U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Internet Infinity, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-27633 95-4679342
- -------------- ------------------------ -------------
(state of (Commission File Number) (IRS Employer
incorporation) I.D. Number)
3303 Harbor Boulevard, K-5
Costa Mesa, CA 92626
310-318-2244
(Address and telephone number of registrant's principal
executive offices and principal place of business)
As of December 31, 1999, there were 11,447,438 shares of the
Registrant's Common Stock, par value $0.001 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes ___
No X
----
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNET INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
12-31-99 03-31-99
Unaudited Audited
--------- --------
ASSETS
Current assets:
<S> <C> <C>
Cash $ 8,053 $ 64,458
Accounts receivable - net of allowance
for doubtful accounts of $10,000 304,705 129,537
Inventories 59,918 59,918
Prepaid expenses 10,433
Note receivable - related company 36,526
Net current deferred tax asset 17,414 36,414
--------- ---------
TOTAL CURRENT ASSETS 400,523 326,853
--------- ---------
Due from related companies 11,090 3,468
Programming costs 1,485 5,969
Property and equipment, at cost
Office equipment 16,955 16,955
Office furniture 15,366 15,366
--------- ---------
32,321 32,321
Less accumulated depreciation (32,321) (32,321)
--------- ---------
Net property and equipment - -
--------- ---------
TOTAL NON-CURRENT ASSETS 12,575 9,437
--------- ---------
TOTAL ASSETS $ 413,098 $ 336,290
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 87,297 $ 92,386
Accounts payable 56,374 51,123
Accrued payroll 4,127 4,127
Interest payable 3,190
Due to officer 71,856 71,856
Other 7,65 2,000
--------- ---------
TOTAL CURRENT LIABILITIES 227,307 224,682
Long-term liabilities:
Due to officer - non-current 144,690 144,708
--------- ---------
TOTAL LONG-TERM LIABILITIES 144,690 144,708
--------- ---------
TOTAL LIABILITIES 371,997 369,390
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $0.001;
authorized 1,000,000 shares; issued and
outstanding -0- shares
Common Stock, par value $0.001;
authorized 20,000,000 shares; issued and
outstanding 10,010,196 10,010 10,010
Paid-in capital 909,659 909,659
Retained earnings (deficit) (371,685) (445,886)
Unpaid stock subscription (506,883) (506,883)
--------- ---------
STOCKHOLDERS' EQUITY 41,101 (33,100)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 413,098 $ 336,290
========= =========
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
December 31, 1999 December 31, 1998 December 31, 1999 December 31, 1998
------------------ ------------------ ----------------- -----------------
Amount Amount Amount Amount
Unaudited Percent Unaudited Percent Unaudited Percent Unaudited Percent
--------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 470,958 100.0 $ 328,239 100.0 $1,091,741 100.0 $ 911,272 100.0
Cost of sales 379,458 80.6 259,309 79.0 849,941 77.9 654,732 71.8
---------- ----- ---------- ----- ---------- ----- ---------- -----
Gross profit 91,500 19.4 68,930 21.0 241,800 22.1 256,540 28.2
Operating expenses 37,856 8.0 45,150 13.8 135,578 12.4 169,593 18.6
---------- ----- ---------- ----- ---------- ----- ---------- -----
Net operating income
(loss) $ 53,644 11.4 $ 23,780 7.2 $ 106,222 9.7 $ (86,947) 9.6
========== ===== ========== ===== ========== ===== ========== =====
Other expenses
Interest expense 1,602 13,026 4,810
----------
Net income before taxes 52,042 23,780 93,196 82,137
Provision for income 19,000
taxes 11,000
Net income $ 41,042 $ 23,780 $ 74,196 $ 82,137
========== ========== ========== ==========
Net income (loss) per
share - basic and diluted $0.004 $0.003 $0.006 $0.009
====== ====== ====== ======
Weighted average shares(1)
outstanding - basic and
diluted 11,447,438 9,259,714 11,447,438 9,259,714
========== ========= ========== ==========
</TABLE>
(1) Includes stock options
See accompanying notes to financial statements
3
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Nine Months Ended December 31,
------------------------------
1999 1998
Unaudited Unaudited
--------- ---------
CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 74,196 $ 82,137
--------- ---------
Adjustments to reconcile net loss to
net cash provided by (used for)
operating activities:
Amortization of programming cost 4,484
Provision for doubtful accounts
Other
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (175,168) (110,264)
Inventory
Note receivable - related company 36,526
Deferred tax asset 19,000
Cash Advance (10,433)
