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 September 30, 2000
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)
Commission File No. 0-27633
State of Incorporation: Delaware
IRS Employer I.D. Number: 95-4679342
3303 Harbor Boulevard, K-5
Costa Mesa, California 92626
Telephone 714-434-0433
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(Address and telephone number of registrant's principal
executive offices and principal place of business)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]
As of September 30, 2000, there were 10,373,196 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
2
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
ASSETS
<TABLE>
CURRENT ASSETS
<S> <C>
Cash $ 5,633
Accounts receivable, net of allowance for doubtful
accounts of $6,500 150,428
Inventory 39,039
Note receivable - related companies - current 37,500
Prepaid expenses 2,907
Net current deferred tax asset 28,577
-----------
Total Current Assets $ 264,084
-----------
PROPERTY AND EQUIPMENT, AT COST -
OTHER ASSETS
Note receivable - related company $ 204,593
Programming costs, net of amortization 5,713
-----------
Total Other Assets 210,306
-----------
Total Assets $ 474,390
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 95,234
Accounts payable and accrued expenses 60,062
Accounts payable - related company 86,930
Due to officer - current 36,000
-----------
Total Current Liabilities 278,226
-----------
LONG TERM LIABILITIES
Due to officer - non-current 116,205
-----------
Total Liabilities 394,431
-----------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001; authorized 1,000,000
shares; issued and outstanding 0 shares -
Common stock, par value $.001; authorized 20,000,000
shares; issued and outstanding 10,373,196 shares 10,373
Paid-in capital 997,546
Retained earnings (deficit) (429,636)
Unpaid stock subscriptions (498,324)
-----------
Total Stockholders' Equity 79,959
-----------
Total Liabilities and Stockholders' Equity $ 474,390
===========
</TABLE>
See the Accompanying Selected Information to Unaudited
Condensed Consolidated Financial Statements
3
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTHS AND SIX-MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three-Months For The Six-Months
Ended September 30, Ended September 30,
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $ 310,237 $ 342,590 $ 631,013 $ 620,783
COST OF SALES 242,006 264,031 492,753 470,483
---------- ---------- ---------- ----------
Gross Profit 68,231 78,559 138,260 150,300
OPERATING EXPENSE 71,474 64,802 137,734 100,764
---------- ---------- ---------- ----------
Net Income (Loss)
Other Income (Expense)
and Provision for
Taxes (3,243) 13,757 526 49,536
OTHER INCOME (EXPENSE)
Interest income 3,500 -- 7,183 --
Interest expense (4,359) (8,224) (8,396) (11,424)
---------- ---------- ---------- ----------
Net Income (4,102) 5,533 (687) 38,112
(PROVISION) BENEFIT FOR
INCOME TAXES $ -- $ (1,500) $ -- $ (8,000)
---------- ---------- ---------- ----------
Net Income (Loss) $ (4,102) $ 4,033 $ (687) $ 30,112
========== ========== ========== ==========
BASIC NET INCOME PER SHARE:
Basic $ .00 $ .00 $ .00 $ .003
========== ========== ========== ==========
Diluted $ .00 $ .00 $ .00 $ .00
========== ========== ========== ==========
WEIGHTED-AVERAGE COMMON
SHARES OUTSTANDING:
Basic 10,373,196 10,010,196 10,373,196 11,447,348
========== ========== ========== ==========
Diluted 10,373,196 14,210,196 10,767,196 15,647,348
========== ========== ========== ==========
</TABLE>
See the Accompanying Selected Information to Unaudited Condensed
Consolidated Financial Statements.
4
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
--------- ---------
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ (687) $ 30,112
Adjustments to reconcile net (loss) to net cash
Amortization and depreciation 1,904 2,986
Royalty expense used against unpaid stock subscription 2,227 3,042
(Increase) in accounts receivable (33,648) (17,004)
Increase in current liabilities and accrued expenses 6,290 4,811
Increase in trade accounts payable - related party 2,241 29,282
Decrease in interest payable 617 --
(Increase) in prepaid expense (1,391) --
Decrease in deferred tax asset -- 8,000
------- -------
Net Cash Flows Provided (Used) by Operating (22,447) 61,229
------- -------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Decrease in note receivable - related party 4,967 --
------- -------
Net Cash Flows Provided (Used ) by Investing 4,967 --
------- -------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
(Decrease) in due to related party (2,000) (97,907)
Proceeds from officer's loan 14,064 --
Payment of loan due to officer (9,000) (405)
------- -------
Net Cash Flows (Used) by Financing Activities 3,064 (98,312)
------- -------
NET (DECREASE) IN CASH (14,416) (37,083)
CASH AT THE BEGINNING OF THE YEAR 20,049 64,458
------- -------
CASH AT THE END OF THE YEAR $ 5,633 $ 27,375
======= =======
ADDITIONAL DISCLOSURES:
Interest paid $ -- $ 6,380
======= =======
Income taxes paid $ 6,747 $ 800
======= =======
</TABLE>
7 See the Accompanying Selected Information to Unaudited Condensed
Consolidated Financial Statements.
5
<PAGE>
INTERNET INFINITY, INC. AND SUBSIDIARIES
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
SELECTED INFORMATION
Substantially All Disclosures Required by Generally
Accepted Accounting Principles are Not Included
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1 - MANAGEMENT'S STATEMENT
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (all of which are normal and recurring in
nature) necessary to present fairly the financial position of Internet Infinity,
Inc. and Subsidiaries (the Company) at September 30, 2000, and the results of
operations and the cash flows for the six-months ended September 30, 2000 and
1999.
