Delaware
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52-1490422
|
|
(State
or other jurisdiction of
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(IRS
Employer
|
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incorporation
or organization)
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Identification
No.)
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Large Accelerated filer
¨
Non-accelerated filer (Do not check if a smaller reporting company)
¨
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Accelerated filer
¨
Smaller reporting company
x
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PAGE
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||
PART
I – FINANCIAL INFORMATION
|
||
Item
1.
|
Consolidated
Financial Statements
|
3
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Consolidated
Balance Sheets – September 30, 2010 (Unaudited) and December 31, 2009
(Audited)
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3
|
|
Consolidated
Statements of Operations (Unaudited) for the three and nine months ended
September 30, 2010 and 2009
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4
|
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Consolidated
Statements of Cash Flows (Unaudited) for the nine months ended September
30, 2010 and 2009
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5
|
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Notes
to Consolidated Financial Statements – (Unaudited)
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6
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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10
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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16
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Item
4.
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Controls
and Procedures
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16
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PART
II – OTHER INFORMATION
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16
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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16
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Item
6.
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Exhibits
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16
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SIGNATURES
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17
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INFINITE
GROUP, INC.
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||||||||
Consolidated
Balance Sheets
|
||||||||
September
30,
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December
31,
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|||||||
2010
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2009
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|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 104,462 | $ | 196,711 | ||||
Accounts
receivable, net of allowance of $70,000
|
665,780 | 1,118,580 | ||||||
Prepaid
expenses and other current assets
|
65,732 | 56,622 | ||||||
Total
current assets
|
835,974 | 1,371,913 | ||||||
Property
and equipment, net
|
76,265 | 58,777 | ||||||
Deposits
and other assets
|
18,424 | 21,544 | ||||||
Total
assets
|
$ | 930,663 | $ | 1,452,234 | ||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 587,845 | 686,457 | |||||
Accrued
payroll
|
368,056 | 388,131 | ||||||
Accrued
interest payable
|
291,496 | 275,563 | ||||||
Accrued
retirement and pension
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3,443,450 | 3,078,361 | ||||||
Accrued
expenses - other
|
39,197 | 61,632 | ||||||
Current
maturities of long-term obligations-bank
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41,869 | 32,243 | ||||||
Notes
payable
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470,000 | 295,000 | ||||||
Notes
payable - related parties
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174,000 | 154,000 | ||||||
Total
current liabilities
|
5,415,913 | 4,971,387 | ||||||
Long-term
obligations:
|
||||||||
Notes
payable:
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||||||||
Banks
and other
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172,939 | 334,029 | ||||||
Related
parties
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501,324 | 501,324 | ||||||
Accrued
pension expense
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735,012 | 735,012 | ||||||
Total
liabilities
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6,825,188 | 6,541,752 | ||||||
Commitments
and contingencies (Note 5)
|
||||||||
Stockholders’
deficiency:
|
||||||||
Common
stock, $.001 par value, 60,000,000 shares authorized; 26,461,883
(25,661,883 – 2009) shares issued and outstanding
|
26,461 | 25,661 | ||||||
Additional
paid-in capital
|
29,988,220 | 29,870,506 | ||||||
Accumulated
deficit
|
(33,104,166 | ) | (32,180,645 | ) | ||||
Accumulated
other comprehensive loss
|
(2,805,040 | ) | (2,805,040 | ) | ||||
Total
stockholders’ deficiency
|
(5,894,525 | ) | (5,089,518 | ) | ||||
Total
liabilities and stockholders’ deficiency
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$ | 930,663 | $ | 1,452,234 |
INFINITE
GROUP, INC.
