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INFINITE GROUP, INC.
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(Exact name of registrant as specified in its charter)
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DELAWARE
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52-1490422
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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80 Office Park Way
Pittsford, NY 14534
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(Address of principal executive offices)
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INFINITE GROUP, INC.
Form 10-K
TABLE OF CONTENTS
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Page
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PART I
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Item 1.
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Business
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3
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Item 1A.
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Risk Factors
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7
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Item 1B.
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Unresolved Staff Comments
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17
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Item 2.
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Properties
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17
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Item 3.
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Legal Proceedings
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18
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Item 4.
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Mine Safety Disclosure
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18
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PART II
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Item 5.
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Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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18
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Item 6.
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Selected Financial Data
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18
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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19
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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28
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Item 8.
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Financial Statements and Supplementary Data
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28
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Item 9.
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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28
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Item 9A.
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Controls and Procedures
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28
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Item 9B
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Other Information
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29
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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29
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Item 11.
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Executive Compensation
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31
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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32
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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35
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Item 14.
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Principal Accountant Fees and Services
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36
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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37
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At December 31, 2015
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Owned
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Square Feet Leased
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Annual Rent
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Termination Date
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Pittsford, New York
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-
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7,112
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$ 64,900
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May 31, 2016
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Bid Prices
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||
Year Ended December 31, 2015
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High
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|
Low
|
|
|
|
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First Quarter
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$ .05
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$ .02
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Second Quarter
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$ .13
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$ .02
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Third Quarter
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$ .10
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$ .04
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Fourth Quarter
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$ .17
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$ .02
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Year Ended December 31, 2014
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High
|
|
Low
|
|
|
|
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First Quarter
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$ .12
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|
$ .08
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Second Quarter
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$ .09
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$ .04
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Third Quarter
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$ .07
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$ .03
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Fourth Quarter
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$ .06
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$ .03
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Name
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Age
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Position
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Affiliated
Since
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James Villa (1)
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58
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Chairman of the Board, Chief Executive Officer and President
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2003
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Donald W. Reeve (1)
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69
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Director
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2013
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Andrew Hoyen
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45
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Chief Administrative Officer and Senior Vice President of Business Development
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2014
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James Witzel
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62
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Chief Financial Officer
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2004
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Name and Principal Position
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Year
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Salary
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Option Awards (1)
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All Other
Compensation (2)
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Total
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James Villa
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Chairman, President and Chief
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2015
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$
208,455
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$
-
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$
943
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$
209,398
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Executive Officer
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2014
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$
200,687
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$
50,850
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$
990
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$
252,527
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|
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William S. Hogan
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Chief Operations Officer
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2015
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$
222,993
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$
1,420
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$
943
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$
225,356
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2014
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$
214,687
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$
-
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$
375
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$
215,062
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|
|
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Andrew Hoyen
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Chief Administrative Officer
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2015
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$
204,993
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$
-
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$
329
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$
205,322
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and Senior Vice President of
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2014
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$
39,863
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$
12,900
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$
25
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$
52,788
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Business Development (3)
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James Witzel
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Chief Financial Officer
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2015
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$
156,429
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$
1,420
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$
1,447
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$
159,296
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|
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2014
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$
150,597
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$
25,267
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$
375
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$
176,239
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Name
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Number of Securities Underlying Unexercised Options - Exercisable
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Number of Securities Underlying Unexercised Options - Unexercisable
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Option Exercise Price
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Option Expiration Date
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|
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James Villa
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333,333
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166,667
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$
.115
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1/20/2024
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|
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Andrew Hoyen
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200,000
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300,000
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$
.04
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11/30/2019
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James Witzel
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50,000
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-
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$
.37
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4/10/2016
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50,000
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-
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$
.67
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7/27/2018
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25,000
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-
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$
.16
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2/4/2019
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300,000
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-
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$
.145
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6/17/2020
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473,000
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-
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$
.093
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8/11/2021
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140,000
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70,000
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$
.115
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1/20/2024
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100,000
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-
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$
.05
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12/30/2024
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40,000
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-
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$
.05
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3/2/2025
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Name of Beneficial Owner (1)
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Shares of Common Stock Beneficially Owned (1)
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Percentage of Ownership
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Donald W. Reeve
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1,510,000
(3)
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5.5
%
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James Villa
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4,674,796
(4)
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15.0
%
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Andrew Hoyen
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505,000
(5)
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1.9
%
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James Witzel
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1,798,980
(6)
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6.4
%
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All Directors and Officers (4 persons) as a group
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8,488,776
(2)
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24.9
%
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5% Stockholders:
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Paul J. Delmore
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2,367,000
(7)
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8.9
%
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One America Place
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600 West Broadway, 28th Floor
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San Diego, CA 92101
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Allan M. Robbins
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11,260,490
(8)
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30.6
%
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44 Hampstead Drive
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Webster, NY 14580
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David N. Slavny
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2,367,320
(9)
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8.4
%
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c/o Infinite Group, Inc.