Notes payable - current (5,089) 35,691
Accounts payable 5,251 (128,057)
Interest payable (3,190)
Due to related companies (22,694)
Due from related companies (7,635) 142,836
Other current liabilities 5,653
--------- ---------
NET CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES (56,405) (621)
CASH FLOWS PROVIDED (USED) BY
INVESTMENT ACTIVITIES - -
CASH FLOWS PROVIDED (USED) BY
FINANCING ACTIVITIES
Capital contributed 25,000
Due to officer
Due from related companies
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 25,000
NET INCREASE (DECREASE) IN CASH (56,405) (24,379)
Cash: Beginning of the year 64,458 10,610
--------- ---------
Cash: End of year $ 8,053 $ (34,989)
========= =========
ADDITIONAL DISCLOSURES
Interest paid $ 6,380
=========
Taxes paid $ 800 $ 6,000
========= =========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1999 AND
INTERIM PERIOD ENDED DECEMBER 31, 1999
NOTE 1 - ORGANIZATION AND PRESENTATION
Organization
Internet Infinity, Inc. (III) was incorporated in the State of Delaware on
October 27, 1995.
On April 1, 1998, Morris and Associates, Inc., (M&A) was incorporated in
California. Morris and Associates Inc. (formerly a division of Internet
Infinity, Inc.) is owned 100% by III. M&A is licensed to distribute special
interest video programming to educational and consumer distributors for health
and medical titles, computer software training including Microsoft Windows and
Explorer, internet information, golf, sports, home and garden titles.
On April 1, 1998, Electronic Media Central Corporation (EMC) was incorporated in
California. Electronic Media Central Corporation (formerly a division of III) is
owned 100% by III. EMC is engaged in the sale of blank electronic media such as
video tapes and the duplication, replication and packaging of DVD's, CD's, video
tapes and audio tapes.
The Company has registered the web address: www.ib2b.com for its new eCommerce
trade center. The new "ib2b.com" site will offer a variety of productivity
increasing products and services for business. The site will support both
distributors and manufacturers offering services in a cooperative marketing
eCommerce environment.
The Company declared a 2 for 1 stock split on March 17, 1999 to shareholders of
record on that date. The number of shares increased by 5,005,098 to 10,010,196.
This split has been shown retroactively.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Internet Infinity,
Inc. and its wholly owned subsidiaries, Morris & Associates, Inc. and Electronic
Media Central Corporation. All significant inter-company transactions and
balances have been eliminated in the consolidation.
Inventory
The Company's inventory (all on the books of "M & A"), consists of the
following:
Duplicated tapes and display boxes $ 59,918
Duplicate tapes and display boxes are valued at the lower of cost or market
(first-in, first-out basis). Inventory has been written down by $5,257 for
possible obsolescence.
Depreciation
The Company's equipment and furniture are carried at cost. Depreciation is
provided over the estimated useful lives of the assets, which are fully
depreciated.
5
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1999 AND
INTERIM PERIOD ENDED DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-Lived Assets
In 1998, the Company adopted SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." In accordance
with SFAS 121, long-lived assets held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicated that the
carrying amount of an asset may not be fully recoverable. For purposes of
evaluating the recoverability of long-lived assets, the estimated future cash
flows associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow value is
required.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers cash and cash
equivalents to include cash on hand, bank balances and short-term investments
with a maturity of three months or less.
Deferred Income Tax Accounts
Deferred tax provisions/benefits are calculated for certain transactions and
events because of differing treatments under generally accepted accounting
principles and the currently enacted tax laws of the federal government. The
results of these differences on a cumulative basis, known as temporary
differences, result in the recognition and measurement of deferred tax assets
and liabilities in the accompanying balance sheet. The liability method (FASB
109) is used to account for these temporary differences.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect 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.
