UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM 10-Q

_________________________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 000-21816

_________________________________________

INFINITE GROUP, INC.
(Exact name of registrant as specified in its charter)

_________________________________________

Delaware	52-1490422
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
175 Sully’s Trail, Suite 202, Pittsford, New York	14534
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(Address of principal executive offices)	(Zip Code)
(585) 385-0610
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(Registrant’s telephone number, including area code)

_________________________________________

Securities registered pursuant to Section 12(b) of the Act

Title of each class	Trading Symbol	Name of each exchange on which registered
N/A	N/A	N/A

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 12 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 ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The Registrant had 521,175 shares of the issuer’s common stock, par value $.001 per share, outstanding as of October 10, 2023.

Infinite Group, Inc.

Quarterly Report on Form 10-Q

For the Period Ended June 30, 2023

Table of Contents
PART I - FINANCIAL INFORMATION	PAGE
Item 1. Financial Statements	4
Balance Sheets – June 30, 2023 (Unaudited) and December 31, 2022	4
Statements of Operations (Unaudited) for the three and six months ended June 30, 2023 and 2022	5
Statements of Stockholders’ Deficiency (Unaudited) for the three and six months ended June 30, 2023 and 2022	6
Statements of Cash Flows (Unaudited) for the three and six months ended June 30, 2023 and 2022	7
Notes to Financial Statements – (Unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	23
Item 4. Controls and Procedures	23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	24
Item 1A. Risk Factors	24
Item 3 Defaults Upon Senior Securities.	24
Item 6. Exhibits	24
SIGNATURES	25
2
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FORWARD-LOOKING STATEMENTS

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements.” All statements other than statements of historical facts contained in this report, including among others, our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth and trends are forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions are intended to identify forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the expansion of our business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Therefore, you should not rely on any of these forward-looking statements. All forward-looking statements in this report are made only as of the date hereof or as indicated and represent our views as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise, except as required by law. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report, our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and our other filings with the Securities and Exchange Commission (the “SEC”). The terms “IGI”, the “Company”, “we”, “our”, “us”, or any derivative thereof, as used herein refer to Infinite Group, Inc., a Delaware corporation.

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PART I

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FINANCIAL INFORMATION

Item 1. Financial Statements

INFINITE GROUP, INC.
BALANCE SHEETS
ASSETS
			December 31,
			2022
Current assets:
Cash	17,339		$	23,187
Accounts receivable, net of allowances for expected credit losses of 32,692
as of June 30, 2023 and 36,710 as of December 31, 2022, respectively	212,890			406,005
Prepaid expenses and other current assets	462,260			144,218
Total current assets	692,489			573,410
Right of Use Asset Operating Lease, net	604,366			645,095
Property and equipment, net	11,640			19,996
Software, net	420,897			417,325
Deposits	10,144			10,144
Total assets	1,739,536		$	1,665,970
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable	1,605,944		$	1,687,579
Accrued payroll	420,602			386,289
Accrued interest payable	1,301,144			783,581
Accrued retirement	292,366			286,605
Deferred revenue	451,738			550,523
Accrued expenses other and other current liabilities	230,336			138,639
Current maturities of long-term obligations	549,000			515,000
Operating lease liability - Short-term	80,762			76,826
Current maturities of long-term obligations - related parties	659,300			385,000
Notes payable, net	1,491,004			1,572,857
Notes payable - related parties	199,000			229,000
Total current liabilities	7,281,196			6,611,899
Long-term obligations:
Notes payable:
Other	416,473			458,849
Related parties	499,000			886,876
Operating lease liability - long-term	531,374			572,560
Total liabilities	8,728,043			8,530,184
Commitments and contingencies
Stockholders' deficiency:
Common stock, .001 par value, 60,000,000 shares authorized; 506,608 and 470,093 shares issued and outstanding, June 30,  2023 and December 31, 2022, respectively.	507			470
Additional paid-in capital	32,324,991			32,164,334
Accumulated deficit	(39,314,005	)		(39,029,018	)
Total stockholders' deficiency	(6,988,507	)		(6,864,214	)
Total liabilities and stockholders' deficiency	1,739,536		$	1,665,970

All values are in US Dollars.

See notes to unaudited financial statements.

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INFINITE GROUP, INC.
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STATEMENTS OF OPERATIONS (Unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenue	$	1,783,476		$	1,696,492		$	3,547,469		$	3,363,562
Cost of revenue		998,215			1,059,639			1,964,421			2,180,879
Gross profit		785,261			636,853			1,583,048			1,182,683
Costs and expenses:
General and administrative		465,177			613,317			996,822			1,217,300
Selling		761,365			612,957			1,454,475			1,260,582
Total costs and expenses		1,226,542			1,226,274			2,451,297			2,477,882
Operating loss		(441,281	)		(589,421	)		(868,249	)		(1,295,199	)
Other income (expense)
Interest Income		71,324			10			71,624			18
Interest expense:
Related parties		(30,755	)		(22,728	)		(57,700	)		(46,142	)
Other		(688,133	)		(221,061	)		(1,188,491	)		(360,111	)
Total interest expense		(718,888	)		(243,789	)		(1,246,191	)		(406,253	)
Debt forgiveness		95,131			0			95,131			0
ERC tax refund		1,662,698			0			1,662,698			0
Total other income (expense)		1,110,265			(243,779	)		583,262			(406,235	)
Net profit (loss)	$	668,984		$	(833,200	)	$	(284,987	)	$	(1,701,434	)
Net profit (loss) per share – basic	$	1.35		$	(1.88	)	$	(0.59	)	$	(3.87	)
Net profit (loss) per share – diluted	$	1.07		$	(1.88	)	$	(0.59	)	$	(3.87	)
Weighted average shares outstanding
– basic		494,960			443,953			483,243			440,004
Weighted average shares outstanding
– dilluted		638,776			443,953			483,243			440,004

See notes to unaudited financial statements.

