Infosearch Media, Inc. - Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2008

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

For the transition period from __________ to ____________.

Commission file number 333-97385

INFOSEARCH MEDIA, INC.

(Exact name of Small Business Issuer as specified in its charter)

Delaware		90-0002618
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

6041 Bristol Parkway, Culver City, California 90230

(Address of principal executive offices)

(310) 437-7380

(Small Business Issuer’s telephone number)

Check whether the Small Business Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the small business issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 126-2 of the Exchange Act).

Yes o No x

Transitional Small Business Disclosure Format (Check one):

Yes o No x

As of August 19, 2008, 52,493,592 shares of the Small Business Issuer’s common stock, $.001 par value, were issued and outstanding.

TABLE OF CONTENTS

	Page
PART I -FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheet		3

Consolidated Statements of Operations		4

Consolidated Statements of Cash Flows		5

Footnotes to Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11

Item 3. Controls and Procedures		17

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		18

Item 6. Exhibits		18

SIGNATURES		19

PART I - FINANCIAL INFORMATION

Item 1: Financial Statements

INFOSEARCH MEDIA, INC.

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2008			2007
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	130,585		$	787,239
Restricted cash		-			20,000
Accounts receivable		333,248			215,518
Prepaid and other current assets		102,228			141,745
TOTAL CURRENT ASSETS		566,061			1,164,202

EMPLOYEE ADVANCE		2,300			1,800
PROPERTY AND EQUIPMENT, NET		110,708			130,650
EQUITY WARRANT ASSET		108,014			112,049

TOTAL ASSETS	$	787,083		$	1,408,701

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable	$	135,198		$	228,308
Accrued salaries and bonuses and expenses		44,314			12,553
Accrued expenses		36,320			170,882
Deferred revenue		359,375			526,868
Provision for refunds payable/chargebacks		15,842			15,842
Current Tax Liability		1,250			1,250
TOTAL CURRENT LIABILITIES		592,299			955,703

FAIR VALUE OF WARRANT LIABILITY		147,003			967,651

DEPOSIT ON SUBSCRIPTION		230,000			-

STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value, 200,000,000 shares authorized; 52,493,592 shares issued and outstanding for the periods ending June 30, 2008 and December 31, 2007		52,494			52,494
Additional paid in capital		11,426,111			11,336,742
Accumulated deficit		(11,660,824	)		(11,903,889	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(182,219	)		(514, 653	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	787,083		$	1,408,701

See accompanying notes to financial statements.

INFOSEARCH MEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three months ended June 30,						For six months ended June 30,
	2008			2007			2008			2007
CONTENT SALES	$	572,594		$	1,120,194		$	1,605,023		$	2,396,109
WEB PROPERTIES SALES		9,116			39,799			25,973			70,749
NET SALES		581,710			1,159,993			1,630,996			2,466,858

CONTENT COST OF SALES		234,806			438,752			588,401			899,927
WEB PROPERTIES COST OF SALES		26,493			16,900			46,452			32,221
COST OF SALES		261,299			455,652			634,853			932,148

GROSS PROFIT		320,411			704,341			996,143			1,534,710

OPERATING EXPENSES
General & Administrative		467,230			1,349,193			1,126,520			2,371,469
Selling		208,052			427,384			448,137			961,511
TOTAL OPERATING EXPENSES		675,282			1,776,577			1,574,657			3,332,979

LOSS FROM OPERATIONS		(354,871	)		(1,072,236	)		(578,514	)		(1,798,269	)

CHANGE IN FAIR VALUE OF WARRANTS		326,551			(61,745	)		816,613			234,458

INTEREST INCOME, NET		655			18,186			5,228			34,966

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAX		(27,665	)		(1,115,796	)		243,327			(1,528,846	)

TAXES FROM CONTINUING OPERATIONS		800			825			262			2,875

NET INCOME (LOSS) FROM CONTINUING OPERATIONS		(28,465	)		(1,116,621	)		243,065			(1,531,721	)

NET INCOME (LOSS)	$	(28,465	)	$	(1,116,621	)	$	243,065		$	(1,531,721	)

EARNINGS (LOSS) PER SHARE
BASIC	$	(0.00	)	$	(0.02	)	$	0.00		$	(0.03	)
DILUTED	$	(0.00	)	$	(0.02	)	$	0.00		$	(0.03	)
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC		52,493,592			52,547,662			52,493,592			52,132,276
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED		52,493,592			52,547,662			52,493,592			52,132,276

See accompanying notes to financial statements.

