SEC Info - Internetstudios Com Inc - ‘10QSB’ for 3/31/05

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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 March 31, 2005

[	] 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.)

322 East 50th Street, New York, NY 10022

(Address of principal executive offices)

(212) 489-0645

(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 CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 14,581,967 common shares issued and outstanding as of May 31, 2005

Transitional Small Business Disclosure Format (Check one):

Yes [

]

No x

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

INTERNETSTUDIOS.COM, INC.

(A Development Stage Company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005

(Unaudited)

CONSOLIDATED BALANCE SHEETS

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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INTERNETSTUDIOS.COM, INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2005	December 31, 2004
	(Unaudited)

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$912	$5,870
Accounts receivable	8,478	3,478
Prepaid Expenses and deposits	5,000	5,000
	14,390	14,348

DEFERRED FINANCE FEE (Note 8)	-	20,000
DEPOSIT ON ACQUISITION (Note 4)	840,000	840,000

	$854,390	$874,348


Schedule “A”LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$784,847	$717,838
Advances due to related party (Note 6)	108,426	26,170
Loans payable (Note 5)	374,585	539,786

	1,267,858	1,283,796

GOING CONCERN CONTINGENCY (Note 1)

STOCKHOLDERS’ EQUITY (CAPITAL DEFICIENCY) (Note 7)
Common stock, $.0001 par value, 100,000,000 shares authorized
14,109,209 shares issued and outstanding (2004 – 12,529,205)	2,962	2,814
Additional paid in capital	67,926,443	67,556,591
Warrants	10,000	10,000
Obligation to issue shares	447,293	547,293
Deficit accumulated during the development stage	(68,800,166)	(68,526,146)

	(413,468)	(409,448)

	$854,390	$874,348

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

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INTERNETSTUDIOS.COM, INC.

(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31, 2005	Three Months Ended March 31, 2004	April 14, 1998 (inception) to March 31, 2005

REVENUE	$5,000	$-	$225,291

OPERATING EXPENSES
General and administrative	207,106	70,937	29,011,701
Sales and marketing	17,677	-	3,147,134
Interest Expense and finance fees	54,237	176,353	640,419
Amortization of goodwill	-	-	12,737,424
Amortization of website development costs	-	-	2,779,668
Website development costs	-	-	6,327,907

	279,020	70,937	54,644,253

Loss from operations	(274,020)	(70,937)	(54,418,962)

Other income (expenses), net
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	$(274,020)	$(247,290)	$(68,800,166)


BASIC NET LOSS PER SHARE	$(0.02)	$(0.02)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING	13,213,872	11,455,798

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

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INTERNETSTUDIOS.COM, INC.

(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31, 2005	Three Months Ended March 31, 2004	April 14, 1998 (inception) to March 31, 2005

CASH FLOWS FROM OPERATING ACTIVITIES	$(274,020)	$(247,290)	$(68,800,166)
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	45,000	174,562	13,619,300
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	(5,000)	-	(54,565)
Taxes recoverable	-	-	17,963
Prepaid expenses and deferred fees	-	-	(142,685)
Accounts payable and accrued expenses	67,009	(14,027)	2,316,840

CASH USED IN OPERATING ACTIVITIES	(167,011)	(86,755)	(19,577,055)

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	-	(10,000)	(807,500)
Notes receivable	-	-	667,500
Acquisition of itsTV.com	-	-	(232,274)
Cash acquired on acquisition of Online Films, LLC	-	-	363,759

CASH USED IN INVESTING ACTIVITIES	-	(10,000)	(3,760,273)

CASH FLOWS FROM FINANCING ACTIVITIES
Bank (repayment) overdraft	-	(3,245)	-
Loans receivable	-	-	(1,201,609)
Loans payable	4,797	-	1,566,329
Advances due to related parties	82,256	-	108,426
Convertible loan payable	-	-	199,159
Net proceeds on sale of common stock	75,000	100,000	22,665,935

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES	162,053	96,755	23,338,240

DECREASE IN CASH AND CASH EQUIVALENTS	(4,958)	-	912

CASH, BEGINNING OF PERIOD	5,870	-	-

CASH, END OF PERIOD	$912	$-	$912

SUPPLEMENTAL CASH FLOW INFORMATION (Note 11)

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

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INTERNETSTUDIO.COM, INC.

(A Development Stage Company)

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005 (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.

Going concern

These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has a working capital deficiency of $1,253,468 at March 31, 2005(2004- $1,269,448) and has incurred losses since inception of $68,800,166, and further losses are anticipated in the development of its business and there can be no assurance that the Company will be able to achieve or maintain profitability. Accordingly, these factors raise 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 accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

There can be no assurance that capital will be available as necessary to meet the Company’s working capital requirements or, if the capital is available, that it will be on terms acceptable to the Company. The issuances of additional equity securities by the Company may result in a significant dilution in the equity interests of its current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase the Company's liabilities and future cash commitments. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, the business and future success may be adversely affected.