The notes to the Consolidated Financial Statements which are incorporated
by reference into Form 10-SK, for the year ended March 31, 2000, should be read
in conjunction with these Condensed Consolidated Financial Statements.
NOTE 2 - RECLASSIFICATION
Certain prior year balances have been reclassified to conform to the
current year presentation.
NOTE 3 - STOCKHOLDERS' EQUITY
The following is an analysis of activities in the Stockholders' Equity
for the six months ended September 30, 2000:
<TABLE>
<CAPTION>
Unpaid
Additional Stock
Preferred Common Stock Paid-In Sub- Retained
Shares Amount Shares Amount Capital scription (Deficit) Balance
------ ------ ---------- ------- -------- ---------- ---------- --------
<S> <C><C> <C> <C> <C> <C> <C> <C>
Balance at 3/31/00 - $ - 10,373,196 $10,373 $997,546 $(500,551) $(428,949) $78,419
September 30,
Royalty earned - - - - - 2,227 - 2,227
Net (Loss) - - - - - - (687) (687)
---- ----- ---------- ------ ------- -------- -------- ------
Balance at 9/30/00 - $ - 10,373,196 $10,373 $997,546 $(498,324) $(429,636) $79,959
==== ===== ========== ====== ======= ======== ======== ======
</TABLE>
NOTE 4 - CORRECTION OF ERROR
Basic weighted-average common shares outstanding for the six months ended
September 30, 1999 were incorrectly reported at 11,010,196 shares in the 10Q,
which was previously filed. The correct basic weighted-average common shares
outstanding for the six months ended September 30, 1999 were 10,010,196. The
basic net income per share for the six months ended September 30, 1999 still
remains as $0.00.
6
<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."
Results of Operations - Second Quarter 2001 Compared to Second Quarter 2000
Sales
Internet Infinity revenues for Q2 2001 were $310,237, a 9.4% decrease in
revenues over Q2 2000 of $342,590. The decrease in sales was attributable to the
absence of an independent sales representative from the sales force. An existing
employee has moved up to service and sell the customers as of September 30,
2000.
Cost of Sales
Our cost of sales decreased to $242,006 for Q2 2001, or 78% of sales,
down from $264,031 for Q2 2000, or 77.1% of sales. This $22,025 decrease in the
cost of sales is due primarily to a decrease in sales volume and the 0.9%
percentage increase in the cost of sales represents an increase of lower margin
duplication sales over higher margin pre-recorded video program sales.
Gross Margin
The company's gross margin decreased to $68,231 for Q2 2001, or 22% of
sales, from $78,559 for Q2 2000, or 22.9% of sales. This slight decrease is
attributable to the increased sales of lower margin services in the period as
noted above.
Operating Expenses
Operating expenses for Q2 2001 increased to $71,474, or 23% of sales,
over $64,802 or 18.9% of sales, for Q2 2000. This increase of $6,672 in
operating expenses for Q2 2001 over Q2 2000 is primarily due to an increase in
sales person base salary compensation. The 4.1% increase in operating expenses
as a percentage of sales to 23% in Q2 2001 resulted from decrease in sales by
all sales persons with the increase in compensation for the major account sales
person.
Net Income (Loss)
The company had a net loss of $4,102 in Q2 2001, or 1.3% of sales, as
compared with a net income of $4,033 in Q2 2000, or 1.2% of sales. The decrease
in net income of $8,135 is discussed in the previous sections.
Balance Sheet Items
Our cash position decreased from $27,375 at September 30, 1999 (Q2 2000)
by $21,472 to $5,633 at September 30, 2000 (Q2 2001). Accounts receivable from
non-affiliates increased from $146,541 at September 30, 1999 (Q2 2000) by $3,887
to $150,428 at September 30, 2000 (Q2 2001), and the inventory decreased from
$59,918 at September 30, 1999 (Q2 2000) by $20,879 to $39,039 at September 30,
2000 (Q2 2001).
Results of Operations - First Half of Fiscal Year 2000 Compared to First Half of
Fiscal Year 1999.
Sales
Internet Infinity revenues for the first half of FY 2001 were $631,013 a
1.6% increase in revenues over the first half of FY 2000 of $620,783. The
increase in sales was attributable to an increased effort by the Internet
Infinity sales force with existing customers in the first quarter Q1 2001 of the
first half of FY 2001.
Cost of Sales
Our cost of sales increased to $492,753 for the first half of FY 2001,
or 78.1% of sales, over $470,483 for the first half of FY 2000, or 75.8% of
sales. This increase in the cost of sales is due primarily to an increase in the
sales of lower margin duplication sales over pre-recorded video program sales.
Gross Margin
The company's gross margin decreased to $138,260 for the first half of
FY 2001, or 21.9% of sales, from $150,300 for the first half of FY 2000, or
24.2% of sales. This decrease is attributable to the increased sales of lower
margin services in the period as noted above.
Operating Expenses
Operating expenses for the first half of FY 2001 increased to $137,734,
or 21.8% of sales, over $100,764, or 16.3% of sales, for the first half of FY
2000. This large increase in operating expenses is primarily due to a $5,352
increase in sales person compensation, $14,391 for insurance premiums and
$10,196 for legal and accounting fees in the first half of FY 2001 over the
first half of FY 2000.
Net Income (Loss)
The company had a net loss of $687 in the first half of FY 2001, or .1%
of sales, as compared with a net income of $30,112 in the first half of FY 2000,
or 4.9% of sales. The decrease in net income of $30,799 is discussed in the
previous sections.
7
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Forms 8-K
None
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.
Dated: November 12, 2000 INTERNET INFINITY, INC.
By/s/ George Morris
----------------------------------
George Morris, President and Chief
Executive Officer
