professional obligations beyond their obligations to our company that may impact their ability to implement the necessary financial, administrative and operational systems necessary

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for our success. There can be no assurance that we will complete in a timely manner the improvements to our systems, procedures and controls necessary to support our future operations, that we will be able to hire, train, retain, motivate and manage required personnel or that we will be able to successfully identify, manage and exploit existing and potential market opportunities.

Risks associated with potential general economic downturn

Our success may be affected significantly by changes in local, regional and national economic conditions. Factors such as inflation, labor and energy costs, the availability and cost of suitable technical employees, fluctuating interest and insurance rates, federal, state and local regulations and licensing requirements can all have a material adverse effect on our business, prospects, financial condition and results of operations.

Our intellectual property may be subject to infringement claims

There can be no assurance that our business activities will not or have not infringed upon the proprietary rights of others, or that other parties will not assert infringement claims against us. From time to time, we may be subject to claims in the ordinary course of our business, including claims of alleged infringement of the trademarks, service marks and other intellectual property rights of third parties by us and the content generated by our members. Such claims and any resultant litigation, should it occur, might subject us to significant liability for damages and might result in invalidation of our proprietary rights and even if these claims are not meritorious, could be time consuming and expensive to defend and could result in the diversion of management time and attention, any of which might have a material adverse effect on our business, prospects, results of operations and financial condition.

We are an early stage company and have not earned any significant revenues which makes it difficult to evaluate whether we will operate profitably.

To December 31, 2003, we have incurred regular operating losses and have no significant source of revenue. Unanticipated problems, expenses and delays are frequently encountered in ramping up sales and launching new businesses. Our ability to successfully acquire additional filmed entertainment assets, to utilize our website and to generate significant operating revenues will depend on our ability to successfully develop and maintain a brand name for our products and to attract new and maintain old users of our services.

Given our limited operating history, operating losses and other factors set out above, there can be no assurance that we will be able to achieve our goals and develop a sufficiently large user base of our website to be profitable. Our management intends to raise debt and equity capital as needed on a private placement basis to finance the operating and capital requirements. In addition, our management expects cash flow from operations to increase over the next year. These factors raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent auditors' report on the December 31, 2003 audited financial statements. Our future will depend upon our ability to obtain adequate financing and continuing support from stockholders and creditors and to achieve and maintain profitable operations. To the extent that we cannot achieve our plans and generate revenues, which exceed expenses on a consistent basis and in a timely manner, our business, results of operations, financial condition and prospects would be materially adversely affected.

Since our shares are thinly traded and trading on the OTCBB trading may be sporadic because it is not an exchange, stockholders may have difficulty reselling their shares.

Our common stock is quoted on the OTC Bulletin Board and is thinly traded. In the past, our trading price has fluctuated widely, depending on many factors that may have little to do with our operations or business prospects. In addition, the OTC Bulletin Board is not an exchange and, because trading of the securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on an exchange or the Nasdaq Stock Market, Inc., you may have difficulty reselling any of our common shares.

-23-

Trading of our stock may be restricted by the United States Securities and Exchange Commission's ("SEC") penny stock regulations which may limit a stockholder's ability to buy and sell our stock.

The SEC has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors." The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

Item 3.  Controls and Procedures.

As required by Rule 13a-15 under the Exchange Act, as at June 30, 2004 (being the end of the period covered by this quarterly report on Form 10-QSB) we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's president and chief executive officer. Based upon that evaluation, our company's president and chief executive officer concluded that our company's disclosure controls and procedures are effective. There have been no significant changes in our company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date we carried out our evaluation.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our company's reports filed or submitted 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 in our company's reports filed under the Exchange Act is accumulated and communicated to management, including our company's president and chief executive officer as appropriate, to allow timely decisions regarding required disclosure.

PART II  -  OTHER INFORMATION

Item 1.  Legal Proceedings.