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

During 2004 the Company completed an agreement to acquire the Trocadero film library. 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). Montecristo Entertainment LLC was formed in December 2004 and is responsible for the sales, marketing and distribution of the Trocadero Library content, and well as the sales, marketing and distribution other acquired film content through outside sources.

Unaudited Interim Financial Statements

The accompanying unaudited interim 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 may not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the period ended December 31, 2004. The interim unaudited financial statements should be read in conjunction with those financial statements. 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 March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

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INTERNETSTUDIO.COM, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 (Unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Comparative figures

Certain of the comparative figures have been reclassified to conform to the current year’s presentation.

Principles of consolidation

The financial statements include the accounts of the Company, its subsidiary, Montecristo Entertainment, LLC, formerly International Media Acquisition Group LLC (“IMAG”). All intercompany accounts and balances have been eliminated in consolidation.

Use of estimates and assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

Cash and cash equivalents

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

Financial Instruments

In accordance with the requirements of SFAS No. 107, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities including cash and cash equivalents, notes and accounts receivable, notes and accounts payable and accrued liabilities, advances due to related parties, and loans payable, approximate carrying value due to the immediate or short-term maturity of these financial instruments.

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.

Revenue recognition

Revenue from all sources is recognized when the amount is fixed or determinable, delivery has occurred or initial services have been performed, and collection is reasonably assured.

Any amounts received in advance of the goods being delivered or services being performed are recorded as deferred revenue.

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.

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INTERNETSTUDIO.COM, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 (Unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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, 2004.

The Company has elected to account for stock options granted to employees and officers using the intrinsic value based method in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, (“APB No. 25”) and comply with the disclosure provisions of SFAS No. 123 as amended by SFAS No. 148 as described above. Under APB No. 25, compensation expense is recognized based on the difference, if any, on the date of grant between the estimated fair value of the Company’s stock and the amount an employee must pay to acquire the stock. Compensation expense is recognized immediately for past services and pro-rata for future services over the option-vesting period. In addition, with respect to stock options granted to employees, the Company provides pro-forma information as required by SFAS No. 123 showing the results of applying the fair value method using the Black-Scholes option pricing model.

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.

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 March 31, 2005 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.

Recent accounting pronouncements

In March 2004, the Financial Accounting Standards Board ("FASB") issued EITF No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments ("EITF 03-1"). The objective of EITF 03-1 is to provide guidance for identifying impaired investments. EITD 03-1 also provides new disclosure requirements for investments that are deemed to be temporarily impaired. In October 2004, the FASB delayed the recognition and measurement provisions of EITF 03-1 until implementation guidance is issued. The disclosure requirements are effective for annual periods ending after June 15, 2004, and remain in effect. Management believes that the adoption of EITF 03-1 will not have a material impact on the Company’s financial condition or results of operations.

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INTERNETSTUDIO.COM, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 (Unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent accounting pronouncements (continued)

In November 2004, the FASB issued SFAS No. 151, Inventory Costs (“SFAS 151”). SFAS 151 requires issuers to treat idle facility expense, freight, handling costs, and wasted material (spoilage) as current-period charges regardless of whether such charges are considered abnormal. In addition, SFAS 151 requires the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 will be effective for all inventory costs incurred in fiscal years beginning after June 15, 2005. Management believes the adoption of this standard will not have a material impact on the Company's financial position or results of operations.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payment ("SFAS 123(R)"), which requires the compensation cost related to share-based payments, such as stock options and employee stock purchase plans, be recognized in the financial statements based on the grant-date fair value of the award. SFAS 123(R) is effective for all interim periods beginning after December 15, 2005. Management is currently evaluating the impact of this standard on the Company’s financial condition and results of operations. See Note 2(i) for information related to the pro forma effects on the Company’s reported net loss and net loss per share of applying the fair value recognition provisions of the previous SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for Non-monetary Transactions (“SFAS 153”) SFAS 153 requires that exchanges of non-monetary assets are to be measured based on fair value and eliminates the exception for exchanges of non-monetary, similar productive assets, and adds an exemption for non-monetary exchanges that do not have commercial substance. SFAS 153 will be effective for fiscal periods beginning after June 15, 2005. Management does not believe that the adoption of this standard will have a material impact on the Company’s financial condition or results of operations.

NOTE 3 – RKO PICTURES, LLC

By Agreement dated May 8, 2003, as amended on June 6, 2003, IMAG entered into a Letter of Intent to acquire 100% of the membership interests of RKO Pictures, LLC (RKO). 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 was also to 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 December 31, 2003, the Company had paid a deposit of $687,500 to RKO Pictures, LLC.

The deposits of $687,500 were 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, repayable by May 14, 2004;

- Promissory Note dated June 16, 2003 in the amount of $250,000, repayable by June 16, 2004;

- Promissory Note dated July 7, 2003 in the amount of $250,000, repayable by July 7, 2004;

- Promissory Note dated August 7, 2003 in the amount of $62,500, repayable by August 7, 2004.

