The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
INTERNET INFINITY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010
NOTE 1 ORGANIZATION
Internet Infinity, Inc. (III or “the Company”) was incorporated in the State of Delaware on October 27, 1995. III was in the business of distribution of electronic media duplication services and electronic blank media. The Company was re-incorporated in Nevada on December 17, 2004. The Company is currently seeking an acquisition or merger to redirect the structure and management to new profitable activities.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements
The accompanying unaudited financial statements have been prepared by the Company, pursuant to the rules and regulations of the Securities Exchange commission (the “SEC”) as applicable to smaller reporting companies, and generally accepted accounting principles for interim accounting reporting. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and 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 presented in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted pursuant to such rules and regulations. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report on Form 10K. The results of the nine month period ended October 31, 2010 are not necessarily indicative of the results to be expected for the full year ending March 31, 2011.
Cash and cash equivalents
The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
INTERNET INFINITY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010
Fair value of financial instruments
The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures" for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
-
|
Level 1: Quoted prices in active markets for identical assets or liabilities.
|
-
|
Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
|
-
|
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
The carrying amounts of the Company’s financial instruments as of April 30, 2010, reflect:
-
|
Cash: Level One measurement based on bank reporting.
|
-
|
Notes payable to Officers and related parties: Level 2 based on promissory notes.
|
Income taxes
The Company utilizes FASB ACS 740,
“Income Taxes”,
which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Basic and Diluted Earnings Per Share
Net loss per share is calculated in accordance with FASB ASC 260, Earnings Per Share, for the period presented. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilative convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
The Company has no potentially dilutive securities outstanding as of December 31, 2010.
INTERNET INFINITY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010
Recent Accounting Pronouncements
In May 2009, the FASB issued new guidance for accounting for subsequent events. The new guidance, which is now part of ASC 855-10, Subsequent Events (formerly, SFAS No. 165, Subsequent Events) is consistent with existing auditing standards in defining subsequent events as events or transactions that occur after the balance sheet date but before the financial statements are issued or are available to be issued, but it also requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The new guidance defines two types of subsequent events: “recognized subsequent events” and “non-recognized subsequent events.” Recognized subsequent events provide additional evidence about conditions that existed at the balance sheet date and must be reflected in the company’s financial statements. Non-recognized subsequent events provide evidence about conditions that arose after the balance sheet date and are not reflected in the financial statements of a company. Certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. The new guidance was effective on a prospective basis for interim or annual periods ending after June 15, 2009. The Company adopted the provisions of ASC 855-10 as required.
In June 2009, the FASB issued new guidance which is now part of ASC 105-10 (formerly Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles). ASC 105-10 replaces FASB Statement No. 162, "The Hierarchy of Generally Accepted Accounting Principles", and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles. ASC 105-10 is effective for interim and annual periods ending after September 15, 2009. The adoption of ASC 105-10 did not have a material impact on the Company’s financial statements.
In January 2010, the FASB issued ASU No. 2010-01, amending SFAS No. 168, “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles.” This Standard codified in ASC 105 is being modified to include the authoritative and non-authoritative levels of GAAP. This amendment is effective for financial statements issued for interim and annual periods ending after September 15, 2009. ASU No. 2010-01 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.
In February 2010, the FASB issued ASU No. 2010-09, “Subsequent Events ( ASC Topic 855), Amendments to Certain Recognition and Disclosure Requirements.” This Standard update requires a SEC Filer to (1) evaluate subsequent events through the date that the financial statements are issued or available to be issued, (2) defines “SEC Filer” as an entity that is required to file or furnish its financial statements with either the SEC or, with respect to an entity subject to Section 12(i) of the Securities Exchange Act of 1934, as amended, the appropriate agency under that Section, (3) not be bound to disclosing the date through which subsequent events have been evaluated, (4) note the definition of
public entity
is not longer defined nor necessary for Topic 855, (5) note the scope of the reissuance disclosure requirements is refined to include revised financial statements only. These Updates are effective for interim or annual periods ending after June 15, 2010. ASU No. 2010-09 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.
NOTE 3
UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN
The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has incurred significant losses and has an accumulated deficit of $2,134,996 and its total liabilities exceeds its assets by $1,031,234. The Company incurred net losses of $26,108 and $77,879 for the nine months ended December 31, 2010 and 2009, respectively.