Other than set out below, we know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Two of our former employees have received judgments against us. One received a Stipulated Judgment against us in the amount of $10,000 from the Los Angeles County Superior Court on April 10, 2002. The other received an Order, Decision or Award from the Labour Commissioner of California awarded against us and OnlineFilmSales.com, LLC in the amount of $26,578.24 on May 29, 2002. To date no payments have been made to either of these former employees.

-24-

August Entertainment, Inc. brought an action against us on September 7, 2000, in Los Angeles County Superior Court for breach of contract arising from an alleged contract for distribution of films. This matter was settled in December 2001. Pursuant to the terms of the settlement, we agreed to pay August Entertainment $70,000, of which $46,000 has been paid as of the date of this report.

On November 5, 2001, we agreed to an Arbitration Award, from the American Arbitration Association, in favor of Sitrick and Company in the sum of $42,000 on the condition that the Award not be confirmed or entered as a judgment in California or any other jurisdiction until after February 5, 2002. We are currently in negotiation with Sitrick and Company to reach an amicable resolution of Sitrick's claim for money owed and there are no plans to have the award entered as a judgment.

.

On September 9, 2003 Oxford & Associates, A Division of Oxford Global Resources, Inc. filed a Writ of Summons and Statement of Claim in British Columbia Supreme Court under action number S034865. Oxford's claim against us is for debt arising for the failure to pay for software development services. Oxford claims US$107,121.25, plus court ordered interest. Although no assurance can be given as to the outcome of this lawsuit, we believe that the ultimate outcome of this matter will not have a material adverse effect on our financial position or results of operations. We filed a Statement of Defence on October 16, 2003 and intend to defend this lawsuit.

On September 29, 2003 a former employee filed a cross-complaint in case number SC 077372 in the Superior Court of the State of California, County of Los Angeles alleging that our company is responsible for certain credit card debts. The action was brought against the former employee by American Express Travel Related Services Company, Inc. We have been advised that the action against the former employee is in the process of being settled and that the cross-complaint will be withdrawn.

Although no assurance can be given as to the outcome of any potential lawsuit, we believe that the ultimate outcome of these matters will not have a material adverse effect on our financial position or results of operations and we intend to vigorously defend against any action.

Item 2.  Change in Securities.

Recent Sales of Unregistered Securities

None.

Item 6.  Exhibits and Reports on Form 8-K.

Exhibits required by Item 601 of Regulation S-B

Exhibit Number

Description

(3)

(i) Articles of Incorporation; and (ii) Bylaws

3.1

Articles of Incorporation (incorporated by reference from our Form 10/A Registration Statement, filed February 10, 2000).

3.2

Bylaws (incorporated by reference from our Form 10/A Registration Statement, filed February 10, 2000).

3.3

Amended Bylaws (incorporated by reference from our Form 10/A Registration Statement, filed February 10, 2000).

3.4

Certificate of Amendment to Articles of Incorporation, dated December 17, 1998 (incorporated by reference from our Form 10/A Registration Statement, filed February 10, 2000)

-25-

3.5

Certificate of Amendment to Articles of Incorporation, dated September 21, 1999 (incorporated by reference from our Form 10/A Registration Statement, filed February 10, 2000)

(10)

Material Contracts

10.1

Consulting Agreement dated April 1, 2000 between OnlineFilmSales.com, LLC and Carraway Management Inc. (incorporated by reference from our Annual Report on Form 10-K filed on April 19, 2001).

10.2

Consulting Agreement dated April 1, 2000 between OnlineFilmSales.com, LLC and Spray Point Consulting Limited (incorporated by reference from our Annual Report on Form 10-K filed on April 19, 2001).

10.3

Consulting Agreement dated February 1, 2001 between InternetStudios.com, Inc. and Emergent Capital Corporation (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002).

10.4

Consulting Agreement dated February 1, 2001 between InternetStudios.com, Inc. and Liddington Ltd. (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002).

10.5

Consulting Agreement dated April 1, 2001 between InternetStudios.com, Inc. and Livint Communications Ltd. (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002).

10.6

Settlement Agreement and Mutual General Release dated July 31, 2002 between InternetStudios.com, Inc. and Robert MacLean (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002).