Closing of the RKO acquisition was scheduled for September 2, 2003 and final documentation was executed between the Company, IMAG and RKO in anticipation of such closing. However, the Letter of Intent expired according to its terms because the financing for this transaction did not close.

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INTERNETSTUDIO.COM, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 (Unaudited)

NOTE 3 – RKO PICTURES, LLC (continued)

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 $6,047 accrued interest) and the promissory note dated June 6, 2003 (in the amount of $250,000 plus $10,684 accrued interest). On July 9, 2004, RKO repaid the promissory note dated July 7, 2003 (in the amount of $250,000 plus $10,000 accrued interest) and on August 6, 2004, RKO repaid the Promissory Note dated August 8, 2003, (in the amount of $62,500 plus $2,500 accrued interest).

As of March 31, 2005, RKO is no longer indebted to the Company and negotiations to acquire RKO under the terms of the RKO Letter of Intent have ceased. However, as a term of the Mutual Release Agreement, the parties have agreed to continue to negotiate a licensing arrangement whereby the Company would create and distribute its DVD (digital video disc) products under the RKO brand name.

NOTE 4 – ACQUISITION OF TROCADERO LIBRARY

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) shares of its common stock and to pay $140,000 to Bigle. As of December 31, 2004, the Company had paid a deposit of $140,000 to Bigle and issued the 1,000,000 shares which were valued at $700,000.

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.

The Company has paid for full consideration of the library which has been acknowledged by the seller. Although there has not been a formal closing and transfer of the library materials, the company will take delivery of masters on an “as needed” basis in conjunction with orders for specific film titles.

NOTE 5 – LOANS PAYABLE

Convertible Loan

On July 14, 2003, the Company received $300,000 by way of a convertible loan bearing interest at 12% per annum, compounded monthly, due the earlier of July 14, 2004, or seven days after the close of a proposed financing. The loan was convertible 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 and was 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 has been amortized over the life of the loan. By an agreement dated July 19, 2004, the lender agreed to accept repayment of $250,000 (paid) of the principal of the loan, and to extend the repayment of the $50,000 balance and any accrued interest to December 31, 2004. As of March 31, 2005 the balance owing was $86,000 plus $6,225 in interest. On April 28, 2005 a “Notice of Conversion” was issued for 472,758 shares as payment for the principal and interest owing on this debt.

Convertible Loan

On July 7, 2003 the Company received $150,000 by way of a convertible loan bearing interest at 10% per annum, compounded monthly, due June 25, 2004. 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 had 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. As of March 31, 2005, the balance owing was $150,000 plus $27,743 in accrued interest..

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INTERNETSTUDIO.COM, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 (Unaudited)

NOTE 5 – LOANS PAYABLE (continued)

Convertible Loan

On June 20, 2003 the Company received $250,000 by way of a convertible loan bearing interest at 12% per annum, compounded monthly, due the earlier of June 20, 2004 or seven days after the close of a proposed financing. The loan 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 and 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 recorded 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 has been 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. This loan was repaid on July 5, 2004 and the security on the promissory notes was released.

Convertible Loan

On July 28, 2003 the Company received $100,000 by way of a convertible loan bearing interest at 10% per annum, compounded monthly, due July 28, 2004. The loan 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. The Company had 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, plus accrued interest to the date of pre-payment. As of March 31, 2005, total interest accrued on this loan is $4,617 and both the loan and accrued interest were due and payable. During the quarter ended March 31, 2005 the Company recorded an additional liability to issue 100,000 shares at a deemed fair value of $0.25 as a lender’s bonus of $25,000.

Loan

On March 31, 2003 the Company received a non-interest bearing loan of $100,000 that was unsecured, bore a fee of $10,000 per quarter, and had no specific terms of repayment As of December 31, 2003 this fee was verbally waived . During March, 2005, the Company issued 680,000 common shares at $0.25 per share in settlement of this loan.

NOTE 6 - RELATED PARTY TRANSACTIONS

During the period, the Company had transactions with directors and officers as follows: expenses paid on behalf of and advances made to the Company - $65,509; management fees incurred by the Company - $40,800; and payments and reimbursements made by the Company - $35,550 leaving $71,185 owing as at March 31, 2005.

All related party transactions are in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

NOTE 7 - CAPITAL STOCK

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 5). To date these shares have not been issued.

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. As of December 31, 2004 these shares had not yet been issued. During March 2005 the Company agreed to issue 1,092,000 common shares at a deemed price of $0.25 per share in settlement of this debt. As of March 31, 2005, these shares have not been issued.

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 loaned the Company $150,000 pursuant to a convertible loan agreement loan dated June 25, 2003 (refer to Note 5). Each unit consists of one common share and one third share purchase warrant. Three share purchase warrants entitle the holder to acquire an additional common share at a price of $1.00 per share 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 5).