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80 Office Park Way
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Pittsford, New York 14534
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Equity Compensation Plan Table
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Number of securities to be issued
upon exercise of outstanding options,
warrants and rights
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Weighted-average exercise price of outstanding options, warrants and rights
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Number of securities remaining available
for future issuance under equity compensation plans
(excluding securities reflected in column (a))
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(a)
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(b)
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(c)
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Equity compensation plans previously approved by security holders (1)
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2,436,500
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$ .27
|
-
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Equity compensation plans not previously approved by security holders (2)
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3,232,000
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$ .11
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768,000
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Individual option grants that have not been approved by security holders (3)
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2,775,000
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$ .13
|
-
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Total
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8,443,500
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$ .16
|
768,000
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|
2015
|
2014
|
Audit fees
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$
83,000
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$
80,000
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Audit related fees
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-
|
-
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Total audit and audit related fees
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$
83,000
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$
80,000
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Exhibit
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No.
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Description
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3.1
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Certificate of Incorporation of the Company dated April 29, 1993. (1)
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3.2
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Certificate of Amendment of Certificate of Incorporation dated December 31, 1997. (3)
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3.3
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Certificate of Amendment of Certificate of Incorporation dated February 3, 1999. (4)
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3.4
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Certificate of Amendment of Certificate of Incorporation dated February 28, 2006. (6)
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3.5
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By-Laws of the Company. (1)
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4.1
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Specimen Stock Certificate. (1)
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10.1
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**2005 Stock Option Plan. (2)
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10.2
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**2009 Stock Option Plan. (9)
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10.3
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Form of Stock Option Agreement. (1)
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10.4
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Promissory Note dated August 13, 2003 in favor of Carle C. Conway. (5)
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10.5
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Promissory Note dated January 16, 2004 in favor of Carle C. Conway. (5)
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10.6
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Promissory Note dated March 11, 2004 in favor of Carle C. Conway. (5)
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10.7
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Promissory Note dated December 31, 2003 in favor of Northwest Hampton Holdings, LLC. (5)
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10.8
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Modification Agreement No. 3 to Promissory Notes between Northwest Hampton Holdings, LLC and the Company dated October 1, 2005. (6)
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10.9
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Modification Agreement No. 3 to Promissory Notes between Allan Robbins and the Company dated October 1, 2005. (6)
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10.10
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Modification Agreement to Promissory Notes between the Company and Carle C. Conway dated December 31, 2005. (6)
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10.11
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Promissory Note dated December 31, 2005 in favor of David N. Slavny and Leah A. Slavny. (6)
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10.12
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Collateral Security Agreement between the Company and David N. Slavny and Leah A. Slavny dated December 31, 2005. (6)
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10.13
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Modification Agreement to Promissory Note between Northwest Hampton Holdings, LLC and the Company dated December 6, 2005. (6)
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10.14
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Collateral Security Agreement between the Company and Northwest Hampton Holdings, LLC dated February 15, 2006. (6)
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10.15
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Collateral Security Agreement between the Company and Allan Robbins dated February 15, 2006. (6)
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10.16
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Purchase and Sale Agreement between the Company and Amerisource Funding, Inc. dated May 21, 2004. (7)
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10.17
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Account Modification Agreement between the Company and Amerisource Funding, Inc. dated August 5, 2005. (7)
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10.18
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Promissory Note dated June 13, 2008 in favor of Dan Cappa. (9)
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10.19
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Modification Agreement to Promissory Notes between the Company and David N. Slavny and Leah A. Slavny dated February 6, 2009. (9)
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10.20
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Promissory Note between Northwest Hampton Holdings, LLC and the Company dated September 30, 2009. (10)
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10.21
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Modification Agreement to Promissory Notes between the Company and Carle C. Conway dated December 31, 2009. (10)
|
10.22
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Demand Promissory Note between Allan M. Robbins and the Company dated August 13, 2010. (12)
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10.23
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Settlement Agreement between the Company and the PBGC, effective as of September 1, 2011. (14)
|
10.24
|
Agreement for Appointment of Trustee and Termination of Plan between the Company and the PBGC, effective as of November 1, 2011. (15)
|
10.25
|
Promissory Note in favor of the PBGC dated October 17, 2011. (15)
|
10.26
|
Modification Agreement to Promissory notes between the Company and Carle C. Conway dated December 31, 2012. (16)
|
10.27
|
Line of Credit Note Agreement between the Company and Donald W. Reeve dated December 1, 2014. (17)
|
10.28
|
Stock Option Agreement between the Company and Donald W. Reeve dated September 5, 2013.