INFOSEARCH MEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)	$	243,065		$	(1,531,721	)

Adjustment to reconcile net earnings (loss) to net cash
used in operating activities
Depreciation and amortization		23,832			60,038
Equity based compensation		89,369			169,718
Change in fair value of warrant liability		(820,648	)		(232,949	)
Change in fair value of equity warrant asset		4,035			-

Changes in assets and liabilities:
Accounts receivable		(118,030	)		19,183
Due from related parties		(500	)		34,423
Prepaid expenses and other current assets		2,017			49,852
Employee Advances		-			(3,700	)
Security Deposit		37,500			-
Accounts payable, accrued expenses and other liabilities		(195,911	)		(352,964	)
Current tax liability		-			1,250
Provision for refunds		-			(16,482	)
Deferred revenue		(167,493	)		(37,325	)
Total adjustments		(1,145,829	)		(305,763	)

NET CASH USED IN OPERATING ACTIVITIES:		(902,764	)		(1,840,677	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash		20,000			288
Capital expenditures - fixed assets		(3,890	)		(68,250	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		16,110			(67,962	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of capital lease obligations		-			(17,162	)
Warrant exercise		-			3,600
Deposit on Subscription		230,000			-
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		230,000			(13,652	)

Net decrease in cash and cash equivalents		(656,654	)		(1,922,201	)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		787,239			2,495,654

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	130,585		$	573,453

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	0		$	292
Income tax paid	$	0		$	2,875

See accompanying notes to financial statements.

INFOSEARCH MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2008

(Unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements for the three and six months ended June 30, 2008 have been prepared by InfoSearch Media, Inc. (the “Company” or “InfoSearch”) in accordance with the instructions to Form 10-Q and the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accounting principles generally accepted in the United States (“GAAP”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and other adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such instructions, rules and regulations. The Company believes that the disclosures provided are adequate to make the information presented clear and straightforward. For a more complete understanding of the Company’s financial position, these financial statements should be read in conjunction with the audited financial statements and explanatory notes in the Company’s Annual Report on Form 10-KSB/A for the year ended December 31, 2007 filed with the SEC on April 17, 2008. Operating results for the period ended June 30, 2008 are not necessarily indicative of the results to be expected for the year ending December 31, 2008.

2. Organization and Nature of Operations

InfoSearch is a Los Angeles-based provider of search-targeted text and video content for the Internet, designed to provide increased search engine traffic, obtain higher rankings, brand recognition and better website performance for electronic commerce, media and publishing clients. InfoSearch's network of hundreds of professional writers, editors, other technical specialists help businesses succeed on the Web by implementing text and video content-based Internet marketing solutions. InfoSearch’s search marketing solutions involve online content that supports the non-paid search marketing initiatives of its clients. Non-paid search results, otherwise known as organic, are the search results that the search engines find on the World Wide Web as opposed to those listings for which companies pay for placement.

Going Concern

The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. Although the Company reduced its net loss to $4,588 for the second half of the year ending 2007 by significantly lowering operating expenses and has increased cash to $787,239 as of December 31, 2007, the Company has historically experienced recurring net losses and negative cash flows from operations. During the year ending December 31, 2007 the Company reported a net loss of $1,536,309 and negative flows from operations of $1,965,961, with operating losses and negative cash flows from operations continuing in the six months of 2008. In view of these conditions, the Company’s ability to continue as a going concern is contingent upon its ability to ultimately achieve and maintain profitable operations or secure additional financing. Management believes that its current and future plans provide an opportunity to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that may be necessary in the event the Company cannot continue as a going concern.

3. Significant Accounting Policies

Significant Clients

One of our clients, Demand Media, represented approximately 19.6% of total revenues for the six months ended June 30, 2008 as opposed to 25.4% for the six months ended June 30, 2007.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and trade receivables. The Company maintains cash and cash equivalents with high-credit, quality financial institutions. At June 30, 2008, the cash balances held at financial institutions were either not in excess of federally insured limits or not subject to the federal insurance system.

Credit is generally extended based upon an evaluation of each customer's financial condition, with terms consistent in the industry and no collateral required. The Company determines an allowance for collectibility on a periodic basis. Amounts are written off against the allowance in the period the Company determines that the receivable is uncollectible.

Recently Issued Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. Subsequent changes in fair value for designated items will be required to be reported in earnings in the current period. SFAS No. 159 also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the effect of implementing this guidance, which directly depends on the nature and extent of eligible items elected to be measured at fair value, upon initial application of the standard on January 1, 2008.