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INTERNETSTUDIO.COM, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 (Unaudited)

NOTE 7 - CAPITAL STOCK (continued)

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 40,000 common shares at a price of $0.50 per share to InCap Group, Inc for payment on a contract to provide financing services (refer to Note 8).

During December 2004, the Company completed a private placement of 400,000 common shares at a price of $.25 per share for net proceeds of $100,000.

During January 2005, the Company completed a private placement of 300,000 common shares at a price of $.25 per share for net proceeds of $75,000.

During March, 2005, the Company issued 680,000 common shares at $0.25 per share upon conversion of a convertible promissory note dated April 1, 2003 made in the original principal amount of $100,000 and an additional $70,000 in consideration for the delay in repayment of the note (refer to Note 5).

During May 2005, the Company issued 472,758 common shares at $0.1961 per share upon conversion of a convertible promissory note dated July 19, 2004 made in the original principal amount of $86,000 plus accrued interest of $6,708.

Stock options

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 :

	Number of options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life
December 31, 2003	13,300	$100.00	0.92 years
Granted	1,500,000	$0.50
Exercised	-	-
Expired	13,300	$100.00
December 31, 2004	1,500,000	$0.50	6.52 years
Granted	-	-
Exercised	-	-
Expired	-	-
March 31, 2005	1,500,000	$0.50	6.27 years

During the period ended September 30, 2004 the Company granted 1,500,000 non-qualified options to consultants under the Company’s Stock Option Plan allowing for the acquisition of a total of 1,500,000 shares of the Company’s common stock at a price of $0.50. The fair value of these options will be recorded as consulting fees of $300,000 upon vesting of the options. The fair value of these stock options was estimated using the Black-Scholes option pricing model assuming an expected life of seven years, a risk-free interest rate of 3% and an expected volatility of 98%. The options vest over a 30 month period. As of December 31, 2004, $150,000 of the expense has been recorded and the remaining $150,000 will be recorded upon vesting of the remaining options. During the quarter ended March 31, 2005 no options vested and accordingly no stock based compensation expense was recognized.

Warrants

As at March 31, 2005 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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INTERNETSTUDIO.COM, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 (Unaudited)

NOTE 8 – FINANCING AGREEMENT

During June, 2004 the Company entered into an agreement with WestLB Securities Inc. whereby WestLB has been engaged to act as agent for the Company and in connection with obtaining a private placement. In consideration, WestLB was paid a fee of $20,000. During the quarter ended March 31, 2005 this fee was expensed as the anticipated private placement did not occur.

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 - SUPPLEMENTAL CASH FLOW INFORMATION

	Three Months Ended March 31, 2005	Three Months Ended March 31, 2004
Cash paid during period for:
Interest on debt instruments	$4,438	$-
Income taxes	-	-

NOTE 11 – CONTINGENCIES

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

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 the Company is for debt arising for the failure to pay for software development services. Oxford claims US$107,121, 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. The Company filed a Statement of Defence on October 16, 2003 and intends 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 the Company, the Company’s Chief Executive Officer and former Chief Executive Officer, are all jointly and severally liable to pay approximately $115,616, plus interest, on account of certain credit card debt charged to the former employee’s account. The original action was initiated against the former employee by American Express Travel Related Services Company, Inc. (“American Express”). On March 6, 2004, American Express obtained a judgment against the former employee in the amount of $110,774. The parties agreed that the cross-defendants (The Company and current and former Chief Executive Officers) could satisfy this debt by payment of $45,000. On April 23, 2004, the former employee obtained a default judgment against the Company and the current and former Chief Executive Officers for indemnity in the amount of $115,616. This default judgment was set aside as to both the current and former Chief Executive Officers, but not as to the Company, which was not represented in the action. The Company is advised that American Express, a former employee and both the current and former Chief Executive Officers are in the process of negotiating a settlement between the parties. The Company accrued a loss in 2003 of $45,000 and accrued an additional loss provision in 2004 of $70,616 relating to this legal action.

On May 28, 2004, a Senior Convertible Note that we issued to Alan Kapilow in the amount of $100,000 matured. This Note carries interest at ten percent per annum. Mr. Kapilow has demanded payment of all principal and accrued interest and he has advised the Company that if he does not receive payment, he will refer collection to his attorneys. The Company is in negotiations to settle this debt . It is intended that shares will be delivered to Mr. Kapilow as part and parcel of a mutually acceptable payment schedule.

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INTERNETSTUDIO.COM, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 (Unaudited)

NOTE 11 - CONTINGENCIES (continued)

Although no assurance can be given as to the outcome of any potential lawsuit, the Company believes that the ultimate outcome of these matters will not have a material adverse effect on the Company’s financial position or results of operations and it intends to vigorously defend against any action.