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INFINITE GROUP, INC.
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STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY (Unaudited)
Six Months Ended June 30, 2023 and 2022
Six Months Ended June 30, 2023
					Additional
	Common Stock				Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance - December 31, 2022		470,093	$	470	$	32,164,334		$	(39,029,018	)	$	(6,864,214	)
Stock based compensation		0		0		26,159			0			26,159
Warrants issued		0		0		107,834			0			107,834
Cashless exercise of warrants		6,515		7		(7	)		0			0
Net loss		0		0		0			(953,971	)		(953,971	)
Balance - March 31, 2023		476,608	$	477	$	32,298,320		$	(39,982,989	)	$	(7,684,192	)
Stock Issued		30,000		30		26,671			0			26,701
Net income		0		0		0			668,984			668,984
Balance - June 30, 2023		506,608	$	507	$	32,324,991		$	(39,314,005	)	$	(6,988,507	)
Six Months Ended June 30, 2022
					Additional
	Common Stock				Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance - December 31, 2021		436,012	$	436	$	31,369,036		$	(35,467,361	)	$	(4,097,889	)
Stock based compensation		0		0		923			0			923
Warrants issued		0		0		148,334			0			148,334
Net loss		0		0		0			(868,234	)		(868,234	)
Balance - March 31, 2022		436,012	$	436	$	31,518,293		$	(36,335,595	)	$	(4,816,866	)
Stock based compensation		0		0		51,708			0			51,708
Warrants issued		0		0		210,816			0			210,816
Cashless exercise of warrants		11,470		11		(11	)		0			0
Net loss		0		0		0			(833,200	)		(833,200	)
Balance - June 30, 2022		447,482	$	447	$	31,780,806		$	(37,168,795	)	$	(5,387,542	)

See notes to unaudited financial statements.

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INFINITE GROUP, INC.
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STATEMENTS OF CASH FLOWS (Unaudited)
	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(284,987	)	$	(1,701,434	)
Adjustments to reconcile net loss to net cash used
by operating activities:
Stock based compensation		26,159			52,631
Depreciation and amortization		124,154			117,686
Amortization of debt discount		635,960			255,042
Amortization of common stock expensed for services		8,517			0
Bad debt recovery		(4,018	)		0
Foregiveness of debt		(95,131	)		0
(Increase) decrease in assets:
Accounts receivable		197,132			76,894
Prepaid expenses and other assets		(299,859	)		17,394
Increase (decrease) in liabilities:
Accounts payable		(81,635	)		549,665
Deferred revenue		(98,785	)		(22,334	)
Accrued expenses		663,654			12,014
Accrued retirement		5,761			5,536
Net cash provided (used) by operating activities		796,922			(636,906	)
Cash flows from investing activities:
Purchase of property and equipment		(2,099	)		(969	)
Sale of ERC claim		1,413,294			0
Capitalization of software development costs		(113,790	)		(110,378	)
Net cash provided (used) by investing activities		1,297,405			(111,347	)
Cash flows from financing activities:
Proceeds from notes payable		257,645			918,900
Debt issuance costs		(295,336	)		(53,445	)
Repayment of ERC Claim Agreement		(1,662,698	)		0
Repayments of note payable-related parties		(30,000	)		0
Repayments of note payable-short-term		(369,786	)		(215,040	)
Net cash provided (used) by financing activities		(2,100,175	)		650,415
Net decrease in cash		(5,848	)		(97,838	)
Cash - beginning of period		23,187			99,432
Cash - end of period	$	17,339		$	1,594
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest	$	248,549		$	54,826
Non-cash investing and financing activities:
Warrant issued in conjunction with debts	$	107,834		$	359,150
Common stock issued via exercise of warrant	$	7		$	11
Common stock issued in conjunction with services	$	30		$	0

See notes to unaudited financial statements.

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INFINITE GROUP, INC.

Notes to Financial Statements - (Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited financial statements of Infinite Group, Inc. (“Infinite Group, Inc.” or the “Company”) included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (U.S.) (“GAAP”) for interim financial information and with instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. The December 31, 2022 balance sheet has been derived from the audited financial statements at that date but does not include all disclosures required by GAAP. The accompanying unaudited financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (SEC). Results of operations for the three and six months ended June 30, 2023, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2023.

Note 2. Management Plans - Capital Resources

The Company reported net losses of $284,987 and $1,701,434 for the six months ended June 30, 2023 and 2022, respectively, and stockholders’ deficiencies of $6,988,507 and $6,864,214 at June 30, 2023 and December 31, 2022, respectively. The Company has a working capital deficit of approximately $6.6 million at June 30, 2023.

The Company’s mission is to drive shareholder value by developing and bringing to market automated, cost effective, and innovative cybersecurity technologies. The Company’s strategy is to build its business by designing, developing, and marketing IT security-based products and solutions that fill technology gaps in cybersecurity.

The Company's goal is to increase sales and generate cash flow from operations on a consistent basis. The Company’s business plans require improving the results of its operations in future periods. The Company has renegotiated the terms of some certain obligations, using operational cash flow to pay down balances and extending terms, and provided financing with the issuance of new loans.

The Company plans to issue stock, restructure certain debt and anticipates significant growth of business.

The Company believes the capital resources generated by the improving results of its operations as well as cash available under its factoring line of credit and from additional related parties and third-party loans, if needed, provide sources to fund its ongoing operations and to support the internal growth of the Company. The Company may need to extend existing debt agreements in order to provide resources for other purposes. If the Company experiences significant growth in its sales, the Company believes that this may require it to increase its financing line, finance additional accounts receivable, or obtain additional working capital from other sources to support its sales growth.

The Company plans to continue to evaluate alternatives which may include continuing to renegotiate the terms of other notes, seeking conversion of the notes to shares of common stock and seeking funds to repay the notes. The Company continues to evaluate repayment of our remaining notes payable based on its cash flow.

As a result, for the foreseeable future, there is substantial doubt about the Company’s ability to continue as a going concern.

Note 3. Summary of Significant Accounting Policies

There are several accounting policies that the Company believes are significant to the presentation of its financial statements. These policies require management to make complex or subjective judgments about matters that are inherently uncertain. Note 3 to the Company’s audited financial statements for the year ended December 31, 2022 presents a summary of significant accounting policies as included in the Company’s Annual Report on Form 10-K as filed with the SEC.

Reclassifications – It is the Company’s policy to reclassify prior year amounts to conform with the current year presentation.

Fair Value of Financial Instruments - The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, and accrued **** expenses approximate fair value because of the immediate short-term maturity of these financial instruments. The carrying value of notes payable and convertible notes payable approximates the fair value based on rates currently available from financial institutions and various lenders.

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Revenue

The Company’s total revenue recognized from contracts from customers was comprised of three major services: Managed support services, Cybersecurity projects, and Software. The categories depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. There were no material unsatisfied performance obligations at June 30, 2023 or 2022 for contracts with an expected original duration of more than one year. The following table summarizes the revenue recognized by the major services:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Managed support services		1,122,084		1,115,607		2,248,882		2,204,614
Cybersecurity projects		353,937		300,456		676,000		626,917
Software		307,455		280,429		622,587		532,031
Total Revenue		1,783,476		1,696,492		3,547,469		3,363,562

Managed support services

Managed support services consist of revenue primarily from our subcontracts with Peraton for services to its end clients, principally a major establishment of the U.S. Government for which we manage one of the nation’s largest physical and virtual Microsoft Windows environments.