(18)
|
10.29
|
Stock Option Agreement between the Company and Donald W. Reeve dated December 1, 2014. (17)
|
10.30
|
Software Assets Purchase Agreement between the Company and
UberScan, LLC and Christopher B. Karr and Duane Pfeiffer.
(18) #
|
10.31
|
Promissory Note and Security Agreement between the Company and UberScan, LLC.
(18)
|
10.32
|
Modification Agreement to Promissory Notes between the Company and Carle C. Conway dated December 31, 2014. (18)
|
10.33
|
Promissory Note between Andrew Hoyen and the Company dated February 12, 2015. (18)
|
10.34
|
Amendment to Promissory Note between the Company and Dan Cappa dated August 24, 2015. (19)
|
10.35
|
Amendment to Promissory Note between the Company and UberScan, LLC dated October 6, 2015. (19)
|
10.36
|
Amendment to Promissory Note between the Company and Allan Robbins dated December 31, 2015
*
|
10.37
|
Amendment to Promissory Note between the Company and Northwest Hampton Holdings, LLC dated December 31, 2015
*
|
10.38
|
Line of Credit
Note and Agreement between the Company and James Leonardo Managing Member of a Limited Liability Corporation to be formed dated March 14, 2016
*
|
23.1
|
Consent of Freed Maxick CPAs, P.C., independent registered public accounting firm*
|
31.1
|
Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.*
|
31.2
|
Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.*
|
32.1
|
Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.*
|
32.2
|
Chief Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. *
|
101.INS
|
XBRL Instance Document.*
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.*
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.*
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.*
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.*
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.*
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.*
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.*
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.*
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.*
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.*
|
|
Infinite Group, Inc.
|
|
|
|
|
|
|
Date: April 14, 2016
|
By:
|
/s/
James Villa
|
|
|
|
James Villa
, Chief Executive Officer
|
|
|
|
|
|
/s/ James Villa
|
|
|
|
James Villa
|
|
Chairman of the Board, Chief Executive Officer and
President
(Principal Executive Officer)
|
April 14, 2016
|
|
|
|
|
/s/ James Witzel
|
|
|
|
James Witzel
|
|
Chief Financial Officer
|
April 14, 2016
|
|
|
(Principal Financial and Accounting Officer)
|
|
/s/ Donald W. Reeve
|
|
|
|
Donald W. Reeve
|
|
Director
|
April 14, 2016
|
INFINITE GROUP, INC.
CONTENTS
|
|
|
Page
|
|
|
Report of Independent Registered Public Accounting Firm
|
F-1
|
|
|
Financial Statements:
|
|
|
|
Balance Sheets
|
F-2
|
|
|
Statements of Operations
|
F-3
|
|
|
Statements of Stockholders' Deficiency
|
F-4
|
|
|
Statements of Cash Flows
|
F-5
|
|
|
Notes to Financial Statements
|
F-6 - F-14
|
|
Years Ended
December 31,
|
|
|
2015
|
2014
|
|
||
Sales
|
$
7,945,921
|
$
8,567,736
|
Cost of sales
|
5,994,857
|
6,386,182
|
Gross profit
|
1,951,064
|
2,181,554
|
|
|
|
Costs and expenses:
|
|
|
General and administrative
|
1,518,958
|
1,302,329
|
Selling
|
887,445
|
930,897
|
Total costs and expenses
|
2,406,403
|
2,233,226
|
|
|
|
Operating loss
|
(455,339
)
|
(51,672
)
|
|
|
|
Loss on investment
|
(109,000