In December 2007, the SEC issued SAB No. 110, Certain Assumptions Used in Valuation Methods - Expected Term (“SAB 110”) According to SAB 110, under certain circumstances the SEC staff will continue to accept beyond December 31, 2007 the use of the simplified method in developing an estimate term of share options that possess certain characteristics in accordance with SFAS 123(R) beyond December 31, 2007. We adopted SAB 110 effective January 1, 2008 and continue to use the simplified method in developing the expected term used for our valuation of stock-based compensation.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”), which revises current purchase accounting guidance in SFAS No. 141, Business Combinations. SFAS No. 141R requires most assets acquired and liabilities assumed in a business combination to be measured at their fair values as of the date of acquisition. SFAS No. 141R also modifies the initial measurement and subsequent remeasurement of contingent consideration and acquired contingencies, and requires that acquisition related costs be recognized as expense as incurred rather than capitalized as part of the cost of the acquisition. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008 (the Company’s fiscal 2009) and is to be applied prospectively to business combinations occurring after adoption. The impact of SFAS No. 141R on the Company’s consolidated financial statements will depend on the nature and extent of the Company’s future acquisition activities.

In December 2007, the FASB issued SFAS No. 160. “Noncontrolling Interests in Consolidated Financial Statements-and Amendment of ARB No. 51.” SFAS 160 establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. This statement also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. Management has reviewed this new standard and believes that it has no impact on the financial statements of the Company at this time; however, it may apply in the future.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. SFAS 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity's liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. SFAS 161 will be effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, will be adopted by the Company beginning in the first quarter of 2009. The Company does not expect there to be any significant impact of adopting SFAS 161 on its financial position, cash flows and results of operations.

4. Equity Warrant Asset

We account for the equity warrant asset with net settlement terms to purchase preferred stock of Demand Media, a privately held company, as a derivative. Under the terms of the warrant, InfoSearch is entitled to purchase 125,000 shares of Series C Preferred Stock of Demand Media at an exercise price of $3.851 per share. Under the accounting treatment required by SFAS No. 133, equity warrant assets with net settlement terms are recorded at fair value and are classified as investments on the balance sheet.

The fair value of the Demand Media warrant is reviewed quarterly. For the six months ended June 30, 2008, we valued the warrant using the Black-Scholes option pricing model, which incorporates the following material assumptions:

Underlying asset value was estimated based on information available, including any information regarding subsequent rounds of funding or initial public offerings.

Volatility, or the amount of uncertainty or risk about the size of the changes in the warrant price, was based on a publicly-listed equity similar in nature to the business in which Demand Media operates and yielded a volatility of 23.45%.

The risk-free interest rate was 3.34%.

Expected life of 39 months based on the contractual term of the warrant.

Any changes from the grant date fair value of the equity warrant asset are recognized as increases or decreases to the equity warrant asset on our consolidated balance sheet and as net gains or losses on derivative investments within non-operating expenses in the consolidated statement of operations.

As of June 30, 2008, there was a $4,035 decrease in the grant date fair value of the equity warrant asset from the valuation at December 31, 2007.

5. Net Earnings (Loss) per Share

Net earnings (loss) per share is computed as net earnings (loss) divided by the basic or diluted weighted average number of common shares outstanding for the period. As of June 30, 2008, 14,298,522 potential shares exercisable from stock options and warrants were excluded from the computation of diluted net earnings (loss) per share as their effect would be anti-dilutive.

6. Income Taxes

The Company and its subsidiaries files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdiction and the Company is not currently under examination by any taxing jurisdiction. Management believes that its accrual for tax liabilities is adequate for all open audit years based on its assessment of many factors including past experience and interpretation of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2002. If any of the unrecognized tax benefits are settled with tax authorities within the next twelve months, the Company would make any necessary adjustments to the accrual for uncertain tax benefits. The Company adopted the provisions of FIN 48 effective January 1, 2007. On the basis of present information, it is the opinion of the Company’s management that any assessment resulting from any future audits will not have a material adverse effect on the Company’s consolidated financial statements.

7. Stockholders’ Equity

The authorized capital stock currently consists of 200,000,000 shares of Common Stock, par value $0.001 per share, and 25,000,000 shares of preferred stock, par value $0.001 per share, the rights and preferences of which may be established from time to time by our board of directors. As of June 30, 2008, there were 52,493,592 shares of our Common Stock issued and outstanding; and options and warrants exercisable representing 14,298,522 shares of Common Stock. No other securities, including without limitation any preferred stock, convertible securities, options, warrants, promissory notes or debentures are outstanding as of June 30, 2008.

