NOTES
TO FINANCIAL STATEMENTS
December
30, 2012
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.
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NOTE 2
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SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
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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 nine month period ended
December 31, 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 six 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.
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:
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●
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Level
1:
Quoted
prices
in
active
markets
for
identical
assets
or
liabilities.
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●
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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.
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●
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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.
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The carrying
amounts of the Company’s financial instruments as of December 31, 2012, reflect:
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●
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Cash:
Level
One
measurement
based
on
bank
reporting.
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●
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Notes
payable
to
Officers
and
related
parties:
Level
2
based
on
observable
inputs.
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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 loss of approximately $2,237,000 is available through the year 2032, unless first utilized.
Interest and
penalties on tax deficiencies recognized in accordance with ASC 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 December 31, 2012.
Recent
Accounting Pronouncements
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.
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 $2,237,182 and its total liability exceeds its assets by $743,720. The Company incurred
net losses of $(18,617) and $(33,034) for the nine months ended December 31, 2012 and 2011, 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.
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.
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NOTE 3
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RELATED
PARTIES TRANSACTIONS
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Company
President
George Morris
is President, 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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Morris
Business Development Company (the Company).
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94.8
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%
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Apple Realty,
Inc.
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100.00
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%
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Internet Infinity
Inc.
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85.06
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%
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L&M Media
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100.00
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%
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Stock Issued
to Related Party
On June 30,
2012, 5,000,000 shares of common stock were issued to the President, George Morris, in payment for a reduction in officer loan
of $250,000.
Notes Payable
to Related Parties
The Company
has notes payable to related parties on December 31, 2012 as follows:
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Due to Related Parties
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7,209
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The
Company has payables to Morris Business Development Company and Morris & Associates, Inc., two parties related through a common
controlling shareholder. The amounts are interest free, unsecured and due on demand.
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L&M Media,
Inc. (related through a common controlling shareholder) – Accounts payable for purchases, converted into a note. The
note is due on demand, unsecured and interest accrues at 6% per annum.
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$
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29,466
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Accumulated
interest thereon
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22,900
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Total
Notes Payable – Related Parties
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59,575
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Due to
Officer
The Company
has notes payable to the President of the Company on December 31, 2012 as follows:
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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 $150,000 of accrued interest payable was transferred
to George Morris. Transferred Note Payable
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$
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400,000
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Due to Officer
The amount is interest free, unsecured and due on demand.
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190.352
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Interest
thereon
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99,767
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Total
Due to Officer
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680,119
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During the
nine months ended December 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., a company owned by the President, at estimated
fair market values, as follows:
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Monthly
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Annually
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Rent
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$
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100
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$
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1,200
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Telephone
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100
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1,200
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Utilities
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100
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1,200
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Office
Expense
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100
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1,200
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Total
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$
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400
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$
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4,800
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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.
No provision
was made for federal income tax for the nine months ended December 31 2012, since the Company had significant net operating loss.
The net operating loss carry-forward 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.
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 nine
months ended December 31, 2012, the Company granted no options. As at December 31, 2012 there are no options outstanding.
During the
nine months ended December 31, 2012, the Company issued stock as follows:
On June 30,
2012, 5,000,000 restricted common shares in return for a $250,000 reduction of officer loan.
As of December
31, 2012 the Company had authorized 30,000,000 preferred shares of par value $0.001, of which none were issued and outstanding.
The Company had authorized 100,000,000 shares of common stock of par value $0.001, of which 33,718,780 shares were issued and
outstanding.