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||||||||||||||||
Consolidated
Statements of Operations (Unaudited)
|
||||||||||||||||
Three
Months Ended
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Nine
Months Ended
|
|||||||||||||||
September 30,
|
September 30,
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|||||||||||||||
2010
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2009
|
2010
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2009
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|||||||||||||
Sales
|
$ | 2,212,716 | $ | 2,756,463 | $ | 7,206,004 | $ | 8,320,492 | ||||||||
Cost
of services
|
1,589,069 | 2,065,766 | 5,354,738 | 6,344,445 | ||||||||||||
Gross
profit
|
623,647 | 690,697 | 1,851,266 | 1,976,047 | ||||||||||||
Costs
and expenses:
|
||||||||||||||||
General
and administrative
|
311,997 | 306,425 | 928,125 | 918,633 | ||||||||||||
Defined
benefit pension plan
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126,675 | 133,468 | 372,624 | 430,214 | ||||||||||||
Selling
|
383,633 | 416,656 | 1,264,680 | 1,309,795 | ||||||||||||
Total
costs and expenses
|
822,305 | 856,549 | 2,565,429 | 2,658,642 | ||||||||||||
Operating
loss
|
(198,658 | ) | (165,852 | ) | (714,163 | ) | (682,595 | ) | ||||||||
Interest
expense:
|
||||||||||||||||
Related
parties
|
(13,838 | ) | (21,060 | ) | (38,515 | ) | (62,423 | ) | ||||||||
Other
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(58,332 | ) | (50,130 | ) | (169,613 | ) | (155,533 | ) | ||||||||
Total
interest expense
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(72,170 | ) | (71,190 | ) | (208,128 | ) | (217,956 | ) | ||||||||
Loss
before income tax expense
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(270,828 | ) | (237,042 | ) | (922,291 | ) | (900,551 | ) | ||||||||
Income
tax expense
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- | - | (1,230 | ) | (4,000 | ) | ||||||||||
Net
loss
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$ | (270,828 | ) | $ | (237,042 | ) | $ | (923,521 | ) | $ | (904,551 | ) | ||||
Net
loss per share – basic and diluted
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$ | (.01 | ) | $ | (.01 | ) | $ | (.04 | ) | $ | (.04 | ) | ||||
Weighted
average number of shares
outstanding – basic and
diluted
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26,148,840 | 25,498,253 | 25,825,986 | 25,400,155 |
INFINITE
GROUP, INC.
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||||||||
Consolidated
Statements of Cash Flows (Unaudited)
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||||||||
Nine
Months Ended
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||||||||
September 30,
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||||||||
2010
|
2009
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|||||||
Operating
activities:
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||||||||
Net
loss
|
$ | (923,521 | ) | $ | (904,551 | ) | ||
Adjustments
to reconcile net loss to net cash used by operating
activities:
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||||||||
Stock
based compensation
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78,514 | 118,580 | ||||||
Depreciation
|
26,265 | 23,568 | ||||||
Decrease
(increase) in assets:
|
||||||||
Accounts
receivable
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452,800 | (99,659 | ) | |||||
Other
assets
|
(5,990 | ) | (19,535 | ) | ||||
(Decrease)
increase in liabilities:
|
||||||||
Accounts
payable
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(98,612 | ) | 174,780 | |||||
Accrued
expenses
|
13,423 | 268,550 | ||||||
Accrued
pension and retirement
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365,089 | 376,316 | ||||||
Net
cash used by operating activities
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(92,032 | ) | (61,951 | ) | ||||
Investing
activities:
|
||||||||
Purchase
of property and equipment
|
(5,078 | ) | (6,651 | ) | ||||
Net
cash used by investing activities
|
(5,078 | ) | (6,651 | ) | ||||
Financing
activities:
|
||||||||
Repayments
of notes payable
|
(15,139 | ) | (31,197 | ) | ||||
Proceeds
from note payable - related parties
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90,000 | 76,151 | ||||||
Repayments
