Internet
Infinity, Inc. (III or “the Company”) was incorporated in the State of Delaware
on October 27, 1995. III is in the business of distribution of electronic
media replication services and the creation of replication masters. The Company
was re-incorporated in Nevada on December 17, 2004.
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NOTE
2
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BASIS
OF PRESENTATION AND BUSINESS
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Unaudited
Interim Financial Information
The
accompanying unaudited consolidated financial statements have been prepared by
the Company, pursuant to the rules and regulations of the Securities and
Exchange Commission (the “SEC”) as applicable to smaller reporting companies,
and generally accepted accounting principles for interim financial 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
consolidated 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
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and footnotes included in the Company’s Annual
Report on Form 10. The results of the three month period ended June 30, 2009 are
not necessarily indicative of the results to be expected for the full year
ending March 31, 2010.
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.
Reclassifications
Certain
comparative amounts have been reclassified to conform to the current year's
presentation.
INTERNET
INFINITY, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
Recent
Pronouncements
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51. This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest. This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.
In March
2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard 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. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows. Management does
not believe the effect of this pronouncement on financial statements will have a
material effect.
In May of
2008, FASB issued SFASB No.162, “The Hierarchy of Generally Accepted Accounting
Principles”. The pronouncement mandates the GAAP hierarchy reside in the
accounting literature as opposed to the audit literature. This has the practical
impact of elevating FASB Statements of Financial Accounting Concepts in the GAAP
hierarchy. This pronouncement will become effective 60 days following SEC
approval. The Company does not believe this pronouncement will impact its
financial statements.
In May
2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance
Contracts-an interpretation of FASB Statement No. 60. The scope of
the statement is limited to financial guarantee insurance (and reinsurance)
contracts. The pronouncement is effective for fiscal years beginning
after December 31, 2008. The company does not believe this
pronouncement will impact its financial statements.
In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This
Statement replaces SFAS No. 141, Business Combinations. This Statement retains
the fundamental requirements in Statement 141 that the acquisition method of
accounting (which Statement 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. This Statement also establishes principles and requirements for how
the acquirer: a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree; b) recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase and c) determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS No.
141(R) will apply prospectively to business combinations for which the
acquisition date is on or after Company’s fiscal year beginning January 1, 2009.
While the Company has not yet evaluated this statement for the impact, if any,
that SFAS No. 141(R) will have on its consolidated financial statements, the
Company will be required to expense costs related to any acquisitions after
January 1, 2009.
INTERNET
INFINITY, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
On
December 30, 2008 FASB issued FIN 48-3, “Effective Date of FASB Interpretation
No. 48 for Certain Nonpublic Enterprises”. This FSP defers the effective date of
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, for
certain non-public enterprises as defined in paragraph 289, as amended, of FASB
Statement No. 109, Accounting for Income Taxes, including non-public
not-for-profit organizations. However, non-public consolidated entities of
public enterprises that apply U. S. GAAP are not eligible for the deferral.
Nonpublic enterprises that have applied the recognition, measurement, and
disclosure provisions of Interpretation 48 in a full set of annual financial
statements issued prior to the issuance of this FSP also are not eligible for
the deferral. This FSP shall be effective upon issuance. The Company does not
believe this pronouncement will impact its financial statements.
On January 12, 2009 FASB issued FSP
EITF 99-20-01, “Amendment to the Impairment Guidance of EITF Issue No. 99-20”.
This FSP amends the impairment guidance in EITF Issue No. 99-20, “Recognition of
Interest Income and Impairment on Purchased Beneficial Interests and Beneficial
Interests That Continue to be Held by a Transferor in Securitized Financial
Assets,” to achieve more consistent determination of whether an
other-than-temporary impairment has
occurred.
The FSP
also retains and emphasizes the objective of an other-than-temporary impairment
assessment and the related disclosure requirements in FASB Statement No. 115,
Accounting for Certain Investments in Debt and Equity Securities, and other
related guidance. The FSP is shall be effective for interim and annual reporting
periods ending after December 15, 2008, and shall be applied prospectively.
Retrospective application to a prior interim or annual reporting
period is not permitted. The Company does not believe this pronouncement will
impact its financial statements.
INTERNET
INFINITY, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
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NOTE
3
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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 accumulated deficit of $2,056,954 at June 30,
2009, and its total liabilities exceeds its total assets by
$953,193.
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.
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 the new
business development company activities and additional funding from 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
|
ACCOUNT
PAYABLE & ACCRUED EXPENSES
|
Accrued
expenses consist of the following at
|
|
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June 30,
2009
|
|
|
March 31,
2009
|
|
|
|
|
|
|
|
|
|
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Accrued
taxes
|
|
$
|
5,600
|
|
|
$
|
4,800
|
|
|
Accrued
interest
|
|
|
184,165
|
|
|
|
175,047
|
|
|
Accrued
accounting
|
|
|
29,680
|
|
|
|
26,000
|
|
|
Accounts
payable
|
|
|
27,909
|
|
|
|
25,516
|
|
|
|
|
$
|
247,354
|
|
|
$
|
231,363
|
|
INTERNET
INFINITY, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
|
|
|
June 30,
2009
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|
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March 31,
2009
|
|
|
|
|
|
|
|
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Five
notes payable with 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 expense for the three month periods ended
June 30, 2009 and 2008 was $660 and $660.