We generate revenue primarily from these subcontracts through fixed price service and support agreements. Revenues are earned and billed weekly and are generally paid within 45 days. The revenues are recognized at time of service.

Cybersecurity projects

Cybersecurity projects includes performing cybersecurity assessments, testing and consulting as a CISO (Chief Information Security Officer).

Cybersecurity assessments and testing services are considered distinct performance obligations when sold stand alone or with other products. These contracts generally have terms of one year or less. For substantially all these contracts, revenue is recognized when the specific performance obligation is satisfied. If the contract has multiple performance obligations, the revenue is recognized when the performance obligations are satisfied. Depending on the nature of the service, the amounts recognized are based on an allocation of the transaction price to each performance obligation based on a relative standalone selling price of the products sold.

In substantially all agreements, a 50% to 75% down payment is required before work is initiated. Down payments received are deferred until revenue is earned. Upon completion of performance obligation of service, payment terms are 30 days.

Software

Software revenue includes the selling of licenses of Nodeware® and third-party software, principally Webroot™.

Nodeware and Webroot software offerings consist of fees generated from the use of the respective software by our customers. Revenue is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer. For Webroot, substantially all customers are billed in the month of the service and is cancellable upon notice per the respective agreements. The majority of Webroot billing is electronic, and those billed amounts are paid to the Company instantaneously via an online payment platform. For Nodeware, billings generally occur annually or monthly in advance of services for clients with recurring subscriptions. In some instances, billing is made monthly in arrears based on actual consumption in the prior month. For payments made in advance, revenue related to the term associated with our software licenses is recognized ratably over the contractual period.

We generate revenue via fixed price service agreements. These are based on periodic billings of a fixed dollar amount for recurring services of a similar nature performed according to the contractual arrangements with clients. The revenues are recognized at time of service.

Based on historical experience, the Company believes that collection is reasonably assured.

During the three and six months ended June 30, 2023, sales to one client, including sales under subcontracts for services to several entities, accounted for 63% of total sales in both periods, (65% for both periods in 2022) and 27% of accounts receivable at June 30, 2023 (27% at December 31, 2022).

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Capitalization of Software for Resale - The Company capitalizes the software development costs for software to be sold, leased, or otherwise marketed.Capitalization begins upon the establishment of technological feasibility of a new product or enhancements to an existing product, which is generally the completion of a working prototype that has been certified as having no critical bugs and is a release candidate. Costs incurred after the enhancement has reached technological feasibility and before it is released in the market are capitalized and are primarily labor costs related to coding and testing. Amortization begins once the software is ready for its intended use, generally based on the pattern in which the economic benefits will be consumed. Costs associated with major upgrade releases begin amortization in the month after release. The amortization period is three years. See Note 5 for further disclosure regarding capitalization of software for resale.

Leases - At contract inception, the Company determines whether the arrangement is or contains a lease and determines the lease classification. The lease **** term is determined based on the non-cancellable term of the lease adjusted to the extent optional renewal terms and termination rights are reasonably certain. Lease expense is recognized evenly over the lease term. Variable lease payments are recognized as period costs. The present value of remaining lease payments is recognized as a liability on the balance sheet with a corresponding right-of-use asset adjusted for prepaid or accrued lease payments. The Company uses its incremental borrowing rate for the discount rate, unless the interest rate implicit in the lease contract is readily determinable. The Company has adopted the practical expedients to not separate non-lease components from lease components and to not present short-term leases on the balance sheet. See Note 11 for further disclosure regarding lease accounting.

Recently Adopted Accounting Guidance - In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments”, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The adoption of this new accounting standard increased the reserve by approximately $21,600, which was deemed immaterial to adjust beginning accumulated deficit.

Note 4. Sale of Certain Accounts Receivable

The Company has available a financing line with a financial institution (the Purchaser), which enables the Company to sell accounts receivable to the Purchaser with full recourse against the Company. Pursuant to the provisions of FASB ASC 860, the Company reflects the transactions as a sale of assets and establishes an accounts receivable from the Purchaser for the retained amount less the costs and fees of the transaction and less any anticipated future loss in the value of the retained asset.

The retained amount is 10% of the total accounts receivable invoice sold to the Purchaser. The fee is charged at prime plus 3.6% (effective rate of 11.85% at June 30, 2023) against the average daily outstanding balance of funds advanced. The estimated future loss reserve for each receivable included in the estimated value of the retained asset is based on the payment history of the accounts receivable customer and is included in the allowance for expected credit losses, if any. As collateral, the Company granted the Purchaser a first priority interest in accounts receivable and a blanket lien, which may be junior to other creditors, on all other assets.

The financing line provides the Company the ability to finance up to $2,000,000 of selected accounts receivable invoices, which includes a sublimit for one of the Company’s customers of $1,500,000. During the six months ended June 30, 2023, the Company sold approximately $1,916,000 ($1,062,000 – June 30, 2022) of its accounts receivable to the Purchaser. As of June 30, 2023, approximately $343,000 ($228,000 - December 31, 2022) of these receivables remained outstanding. Additionally, as of June 30, 2023, the Company had $20,000 available under the financing line with the Purchaser ($144,000 at December 31, 2022). After deducting estimated fees, allowance for expected credit losses and advances from the Purchaser, the net receivable from the Purchaser amounted to approximately $34,000 at June 30, 2023 ($23,000 at December 31, 2022), and is included in accounts receivable in the accompanying balance sheets.

There were no gains or losses on the sale of the accounts receivable because all were collected. The cost associated with the financing line totaled $9,838 for the three months ended June 30, 2023 ($12,195 – June 30, 2022). The cost associated with the financing line totaled $24,510 for the six months ended June 30, 2023 ($22,306 – June 30, 2022). These financing line fees are classified on the statements of operations as interest expense.

Note 5. Capitalization of Software for Resale

As of June 30, 2023, there was $1,007,817 of costs capitalized ($894,027 as of December 31, 2022) and $586,920 of accumulated amortization ($472,702 as of December 31, 2022). During the three and six months ended June 30, 2023, there was $49,389 and $110,218, respectively, of amortization expense recorded ($53,402 and $106,803, respectively, for the three and six months ended June 30, 2022). Costs incurred prior to reaching technological feasibility are expensed as incurred. During the three and six months ended June 30, 2023, there was approximately $15,000 and $21,700, respectively, of labor amounts expensed related to these development costs ($7,800 and $16,100, respectively in 2022).