Warrants

The warrants issued to all participants in the November 7, 2005 private placement require the Company to settle the contracts by the delivery of registered shares. At the date of issuance, the Company did not have an effective registration statement related to the shares that could be issued should the warrant holders exercise the warrants. In addition, the warrant holders have the right to require that the Company settle the warrant on a net-cash basis in a fundamental transaction, regardless of the form of tender underlying the fundamental transaction. As the contracts must be settled by the delivery of registered shares and the delivery of the registered shares are not controlled by the Company and the rights of the warrant holders to settle in cash potentially in preference to other shareholders receiving other forms of consideration, pursuant to EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock", the warrants are being treated as a liability. The fair value of the warrants was calculated as of November 7, 2005 using the Black-Scholes pricing model and was recorded as a warrant liability on the balance sheet date. The change in fair value was included in other income on the income statement under change in fair value of warrant liability. The value of these 4,179,606 warrants on June 30, 2008 and December 31, 2007 was $42,412 and $309,567, respectively. In addition, the fair value decreased from December 31, 2007 through June 30, 2008 by $267,155. The change in fair value from December 31, 2007 was calculated by using the Black-Scholes pricing model with the following assumptions: expected weighted average life, 28 months as of June 30, 2008; stock volatility, 167.49%; risk-free interest rates of 2.91%; and no dividends during the expected term.

On October 3, 2006, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) to sell substantially all of the assets of Answerbag to Demand Answers, Inc. and its parent, Demand Media . In conjunction with the agreement, Demand Media received a five year warrant to purchase 5,000,000 shares of the Company's common stock at a purchase price of $0.158 per share that expires on October 3, 2011. We have performed an EITF 00-19 analysis of the warrants issued pursuant to the Asset Purchase Agreement and determined that they will be treated as a liability because of the requirement to maintain an effective registration statement for a period of two years. The fair value decreased from December 31, 2007 through June 30, 2008 by $553,493. The fair value of $104,591 at June 30, 2008 was calculated by using the Black-Scholes pricing model with the following assumptions: expected life, 38 months as of June 30, 2008; stock volatility, 167.49%; risk-free interest rates of 2.91%; and no dividends during the expected term. The warrant was offered and sold by the Company in reliance on exemptions provided by Section 4(2) of the Securities Act as such transaction did not involve any public offering.

8. Stock Options

The Company’s estimates of the fair value of stock options were made using the Black-Scholes option pricing model with the following weighted average assumptions for the three months ended June 30, 2008 and 2007: expected life, ten years following the grant date; stock volatility, 167.49% and 114.23%, respectively; risk-free interest rates of 3.34% and 4.92%, respectively; and no dividends during the expected term. As stock-based compensation expense recognized in the consolidated statement of operations pursuant to SFAS No. 123(R) is based on awards ultimately expected to vest, expense for grants beginning upon adoption of SFAS No. 123(R) on January 1, 2006 is reduced for estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience of forfeited stock options as a percent of total options granted.

A summary of the Company’s stock option activity is as follows:

	# of Shares		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding as of December 31, 2007		3,897,150			$	0.18
Granted		2,450,000			$	0.04
Cancelled / Forfeited		470,000			$	0.22
Outstanding as of June 30, 2008		5,877,150		9.14 years	$	0.12	$	157,361
Exercisable as of June 30, 2008		4,158,555		9.09 years	$	0.18	$	81,554
Expected to vest in future years		1,718,595		9.13 years	$	0.18	$	75,807

The weighted average grant date fair value of options granted during the three months ended June 30, 2008 was $0.04.

Additional information regarding options outstanding as of June 30, 2008 is as follows:

		Options outstanding						Options exercisable
Exercise prices		Number of shares		Weighted average remaining contractual Life (Years)		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
$	0.03		250,000		9.88	$	0.03		250,000	$	0.03
$	0.04		2,200,000		9.88		0.04		2,200,000		0.04
$	0.13		15,000		9.38	$	0.13		0	$	0.10
$	0.14		1,000,000		8.95	$	0.14		121,616	$	0.14
$	0.15		185,000		8.25	$	0.15		4,374	$	0.15
$	0.17		345,000		8.45	$	0.17		342,670	$	0.17
$	0.19		35,000		8.73	$	0.19		0	$	0.19
$	0.20		1,772,150		9.52	$	0.20		486,531	$	0.20
$	0.22		5,000		8.07	$	0.22		0	$	0.22
$	0.23		5,000		8.34	$	0.23		0	$	0.23
$	0.39		15,000		7.76	$	0.39		240,000	$	0.39
$	0.41		5,000		7.86	$	0.41
$	0.78		35,000		7.34	$	0.78		45,000	$	0.78
$	0.81		10,000		6.96	$	0.81		22,500	$	0.81
Total Options			5,877,150		9.14	$	0.12		4,158,555	$	0.18

At June 30, 2008, 4,592,850 shares (remaining balance reflects issuance of restricted stock) were available for future grants under the Company’s Stock Option Plan (the “Stock Option Plan”).