Accordingly, actual results could differ from those estimates.
Year 2000 Compliance
Management does not believe any material year 2000 problems with the Company's
vendors, service providers, or other third parties will affect the Company's
financial information.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion (APBO) No.
25, Accounting for Stock Issued to Employees, and related interpretations
in accounting for its stock-based compensation and to provide the disclosures
required under Statement of Financial Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation."
APBO No. 25 requires no recognition of compensation expense for most of the
stock-based compensation agreements provided by the Company where the exercise
price is equal to the market value at the date of grant. However, APBO No. 25
requires recognition of compensation expense for variable award plans over the
vesting periods of such plans, based upon the then-current market values of the
underlying stock.
6
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1999 AND
INTERIM PERIOD ENDED DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation (Continued)
In contrast, SFAS No. 123 requires recognition of compensation expense for
grants of stock, stock options, and other equity instruments over the vesting
periods of such grants, based on the estimated grant-date fair values of those
grants. See Note 14 for pro forma disclosures required by FAS 123 plus
additional information on the Company's stock options.
Revenue Recognition
Income and expenses are recorded on the accrual basis of accounting. Revenue is
recognized from sales when a product is shipped and collection is probable and
the fee is fixed and determinable. Expenses are recognized when incurred.
Segment Reporting
The Company is a single segment reporting entity. At the current time all sales
and related expenses are from video media programs, which includes tapes and
CD's.
Earnings Per Share of Common Stock
The Company adopted Statement of Financial Accounting Standards No. 128-
Earnings Per Share (SFAS No. 128) in the fourth quarter of fiscal 1998. SFAS No.
128 is intended to simplify the earnings per share computations and make them
more comparable from company to company. All prior year earnings per share
amounts have been recalculated in accordance with the earnings per share
requirements under SFAS No. 128; however, such recalculation did not result in
any change to the Company's previously reported earnings per share for all years
presented.
NOTE 3 - SUBSCRIPTION AND ROYALTY AGREEMENTS
The Company has royalty agreements with two separate related entities. In July
1997, the Company entered into an agreement with L&M Media, Inc. for the rights
to market pre-recorded health and medical programs. The agreement specifies that
the Company shall pay a 15% royalty to L&M Media, Inc. on gross sales for all of
these programs sold between April 1, 1998 and March 31, 2001. In consideration
for these rights, the Company entered into a stock subscription agreement for
2,267,857 shares of common stock, with a trading value of $375,000. Royalties
earned will go toward the reduction of the stock subscription obligation. George
Morris, President of Internet Infinity, Inc. owns 98% of the stock of L&M Media,
Inc.
In January 1999 the Company entered into an agreement with Apple Realty, Inc.
(DBA Hollywood Riviera Studios) for the rights to market pre-recorded personal
and sales development multimedia success programs. The agreement specifies that
the Company shall pay a 20% royalty to Apple Realty, Inc. on gross sales for all
of these programs sold between April 1, 1999 and March 31, 2001. In
consideration for these rights, the Company entered into a stock subscription
agreement for 517,241 shares of common stock, with a trading value of $150,000.
In addition the Company issued 517,241 options at a market price of $.3135 per
share. Royalties earned will go toward the reduction of the stock subscription
obligation. George Morris owns 100% of the stock of Apple Realty, Inc.
7
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1999 AND
INTERIM PERIOD ENDED DECEMBER 31, 1999
NOTE 3 -ROYALTY AGREEMENTS (CONTINUED)
Currently, the royalty agreement amounts of $375,000 and $150,000, less the
royalties earned of $18,117 (total $506,883) are shown in the equity section as
unpaid subscription receivable.
In addition, the Company has a non-exclusive distribution license from L&M Media
Inc. for approximately 200 special interest video programs for which it has not
prepaid any royalties. Royalties owed to L&M Media Inc. from the sales of any
special interest programs are applied to the prepaid royalties associated with
the health and medical and the sales development training programs.