Note 6. Deferred Revenue and Performance Obligations

Deferred Revenue

Deferred revenue, which is a contract liability, consists primarily of payments received and accounts receivable recorded in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met.

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Revenue recognized during the three months ended June 30, 2023 and 2022, that was included in the deferred revenue balances at the beginning of the respective periods, was approximately $123,000 and $136,000, respectively.

Revenue recognized during the six months ended June 30, 2023 and 2022, that was included in the deferred revenue balances at the beginning of the respective periods was approximately $307,000 and $278,000, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

Transaction price allocated to the remaining performance obligations represents all future, non-cancelable contracted revenue that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.

As of June 30, 2023, total remaining non-cancelable performance obligations under the Company’s contracts with customers was approximately $882,000. The Company expects to recognize all but approximately $90,000 of this revenue over the next 12 months.

Note 7. Debt Obligations

Mast Hill Loan #5 - On February 3, 2023, Infinite Group, Inc. (the “Company”), as borrower, entered into a financing arrangement (the “Loan”) with Mast Hill Fund, L.P. (the “Lender”), a Delaware limited partnership. In exchange for a promissory note, Lender agreed to lend the Company $118,000.00, which bears interest at a rate of eight percent (8%) per annum, less $11,800.00 original issue discount. Under the terms of the Loan, amortization payments are due beginning June 3, 2023, and each month thereafter with the final payment due on February 3, 2024. Additionally, in the event of a default under the Loan or if the Company elects to pre-pay the Loan, the Lender has the right to convert any portion or all of the outstanding and unpaid principal and interest into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $2.00 per share. The conversion price is subject to adjustment under certain circumstances, including issuances of Company common stock below the conversion price. The Company is not required to issue additional shares to Lender in the event an adjustment to the conversion price occurs. Except for the option to convert the note in the event of a pre-payment, there is no pre-payment penalty associated with the promissory note. The Loan is subject to customary events of default, including cross-defaults on the Loan agreements and on other indebtedness of the Company, violations of securities laws (including Regulation FD), and failure to issue shares upon a conversion of the note. Amounts due under the Loan are subject to a 15% penalty in the event of a default. As additional consideration for the financing, the Company issued Lender a 5-year warrant to purchase 59,000 shares of Company common stock at a fixed price of $2.00 per share, subject to price adjustments for certain actions, including dilutive issuances, representing 100% warrant coverage on the principal amount of the Loan. The Company has granted the Lender customary “piggy-back” registration rights with respect to the shares issuable upon conversion of the promissory note and exercise of the warrant. No material relationship exists between the Company or its affiliates and Lender, other than in respect of the Loan and similar loans between the Company and Lender entered into on November 3, 2021, February 11, 2022, May 31, 2022, and November 23, 2022, respectively. This loan was in default at June 30, 2023 and the amount of interest expense recorded as penalties during the three months ended June 30, 2023 was approximately $18,900.

J.H. Darbie & Co., Inc. ( “Finder”), a registered broker-dealer, acted as a finder in connection with the Loan, and was paid a cash fee of $3,100 (2.92% of the gross proceeds of the Loan) and issued a 5-year warrant to purchase 3,098 shares of Company common stock at a fixed price of $2.40 per share (120% of the exercise price of the warrant issued in connection with the Loan), subject to price adjustments for certain actions, including dilutive issuances, representing 7% warrant coverage on the gross proceeds of the Loan. The Company has granted the Finder customary “piggy-back” registration rights with respect to the shares issuable upon exercise of the warrant.

Amended and Restated Line of Credit Note - On March 17, 2023, the Company, as borrower, entered into an Amended and Restated Line of Credit Note and Agreement (the “New Note”) effective as of October 1, 2022, which amended and restated that certain Line of Credit Note and Agreement dated March 14, 2016 (the “Original Note”) by and between the Company and James V. Leonardo (the “Holder”). The New Note has a principal amount of $250,000 (the ‘Principal Amount”) and accrues interest on the unpaid Principal Amount at a rate of ten percent (10%) per annum. Also on March 17, 2023, James Villa, the Company’s Chief Executive Officer, entered into a personal guarantee with the Holder to personally guarantee the obligations of the Company under the New Note.

Under the terms of the New Note, the Company agreed to make a one-time payment of $16,667 for interest accrued on the Original Note for the four-month period covering June 2022 through September 2022 during the first quarter of 2023. The Company has also agreed to make quarterly interest payments of $6,250, commencing on December 31, 2022, and continuing through and including September 30, 2024.

Revised Financing Arrangement - During March 2023, the Company entered into a revised financing arrangement with Celtic Bank which originally loaned the Company $139,400 with a one-time fixed loan fee of $11,152 for a total obligation of $150,552 in 2022. Under the terms of the revised financing arrangement, the lender loaned the Company $155,800 with a one-time fixed loan fee of $12,464 for a total obligation of $168,264. The balance of the original loan of $27,559 was paid to the lender as part of the revised financing agreement. The lender payments became due on March 24, 2023, and consisted of 30% of the Company’s receivables processed through Stripe, Inc.’s payment processing platform and then due and owing to the Company or $18,696 over a sixty-day period, whichever is higher, with the final payment due on September 14, 2024. At June 30, 2023, the balance of this revised financing arrangement was $105,696.

Extinguishment of Convertible Promissory Note - On April 12, 2023, the Company entered into an agreement with Talos Victory Fund to accept final payment in the amount of $200,000 on the convertible promissory note dated April 12, 2022. The debt was forgiven at that time and approximately $95,000 was recorded as forgiveness of debt in the Statements of Operations.

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Payment to Board Member – On April 11, 2023, the Company paid off a demand note to one board member. The payment was for $30,000 plus $2,891 of accrued interest.

Obligations in Default – As of June 30, 2023, the Company is in default with the Mast Hill financing arrangements dated November 3, 2021, February 11, 2022, May 31, 2022, and November 23, 2022 and February 3, 2023. Per the arrangements, the Company has accrued approximately $130,000 and $347,000 in default and penalty interest expense during the three months and six months ended June 30, 2023, respectively.

Note 8. Short-term Obligation

ERC Claim and Risk Participation Agreement – In January 2023, the Company filed for the Employee Retention Credit (“ERC”) for $1,662,698.  The ERC is a refundable tax credit for businesses that continued to pay employees while sustaining a full or partial suspension of operations limiting commerce, travel or group meetings due to COVID-19 pandemic and orders from an appropriate governmental authority or had significant declines in gross receipts from March 13, 2020 to September 30, 2021. The Company sustained a partial suspension of operations during this time due to governmental orders.  Eligible employers can claim the ERC on an original or adjusted employment tax return for a period within those dates.  The Company did not record the calculated quarterly credits as income at December 31, 2022 because as of December 31, 2022 it was not reasonably certain the amounts would be collected.