of note payable - related parties
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(70,000 | ) | (76,151 | ) | ||||
Proceeds
from exercise of stock options
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- | 1,750 | ||||||
Net
cash provided by (used by) financing activities
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4,861 | (29,447 | ) | |||||
Net
decrease in cash and cash equivalents
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(92,249 | ) | (98,049 | ) | ||||
Cash
- beginning of period
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196,711 | 153,336 | ||||||
Cash
- end of period
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$ | 104,462 | $ | 55,287 | ||||
Supplemental
disclosure:
|
||||||||
Cash
paid for:
|
||||||||
Interest
|
$ | 154,082 | $ | 173,790 | ||||
Income
taxes
|
$ | 1,230 | $ | 4,000 |
2010
|
2009
|
|||||
Risk-free
interest rate
|
1.73% - 2.93%
|
2.09% - 2.80%
|
||||
Expected
dividend yield
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0%
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0%
|
||||
Expected
stock price volatility
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75%
|
75%
|
||||
Expected
life of options
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5.75 years
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5.75 years
|
Three
Months
ended
September 30,
2010
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Three
Months
ended
September 30,
2009
|
Nine
Months
ended
September 30,
2010
|
Nine
Months
ended
September 30,
2009
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|||||||||||||
Employee
stock options
|
$ | 19,598 | $ | 29,689 | $ | 78,514 | $ | 120,749 | ||||||||
Consultants
– common stock warrants
|
- | - | - | (2,169 | ) | |||||||||||
Total
expense
|
$ | 19,598 | $ | 29,689 | $ | 78,514 | $ | 118,580 |
Number of
Options
|
Weighted
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic Value
|
|||||||||||||
Outstanding
at December 31, 2009
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5,491,500 | $ | .26 | |||||||||||||
Options
granted
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1,766,000 | $ | .14 | |||||||||||||
Options
expired
|
(558,000 | ) | $ | .29 | ||||||||||||
Outstanding
at September 30, 2010
|
6,699,500 | $ | .24 |
6.3 years
|
$ | 21,860 | ||||||||||
Exercisable
at September 30, 2010
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4,800,834 | $ | .26 |
5.0 years
|
$ | 21,860 |
Number of
Nonvested
Options
|
Weighted Average
Fair Value
at Grant Date
|
|||||||
Nonvested
outstanding at December 31, 2009
|
866,333 | $ | .15 | |||||
Options
granted
|
1,766,000 | $ | .09 | |||||
Options
vested
|
(542,000 | ) | $ | .26 | ||||
Options
forfeited
|
(191,667 | ) | $ | .13 | ||||
Nonvested
outstanding at September 30, 2010
|
1,898,666 | $ | .10 |
Three Months
ended
September 30,
2010
|
Three Months
ended
September 30,
2009
|
Nine Months
ended
September 30,
2010
|
Nine Months
ended
September 30,
2009
|
|||||||||||||
Interest
cost
|
$ | 72,531 | $ | 71,996 | $ | 217,594 | $ | 215,989 | ||||||||
Expected
return on plan assets
|
(39,148 | ) | (42,115 | ) | (117,443 | ) | (126,346 | ) | ||||||||
Service
cost
|
12,500 | 17,750 | 37,500 | 53,250 | ||||||||||||
Actuarial
loss
|
31,882 | 37,343 | 95,645 | 112,030 | ||||||||||||
Net
periodic pension cost
|
$ | 77,765 | $ | 84,974 | $ | 233,296 | $ | 254,923 |
Nine Months Ended September
30,
|
||||||||
2010
|
2009
|
|||||||
Conversion
of accrued interest payable under note payable -related party into 800,000
and 500,000 shares on common stock, respectively
|
$ | 40,000 | $ | 25,000 | ||||
Purchase
of computer and communications equipment through long-term
obligations
|
$ | 38,675 | $ | 9,465 | ||||
Conversion
of convertible accrued interest payable into a convertible note
payable
|
$ | - | $ | 25,000 |
Three Months Ended September
30,
|
||||||||||||||||||||||||
2010 vs. 2009
|
||||||||||||||||||||||||
As
a % of
|
As
a % of
|
Amount
of
|
%
Increase
|
|||||||||||||||||||||
2010
|
Sales
|
2009
|
Sales
|
Change
|
(Decrease)
|
|||||||||||||||||||
Sales
|
$ | 2,212,716 | 100.0 | % | $ | 2,756,463 | 100.0 | % | $ | (543,747 | ) | (19.7 | )% | |||||||||||
Cost
of services
|
1,589,069 | 71.8 | 2,065,766 | 74.9 | (476,697 | ) | (23.1 | ) | ||||||||||||||||