10.7

Settlement Agreement and Mutual General Release dated July 31, 2002 between InternetStudios.com, Inc. and Nick Waddell (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002).

10.8

Settlement Agreement and Mutual General Release dated July 31, 2002 between InternetStudios.com, Inc. and Alex McKean (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002).

10.9

Settlement Agreement and Mutual General Release dated July 31, 2002 between InternetStudios.com, Inc. and Michael Edwards (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002).

10.10

Settlement Agreement and Mutual General Release dated July 31, 2002 between InternetStudios.com, Inc. and Livint Communications Ltd. (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002).

10.11

Settlement Agreement and Mutual General Release dated July 31, 2002 between InternetStudios.com, Inc. and Emergent Capital Corporation (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002)

10.12

Settlement Agreement and Mutual General Release dated July 31, 2002 between InternetStudios.com, Inc. and Liddington Ltd. (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002)

-26-

10.13

Settlement Agreement and Mutual General Release dated July 31, 2002 between InternetStudios.com, Inc. and Mark Rutledge (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002)

10.14

Settlement Agreement and Mutual General Release dated July 31, 2002 between InternetStudios.com, Inc. and Jesse Menzies (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2002)

10.15

Employment Agreement dated January 1, 2001 between InternetStudios.com, Inc. and Michael Edwards (incorporated by reference from our Registration Statement on Form S-8 filed on December 11, 2002).

10.16

Employment Agreement dated January 1, 2001 between InternetStudios.com, Inc. and Nick Waddell (incorporated by reference from our Registration Statement on Form S-8 filed on December 11, 2002).

10.17

Employment Agreement dated February 1, 2001 between InternetStudios.com, Inc. and Jesse Menzies (incorporated by reference from our Registration Statement on Form S-8 filed on December 11, 2002).

10.18

Employment Agreement dated February 29, 2000 between InternetStudios.com, Inc. and Alex McKean (incorporated by reference from our Registration Statement on Form S-8 filed on December 11, 2002).

10.19

Letter of Intent dated February 13, 2003 between InternetStudios.com, Inc. and Dominque Bigle (incorporated by reference from our Annual Report on Form 10-K filed on April 1, 2003).

10.20

Letter Agreement dated March 30, 2003 between InternetStudios.com Inc. and CapStone Investments (incorporated by reference from our Annual Report on Form 10-K filed on April 1, 2003).

10.21

Consulting Agreement dated March 1, 2003 between InternetStudios.com, Inc. and Venture Spark LLC (incorporated by reference from our Quarterly Report on Form 10-Q filed on May 20, 2003).

10.22

Addendum to Letter of Intent dated May 16, 2003 between InternetStudios.com, Inc. and Dominique Bigle (incorporated by reference from our Quarterly Report on Form 10-Q filed on May 20, 2003).

10.23

Letter of Intent dated May 8, 2003 between International Media Acquisition Group, LLC and Ted Hartley and Dina Merrill (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 14, 2003).

10.24

Convertible Note dated May 28, 2003 between InternetStudios.com, Inc. and Alan Kapilow (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 14, 2003).

10.25

Addendum to Letter of Intent dated June 6, 2003 between International Media Acquisition Group, LLC and Ted Hartley and Dina Merrill (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 14, 2003).

10.26

Convertible Note dated June 20, 2003 between InternetStudios.com, Inc., Emergent Capital Corp. and Gustavson Development Inc. (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 14, 2003).

-27-

10.27

Assignment Agreement dated June 20, 2003 between International Media Acquisition Group LLC, Emergent Capital Corp. and Gustavson Development Trust (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 14, 2003).

10.28

Convertible Note dated June 25, 2003 between InternetStudios.com, Inc. and Martial Chaillet (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 14, 2003).

10.29

Letter Agreement dated July 10, 2003 between InternetStudios.com, Inc. and Natexis Bleichroeder Inc. (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 14, 2003).

10.30

Asset Purchase Agreement dated July 30, 2003 between InternetStudios.com, Inc. and Dominque Bigle (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 14, 2003).