NOTE 4 - NON CASH DIVIDEND
At March 31, 1998, the Company had an investment of $108,131 in a wholly owned
subsidiary, More Media, Inc. In 1999, the Company distributed its stock in More
Media, Inc. to the Company's stockholders as a non cash dividend.
NOTE 5 - PROGRAMMING COSTS
Programming costs, consisting of video production and editing, are capitalized
and amortized over three years. Accumulated amortization was $14,924 at December
31, 1999.
NOTE 6 - NOTES PAYABLE
The Company has nine notes payable with various unrelated individuals, totaling
$87,297. 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.
NOTE 7 - RELATED COMPANY TRANSACTIONS
Note receivable from L&M Media, Inc.,
payable at $36,526 per year,
plus interest at 6% per annum.
The first payment is due
March 31, 2000. L&M Media, Inc.
is 98% owned by George Morris,
President of Internet Infinity, Inc. $ 39,994
Less current portion 36,526
-------
Long-term portion $ 3,468
========
Loan payable to Morris Financial, without
interest. Loan was paid subsequent to year end.
Morris Financial is owned 100% by George Morris. $ (2,000)
========
There is no interest expense on the above notes for the years ended March 31,
1999 or 1998.
L&M Media, Inc. owns 45.3% of the outstanding stock of Internet Infinity, Inc.
The above note receivable from L&M Media, Inc. for $39,994 is secured by George
Morris, President of the Company. Mr. Morris is using the notes due to him by
Internet Infinity, Inc. (see Note 8) as the collateral.
8
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1999 AND
INTERIM PERIOD ENDED DECEMBER 31, 1999
NOTE 7 - RELATED COMPANY TRANSACTIONS (CONTINUED)
The Company utilizes office space, telephone and utilities provided by Apple
Media corporation at no charge. An estimate of the monthly values of the
services are as follows:
<TABLE>
<CAPTION>
Total Internet Infinity Inc.
<S> <C> <C>
Rent $ 2,620 $ 400
Telephone 500 400
Utilities 1,000 100
$ 900
=========
</TABLE>
The annual charge of $10,800 for 1999 was credited against paid in capital.
NOTE 8 - DUE TO OFFICER
Unsecured note payable to George Morris, with
simple interest at 12% per annum beginning
March 31, 1999. Note is due and payable on
May 1, 2001. (see Note 7) $144,690
Two unsecured notes payable to George Morris,
due on demand with 90 days notice, with
interest at 6% per annum. 71,856
--------
216,546
Less current portion 71,856
--------
Long-term portion $144,690
========
Maturities of due to officer are as follows:
For Year Ended
March 31,
--------------
2000 $ 71,856
2001 144,690
--------
$ 216,546
=========
Interest charged to expense for the year ended March 31, 1999 on the above notes
was $8,680.
NOTE 9 - CONCENTRATION OF CREDIT RISK
Concentration of credit risk with respect to trade accounts receivable is
limited due to the large number of businesses comprising the Company's
geographically dispersed customer base.
The Company's only supplier of products is Apple Media, Inc. The Company's cost
for the product is 80% of the selling price. Apple Media, Inc. is owned 98% by
George Morris.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with
the financial statements and the accompanying notes thereto and is qualified in
its entirety by the foregoing and by more detailed financial information
appearing elsewhere. See "Item 1. Financial Statements."
Financial condition, changes in financial condition and results of
------------------------------------------------------------------------
operations - Third Quarter of Fiscal Year 2000 Compared to Third Quarter of
- --------------------------------------------------------------------------------
Fiscal Year 1999
- ----------------
Internet Infinity's sales increased from $328,239 in the three-month
period ended December 31, 1998 (Q3:1999) to $470,958 in the three-month period
ended December 31, 1999 (Q3:2000), a 43.5 percent increase of $142,719. The
increase is due primarily to a 48.3 percent increase of $149,921 in the sales of
the Electronic Media Central subsidiary of Internet Infinity for duplication
services of $460,432 for the three-month period ended December 31, 1999
(Q3:2000) over $310,511 for the three-month period ended December 31, 1998
(Q3:1999). Morris and Associates sales of pre-recorded video programs decreased
to $10,526 from $17,728 or a 40.6 percent decrease for the same period.