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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", "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 subsidiary Montecristo Entertainment LLC, 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 were incorporated in the State of Nevada on April 14, 1998 under the name The Enterprise, Inc. We changed our name to eHealth.com, Inc. in anticipation of acquiring a license to software technology for the health industry. This acquisition was not completed. Effective September 21, 1999 we changed our name to InternetStudios.com, Inc.

We currently have one subsidiary, a Delaware limited liability company formed on May 12, 2003 under the name International Media Acquisition Group LLC. On January 14, 2005 International Media Acquisition Group LLC changed its name to Montecristo Entertainment LLC. We operate our business through this subsidiary company.

Through Montecristo Entertainment LLC, we acquire the distribution and marketing rights to independent film products from around the world and we market and distribute these products, including theatrical motion pictures, television programs, home video products, and digitally delivered entertainment and media. Currently, our catalogue consists of 16 films from Japan, Thailand, India, the Czech Republic, the United Kingdom and the United States, with a focus on “world cinema”.

On January 19, 2004, we entered into a formal asset purchase agreement with Dominique Bigle to acquire the Trocadero library, a motion picture library consisting of over 1500 motion pictures. As consideration, we agreed to issue to Mr. Bigle 1,000,000 shares of our common stock and to pay to him the amount of $250,000. On April 27, 2004, we amended this agreement to reduce the cash consideration from $250,000 to $140,000 and we agreed to hire

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Mr. Bigle pursuant to a written management agreement. In the April 27, 2004 amendment Mr. Bigle acknowledged receipt of both the 1,000,000 shares and the $140,000 in cash. Effective February 1, 2005, we hired Mr. Bigle’s company, 24/7 Entertainment International Inc. to provide Mr. Bigle’s services to us for an annual consulting fee of $150,000. This consulting agreement contemplates that Mr. Bigle will facilitate the exploitation of the movies included in the Trocadero library, with a focus on marketing and distribution of television and home video products. MonteCristo Entertainment will sell DVDs of the classic titles from our Trocadero Library as they become available for distribution. We have not yet asked Mr. Bigle to deliver any of the titles included in the Trocadero library, as they are currently in storage under controlled conditions and would begin to deteriorate if delivered out of storage. We intend to have these films delivered to us as and when we need them, on a title by title basis, and to incur shipping and lab charges only as and when we receive a bona fide offer for each film.

On December 30, 2004 we signed a letter of intent with Michelle Taverna pursuant to which we agreed to appoint Mr. Taverna as president of Montecristo Entertainment LLC and a European company to be formed, and agreed to make him a director of our company, Montecristo Entertainment LLC and the European company to be formed. Mr. Taverna agreed to be responsible for all sales, marketing and distribution efforts of Montecristo Entertainment LLC and the European company. We agreed to pay to Mr. Taverna a salary in an amount to be determined (but in no event less than the salary we pay to our President and Chief Executive Officer), and a signing bonus of 500,000 shares of our common stock. We also agreed to issue to Mr. Taverna share purchase options entitling him to purchase an additional 1,500,000 common shares of our company at an exercise price of $0.25. This letter of intent was subject to the negotiation and execution of a formal agreement; as at the date of filing of this quarterly report on form 10-QSB, we have not yet negotiated or executed such a formal agreement. On March 2, 2005, we issued 500,000 shares of our common stock to Mr. Taverna as contemplated by the letter of intent.

On October 4, 2004, we executed a letter of intent with Airwaves Digital Group Ltd. and Mr. Alex Downie regarding the purchase of Airwaves Sound Design Ltd., a British Columbia corporation and the wholly-owned subsidiary of Airwaves Digital Group Ltd. The letter of intent contemplates that we will issue 1,000,000 shares of our common stock to Airwaves Digital Group together with 1,000,000 non-transferable share purchase warrants, each of which would, when and if issued, entitle the holder to acquire an additional share of our common stock at an exercise price equal to the price per share to be paid in our next financing. This letter agreement is subject to conditions, including a condition that the parties negotiate the terms of a formal purchase agreement. Although we began the negotiation of a formal agreement in October of 2004, we have since suspended the negotiation. We continue to explore the synergies between our company and Airwaves Sound Design Ltd. in an effort to determine whether alternative relationships between both companies might better suit our respective requirements at this time.

Mr. Alex Downie is the president of Airwaves Sound Design Ltd. and a principal of Airwaves Digital Group, Ltd. Airwaves Sound Design Ltd. owns a sound and film editing studio used for the completion of film, television, advertising, animation and new media. We plan to use this studio to re-master, author and mix DVDs, including the classic titles from our Trocadero library. We are working together on an as-needed basis, and Airwaves has extended us the courtesy of a preferred rate for the work we refer to them. Currently, Airwaves Sound Design is assisting us in marketing our film titles and is performing a quality control function during our re-mastering of both visual and audio on some of our motion picture products, as well as transferring our products to a digital archive and multi-language dubbing and mixing, which we believe will be a valuable advantage to our company in addressing international DVD formats and menus.