On March 29, 2023, Company, as seller, received $1,330,464 as a purchase price (the “Purchase Price”) for the sale of the Company’s rights, title and interest per a Risk Participation of ERC Claim Agreement, dated March 27, 2023 (“Agreement”) by and between the Company and 1861 Acquisition LLC (the “Buyer”). On April 21, 2023, the Company received an additional $82,830 from the Buyer which was held in escrow.

The Agreement transferred all of the Company’s rights to receive any and all payments, proceeds or distributions of any kind (without set-off, deduction or withholding of any kind), including interest, from the United States Internal Revenue Service (the “IRS”) in respect of the employee retention credits duly and timely claimed by Seller on account of qualified wages paid by Seller and identified as a “Claim for Refund” under Form 941-X Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund for the third (3rd) and fourth (4th) quarters of 2020, and the first (1st), second (2nd) and third (3rd) quarters of 2021 (the “Tax Refund Claim”) in the aggregate amount of $1,662,698 (“Transferred Interests”).

During June 2023, the Company received checks for the ERC from the IRS.  The amount received was the $1,662,698 plus $70,699 of interest.  These checks were forwarded to the Buyer as per the Agreement.  The Company recorded the Transferred Interests amount as other income and the interest as interest income and interest expense.  In the Statements of Cash Flows the amounts received from the IRS were recorded as an operating activity and the amounts forwarded to the Buyer were recorded as a financing activity.

Note 9. Earnings per Share

Basic earnings per share is based on the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is based on the weighted average number of common shares outstanding, as well as dilutive potential common shares which, in the Company’s case, comprise shares issuable under convertible notes payable and stock options. The treasury stock method is used to calculate dilutive shares, which reduces the gross number of dilutive shares by the number of shares purchasable from the proceeds of the options and warrants assumed to be exercised. In a loss period, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.

The following table sets forth the computation of basic and diluted net profit (loss) per share for the three and six months ended June 30, 2023:

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	Three Months Ended June 30,					Six Months Ended June 30,
---	---	---	---	---	---	---	---	---	---	---	---
	2023		2022			2023			2022
Numerator for basic  net profit (loss) per share:
Net profit (loss)	$	668,984	$	(833,200	)	$	(284,987	)	$	(1,701,434	)
Net profit (loss) per share - basic	$	1.35	$	(1.88	)	$	(0.59	)	$	(3.87	)
Numerator for diluted net profit (loss) per share:
Net profit (loss)	$	681,001	$	(833,200	)	$	(284,987	)	$	(1,701,434	)
Net profit (loss) per share - diluted	$	1.07	$	(1.88	)	$	(0.59	)	$	(3.87	)
Weighted average common shares outstanding
Basic		494,960		443,953			483,243			440,004
Weighted average common shares outstanding
Diluted		638,776		443,953			483,243			440,004
Anti-dilutive shares excluded from
per share calculations		325,634		319,350			505,770			319,350

Certain common shares issuable under stock options and convertible notes payable have been omitted from the diluted net loss per share calculation because their inclusion is considered anti-dilutive because the exercise prices were greater than the average market price of the common shares or their inclusion would have been anti-dilutive.

Note 10. Stock Option Plans and Agreements

At the annual meeting of stockholders of the Company held on January 26, 2022; the Company’s stockholders voted to approve the Company’s 2021 Equity Incentive Plan (“2021 Plan”). The maximum number of shares of Common Stock available for grant and issuance under the 2021 Plan will be (a) 60,000, plus (b) any shares of Common Stock that are subject to options granted under the Prior Plans that expire, are forfeited or canceled or terminate for any other reason without the issuance of shares under the Prior Plans on or after January 26, 2022, plus (c) any shares of Common Stock that are subject to options granted under the Prior Plans that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any option under the Prior Plans on or after January 26, 2022.

The Company has approved stock options plans and agreements covering up to an aggregate of 249,113 shares of common stock. Such options may be designated at the time of grant as either incentive stock options or nonqualified stock options. Stock based compensation consists of charges for stock option awards to employees, directors and consultants.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. 47,600 options were granted during the six months ended June 30, 2023. 1,267 options were granted during the six months ended June 30, 2022. The following assumptions were used for the six months ended June 30, 2023:

Risk-free interest rate	3.57% - 3.98		%
Expected dividend yield		0	%
Expected stock price volatility		110	%
Expected life of options (years)		2.75

The Company recorded expense for options issued to employees and independent service providers of $26,159 for both the three and six months ended June 30, 2023, and $51,708 and $52,631, for the three and six months June 30, 2022, respectively.

32,600 options vested during the six months ended June 30, 2023.

The Company issued 15,000 performance-based stock options during the six months ended June 30, 2023 at $1.17 per share to an executive of the Company. Certain bookings targets must be made for the options to vest. The unrecognized compensation expense for these options is approximately $12,000 at June 30, 2023.

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A summary of all stock option activity for the six months ended June 30, 2023 follows:

	Number of			Weighted		Remaining	Aggregate
	Options			Average		Contractual	Intrinsic
	Outstanding			Exercise Price		Term	Value
Outstanding at December 31, 2022		131,789		$	6.03
Granted		47,600			1.20
Expired		(6,335	)		3.85
Outstanding at June 30, 2023		173,054		$	5.14	2.9 years	$	0.00
At June 30, 2023- vested or
expected to vest		158,054		$	5.14	2.7 years	$	0.00
Exercisable		158,054		$	5.14	2.7 years	$	0.00

Note 11. Lease

Beginning on June 1, 2022, the Company leases its headquarters facility under an operating lease agreement that expires on May 31, 2029. Rent due is $118,487 annually during the first year of the lease term, and increases by 2.0% annually thereafter.

Upon entering the lease agreement, the Company recognized a right-of-use asset of $691,009 and a lease liability of $691,009.

Supplemental balance sheet information related to the lease on June 30, 2023 and December 31, 2022 is as follows:

		June 30,			December 31,
Description	Classification	2023			2022
Right of Use Asset – Lease, net	Other assets (non-current)	$	604,366		$	645,095
Operating Lease liability – Short-term	Accrued liabilities		80,762			76,826
Operating Lease liability – Long-term	Other long-term liabilities		531,374			572,560
Total operating lease liability		$	612,136		$	649,386
Discount rate – operating lease			7.00	%		7.00	%

Note 12. Related Party Accrued Interest Payable

Included in accrued interest payable are amounts due to related parties of approximately $345,000, at June 30, 2023 ($299,000 at December 31, 2022).