)
|
(168,000
)
|
|
|
|
Interest expense:
|
|
|
Related parties
|
(78,403
)
|
(48,735
)
|
Other
|
(168,340
)
|
(229,593
)
|
Total interest expense
|
(246,743
)
|
(278,328
)
|
|
|
|
Net loss
|
$
(811,082
)
|
$
(498,000
)
|
|
|
|
Net loss per share – basic and diluted
|
$
(.03
)
|
$
(.02
)
|
|
|
|
Weighted average shares outstanding – basic and diluted
|
26,561,883
|
26,012,842
|
|
|
|
|
|
|
|
Depreciable
|
|
|
||
|
Lives
|
2015
|
2014
|
||
|
|
|
|
|
|
Software
|
3
|
to
|
5 years
|
$
29,004
|
$
29,004
|
Equipment
|
3
|
to
|
10 years
|
158,851
|
155,039
|
Furniture and fixtures
|
5
|
to
|
7 years
|
17,735
|
17,735
|
Leasehold improvements
|
|
3 years
|
|
5,874
|
5,874
|
|
|
|
|
211,464
|
207,652
|
Accumulated depreciation
|
|
|
|
(172,191
)
|
(147,613
)
|
|
|
|
|
$
39,273
|
$
60,039
|
|
December 31,
|
|
|
2015
|
2014
|
|
|
|
Note payable, 10%, unsecured
|
$
30,000
|
$
30,000
|
Note payable, 10%, secured by Software (A)
|
42,000
|
0
|
|
$
72,000
|
$
30,000
|
|
December 31,
|
|
|
2015
|
2014
|
|
|
|
Note payable, 10%, secured, due January 1, 2018
|
$
265,000
|
$
265,000
|
Convertible term note payable,12%, secured, due August 31, 2018
|
175,000
|
175,000
|
Convertible notes payable, 6%, due December 31, 2016
|
150,000
|
150,000
|
Term note payable - PBGC, 6%, secured
|
249,000
|
261,000
|
Obligation to PBGC based on free cash flow
|
569,999
|
569,999
|
Convertible term note payable, 7%, secured, due October 3, 2016
|
100,000
|
100,000
|
Term notes payable - banks, secured
|
0
|
2,407
|
|
1,508,999
|
1,523,406
|
Less: current maturities
|
262,000
|
14,388
|
|
$
1,246,999
|
$
1,509,018
|
|
December 31,
|
|
|
|
|
|
2015
|
2014
|
Convertible notes payable, 6%, due January 1, 2017
|
$
419,300
|
$
473,000
|
Note payable, line of credit, 6.35%, unsecured
|
394,028
|
200,000
|
Convertible note payable, 7%, due March 31, 2018
|
25,000
|
0
|
|
838,328
|
673,000
|
Less current maturities
|
16,979
|
8,172
|
|
$
821,349
|
$
664,828
|
2016
|
$
278,979
|
2017
|
1,378,348
|
2018
|
690,000
|
Total long-term obligations
|
$
2,347,327
|
|
2015
|
2014
|
Risk-free interest rate
|
1.49% - 1.78%
|
.77% - 1.98%
|
Expected dividend yield
|
0%
|
0%
|
Expected stock price volatility
|
100%
|
100%
|
Expected life of options
|
5.75 years
|
3.25 - 5.75 years
|
|
Number of Options Outstanding
|
Weighted Average Exercise Price
|
Remaining Contractual Term
|
Aggregate Intrinsic Value
|
Outstanding at December 31, 2013
|
9,220,500
|
$
.18
|
|
|
Granted
|
3,030,000
|
$
.09
|
|
|
Expired
|
(517,667
)
|
$
.15
|
|
|
Forfeited
|
(833,333
)
|
$
.13
|
|
|
Outstanding at December 31, 2014
|
10,899,500
|
$
.16
|
|
|
Granted
|
150,000
|
$
.05
|
|
|
Expired
|
(1,954,333
)
|
$
.13
|
|
|
Forfeited
|
(651,667
)
|
$
.13
|
|
|
Outstanding at December 31, 2015
|
8,443,500
|
$
.16
|
4.8 years
|
$
0
|
|
|
|
|
|
Vested or expected to vest at
|
|
|
|
|
December 31, 2015
|
6,693,500
|
$
.17
|
5.4 years
|
$
0
|
Exercisable at December 31, 2015
|
6,073,500
|
$
.17
|
5.2 years
|
$
0
|
|
December 31,
|
|
|
2015
|
2014
|
Deferred:
|
|
|
Federal
|
$
(255,000
)
|
$
(135,000
)
|
State
|
(31,000
)
|
90,000
|
|
(286,000
)
|
(45,000
)
|
Change in valuation allowance
|
286,000
|
45,000
|
|
$
0
|
$
0
|
Origination Schedule
|
Date
|
Amount
|
|
|
|
Initial Loan
|
March 29, 2016
|
$200,000.00
|
Second Origination
|
July 1, 2016
|
$200,000.00
|
Third Origination
|
October 1, 2016
|
$100,000.00
|