As of June 30, 2008, we had 742,857 shares of restricted stock grants outstanding to employees and directors of the Company. A summary of the Company’s restricted stock activity is as follows:

	Shares		Weighted Average Grant Date Fair Value
N Non Vested Shares as of December 31, 2007		742,857	$	0.14
Granted		-		0.00
Forfeited		-		0.00
Vested		-		0.00
N Non Vested Shares as of June 30, 2008		742,857		0.14

Additionally, during the second quarter the Company granted a total of 3,018,750 retention options to the Chief Executive Officer and the Chief Financial Officer outside of the Plan at exercise prices ranging from $0.04 to $0.06 per share.

9. Related Party Transactions.

Mr. Warthen, former Chief Technology Officer, is a shareholder and was the Chief Technology Officer of Global Streams, a digital video processing company, from 2000 to 2002. At June 30, 2008, accounts receivable from related parties of $14,385 was due from David Warthen to repay the Company for income taxes paid on his behalf.

10. Commitments and Contingencies

The Company has entered into a non-cancelable operating lease for facilities through July 31, 2008. Rental expense was $126,335 and $117,357 for the six months ended June 30, 2008 and 2007, respectively. At June 30, 2008, the future minimum lease payments for the years ending June 30, 2008 are as follows:

Remainder of 2008			19,530
Total Minimum Lease Payments		$	19,530

Litigation

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our results of operations or financial position.

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

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to future events or our future financial performance and are not statements of historical fact. In some cases, you can identify forward-looking statements by terminology such as “expect”, “anticipate”, “intend”, “plan”, “believe”, “estimate”, “predict”, “target”, “may”, “could”, “will”, “should”, “potential”, “objective”, “forecast”, “goal” or “continue”, the negative of such terms, or other comparable terminology. These statements are only predictions, and actual events or results may differ materially. 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; and in all cases, and such statements are subject to our ability to secure sufficient financing or to increase revenues to support our operations. In this regard, our business and operations are subject to substantial risks that increase the uncertainty inherent in the forward-looking statements contained in this Form 10-Q. In evaluating our business, you should give careful consideration to the information set forth herein and the risks, uncertainties and assumptions that are more fully discussed in “Item 1.A Risk Factors” of our Annual Report on Form 10-KSB/A for the fiscal year ended December 31, 2007.

The inclusion of the forward-looking statements should not be regarded as a representation by us, or any other person, that such forward-looking statements will be achieved. We undertake no duty to update any of the forward-looking statements, whether as a result of new information, future events or otherwise. In light of the foregoing, readers are cautioned not to place undue reliance on the forward-looking statements contained in this report.

CRITICAL ACCOUNTING POLICIES

These financial statements have been prepared in accordance with GAAP. The significant accounting policies used in the preparation of these financial statements are summarized below.

Revenue Recognition

The Company recognizes revenue on arrangements in accordance with SEC Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" and No. 104 "Revenue Recognition," and Emerging Issues Task Force Issue 00-21, "Revenue Arrangements with Multiple Deliverables." In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectibility of the resulting receivable is reasonably assured.

The Company’s revenues are derived principally from the licensing and sale of unique content developed under its TrafficBuilder program for clients who operate electronic commerce or publishing web sites.

Content licensing and sales revenue is recognized when the content is delivered to and accepted by the client. Revenue earned under month-to-month licensing agreements is recognized on a monthly basis. Client deposits received in advance of work being completed for such services are deferred by creation of a revenue liability account entry until the revenue is recognized.

Cost of Sales

The majority of the Company’s cost of sales is related to content developed under the TrafficBuilder program in support of purchased and licensed content.

For the TrafficBuilder program, content developed pursuant to outright sales and licensing is developed through editors, keyword analysts and independent contractors who write and edit the copy and analyze the keywords. The Company recognizes and expenses those costs related to the content developed for outright sales to clients as the cost is incurred, while the cost of content development for licensing subject to a 12-month contract is amortized over the life of the contract.

Accounting for Stock-Based Compensation

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment (“SFAS 123(R)”), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including stock options based on their fair values.

Share-based compensation expense recognized is based on the value of the portion of share-based payment awards that is ultimately expected to vest. Share-based compensation expense recognized in the Company’s Consolidated Statements of Operations during the six months ended June 30, 2008 and 2007 includes compensation expense for share-based payment awards granted prior to, but not yet vested as of, December 31, 2005 based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS 123.