We continue to explore other available business opportunities whereby we can build our library of filmed entertainment assets and add to our DVD (digital video disc) titles.

Results of Operations for the three months ended March 31, 2005 and March 31, 2004

The discussion set forth below relating to results of operations pertains to the comparison of the three months ended March 31, 2005 and 2004.

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Revenues

We recognized $5,000 in revenue during the three months ended March 31, 2005, as compared to $nil for the three months ended March 31, 2004. 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.

Sales and Marketing Expenses

For the three months ended March 31, 2005 we had sales and marketing expenses of $17,677, as compared to $nil for the three months ended March 31, 2004. This increase was due primarily to the cost of our attendance at the Berlin Market and the refining of our sales and marketing strategy.

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 March 31, 2005 were $207,106, as compared to $70,937 for the three months ended March 31, 2004. This increase in the amount of our general and administrative expenses is primarily a result of the completion of our acquisition of the Trocadero library, the retention of Michelle Taverna and Dominique Bigle, and the resulting refocus of our sales and marketing strategy our business plan.

Net Loss

Our net loss was $274,020 for the three months ended March 31, 2005, and $247,290 for the three months ended March 31, 2004. The primary reason for the increase in our net loss is due to the increase in our general and administrative expenses. Our management believes that we will continue to experience losses from operations during the balance of the year ending December 31, 2005.

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 to our auditors to question 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 March 31, 2005, we had cash of $912 compared to cash of $5,870 at December 31, 2004. 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 ($167,000) for the three months ended March 31, 2005 as compared to $86,755 for the three months ended March 31, 2004. During the three months ended March 31, 2005 we used cash primarily to pay expenses related to the Trocadero transaction and to establish our presence at marketing events, beginning with the Berlin Film market event.

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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 March 31, 2005 we had a working capital deficiency of $1,252,928 and we have incurred losses since inception of $68,800,166. 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.

During the last fiscal year our management reduced our operating requirements in an effort to assure our ability to continue our operations while we acquired the Trocadero library, negotiated with Mr. Taverna and Mr. Bigle and refined our business plan and its implementation. These steps included reductions in our staffing, marketing and consulting expenses. We are now in the process of securing additional capital through debt/equity transactions in order to implement our current business plan and continue our 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 our 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 timely achieve our financing and acquisition plans and generate revenues in amounts sufficient to support our operations 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 are currently conducting discussions with financiers and, after the Cannes Film Festival, we anticipate that our subsidiary Montecristo Entertainment LLC will begin generating significant revenues. At and after the Cannes marketing event, we will refine our business model and approach the financial markets with the intention of issuing shares to institutional investors in order to assist us in marketing our products and services in similar film market events during the balance of the year and to finance the production of DVD (digital video disc)'s for distribution and to expand our planned DVD (digital video disc) sales and marketing program.

We expect that the implementation of our new business strategy will lead to the generation of revenues in fiscal 2005.

Plan of Operations

Our primary objective over the twelve months ending March 31, 2006 will be to build a niche distribution platform to maximize revenues from filmed entertainment content in all formats through the building of a brand, the re-labelling of classic content from our Trocadero library titles 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 DVD’s (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

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(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 March 2004, the FASB issued EITF No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments ("EITF 03-1"). The objective of EITF 03-1 is to provide guidance for identifying impaired investments. EITD 03-1 also provides new disclosure requirements for investments that are deemed to be temporarily impaired. In October 2004, the FASB delayed the recognition and measurement provisions of EITF 03-1 until implementation guidance is issued. The disclosure requirements are effective for annual periods ending after June 15, 2004, and remain in effect. Management believes that the adoption of EITF 03-1 will not have a material impact on our financial condition or results of operations.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payment ("SFAS 123(R)"), which requires the compensation cost related to share-based payments, such as stock options and employee stock purchase plans, be recognized in the financial statements based on the grant-date fair value of the award. SFAS 123(R) is effective for all interim periods beginning after December 15, 2005. Management is currently evaluating the impact of this standard on our financial condition and results of operations. See Note 2(i) for information related to the pro forma effects on our reported net loss and net loss per share of applying the fair value recognition provisions of the previous SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

RISK FACTORS

Much of the information included in this quarterly 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 quarterly 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

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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.

RISKS SPECIFIC TO OUR COMPANY

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 March 31, 2005, we have incurred regular operating losses and we 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, 2004 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.

We have a limited operating history

Although we have been in business for many years, we are still 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:

•	competition;
•	whether we can compete successfully with others pursuing the same line of business;
•	whether we can anticipate and adapt to a developing market;
•	whether we can effectively manage rapidly expanding operations should our operations rapidly expand;
•	the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure;
•	whether we can provide acceptable customer service;

•	whether we can respond to competitive developments;
•	the possibility of unforeseen price competition for our services, or reductions in market prices for DVD (digital video disc) sales ; and
•	our dependence upon key personnel.