Note 13. Subsequent Events

On July 13, 2023, Donald Reeve, Chairman of the Board, and the Company, entered into a short term note wherein the Company borrowed $40,000 from Mr. Reeve.  Interest will accrue monthly at a rate of 10% per annum.  The note was due in full with interest on August 14, 2023 and has been extended to a new term date of September 13, 2023.  This note remains outstanding as of the filing date.

In July 2023, warrants were exercised via a cashless exercise, resulting in 14,567 shares of common stock being issued.

On August 7, 2023, the Company received legal notice from a former employee, that he is suing the Company for alleged violations of Oregon labor law, related to his July 2023 termination. The Company believes this lawsuit is without merit and will defend it vigorously.

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On August 25, 2023, the Company, as borrower, entered into a business loan arrangement (the “Loan”) with WebBank (the “Lender”). In exchange for the Loan, Lender agreed to lend the Company $150,000.00, with a payment plan of $2,671.15 per week for 78 weeks effective August 28, 2023.  The effective interest rate of the Loan is 46.8%. If Loan is prepaid, the unpaid portion of the finance charge of $58,350 will be due to Lender.

On September 14, 2023, the Company, as borrower, entered into a Financing and Security Agreement ("Agreement") with Celtic Bank Corporation (the “Celtic”). In exchange for a line of credit (“LOC”), Celtic agreed to lend the Company $200,000.00, with a payment plan of $20,892.15 per month for 12 months effective October 16, 2023.  The annual percentage rate of the LOC is 48.4%, If LOC is prepaid, the unpaid interest accrued will be due to Celtic.  If an additional draw on the LOC is requested, a draw fee will be imposed.

On October 13, 2023, the Company received funding from a loan agreement with Stripe and Celtic Bank.  The loan amount was $140,200 plus a fixed fee of $16,403. The repayment amount of $156,603 will be repaid at a repayment rate of 20% of the Company’s receivables automatically withheld by Stripe.  There is no financing percentage.  The repayment start date is October 19, 2023, with a minimum payment amount of $17,400 over every 60-day period. The final repayment date is April 25, 2025, if total repayment amount is not paid as of that date.  This loan agreement also eliminates the remaining balance of $35,754 from the previous Stripe loan dated March 16, 2023, as the remaining balance was rolled into this new loan.

************

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion contains forward-looking statements, the accuracy of which involves risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons including, but not limited to, those discussed under the heading “Forward Looking Statements” above and elsewhere in this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our financial statements and the notes thereto appearing elsewhere in this report.

Overview

Impact of COVID-19

The COVID-19 pandemic has resulted, and is likely to continue to result, in economic disruption on a global basis. It has already changed traditional global travel and supply chains and adversely impacted global commercial activity. Considerable uncertainty still surrounds COVID-19 and its potential long-term economic effects, as well as the effectiveness of any responses taken by government authorities and businesses. While the travel restrictions, limits on hours of operations and/or closures of non-essential businesses, and other efforts to curb the spread of COVID-19, have been generally lifted, there continues to be a disruption in business activity globally. New strains and variants of the coronavirus continue to spread around the world. The rollout of vaccines around the globe is encouraging, but their long-term impact on the political environment, business environment, and the Company is still uncertain.

During 2023, our managed support services, cybersecurity projects and software revenues were minimally impacted by the impact of the COVID-19 pandemic on our customers’ operational priorities. We are continuing to adapt our operations to meet the challenges of these changing priorities.  While employees at our headquarters are physically present in the office, other locations have had to go fully remote due to the changing nature of IT work during the pandemic.  Our sales and marketing expenses increased significantly during the first two quarters of 2023, and we expect these expenses to continue to grow. We will continue to actively monitor the nature and extent of the impact to our business, operating results, and financial condition.

Our Business

Headquartered in Pittsford, New York, Infinite Group is a developer of cybersecurity software and related cybersecurity consulting, advisory, and managed information security services. We principally sell our software and services through indirect channels such as Managed Service Providers (“MSPs”), Managed Security Services Providers (“MSSPs”), agents and distributors and government contractors, whom we refer to collectively as our channel partners. We also sell directly to end customers.

We believe our ability to succeed depends on how successful we are in differentiating ourselves in the cybersecurity market at a time when competition and consolidation in these markets are on the rise. Our strategy to differentiate our cybersecurity software and services from our competitors is to combine customized software and professional services, and grow our business by designing, developing, and marketing cybersecurity software-as-a-service (“SaaS”) solutions that can be deployed in myriad environments. Software and services are initially developed in our wholly-owned subsidiary, IGI CyberLabs (“CyberLabs”), to fill technology gaps we identify, and then we bring these software and services to market through our existing channel partner and customer relationships. Our software and services are designed to simplify and manage the security needs of our customers and channel partners in a variety of environments. We focus on the small and medium-sized enterprises market. We support our channel partners by providing recurring-revenue business models for both services and through our cybersecurity SaaS solutions. Products may be sold as standalone solutions or integrated into existing environments to further automate the management of cybersecurity and related IT functions.

As part of these software and service offerings we:

Internally developed and brought to market Nodeware®, a patented SaaS solution that automates network asset identification, and cybersecurity vulnerability management and monitoring. Nodeware simply and affordably enhances security by proactively identifying, monitoring, and addressing potential cybersecurity vulnerabilities on networks, which creates enhanced security to safeguard against hackers and ransomware. Nodeware provides an economical solution for small and medium-sized enterprises as compared to more costly solutions focused on enterprise-sized customers and is designed to accommodate the varying network needs of our end customers’ organizations and networks. Nodeware’s flexibility allows it to span from a single network to several subnetworks, as well as accommodating larger, more complex organizations with more advanced network needs. Nodeware is sold as a SaaS solution and continuously releases enhancements, updates, and upgrades to stay current with security needs and changes in the market. Nodeware is also designed to be integrated into other technology platforms. We primarily sell Nodeware through our channel partners, with a small percentage being sold directly to end customers. We intend to continue to develop our intellectual property to serve as the core to our proprietary software and services. In addition to our proprietary software and services we also act as a master distributor for other cybersecurity software, principally Webroot a cloud-based endpoint security platform solution, where we market to and provide support for over 250 channel partners across North America;

Provide cybersecurity consulting and advisory services to channel partners and direct customers across different markets, including banking, manufacturing, supply chain, and technology. As part of our consulting and advisory services, we are contracted to support existing information technology and executive teams at both the customer and channel partner level and provide security leadership and guidance. We validate overall corporate and infrastructure cybersecurity with the goal of maintaining and securing the integrity of confidential client information, preserving the continuity of services, and minimizing potential data damage from threats and incidents; and

Provide managed support services related to information security, principally as a subcontractor for Peraton, a large information technology provider and U.S. government contractor, by providing in-depth troubleshooting, backend analysis, and technical and security support, commonly referred to as Level 2 support, for mission critical technical infrastructure from the server level to the end user interface application in a critical government environment.