Gross
profit
|
623,647 | 28.2 | 690,697 | 25.1 | (67,050 | ) | (9.7 | ) | ||||||||||||||||
General
and administrative
|
311,997 | 14.1 | 306,425 | 11.1 | 5,572 | 1.8 | ||||||||||||||||||
Defined
benefit pension plan
|
126,675 | 5.7 | 133,468 | 4.8 | (6,793 | ) | (5.1 | ) | ||||||||||||||||
Selling
|
383,633 | 17.3 | 416,656 | 15.1 | (33,023 | ) | (7.9 | ) | ||||||||||||||||
Total
costs and expenses
|
822,305 | 37.2 | 856,549 | 31.0 | (34,244 | ) | (4.0 | ) | ||||||||||||||||
Operating
loss
|
(198,658 | ) | (9.0 | ) | (165,852 | ) | (5.9 | ) | 32,806 | 19.8 | ||||||||||||||
Interest
expense
|
(72,170 | ) | (3.3 | ) | (71,190 | ) | (2.6 | ) | 980 | 1.4 | ||||||||||||||
Net
loss
|
$ | (270,828 | ) | (12.2 | )% | $ | (237,042 | ) | (8.6 | )% | $ | 33,786 | 14.3 | % | ||||||||||
Net
loss per share - basic and diluted
|
$ | (.01 | ) | $ | (.01 | ) | $ | - |
2010 vs. 2009
|
||||||||||||||||||||||||
As
a % of
|
As
a % of
|
Amount
of
|
%
Increase
|
|||||||||||||||||||||
2010
|
Sales
|
2009
|
Sales
|
Change
|
(Decrease)
|
|||||||||||||||||||
Sales
|
$ | 7,206,004 | 100.0 | % | $ | 8,320,492 | 100.0 | % | $ | (1,114,488 | ) | (13.4 | )% | |||||||||||
Cost
of services
|
5,354,738 | 74.3 | 6,344,445 | 76.3 | (989,707 | ) | (15.6 | ) | ||||||||||||||||
Gross
profit
|
1,851,266 | 25.7 | 1,976,047 | 23.7 | (124,781 | ) | (6.3 | ) | ||||||||||||||||
General
and administrative
|
928,125 | 12.9 | 918,633 | 11.0 | 9,492 | 1.0 | ||||||||||||||||||
Defined
benefit pension plan
|
372,624 | 5.2 | 430,214 | 5.2 | (57,590 | ) | (13.4 | ) | ||||||||||||||||
Selling
|
1,264,680 | 17.6 | 1,309,795 | 15.7 | (45,115 | ) | (3.4 | ) | ||||||||||||||||
Total
costs and expenses
|
2,565,429 | 35.6 | 2,658,642 | 32.0 | (93,213 | ) | (3.5 | ) | ||||||||||||||||
Operating
loss
|
(714,163 | ) | (9.9 | ) | (682,595 | ) | (8.2 | ) | 31,568 | 4.6 | ||||||||||||||
Interest
expense
|
(208,128 | ) | (2.9 | ) | (217,956 | ) | (2.6 | ) | (9,828 | ) | (4.5 | ) | ||||||||||||
Income
tax expense
|
(1,230 | ) | (4,000 | ) | (2,770 | ) | (69.3 | ) | ||||||||||||||||
Net
loss
|
$ | (923,521 | ) | (12.8 | )% | $ | (904,551 | ) | (10.9 | )% | $ | 18,970 | 2.1 | % | ||||||||||
Net
loss per share - basic and diluted
|
$ | (.04 | ) | $ | (.04 | ) | $ | .00 |
Nine
Months Ended
September
30,
|
||||||||
2010
|
2009
|
|||||||
Net
cash used by operating activities
|
$ | (92,032 | ) | $ | (61,951 | ) | ||
Net
cash used by investing activities
|
(5,078 | ) | (6,651 | ) | ||||
Net
cash provided/(used) by financing activities
|
4,861 | (29,447 | ) | |||||
Net
decrease in cash
|
$ | (92,249 | ) | $ | (98,049 | ) |
Exhibit No.
|
Description
|
|
10.31
|
Promissory
Note between Allan M. Robbins and the Company dated August 13,
2010.*
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.*
|
|
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of
2002.*
|
Infinite Group, Inc.
|
|
(Registrant)
|
|
Date:
November 10, 2010
|
/s/ Michael S. Smith
|
Michael
S. Smith
|
|
Chief
Executive Officer
|
|
(Principal
Executive Officer)
|
|
Date:
November 10, 2010
|
/s/ James Witzel
|
James
Witzel
|
|
Chief
Financial Officer
|
|
(Principal
Financial Officer)
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of Infinite Group,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f))for the registrant and
have:
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/ Michael S. Smith
|
Michael
S. Smith
|
Chief
Executive Officer
|
(Principal
Executive Officer)
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of Infinite Group,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f))for the registrant and
have:
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/
James Witzel
|
James
Witzel
|
Chief
Financial Officer
|
(Principal
Financial Officer)
|
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended;
and
|
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the
Company.
|
November
10, 2010
|
/s/
Michael S. Smith
|
Michael
S. Smith
|
|
Chief
Executive Officer
|
|
(Principal
Executive
Officer)
|
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended;
and
|
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the
Company.
|
/s/
James Witzel
|
James
Witzel
|
Chief
Financial Officer
|
(Principal
Financial and Accounting
Officer)
|