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

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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.

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:

•	fluctuating demand for filmed entertainment;
•	the amount and timing of capital expenditures and other costs relating to the expansion of our operations;
•	whether we can acquire filmed entertainment product in a timely and effective manner;
•	whether we can attract new personnel in a timely and effective manner and to retain existing personnel;
•	competition;
•	costs relating to future acquisitions;
•	seasonality;
•	general economic conditions and economic conditions specific to the filmed entertainment rights industry, the Internet or all or a portion of the technology market.

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 our sales, distribution and marketing plan, in the amount of approximately $1,500,000, 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

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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.

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

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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:

•	filmed entertainment rights industry connections;
•	brand recognition;
•	quality of assets; and
•	quality of filmed entertainment product.

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.

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:

•	changes in laws and policies affecting trade;
•	changes to laws and policies related to investments and taxes;
•	varying degrees of protection for intellectual property;
•	instability of foreign economies and governments;
•	cultural barriers; and
•	currency risk.

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

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

We will be required to develop a marketing campaign that will effectively make buyers aware of our catalogue of films and DVDs and filmed entertainment library. We may also elect to enter into agreements or relationships with third parties regarding the promotion or marketing of our DVDs 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) catalogue and to expanding our commerce relationships. In order

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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.

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, labour 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.

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.

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

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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 Securities Exchange Act of 1934, as of the end of the period covered by the annual report, being March 31, 2005, 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 principal executive officer and principal financial officer. Based upon that evaluation, our company’s principal executive officer and principal financial officer concluded that our company’s disclosure controls and procedures are effective as at the end of the period covered by this report. There have been no significant changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period 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 reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our president and secretary 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.

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 stipulated 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. To our knowledge, nothing further has occurred in connection with this Arbitration Award.

On November 15, 2002, The Hollywood Reporter Incorporated filed an action against our company in the Supreme Court of British Columbia. Hollywood’s claim against the Company is for debt arising for the failure to pay for advertising copy published in Hollywood’s periodical. Hollywood claims US$8,843.42, plus contractual and court ordered interest. We filed a Statement of Defence on December 20, 2002. There has been no further activity in this lawsuit and we intend to vigorously defend it.

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

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operations. We filed a Statement of Defence on October 16, 2003. There has been no further activity in this lawsuit and we intend to vigorously defend it.

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, our Chief Executive Officer and our former Chief Executive Officer are all jointly and severally liable to pay approximately $115,616, plus interest, on account of certain credit card debt charged to the former employee’s account. The action was initiated against the former employee by American Express Travel Related Services Company, Inc. On March 6, 2004, American Express obtained a judgement against the former employee in the amount of $110,773.94. The parties agreed that the cross-defendants (our company and our current and former Chief Executive Officers) could satisfy this debt by payment of $45,000. On April 23, 2004, the former employee obtained a default judgment against our company and our current and former Chief Executive Officers for indemnity in the amount of $115,616.33. This default judgment was set aside as to both our current and former Chief Executive Officers, but not as to our company, which was not represented in the action. We are advised that American Express Travel Related Services, our former employee and both our current and former Chief Executive Officers are in the process of negotiating a settlement between the parties

On March 23, 2005 we received written demand from attorneys representing the law firm of Kopple & Klinger, LLP in a debt collection action. These attorneys demanded that our company pay to them, on account of the debt owed to Kopple & Klinger, the sum of $108,207.03 within ten days of the date of their letter or they will pursue legal action. We have not paid this amount and, to our knowledge, no lawsuit has yet been filed in respect of this matter.

We can give no assurance as to the outcome of any lawsuit, pending, threatened or otherwise.

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

On March 30, 2005, we issued 680,000 common shares in the capital of our company to one investor upon the conversion of all amounts due pursuant to a convertible promissory note dated April 1, 2003 made in the original principal amount of $100,000. The investor was not a U.S. person and the transaction did not occur in the United States and we relied on the exemption provided under Regulation S promulgated pursuant to the Securities Act of 1933.

On May 20, 2005, we issued 472,758 common shares in the capital of our company to one investor upon the conversion of all amounts due pursuant to a senior convertible promissory note dated July 15, 2004 made in the original principal amount of $86,000. The shares were issued to an accredited investor relying on Rule 506 of Regulation D and/or Section 4(2) of the Securities Act.

Item 6. Exhibits.

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).

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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)
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)

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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)
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 Dominique 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).

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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).
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 Dominique 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).

