- Quarterly Report (10-Q)

 

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2012

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to __________

 

Commission File No. 0-27633

 

INTERNET INFINITY, INC.

(Exact name of registrant as specified in its charter)

 

State of Incorporation: Nevada

IRS Employer I.D. Number: 95-4679342

 

220 Nice Lane #108

Newport Beach, California 92663

Telephone [phone]

 

(Address and telephone number of registrant’s principal

executive offices and principal place of business)

 

Securities registered under Section 12(b) of the exchange Act: None

 

Securities registered under Section 12(g) of the exchange Act:

Common Stock $0.001 par value

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer [  ] Accelerated filer [  ]

 

Non-accelerated filer [  ] Smaller reporting company [X]

 

As of August 8, 20122012, there were 28,718,780 shares of the Registrant’s Common Stock, par value $0.001 per share, outstanding.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X ]

 

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

 

DOCUMENTS INCORPORATED BY REFERENCE

 

 

  

    

TABLE OF CONTENTS

 

			Page
PART I - FINANCIAL INFORMATION			3
Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and		4
Item 3.	Results of Operations		4
Item 4.	Controls and Procedures		4
PART II - OTHER INFORMATION			5
Item 1.	Legal Proceedings		5
Item 6.	Exhibits		5
SIGNATURES			6

   

2

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

		Page
Balance Sheet (Unaudited) at June 30, 2012, March 31, 2012		F-1
Statements of Operations (Unaudited) for the Three Month Periods Ended June 30, 2012 and 2011		F-2
Statements of Cash Flows (Unaudited) for the Three Month Periods Ended June 30, 2012, 2011		F-3
Notes to Unaudited Financial Statements		F-4

 

3

 

INTERNET INFINITY INC.

Balance Sheet

June 30, 2012 and March 31, 2012

---

  

		June 30, 2012				March 31, 2012
		(Unaudited)
ASSETS
Current Assets
Cash and Cash Equivalents			3,847				4,188
Account Receivable			3,000				2,500
Total Assets		$	6,847			$	6,688
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities
Current Liabilities
Accounts Payable and Accrued Expenses		$	7,851			$	7,851
Accrued Interest			22,015				223,307
Notes Payable - Related Parties			29,466				429,466
Due to Officer			783,503				367,561
Due to related party			7,209				7,209
Total Liabilities			850,044				1,035,394
Stockholders’ Equity  (Deficit)
Preferred Stock, $0.001 par value, 30,000,000 shares authorized, none issued and outstanding at June 30, 2012 and March 31, 2012
Common Stock, $0.001 par value, 100,000,000 shares authorized, 28,718,780 shares issued and outstanding as at June 30, 2012, and 28,718,780 shares isued and outstading as at March 31, 2012			28,719				28,719
Additional Paid-in Capital			1,347,497				1,161,140
Accumulated Deficit			(2,219,413	)			(2,218,565	)
Total Stockholders’ Equity (Deficit)			(843,197	)			(1,028,706	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)		$	6,847			$	6,688

 

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

 

F- 1

  

INTERNET INFINITY INC.

Statement of Operations

for the three months ended June 30, 2012, 2011

(Unaudited)

---

  

		2012				2011
Revenue			3,500				-
Cost of Revenue			-				-
Gross Profit			3,500				-
Operating Expenses:
Professional Fees			-				1,800
Consulting			-				445
Other			41				223
Total Operating Expenses			41				2,468
Net Profit (Loss) from operations			3,459				(2,468	)
Non-operating income (expense)
Interest expense			(4,307	)			(10,307	)
Net Loss		$	(848	)		$	(12,775	)
Basic and diluted net loss per common share		$	(0	)		$	(0	)
Basic and diluted weighted average number of  common shares outstanding			28,718,780				28,718,780

 

 The accompanying notes are an integral part of these financial statements

  

F- 2

INTERNET INFINITY INC.

Statement of Cash Flows

for the three months ended June 30, 2012 and 2011

(Unaudited)

---

 

		2012				2011
Cash flows from operating activities:
Net loss		$	(848	)		$	(12,775	)
Adjustments to reconcile net loss to net cash used by operating activities:
Accrued interest			(201,292	)			10,307
Change in operating assets and liabilities:
Account receivable			(500	)
Accounts payable							2,351
Accrued Interest
Net cash (used by) operating  activities			(202,640	)			(117	)
Cash flows from financing activities:
Increase (decrease) in due to officer			15,942				9,599
Accrued interest cancelled, contributed			186,357
Repayment of note payable-related party							(4,500	)
Net cash provided by financing activities			202,299				5,099
Net increase (decrease) in cash			(341	)			4,982
Cash, beginning of the period			4,188				432
Cash, end of the period		$	3,847			$	5,414
Supplemental cash flow disclosure:
Interest paid during the year		$	-			$	-
Taxes paid during the year		$	-			$	-

 

 The accompanying notes are an integral part of these financial statements

 

F- 3

  

INTERNET INFINITY, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

June 30, 2012

 

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 chose March 31 as its fiscal year end. 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 10-K. The results of the three month period ended June 30, 2012 are not necessarily indicative of the results to be expected for the full year ending March 31, 2013.

 

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.

 

F- 4

 

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 June 30, 2012, reflect:

 

●

Cash: Level One measurement based on bank reporting.

 

●

Notes payable to Officers and related parties: Level 2 based on observable inputs.

 

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 tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

The Company generated a deferred tax credit through net operating loss carry-forward. However, a valuation allowance of 100% has been established. Net operating losses of approximately $2,225,000 have begun to expire. The balance is available through the year 2032, unless first utilized.