The Company attributes the value of share-based compensation to expense using the straight-line method. Share-based compensation expense related to stock options was recorded in the accompanying Statements of Operations as follows:

	Six Months Ended June 30, 2008		Six Months Ended June 30, 2007		Three Months Ended June 30, 2008		Three Months Ended June 30, 2007
Selling and marketing	$	68,746	$	991	$	68,517	$	542
General and administration		20,622		75,274		6,800		11,244
Total share-based compensation expense for stock options	$	89,368	$	76,265	$	75,317	$	11,786

RECENT ACCOUNTING PRONOUNCEMENTS

In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS No. 155”), which amends SFAS No.133, “Accounting for Derivatives Instruments and Hedging Activities” (“SFAS No. 133”) and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”(“SFAS No. 140”). SFAS No. 155 amends SFAS No. 133 to narrow the scope exception for interest-only and principal-only strips on debt instruments to include only such strips representing rights to receive a specified portion of the contractual interest or principal cash flows. SFAS No. 155 amends SFAS No. 140 to allow qualifying special-purpose entities to hold a passive derivative financial instrument pertaining to a beneficial interest that itself is a derivative instrument. SFAS No. 155 is effective for financial instruments acquired, issued, or subject to a remeasurement event for fiscal years beginning after September 15, 2006. The adoption of SFAS 156 did not have a material impact on the Company's results of operations and financial position.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets” (“SFAS No.156”), which provides an approach to simplify efforts to obtain hedge-like (offset) accounting. This Statement amends SFAS No. 140 with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156(1) requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations; (2) requires that a separately recognized servicing asset or servicing liability be initially measured at fair value, if practicable; (3) permits an entity to choose either the amortization method or the fair value method for subsequent measurement for each class of separately recognized servicing assets or servicing liabilities; (4) permits at initial adoption a one-time reclassification of available-for-sale securities to trading securities by an entity with recognized servicing rights, provided the securities reclassified offset the entity's exposure to changes in the fair value of the servicing assets or liabilities; and (5) requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the balance sheet and additional disclosures for all separately recognized servicing assets and servicing liabilities. SFAS No. 156 is effective for all separately recognized servicing assets and liabilities as of the beginning of an entity's fiscal year that begins after September 15, 2006, with earlier adoption permitted in certain circumstances. The Statement also describes the manner in which it should be initially applied. The adoption of SFAS 156 did not have a material impact on the Company's results of operations and financial position.

In July 2006, the FASB released FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. This Statement is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have a material impact on the Company’s results of operations and financial position.

On September 15, 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" which is effective for fiscal years beginning after November 15, 2007. This statement defines fair value, specifies the acceptable methods for determining fair value, and expands disclosure requirements regarding fair value measurements. SFAS No. 157 is effective beginning January 1, 2008. In February 2008, the FASB deferred the adoption of SFAS No. 157 for one year as it applies to certain times, including assets and liabilities measured at fair value in connection with goodwill impairment tests in accordance with SFAS No. 142 and long-lived assets measured at fair value for impairment assessments under SFAS No. 144. Accounting for the Impairment and Disposal of Long-Lived Assets. We are still required to adopt the provisions of SFAS No. 157 in 2008 as it related to certain other items, including those within the scope of SFAS No, 1097, Disclosure about Fair Value of Financial Instrument , and financial and nonfinancial derivatives within the scope of SFAS No. 133. We believe that the adoption of SFAS No. 157 will not have a material impact on our consolidated financial position, results of operations or cash flows.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB108 provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of each of the company's balance sheet and statement of operations and the related financial statement disclosures. SAB 108 permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15, 2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. The adoption of this pronouncement has not had a material impact on the Company's financial position or statement of operations and cash flows.

In September 2006, the FASB issued SFAS No. 158, “Employer's Accounting for Defined Benefit Pension and Other Post Retirement Plans”. SFAS No. 158 requires employers to recognize in its statement of financial position an asset or liability based on the retirement plan's over or under funded status. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The adoption of this pronouncement has not had a material impact on the Company's financial position or statement of operations and cash flows.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007

REVENUES

Revenues decreased 33.9% or $835,862 to $1,630,996 for the six months ended June 30, 2008 from $2,466,858 for the six months ended June 30, 2007, primarily due to a reduction of $791,086 in sales for the Content Group. Revenues decreased 49.9% or $578,283 to $581,710 for the three months ended June 30, 2008 from $1,159,993 for the three months ended June 30, 2007, primarily due to a reduction of $547,600 in sales for the Content Group. The Content decrease was largely due to a $299,306 decrease in legacy license revenue year over year being partially offset by sales of a new license program launched in January 2008 as well as a decrease of approximately $280,000 in quarterly revenue from one major client.

Revenues associated with our Web Properties group fell to $25,973 from $70,749 for the six months ended June 30, 2008 and 2007, respectively, and to $9,116 from $39,799 for the three months ended June 30, 2008 and 2007, respectively, due primarily to the continued decline in revenue from owned domains such as ArticleInsider and Popdex which are no longer being actively developed by the Company.