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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)
10.40	Letter of Intent dated October 4, 2004 between InternetStudios.com, Inc., Airwaves Digital Group Ltd. and Airwave Sound Design Ltd. (incorporated by reference from our Quarterly Report on Form 10-QSB filed on November 29, 2004)
10.41	Form of Private Placement Subscription Agreement with the following: Christopher Lanning Livingston Investments LLC (incorporated by reference from our Annual Report on Form 10-KSB filed on May 19, 2005)
10.42	Letter Agreement dated December 30, 2004 between the Company and Michele Taverna (incorporated by reference from our Annual Report on Form 10-KSB filed on May 19, 2005)
10.43	Consulting Agreement dated February 1, 2005 between the Company and Dominique Bigle (incorporated by reference from our Annual Report on Form 10-KSB filed on May 19, 2005)
(21)	Subsidiaries of the small business issuer
	Online FilmandTVSales.com, Inc.
	InternetStudios UK Limited
	InternetStudios Entertainment Finance
	Montecristo Entertainment LLC
(31)	Rule 13a-14(a)/15d-14(a) Certifications
31.1	Certification.
(32)	Section 1350 Certifications
32.1	Certification.

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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

CEO, President, Secretary, Treasurer & Director

(Principal Executive Officer,

Principal Financial Officer and Principal Accounting Officer)

Date: June 21, 2005

Internetstudios Com Inc – ‘10QSB’ for 3/31/05

On: Tuesday, 6/21/05, at 3:37pm ET · For: 3/31/05 · Accession #: 1085037-5-882 · File #: 0-27363

Previous ‘10QSB’: ‘10QSB’ on 11/29/04 for 9/30/04 · Next: ‘10QSB’ on 9/22/05 for 6/30/05 · Latest: ‘10QSB’ on 12/23/05 for 9/30/05

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

10QSB — Quarterly Report — Small Business

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10QSB’ Filing	Date	First	Last	Other Filings

	3/31/06	18		NT 10-K
	2/19/06	12
	12/31/05	6	17	NT 10-K
	12/15/05	9	19
Filed on:	6/21/05	31
	6/15/05	9	19
	5/31/05	1
	5/20/05	26
	5/19/05	30		10KSB
	4/28/05	10
For Period End:	3/31/05	1	25	NT 10-Q
	3/30/05	26
	3/23/05	26
	3/2/05	16
	2/1/05	16	30
	1/14/05	15
	12/31/04	3	20	10KSB, NT 10-K
	12/30/04	16	30
	11/29/04	30		10QSB
	10/4/04	16	30
	9/30/04	12		10QSB, NT 10-Q
	8/8/04	29
	8/7/04	9
	8/6/04	10
	7/28/04	11
	7/19/04	10	12
	7/15/04	26
	7/14/04	10
	7/9/04	10
	7/7/04	9	29
	7/5/04	11
	7/2/04	10
	6/27/04	10
	6/25/04	10
	6/20/04	11
	6/16/04	9	29
	6/15/04	8	19
	5/28/04	11	26
	5/25/04	30		10QSB
	5/14/04	9	29
	4/27/04	10	30
	4/23/04	13	26
	4/19/04	29		10-K
	3/31/04	4	17	10QSB, NT 10-K, NT 10-Q
	3/6/04	13	26
	2/24/04	29
	2/10/04	29
	1/19/04	10	15
	12/31/03	9	12	10-K, NT 10-K
	11/14/03	29		10-Q
	10/16/03	13	26
	9/29/03	13	26
	9/9/03	13	25
	9/2/03	9
	8/14/03	28	29	10-Q
	8/8/03	10
	8/7/03	9
	7/30/03	10	29
	7/28/03	11
	7/14/03	10	29
	7/10/03	29
	7/7/03	9	10
	6/25/03	11	29
	6/20/03	11	29
	6/16/03	9	11
	6/6/03	9	28
	5/28/03	28
	5/20/03	28		10-Q
	5/16/03	28		NT 10-Q
	5/14/03	9	11
	5/12/03	15
	5/8/03	9	28
	4/1/03	12	28	10-K, NT 10-K
	3/31/03	11		10-K, 10-Q, NT 10-K, NT 10-Q
	3/30/03	28
	3/1/03	28
	2/13/03	10	28
	12/20/02	25
	12/11/02	28		S-8
	11/15/02	25		8-K
	11/14/02	27	28	10-Q, 8-K
	7/31/02	27	28
	2/5/02	25
	11/5/01	25
	4/19/01	27		10-K
	4/1/01	27
	2/1/01	27	28
	1/1/01	28
	9/7/00	25
	7/1/00	8
	4/1/00	27
	2/29/00	28
	2/10/00	26	27	10-12G/A
	9/21/99	15	27
	9/20/99	6
	12/17/98	27
	12/15/98	8
	12/14/98	6
	4/14/98	4	15
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Internetstudios Com Inc – ‘10QSB’ for 3/31/05

On: Tuesday, 6/21/05, at 3:37pm ET · For: 3/31/05 · Accession #: 1085037-5-882 · File #: 0-27363

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Quarterly Report — Small Business — Form 10-QSBFiling Table of Contents

10QSB — Quarterly Report — Small Business

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Dates Referenced Herein and Documents Incorporated by Reference

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