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Business Strategy

We have a threefold business strategy composed of:

-	providing differentiated cybersecurity software and services to small to mid-sized enterprises who lack the internal resources to focus on cybersecurity related matters by combining customized software and professional services;
-	designing, developing, and marketing cybersecurity SaaS solutions, including Nodeware; and
-	identifying other cybersecurity companies to acquire as part of a strategic roll-up strategy.

We believe our ability to succeed depends on how successful we are in differentiating ourselves in the market at a time when competition and consolidation in these markets is on the rise.

Our software and services are designed to simplify the security needs of our customers and channel partners, with a focus on the small to mid-sized enterprises, and we believe our ability to integrate our product and service offerings differentiates them from our competitors. In addition, we support our channel partners by providing recurring -revenue business models for both services and our cybersecurity SaaS solutions.

Cybersecurity is a constantly evolving field, so we devote significant efforts in developing proprietary software and services to meet our customer and channel partners’ evolving needs. These efforts have resulted in the development of our patented and patent-pending Nodeware solution. We expect to continue to make significant investments in developing other intellectual property to serve as the core to other proprietary software and services.

Historically, a significant portion of our revenues has been derived through our managed support services, however, we believe our cybersecurity SaaS solutions, including Nodeware, present an opportunity for significant growth. We believe that Nodeware’s ability to be deployed across a wide variety of networks and the ability to integrate it into existing and new cybersecurity solutions, will allow us to significantly grow this segment of our business. Similarly, we believe Nodeware’s SaaS recurring revenue business model and its flexibility as a standalone or integrated solution makes it an attractive part of our channel partners’ portfolio of products. Accordingly, in 2022 we made significant investments in IGI and CyberLabs sales and marketing to grow our team of cybersecurity sales and technical consultants. As a result, we believe we are seeing the pipeline growth expected from focused efforts, which we anticipate will convert to revenue growth in 2023.

We believe the market for cybersecurity services for small and medium-sized enterprises is fragmented and does not currently meet the needs of this customer base. The market is fragmented and is beginning to consolidate, which is why we are seeking to strategically acquire other cybersecurity technology and services companies.

The following sections define specific components of our business strategy.

Nodeware®

In May 2016, we filed a provisional patent application for our proprietary product, Nodeware and launched it commercially in November 2016. In May 2017, we filed a utility patent application for Nodeware.

U.S. Patent No. 10,999,307, was issued on May 4, 2021, for NETWORK ASSESSMENT SYSTEMS AND METHODS THEREOF U. S. Patent Application Serial No. 15/600,297, filed May 19, 2017, claiming priority of U.S. Provisional Patent Application Serial No. 62/338,904, filed May 19, 2016.

Nodeware is an automated asset identification and vulnerability management and monitoring solution that enhances security by proactively identifying, monitoring, and addressing potential vulnerabilities on both internal and external facing networks, creating a safeguard against malicious intent to exploit known problems in a customer’s network with simplicity and affordability. Nodeware assesses vulnerabilities in a computer network using scanning technology to capture a comprehensive view of the security exposure of a network infrastructure. Users receive alerts and view network information through a proprietary, web enabled dashboard. Continuous and automated internal scanning and external on demand scanning are components of this offering.

The Cloud based SaaS platform has an agile and continuous development process that is flexible to react to customer and market needs. In December 2019, we filed a second provisional patent application and in December 2020 we filed the subsequent action on the institutional patent on the Nodeware platform. In 2020 and 2021, we created many new feature updates and improvements to the platform in response to COVID-19 needs and impact such as a downloadable Windows executable version along with Windows, Mac, and Linux Agents that could be downloaded to a remote PC or server. A number of enhancements related to data management, threat intelligence, and user functionality were part of the 2020/21 continued evolution of Nodeware.

Nodeware creates an opportunity for resellers, including managed service providers, managed security service providers, distributors, and value-added resellers to use a product that provides greater visibility into the network security of an organization. We sell Nodeware in the commercial sector through channel partners and agents. Since 2018, we have continued to expand our channel of direct resellers, which now includes Telarus, SYNNEX, and Staples.

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In June 2021, we created IGI CyberLabs, LLC, a wholly owned subsidiary to support our Nodeware solution and continued software development. Cyberlabs’ overarching mission is to drive sales of our Nodeware Cloud security platform, which will drive monthly and annualized recurring revenue. CyberLabs will also drive product and platform enhancements in Nodeware and continue to enhance our rapid scale Go-to-Market capabilities. Additionally, CyberLabs is chartered with development of cloud and SaaS cybersecurity related products that will be brought to market through our growing channel relationships.

Intellectual Property

We believe that our intellectual property is an asset that will contribute to the growth and profitability of our business. We rely on a combination of patented, patent-pending and confidentiality procedures, trademarks and contractual provisions to establish and protect our intellectual property rights in the United States and abroad. We intend to rely on both registration and common law protection for our trademarks.

In May 2016, we filed a provisional patent application for our proprietary product, Nodeware, and launched it commercially in November 2016. In May 2017, we filed a utility patent application for Nodeware: U.S. Patent No. 10,999,307, was issued on May 4, 2021, for NETWORK ASSESSMENT SYSTEMS AND METHODS THEREOF U.S. Patent Application Serial No. 15/600,297, filed May 19, 2017, claiming priority of U.S. Provisional Patent Application Serial No. 62/338,904, filed May 19, 2016. The patent will remain in effect for four years from the date of issue and may be extended for up to twenty years from the filing date. Therefore, the expiration date of the subject patent, assuming all milestones to extend are met, is July 19, 2037.

In December 2019, we filed a second provisional patent application and in December 2020 we filed the subsequent action on the patent on Nodeware. In 2020 and 2021, we created updates and improvements to the platform in response to COVID-19 needs and impact such as a downloadable Windows executable version along with Windows, Mac, and Linux Agents that could be downloaded to a remote PC or server. A number of enhancements related to data management, threat intelligence, and user functionality were part of these updates.

The efforts we have taken to protect our intellectual property may not be sufficient or effective. As a result of this uncertainty and overall significance to the financial statements, these costs have been expensed.