COST OF SALES AND GROSS PROFIT

Cost of Sales decreased by 31.9% or $297,295 to $634,853 from $932,148 for the six months ended June 30, 2008 and 2007, respectively, as expense levels were adjusted to offset declines in revenue. Cost of Sales decreased by 42.7% to $261,299 from $455,652 for the three months ended June 30, 2008 and 2007, respectively.

The Company had a gross profit of $996,143 and a gross margin of 61.1% for the six months ended June 30, 2008 versus a gross profit of $1,534,710 and a gross margin of 62.2% for the six months ended June 30, 2007. The Company had a gross profit of $320,411 and a gross margin of 55.1% for the three months ended June 30, 2008 versus a gross profit of $704,341and a gross margin of 60.7% for the same period ended June 30, 2007.

Gross profits and margins for the Content Group were $1,496,182 and 62.4% for the six months ended June 30, 2008 versus $681,442 and 60.8% for the three months ended June 30, 2007. Gross profits and margins for the Content Group were $337,788 and 58.9% for the three months ended June 30, 2008 versus $681,442 and 60.8% for the three months ended June 30, 2007. Changes in our TrafficBuilder production process to reduce the level of fixed expenses and replace them with variable expenses in order to reduce the effect of changes in production volume on gross margins had an impact.

The Web Properties group generated a negative gross profit of ($20,479) and (78.8%) for the six months ended June 30, 2008 versus a gross profit and margin of $38,528 and 54.5% for the six months ended June 30, 2007, as the level of revenues now approximate the cost of operating the Web Properties.

OPERATING EXPENSES

Operating expenses consist of general and administrative expenses as well as selling expenses. Operating expenses decreased by $1,758,322 or 52.8% to $1,574,657 from $3,332,979 for the six months ended June 30, 2008 and 2007, respectively, and by $1,101,295 or 62.0% to $675,282 from $1,776,577 for the three months ended June 30, 2008 and 2007, respectively. These decreases were primarily attributed to a reduction in professional services fees and the number of personnel and accompanying expenses.

General and Administrative expenses include senior management, accounting, legal, rent, benefits costs, administrative personnel, depreciation and amortization and other overhead related costs. These costs decreased 52.5% to $1,126,520 from $2,371,469 for the six months ended June 30, 2008 and 2007, respectively, and $881,963 or 65.4% to $467,230 from $1,349,193 for the three months ended June 30, 2008 and 2007, respectively.

Selling expenses consist of costs primarily incurred to develop and implement marketing and sales programs for the Company’s Content product. These include costs associated with the marketing department participation in trade shows, media development and advertising. These selling expenses also include the costs of hiring and maintaining a sales department. These costs decreased 53.4% to $448,137 from $961,511 for the six months ended June 30, 2008 and 2007, respectively, as the Company reduced employee costs associated with sales and marketing personnel as well as advertising expenses. Selling expenses decreased $219,332 or 51.3% to $208,052 from $427,384 for the three months ended June 30, 2008 and 2007, respectively.

OTHER NON-OPERATING INCOME

Other non-operating net income is substantially comprised of changes in the fair value of certain financial instruments we have granted or currently hold. Non-operating income of $821,841 for the six months ended June 30, 2008 was higher than $269,424 for the six months ended June 30, 2007, was primarily due to decreases in the fair value of the warrant liabilities which results in higher levels of reported income. The Company received less interest income on the cash balances the Company maintains in money market accounts due to lower cash balances during the period ended June 30, 2008 relative to the same period in 2007. Interest income, net of interest expense of $5,228 was $29,738 less in the six months ended June 30, 2008 as compared to $34,966 in interest income, net of interest expense, in the six months ended June 30, 2007.

For the three months ended June 30, 2008, other operating income increased to $327,206 from other operating expense of ($43,599) for the same period ending June 30, 2007. This improvement was primarily due from a change in the value of warrants of $326,551 for the three months ended June 30, 2008, compared to a loss of ($61,745) for the three months ended June 30, 2007. This was offset by a decrease of $17,531 in net interest income for the three months ended June 30, 2008 compared to the same period for 2007.

NET EARNINGS (LOSS)

Net earnings for the six months ended June 30, 2008 of $243,065 was an improvement of $1,774,786 from the net loss of ($1,531,721) for the six months ended June 30, 2007, due to a lower Loss from Operations as well as a decrease in the warrant liability. The resulting Earnings Per Share of $0.00 was an improvement from ($0.03) for the six months ended June 30, 2008 and 2007, respectively.