In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
INTERNET INFINITY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010
Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing additional funding and potential merger or acquisition candidates to redirect the structure and management to new profitable activities. The Company is also seeking strategic partners, which would enhance stockholders’ investment. Management believes that the above actions will allow the Company to continue operations through the next fiscal year.
NOTE 4 NOTES PAYABLE
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,000
|
|
|
$
|
27,000
|
|
Notes Payable consists of five notes payable to various unrelated individuals. The notes are due upon 90 days written notice from the individuals. The notes are unsecured, with interest ranging from 6% to 12% payable quarterly. The notes have been outstanding since 1990. Interest accrual has been suspended due to the uncertainty of ability to repay the obligation, rendering additional obligations irrelevant.
NOTE 5 RELATED ENTITIES TRANSACTIONS
George Morris is chief financial officer, vice president, the chairman of the Board of directors of the Company and the controlling shareholder of the Company and its related parties through his beneficial ownership of the following percentages of the outstanding voting shares of the related parties:
Internet Infinity, Inc. (The Company)
|
|
|
85.06
|
%
|
Morris & Associates, Inc.
|
|
|
71.30
|
%
|
Electronic Media Central, Corp.
|
|
|
82.87
|
%
|
Apple Realty, Inc.
|
|
|
100.00
|
%
|
L&M Media, Inc.
|
|
|
100.00
|
%
|
The Company has notes payable to related parties on September 30, 2010 as follows: Interest has been suspended due to the uncertainty of the ability to repay the obligations as well as the discretionary control over repayment, rendering additional obligations irrelevant.
|
|
Dec. 31,
|
|
|
Mar. 31,
|
|
|
|
2010
|
|
|
2010
|
|
Anna Moras
(mother of George Morris), with interest at 6% per annum,
unsecured and due upon 90 days written notice.
|
|
$
|
14,652
|
|
|
$
|
14,652
|
|
Apple Realty, Inc.
(related through a common controlling shareholder),
secured by assets of the Company, past due and payable upon
demand. Interest accrues at 6% per annum. This note is in connection
with consulting fees and office expenses owed
|
|
$
|
360,215
|
|
|
$
|
360,215
|
|
L&M Media, Inc.
(related through a common controlling shareholder)
– Accounts payable for purchases, converted into a note during in
September , 2004. The note is due on demand, unsecured with
interest at 6% per annum.
|
|
$
|
36,533
|
|
|
$
|
36,533$
|
|
|
|
|
|
|
|
|
|
|
Total notes payable – related parties
|
|
$
|
411,400
|
|
|
$
|
411,400
|
|
INTERNET INFINITY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010
|
|
|
Dec.31,
2010
|
|
|
Mar. 31
2010
|
|
The Company has a payable to officer as follows:
Unsecured miscellaneous payable upon demand to George Morris,
with interest at 6% per annum, with monthly installments of
$3,000 beginning June 30, 2000 and paid as available. George Morris
is the chairman of the Company. The Company has not made any
principal payments to George Morris and is in default of this note.
|
Current
|
|
$
|
196,286
|
|
|
$
|
185,306
|
|
|
|
|
|
|
|
|
|
|
|
Note payable – Officer
Unsecured note payable upon demand to George Morris, with
interest at 6% per annum. The Company has not made any
principle payments to George Morris and is in default of this note
|
Current
|
|
|
63,433
|
|
|
$
|
64,433
|
|
|
|
|
|
|
|
|
|
|
|
Interest payable – Officer
|
Current
|
|
|
61,059
|
|
|
$
|
61,059
|
|
|
|
|
|
|
|
|
|
|
|
Other obligations
|
Current
|
|
$
|
14,821
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
335,600
|
|
|
$
|
305,139
|
|
The Company has a payable to Morris Business Development Company and Morris & Associates, Inc., two parties related through a common controlling shareholder, amounting to $7,209 as of June 30, 2010. The amount is interest free, unsecured and due on demand.
During the nine months ended September 30, 2010, the Company’s officers and directors did not charge for their services. In the prior fiscal year ended March 31, 2010, such contributed services were recorded as capital contribution in the amount of $5,499, which was determined based on the fair value of the services provided.