The cost of sales increased from $259,309, or 79.0 percent of sales, in
Q3:1999 to $379,458, or 80.6 percent of sales, in Q3:2000, a decrease of 1.6
percent when considered as a percentage of sales.
Operating expenses also decreased from $45,150 - or 13.8 percent of
sales - in Q3:1999 to $37,856 - or 8.0 percent of sales - in Q3:2000. This
decrease is due primarily to -
o a decrease in advertising expense from $285 or 0.1 percent of
sales in Q3:1999 to nothing in Q3:2000;
o an increase in bank charges from $533 or 0.2 percent of sales in
Q3:1999 to $805 or 0.2 percent of sales in Q3:2000;
o an increase in payroll processing expense from $895 or 0.3
percent of sales in Q3:1999 to $1,006 or 0.2 percent of sales in
Q3:2000;
o an increase in insurance expense from nothing to $324 or 0.1
percent of sales in Q3:2000;
o an increase in legal and accounting fees from $1,300 or 0.4
percent of sales in Q3:1999 to $4,783 or 1.0 percent of sales in
Q3:2000;
o a decrease in salary expense from $30,703 or 9.4 percent of
sales in Q3:1999 to $20,931 or 4.4 percent in Q3:2000;
o an increase in taxes and licenses expense from $427 or 0.1
percent of sales in Q3:1999 to $2,487 or 0.5 percent in Q3:2000;
10
<PAGE>
o a decrease in office salaries from $2,963 or 0.9 percent of
sales in Q3:1999 to $2,666 or 0.6 percent of sales in Q3:2000;
o a decrease in trade show expense from $1,217 or 0.4 percent of
sales in Q3:1999 to nothing in Q3:2000.
o a decrease in commission expense from $7,578 or 2.3 percent of
sales in Q3:1999 to $3,530 or 0.7 percent of sales in Q3:2000.
Internet Infinity had an increase in net income from operations of
$41,402 in Q3:2000 from a net income of $23,780 in Q3:1999. This $17,622 is
attributable to the above-described increase in sales, increase in cost of sales
and decrease in operating expenses.
Our accounts receivable increased by $175,168 from $129,537 at the end
of fiscal year 1999 to $304,705 at the end of Q3:2000, and our accounts payable
and accrued expenses increased by $5,251 from $51,123 at the end of FY 1999 to
$56,374 at the end of Q3:2000. A cash position of $64,458 at the end of FY 1999
was reduced to $8,053 at the end of Q3:2000, and inventory remained unchanged at
$59,918 from the end of FY 1999 to the end of Q3:2000. Stockholders' equity
increased from a deficit of $33,100 at the end of FY 1999 to $41,101 at the end
of Q3:2000.
Financial condition, changes in financial condition and results of
------------------------------------------------------------------------
operations - First Nine Months of Fiscal Year 2000 Compared to First Nine
- --------------------------------------------------------------------------------
Months of Fiscal Year 1999.
- --------------------------
Sales in the first nine months of FY 2000 increased by $180,469 or 19.8
percent over sales in the first nine months of FY 1999 - $1,091,741 compared to
the earlier $911,272. The increase is due primarily to a 24.5 percent increase
of $206,540 in the sales of duplication services by the Electronic Media Central
subsidiary of Internet Infinity from $841,663 for the first nine months of
FY 1999 to $1,048,203 for the first nine months of FY 2000. Morris and
Associates sales of pre-recorded video programs decreased $26,071 or 37.4
percent to $43,538 for the first nine months of FY 2000 from $26,071 for the
first nine months of FY 1999.
The cost of sales increased from $654,732 or 71.8 percent of sales in
the first nine months of FY 1999 to $849,941 or 77.9 percent of sales in the
first nine months of FY 2000. The increase of 6.1 percent is due to accounting
adjustments for purchases.