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|
$
|
27,000
|
|
|
$
|
27,000
|
|
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NOTE
6
|
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:
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|
|
|
|
Internet
Infinity, Inc. (The Company)
|
|
85.10%
|
|
Morris
& Associates, Inc.
|
|
71.30%
|
|
Morris
Business Development Company
|
|
82.87%
|
|
Apple
Realty, Inc.
|
|
100.00%
|
|
L&M
Media, Inc.
|
|
100.00%
|
The
Company has notes payable to related parties on June 30, 2009 and
March 31, 2009 as follows:
|
|
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June 30,
2009
|
|
|
March 31,
2009
|
|
|
|
|
|
|
|
|
|
|
Anna Moras
(mother of George Morris), with
interest at 6% per annum, due upon 90 days written notice. Interest
expenses for the quarters ended June 30, 2009 and March 31, 2009 on
this note are $502 and $495, respectively.
|
|
$
|
14,652
|
|
|
$
|
14,652
|
|
|
|
|
|
|
|
|
|
|
|
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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. Interest
expenses on this note for the quarters ended June 30, 2009 and March
31, 2009 are $7,182 and $5,462, respectively.
|
|
|
358,415
|
|
|
|
357,215
|
|
|
|
|
|
|
|
|
|
|
|
|
L&M Media, Inc.
(related through a
common controlling shareholder) – Accounts payable for purchases,
converted into a note during the three month period ended
September 30, 2004. The note is due on demand, unsecured and interest
accrues at 6% per annum. Interest expenses on this note for the quarters
ended June 30, 2009 and March 31, 2009 are $754 and $743,
respectively.
|
|
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35,755
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|
|
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35,755
|
|
|
|
|
|
|
|
|
|
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Total
notes payable – related parties
|
|
$
|
408,822
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|
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$
|
407,622
|
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INTERNET
INFINITY, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
The
Company utilizes office space, telephone and utilities provided by Apple Realty,
Inc. at estimated fair market values, as follows:
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|
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Monthly
|
|
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Annually
|
|
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Rent
|
|
$
|
100
|
|
|
$
|
1,200
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|
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Telephone
|
|
|
100
|
|
|
|
1,200
|
|
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Utilities
|
|
|
100
|
|
|
|
1,200
|
|
|
Office
Expense
|
|
|
100
|
|
|
|
1,200
|
|
|
|
|
$
|
400
|
|
|
$
|
4,800
|
|
The
Company has a month-to-month agreement with Apple Realty, Inc. for a total
monthly fee of $400 for the above expenses.
The
Company has a payable to officer of $261,908 and $258,038 as of June 30,
2009 and March 31, 2009, respectively, as follows:
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June 30,
2009
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|
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March 31,
2009
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|
|
|
|
|
|
|
|
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Unsecured
miscellaneous payables upon demand to the chairman with
interest
at 6% per annum.
|
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$
|
261,908
|
|
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$
|
258,038
|
|
Interest
accrued for the three month periods ended June 30, 2009 and March 31, 2009,
on the above note in the amounts of $3,893 and $3,831, respectively. Total
interest payable for the quarters ended June 30, 2009 and March 31, 2009 on
this note are $44,661 and $40,768 respectively have been included in the
financial statements
.
INTERNET
INFINITY, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
The
Company has a payable to Morris Business Development Company and Morris &
Associates, Inc., parties related through a common controlling shareholder,
amounting to $8,109 as of June 30, 2009 and $7,209 as of March 31,
2009. The amount is interest free, unsecured and due on demand.
No
provision was made for federal income tax for the three months period ended
June 30, 2009 and year ended March 31, 2009, since the
Company had significant net operating loss. The net operating loss carryforwards
may be used to reduce taxable income through the year 2027. 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 $1,384,547 and $1,362,585 as of June 30, 2009 and March 31, 2009
respectively.
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:
|
|
|
June
2009
|
|
|
March
2009
|
|
|
Deferred
tax asset – net operating loss
|
|
$
|
553,791
|
|
|
$
|
545,007
|
|
|
Less
valuation allowance
|
|
|
(553,791
|
)
|
|
|
(545,007
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
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June 30,
2009
|
|
|
March
31, 2009
|
|
|
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
|
|
|
-
|
|
|
|
-
|
|
INTERNET
INFINITY, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
Income
tax expense consisted of the following:
|
|
|
June
2009
|
|
|
March
2009
|
|
|
Current
tax expense:
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
|
State
|
|
|
800
|
|
|
|
800
|
|
|
Total
current
|
|
$
|
800
|
|
|
$
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax credit:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
7,467
|
|
|
$
|
36,560
|
|
|
State
|
|
|
1.318
|
|
|
|
6,452
|
|
|
Total
deferred
|
|
$
|
8,785
|
|
|
$
|
43,011
|
|
|
Less:
valuation allowance
|
|
|
(8,785
|
)
|
|
|
(43,011
|
)
|
|
Net
deferred tax credit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
expense
|
|
$
|
800
|
|
|
$
|
800
|
|