NOTE 6 INCOME TAXES
No provision was made for federal income tax for the year ended March 31, 2010 and 2009, since the Company had significant net operating loss. The net operating loss carryforwards may be used to reduce taxable income through the year 2028. The availability of the Company’s net operating loss carryforwards are subject to limitation if there is a 50% or more positive change in the ownership of the Company’s stock. The provision for income taxes consists of the state minimum tax imposed on corporations.
The net operating loss carryforward for federal and state income tax purposes of approximately
$1,457,500 as of December 31, 2010.
INTERNET INFINITY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010
The Company has recorded a 100% valuation allowance for the deferred tax asset due to the uncertainty of its realization.
The components of the net deferred tax asset are summarized below:
|
|
12/31/2010
|
|
|
3/31/2010
|
|
Deferred tax asset – net operating loss
|
|
$
|
583,000
|
|
|
|
573,130
|
|
Less valuation allowance
|
|
|
(583,000
|
)
|
|
|
(573,130
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
|
-
|
|
The following is a reconciliation of the provision for income taxes at the U.S. federal income tax rate to the income taxes reflected in the Statement of Operations:
|
|
Dec. 31, 2010
|
|
|
March 31, 2010
|
|
Tax expense (credit) at statutory rate-federal
|
|
|
-34
|
%
|
|
|
-34
|
%
|
State tax expense net of federal tax
|
|
|
-6
|
%
|
|
|
-6
|
%
|
Changes in valuation allowance
|
|
|
40
|
%
|
|
|
40
|
%
|
Tax expense at actual rate
|
|
|
-
|
|
|
|
-
|
|
Income tax expense consisted of the following:
|
|
12/31/2010
|
|
|
3/31/2010
|
|
Current tax expense:
|
|
|
-
|
|
|
|
-
|
|
Federal
|
|
$
|
-
|
|
|
|
-
|
|
State
|
|
|
800
|
|
|
|
800
|
|
Total current
|
|
$
|
800
|
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
Deferred tax credit:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
24,026
|
|
|
|
23,905
|
|
State
|
|
|
4,292
|
|
|
|
4,218
|
|
Total deferred
|
|
$
|
28,318
|
|
|
|
28,123
|
|
Less: valuation allowance
|
|
|
(28,318
|
)
|
|
|
(28,123
|
)
|
Net deferred tax credit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Tax expense
|
|
$
|
800
|
|
|
|
800
|
|
NOTE 7 STOCK OPTIONS
The Company’s 1996 stock option plan provides that incentive stock options and nonqualified stock options to purchase common stock may be granted to directors, officers, key employees, consultants, and subsidiaries with an exercise price of up to 110% of market price at the date of grant. Generally, options are exercisable one or two years from the date of grant and expire three to ten years from the date of grant.
INTERNET INFINITY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2010
For the nine months ended December 31, 2010, the Company granted no options. As at December 31, 2010 there are no options outstanding.
NOTE 8
CAPITAL
During the nine months ended December 31, 2010, the Company did not issue any shares.
As of December 31, 2010 the Company had authorized 30,000,000 preferred shares of par value $0.001, of which none were issued and outstanding. As of December 31, 2010 the Company had authorized 100,000,000 shares of common stock of par value $0.001, of which 28,718,780 shares were issued and outstanding.
NOTE 9 SUBSEQUENT EVENTS
Events subsequent to December 31, 2010 have been evaluated through February 12, 2011, the date these statements were available to be issued, to determine whether they should be disclosed to keep the financial statements from being misleading. Management found no subsequent events to be disclosed
Item 2.
Management’s Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction with the financial statements and the accompanying notes thereto for the three-month period ended December 31, , 2009 and is qualified in its entirety by the foregoing and by more detailed financial information appearing elsewhere. See “Item 1. Financial Statements.” The discussion includes management’s expectations for the future.
Results of Operations – Third Quarter of (“Q3”) Fiscal 2010 Compared to Third Quarter (“Q3”) of Fiscal 2009
Sales
Internet Infinity revenues for Q3 2010 were $0, as compared with revenues of $60 in Q3 2009. This inability to increase revenues is attributable to the slowing economy and the lack of success in finding acquisitions..