Operating expenses decreased from $169,593 - or 18.6 percent of sales -
in the first nine months of FY 1999 to $135,578 - or 12.4 percent of sales - in
the first months of FY 2000. The decrease is due primarily to -
o a decrease in advertising expense from $682 or 0.1 percent of
sales in the first nine months of FY 1999 to $450 or 0.04 percent
of sales in the first nine months of FY 2000;
o an increase in bank charges from $1,179 or 0.1 percent of sales
in the first nine months of FY 1999 to $2,666 or 0.2 percent of
sales in the first nine months of FY 2000;
11
<PAGE>
o an increase in payroll processing expense from $3,054 or 0.3
percent of sales in the first nine months of FY 1999 to $3,559 or
0.3 percent of sales in the first nine months of FY 2000;
o a decrease in insurance expense from $5,069 or 0.6 percent of
sales in the first nine months of FY 1999 to $3,559 or 0.3
percent of sales in the first nine months of FY 2000;
o a decrease in legal and accounting fees from $26,317 or 2.9
percent of sales in the first nine months of FY 1999 to $22,142
or 2.0 percent of sales in the first nine months of FY 2000;
o a decrease in salary expense from $84,235 or 9.2 percent of sales
in the first nine months of FY 1999 to $83,099 or 7.6 percent of
sales in the first nine months of FY 2000;
o a decrease in office expense from $839 or 0.1 percent of sales in
the first nine months of FY 1999 to $659, or 0.1 percent of sales
in the first nine months of FY 2000;
o a decrease in data processing expense from $455 or 0.05 percent
of sales in the first nine months of FY 1999 to $390 or 0.04
percent of sales in the first nine months of FY 2000;
o a decrease in taxes and licenses expense from $4,648 or 0.5
percent of sales in the first nine months of FY 1999 to $3,996 or
0.4 percent of sales in the first nine months of FY 2000;
o a decrease in office salaries from $9,735 or 1.1 percent of sales
in the first nine months of FY 1999 to $8,138 or 0.7 percent of
sales in the first nine months of FY 2000;
o a decrease in postage from $747 or 0.1 percent of sales in the
first nine months of FY 1999 to nothing in the first nine months
of FY 2000;
o a decrease in trade show expense from $7,099 or 0.8 percent of
sales in the first nine months of FY 1999 to nothing in the first
nine months of FY 2000; and
o a decrease in commission expense from $26,392 or 2.9 percent of
sales in the first nine months of FY 1999 to $3,530 or 0.3
percent in the first nine months of FY 2000.
Internet Infinity had a net income from operations of $82,137 in the
first nine months of 1999 and a net income from operations of $74,196 in the
first nine months of FY 2000. The slight decrease of $7,941 is attributable to
the above-described increase in sales, increase in cost of sales, and decrease
in operating expenses.
Liquidity and Outlook.
---------------------
We have been able to stay in operation (1) from the services provided by
Apple Media Corporation, formerly known as L&M Media, Inc., a supplier of
electronic media duplication services and blank electronic media, which
12
<PAGE>
is under the control of George Morris, chief executive officer of our company,
and (2) from the cash flow generated for Internet Infinity from the sale of pre-
recorded video licensed from L&M Media, Inc. and Hollywood Riviera Studios, a
subsidiary of Apple Realty, Inc., both controlled by George Morris. Since early
1997, sales from electronic blank media and duplication services have continued
to grow and provide the funds to reduce Internet Infinity debt and to create a
new Internet product and service line.
By the end of the third quarter of fiscal 2000 (December 31, 1999), our
cash position had fallen to $8,053 from $64,458 at the end of fiscal 1999. Our
net income from operations was $74,196 during the first nine months of FY 2000,
and we increased our accounts receivable by $175,168. Prepaid expenses increased
from zero to $10,433, Notes Receivable decreased by $36,526, and Current
Deferred Tax Asset decreased by $19,000.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Forms 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: February 23, 2000 Internet Infinity, Inc.
By /s/ George Morris
------------------------------------
George Morris
Chief Executive Officer
13
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