10.31

Management Agreement dated July 30, 2003 between InternetStudios.com and Dominique Bigle (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 14, 2003).

10.32

Form of Promissory Note with RKO Pictures, LLC. in the following amounts: $125,000 (May 14, 2004), $125,000 (June 16, 2004), $125,000 (July 7, 2004) and $62,500 (August 8, 2004) (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2003).

10.33

Loan Agreement dated July 14, 2003 between InternetStudios.com and Proximity Capital, L.P. (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2003).

10.34

Senior Convertible Note dated July 14, 2003 between InternetStudios.com, Inc. and Proximity Capital, L.P. (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2003).

10.35

Assignment Agreement dated July 14, 2003 between International Media Acquisition Group, LLC and Proximity Capital, L.P. (incorporated by reference from our Quarterly Report on Form 10-Q filed on November 14, 2003).

10.36

Form of Private Placement Subscription Agreement between Internetstudios.com, Inc and Dominique Bigle (incorporated by reference from our Annual Report Form 10-K filed on April 19, 2004).

10.37

Advisory Fee Payment and Subscription Agreement dated February 10, 2004 between Internetstudios.com, Inc. and InCap Group, Inc. (incorporated by reference from our Annual Report Form 10-K filed on April 19, 2004).

10.38

Advisory Fee Payment and Subscription Agreement dated February 24, 2004 between Internetstudios.com, Inc. and InCap Group, Inc. (incorporated by reference from our Annual Report Form 10-K filed on April 19, 2004).

10.39

Amending Agreement, dated April 27, 2004, between InternetStudios.com, Inc. and Dominique Bigle.(incorporated by reference from our Quarterly Report on Form 10-QSB filed on May 25, 2004)

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(21)

Subsidiaries of the small business issuer

 

Online FilmandTVSales.com, Inc.

 

InternetStudios UK Limited

 

InternetStudios Entertainment Finance

 

International Media Acquisition Group LLC

(31)

Rule 13a-14(a)/15d-14(a) Certifications

31.1

Certification.

(32)

Section 1350 Certifications

32.1

Certification.

Reports on Form 8-K

None

-29-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTERNETSTUDIOS.COM, INC.



By: /s/ Robert MacLean
Robert MacLean
Chairman of the Board
(Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer)

Date: August 23, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

 

 

 

/s/ Robert MacLean
Robert MacLean

Chairman of the Board

August 23, 2004


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10QSB’ Filing    Date    Other Filings
2/19/06
6/30/0510QSB,  NT 10-Q
12/31/0410KSB,  NT 10-K
11/30/04
Filed on:8/23/04
8/18/04
8/8/04
8/7/04
8/6/04
7/19/04
7/9/04
7/7/04
7/5/04
7/2/04
For Period End:6/30/04NT 10-Q
6/27/04
6/25/04
6/16/04
5/28/04
5/25/0410QSB
5/14/04
4/27/04
4/19/0410-K
2/24/04
2/10/04
1/19/04
12/31/0310-K,  NT 10-K
11/14/0310-Q
10/16/03
9/29/03
9/9/03
9/2/03
8/14/0310-Q
8/8/03
8/7/03
7/30/03
7/14/03
7/10/03
7/7/03
6/30/0310-Q
6/25/03
6/20/03
6/16/03
6/15/03
6/6/03
5/31/03
5/28/03
5/20/0310-Q
5/16/03NT 10-Q
5/14/03
5/8/03
4/1/0310-K,  NT 10-K
3/30/03
3/1/03
2/13/03
1/31/03
12/31/0210-K,  NT 10-K
12/11/02S-8
11/14/0210-Q,  8-K
8/15/0210-Q,  4,  8-K
7/31/02
5/29/02
4/10/02
2/5/02
12/31/0110-K
11/5/01
4/19/0110-K
4/1/01
2/1/01
1/1/01
9/7/00
7/1/00
4/1/00
2/29/00
2/10/0010-12G/A
9/21/99
9/20/99
12/17/98
12/15/98
12/14/98
4/14/98
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