Net Loss of ($28,465) for the three months ended June 30, 2008 was an improvement of 97.5% from a net loss of ($1,116,621) for the three months ended June 30, 2007, as the $578,283 decrease in revenues was more than offset by a $1,101,295 reduction in operating expenses, as well as additional non-operating income from a decrease in the warrant liability. The resulting Earnings Per Share improved to ($0.00) from ($0.02) for the three months ended June 30, 2008 and 2007, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Cash decreased by $656,654 to $130,585 in the six months ended June 30, 2008 relative to the Company’s fiscal year ending December 31, 2007.

Cash used in operating activities totaled $902,764 for the six months ended June 30, 2008, as increases in accounts receivable of $118,030 due to the aforementioned new license programs and a decrease of $167,493 in deferred revenue primarily associated with the final quarterly delivery under the first Demand Media contract which expired March 31, 2008 but was prepaid in December 2007.

For the six months ended June 30, 2008, cash provided from investing activities was $16,110 compared to cash used of $31,378 for the six months ended June 30, 2007. Cash used for capital expenditures - fixed assets was $3,890 and $68,250, respectively.

For the six months ended June 30, 2008, cash provided by financing activities was $230,000 all relating to a deposit on an equity subscription round compared to $13,652 in cash used for the comparable period of the prior year. Cash used for principal reductions in capital leases was $0 and $17,162 and cash received from the exercise of a warrant was $0 and $3,600 for the six months ended June 30 2008 and 2007, respectively.

There are no material commitments for additional capital expenditures and the Company had no debt at June 30, 2008.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

SUBSEQUENT EVENTS

During July 2008 the Company entered into a sublease for its new offices and moved into its new location at 6041 Bristol Parkway, Culver City, California 90230. This space affords the Company more modern and centrally located facilities, as well as significantly reducing its going forward operating expense levels.

Item 3. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within the required time periods. Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2008. As a result of the material weakness described below, they have concluded that our disclosure controls and procedures were not effective as of June 30, 2008 in providing reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act was properly recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

As described below, the Company restated its financial statements for the fiscal year ended December 31, 2006. Management has concluded that this restatement resulted from how the Company accounted for cancelled stock options upon the termination of employees. Under standards established by the Public Accounting Oversight Board a “material weakness” is a significant deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. A “significant deficiency” is a control deficiency, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected.

At the beginning of 2006, the Company adopted FASB 123R, Share Based Payment , and began recording expenses associated with stock option and restricted stock grants to employees. The Company previously accounted for cancelled stock options upon the termination of employees by recording an expense for the unvested portion of each terminated employee’s options. Upon further examination of our accounting methodology for cancelled stock options, the Company determined that the cancelled stock options should not have been expensed and restated our financial information for the fiscal year ended December 31, 2006.

In order to remediate this material weakness, the Company has hired an outside consultant to assist it in addressing and resolving accounting and reporting matters for certain equity issuances and other complex transactions that involve the application of highly specialized accounting principles so that as of June 30, 2008 this was no longer a material weakness.

The Sarbanes-Oxley Act of 2002 imposed many new requirements on public companies, the most significant of which involve the documentation, testing and reporting of the effectiveness of our internal control over financial reporting. We expect this effort will involve substantial time and expense. Because we have limited resources we can devote to this effort we cannot be sure that we will be able to complete the task in a timely manner or that our internal controls will meet the standards that are currently required. We are also reviewing other procedures with respect to equity issuances in connection with the internal investigation that we announced on March 9, 2007, of the potentially improper issuance of share certificates without legends restricting transfer that may have been facilitated by Mr. Louis Zehil, a partner of our former external legal counsel, McGuire Woods LLP, and our former corporate secretary. Although we are not yet required to report on our assessment of the effectiveness of our internal controls over financial reporting until at least the end of the next fiscal year or provide auditor attestation until the end of fiscal 2009, it is possible that we may identify one or more material weaknesses before we complete our compliance and remediation efforts.

(b) Changes in Internal Control over Financial Reporting

There were no significant changes made in our internal controls over financial reporting during the six months ended June 30, 2008 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting as all the remedial measures have not been fully implemented or have not operated for a significant period of time. Although we have addressed several of the internal control weaknesses that existed during earlier reporting periods, the remaining weaknesses are significant and continue to materially affect our internal control over financial reporting. However, we do intend to take additional remedial action related to our material weakness described above, which may result in a significant change to our internal controls over financial reporting in the future.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Item 6. Exhibits

The following exhibits are filed or incorporated by reference as part of this report as required by Item 601 of Regulation S-B:

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

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

		INFOSEARCH MEDIA, INC.

Date: August 19, 2008		/s/ George Lichter
		By: George Lichter
		Its: Chief Executive Officer


Date: August 19, 2008		/s/ Scott Brogi
		By: Scott Brogi
		Its: Chief Financial Officer

EXHIBIT INDEX

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002