Cost of Sales - Gross Margin
Our cost of sales was $0 for Q3 2010, as compared to $60for Q3 2009 since there very little Q3 sales.
Operating Expenses
Operating expenses for Q3 2010 decreased to $1,180 from $8,738 for Q3 2009. This decrease in operating expenses is primarily due to a decrease in operating activity.
Net Income (Loss)
The company had a net loss of 1,180 from operations in Q3 2010, as compared with a net loss of $8,198 from operations in Q3 2009. Overall, we had net loss after taxes including interest expense of $1,240 for Q3 2010 compared to $23,494 for Q3 of 2009
Balance Sheet Items
Our cash position increased to $413 at December 31, 2010 (Q3 2010) from $0 at December 31, , 2009 (Q3.
Off-Balance Sheet Arrangements
Our company has not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have
·
|
an obligation under a guarantee contract,
|
·
|
a retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets,
|
·
|
any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument, or
|
·
|
any obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by us and material to us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us.
|
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
. The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective and are designed to provide reasonable assurances of achieving their objectives. Further, the Company’s officers concluded that its disclosure controls and procedures are also effective to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is accumulated and communicated to its management, including its chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. There were no significant changes in the Company's internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings
We are not, and none of our property is, a party to any pending legal proceedings, and no such proceedings are known to be contemplated.
No director, officer or affiliate of the company, and no owner of record or beneficial owner of more than 5.0% of the securities of the company, or any associate of any such director, officer or security holder is a party adverse to the company or has a material interest adverse to the Company in reference to any litigation.
Item 6. Exhibits
The following exhibits are filed, by incorporation by reference, as part of this Form 10-Q:
2
|
Certificate of Ownership and Merger of Morris & Associates, Inc., a California corporation, into Internet Infinity, Inc., a Delaware corporation*
|
2.1
|
Plan of Merger (Internet Infinity - Delaware into Internet Infinity - Nevada)***
|
2.2
|
State of Delaware Certificate of Merger of Domestic Corporation into Foreign Corporation which merges Internet Infinity, Inc., a Delaware corporation, with and into Internet Infinity, Inc., a Nevada corporation***
|
2.3
|
Articles of Merger (Pursuant to NRS 92A.200) which merges Internet Infinity, Inc., a Delaware corporation, with Internet Infinity, Inc., a Nevada corporation, with the Nevada corporation being the surviving entity***
|
3
|
Articles of Incorporation of Internet Infinity, Inc.*
|
3.1
|
Amended Certificate of Incorporation of Internet Infinity, Inc.*
|
3.2
|
Bylaws of Internet Infinity, Inc.*
|
3.3
|
Corporate Charter and Articles of Incorporation of Internet Infinity, Inc., a Nevada corporation***
|
3.4
|
Certificate of Amendment to Articles of Incorporation of Internet Infinity, Inc., a Nevada corporation++
|
10.1
|
Master License and non-exclusive Distribution Agreement between Internet Infinity, Inc. and Lord & Morris Productions, Inc.*
|
10.2
|
Master License and Exclusive Distribution Agreement between L&M Media, Inc. and Internet Infinity, Inc.*
|
10.3
|
Master License and Exclusive Distribution Agreement between Hollywood Riviera Studios and Internet Infinity, Inc.*
|
10.4
|
Fulfillment Supply Agreement between Internet Infinity, Inc. and Ingram Book Company**
|
14
|
Code of Ethics for CEO and Senior Financial Officers+
|
31.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
*Previously filed with Form 10-SB 10-13-99; Commission File No. 0-27633incorporated herein.
**Previously filed with Amendment No. 2 to Form 10-SB 02-08-00; Commission FileNo. 0-27633 incorporated herein.
***Previously filed with Form 8-K Current Report March 14, 2005, Commission File No. 0-27633 incorporated herein.
+Previously filed with Form 10-KSB; Commission File No. 0-27633 incorporated herein.
++Previously filed with Form 8-K Current Report February 17, 2006; Commission File No. 0-27633 incorporated herein.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
INTERNET INFINITY, INC.
|
|
|
|
|
|
Dated: February 12, 2011
|
By:
|
/s/
George Morris
|
|
|
|
George Morris, Chief Executive Officer
|
|
17