Interest and penalties on tax deficiencies recognized in accordance with ACS accounting standards are classified as income taxes in accordance with ASC Topic 740-10-50-19.

 

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 June 30, 2012.

 

F- 5

 

Recent Accounting Pronouncements

 

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The amendments in this update generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. The amendments in this update are to be applied prospectively. The amendments are effective for interim and annual periods beginning after December 15, 2011. Early application is not permitted. The Company does not expect this guidance to have a significant impact on its consolidated financial position, results of operations or cash flows.

 

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” This update was amended in December 2011 by ASU No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” This update defers only those changes in update 2011-05 that relate to the presentation of reclassification adjustments. All other requirements in update 2011-05 are not affected by this update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. ASU No. 2011-05 and 2011-12 are effective for fiscal years (including interim periods) beginning after December 15, 2011. The Company does not expect this guidance to have a significant impact on its consolidated financial position, results of operations or cash flows.

 

In December 2011, the FASB issued ASU No. 2011-11, “Disclosures about Offsetting Assets and Liabilities.” The amendments in this update require enhanced disclosures around financial instruments and derivative instruments that are either (1) offset in accordance with either ASC 210-20-45 or ASC 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either ASC 210-20-45 or ASC 815-10-45. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The amendments are effective during interim and annual periods beginning on or after January 1, 2013. The Company does not expect this guidance to have any impact on its consolidated financial position, results of operations or cash flows.

 

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, the Company’s management has not determined whether implementation of such standards would be material to its financial statements.

 

NOTE 3

 

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 $2,225,413 and its total liability exceeds its assets by $1,035,554. The Company incurred net losses of $(6,848) and $(12,775) for the three months ended June 30, 2012 and 2011, respectively.

 

F- 6

 

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 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 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	%

 

F- 7

 

The Company has notes payable to related parties on December 31, 2011 as follows:

 

L&M Media, Inc. (related through a common controlling shareholder) – Accounts payable for purchases, converted into a note. The note is due on demand, unsecured and interest accrues at 6% per annum.		$	29,466
Accumulated interest thereon			22,015
Total L&M Media, Inc			51,481
Total Notes Payable – Related Parties		$	51,481
Due to Officer
George Morris. The note payable to Anna Moras (mother of George Morris) of $400,000 was transferred to the President, George Morris, on June 30, 2012. The interest rate was reduced from 6% to 0% and accrued interest of $186,954 was forgone Note		$	400,000
Accrued Interest			0
Total George Morris			400,000
Note Payable	Current		276,686
Officer Draw/Payable	Current		1,535
Other			11,700
Total		$	689,921
Accumulated interest thereon		$	93,582
Total Due to Officer		$	783,503
Due to Related Party		$	7,209

 

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 March 31, 2012. The amount is interest free, unsecured and due on demand.

 

During the three months ended March 31, 2012, the Company’s officers and directors did not charge for their services.

The Company utilizes office space, telephone and utilities provided by Apple Realty, Inc. at estimated fair market values, as follows:

 

		Monthly				Annually
Rent		$	100			$	1,200
Telephone			100				1,200
Utilities			100				1,200
Office Expense			100				1,200
Total		$	400			$	4,800

 

The Company has a month-to-month agreements with Apple Realty, Inc. for a total monthly fee of $400 for the above expenses. The charges are currently in abeyance.

 

NOTE 6 INCOME TAXES

 

No provision was made for federal income tax for the three months ended June 30, 2012, since the Company had significant net operating loss. The net operating loss carry-forwards may be used to reduce taxable income through the year 2032. The availability of the Company’s net operating loss carry-forwards 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.

 

F- 8

 

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.

For the three months ended June 30, 2012, the Company granted no options. As at June 30, 2012 there are no options outstanding.

 

NOTE 8 CAPITAL

 

During the three months ended June 30, 2012, the Company did not issue any shares.

 

As of June 30, 2012 the Company had authorized 30,000,000 preferred shares of par value $0.001, of which none were issued and outstanding. As of June 30, 2012 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.

 

F- 9

 

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 June 30, 2012 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 – First Quarter of (“Q1”) Fiscal 2012 Compared to First Quarter (“Q1”) of Fiscal 2011

Sales

 

Internet Infinity revenues for Q12012 were $3,500, as compared with revenues of $0 in Q12011. This increase in revenues is attributable to the delivery of Internet consulting services...

 

Cost of Sales - Gross Margin

 

Our cost of sales was $0 for Q12012, as compared to $0 for Q12011since consulting advice had no cost to us at this time...

 

Operating Expenses

 

Operating expenses for Q12012 decreased to $41 from $2,468 for Q12011. This decrease in operating expenses is primarily due to a low quarterly operating activity.

 

Net Income (Loss)

 

The company had a net profit of $3,459 in Q12012, as compared with a net loss of $2,468 from operations in Q12011. Overall, we had net loss after taxes of $848 with lower interest expense of $4,307 for Q12012 compared to a $12,775 loss with $10,307 interest for Q1 of 2011.

 

Balance Sheet Items

 

Our cash position decreased to $3,847 at June 30, 2012 (Q12012) from $4,188 at June 30, 2011 (Q12011).

 

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.

 

4

 

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. 0-27633 incorporated herein.

**Previously filed with Amendment No. 2 to Form 10-SB 02-08-00; Commission File No. 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.

 

5

 

 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: August 13, 2012	By:	/s/ George Morris
		George Morris, Chief Executive Officer

 

6