The U.S. patent system permits the filing of provisional and non-provisional patent applications. A non-provisional patent application is examined by the United States Patent and Trademark Office and can mature into a patent once that office determines that the claimed invention meets the standards for patentability.

Our current patent and trademark portfolio consists of a patent for the Nodeware solution and process for scanning for vulnerabilities and a pending patent covering the methodologies associated with identifying and cataloging the assets on or across any physical or cloud network, together with a registered trademark for the “Nodeware” name and other trademarks and tradenames associated with our company and products. We intend to continue to work to enhance our intellectual property position on the Nodeware solution and in other appropriate cybersecurity technology we generate.

Technology and Product Development

Our goal is to position our products and solutions to enable vertical and other Application Programming Interface (API) based integration, with other industry solutions. We have a technology and product development strategy aligned with our business strategy. We continue to identify other technical partners in the cybersecurity market to integrate Nodeware into, through either API or full stack integration.

Cybersecurity Services

We provide cybersecurity consulting services that include incident response, security awareness training, risk management, IT governance and compliance, security assessment services, penetration testing, and Chief Information Security Officer Team as a Service (CISOTaaS™) offerings to channel partners and direct customers across different vertical markets (banking, supply chain, manufacturing, healthcare, legal, etc.) in North America. Our cybersecurity projects leverage different technology platforms and processes such as Nodeware to create a living document that a customer can use to go forward on a path of continuous improvement for its overall Information security. We support both internal and external organizations with our cybersecurity overlay that allows us to stay agnostic in the process, especially for compliance while enabling the IT organization to address the issues discovered. We validate overall network security with the goal of maintaining the integrity of confidential client information, preserving the continuity of services, and minimizing potential data damage from attempted threats and incidents. We continue to enhance our cybersecurity services when opportunities materialize and as the market evolves.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2023 and 2022

The following tables compare our statements of operations data for the three and six months ended June 30, 2023 and 2022. The trends suggested by this table are not indicative of future operating results.

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	Three Months Ended June 30,
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
													2023 vs 2022
				As a % of						As a % of			Amount of			% Increase
	2023			Sales			2022			Sales			Change			(Decrease)
Sales	$	1,783,476			100.0	%	$	1,696,492			100.0	%	$	86,984			5.1	%
Cost of sales		998,215			56.0			1,059,639			62.5			(61,424	)		(5.8	)
Gross profit		785,261			44.0			636,853			37.5	%		148,408			23.3
General and administrative		465,177			26.1			613,317			36.2			(148,140	)		(24.2	)
Selling		761,365			42.7			612,957			36.1			148,408			24.2
Total cost and expenses		1,226,542			68.8			1,226,274			72.3			268			0.0
Operating loss		(441,281	)		(24.7	)		(589,421	)		(34.7	)		148,140			25.1
Interest expense (net)		(647,564	)		(36.3	)		(243,779	)		(14.4	)		(403,785	)		(165.6	)
Other income		1,757,829			98.6			0			-			1,757,829			-
Net profit (loss)	$	668,984			37.5	%	$	(833,200	)		(49.1	)%	$	1,502,184			180.3	%
Net profit (loss) per share - basic	$	1.35					$	(1.88	)				$	3.23
Net profit (loss) per share - diluted	$	1.07					$	(1.88	)				$	2.95
	Six Months Ended June 30,
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
													2023 vs 2022
				As a % of						As a % of			Amount of			% Increase
	2023			Sales			2022			Sales			Change			(Decrease)
Sales	$	3,547,469			100.0	%	$	3,363,562			100.0	%	$	183,907			5.5	%
Cost of sales		1,964,421			55.4			2,180,879			64.8			(216,458	)		(9.9	)
Gross profit		1,583,048			44.6			1,182,683			35.2	%		400,365			33.9
General and administrative		996,822			28.1			1,217,300			36.2			(220,478	)		(18.1	)
Selling		1,454,475			41.0			1,260,582			37.5			193,893			15.4
Total cost and expenses		2,451,297			69.1			2,477,882			73.7			(26,585	)		(1.1	)
Operating loss		(868,249	)		(24.5	)		(1,295,199	)		(38.5	)		426,950			33.0
Interest expense (net)		(1,174,567	)		(33.1	)		(406,235	)		(12.1	)		(768,332	)		(189.1	)
Other Income		1,757,829			49.6			0			-			1,757,829			-
Net loss	$	(284,987	)		(8.0	)%	$	(1,701,434	)		(50.6	)%	$	1,416,447			83.3	%
Net loss per share - basic and diluted	$	(0.59	)				$	(3.87	)				$	3.28

Sales

Our managed support service sales increased by 1% from $1,115,607 during the three months ended June 30, 2022 to $1,122,084 during the corresponding period of 2023.  For the six month period ended June 30, managed support service sales increased 2% from $2,204,614 in 2022, to $2,248,882 for the same period in 2023.  Managed support service sales comprised approximately 63% of our sales in three months ended June 30, 2023, and approximately 66% for the same period in 2022. For the six months ended June 30, managed support service sales comprised approximately 63% of sales in 2023, and 66% for the same period in 2022.  The increase in our managed support service sales during the three and six months ended June 30, 2023 was due to additional projects requested by Perspecta.

Our cybersecurity projects revenue increased by 18%, from $300,456 for the three months ended June 30, 2022, to $353,937 for the same period ended June 30, 2023. For the six months ended June 30, 2023, cybersecurity projects increased 8% to $676,000 from $626,917 in the same prior year period.  These increases were due to increased sales efforts and the timing of the completion of the engagements.

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Software sales, which includes the selling of licenses of Nodeware and third-party software Webroot, increased by 10% from the three months ended June 30, 2022 to the same period in 2023.  Sales for the period in 2022 were $280,429 and increased by $27,026 to $307,455 for the same period in 2023.  For the six months ended June 30, 2022 and 2023, sale were $532,031 and $622,587, respectively, for an increase of 17%.  The increase was primarily attributable to improving sales of Nodeware, and slightly offset by decreasing sales of Webroot.  We expect this trend to continue throughout 2023 as we focus our resources on Nodeware.

Cost of Sales and Gross Profit

Cost of sales principally represents compensation expense for our employees. Cost of sales decreased by 6% to $998,215 during the three months ended June 30, 2023 from $1,059,639 during the corresponding period of 2022. For the six month periods ended June 30 2022 and 2023, cost of sales decreased from $2,180,879 in 2022 to $1,964,421 in 2023; a decrease of 10%.  The decrease in cost of sales during the three and six months ended June 30, 2023 from 2022 was primarily due to a decrease in payroll and benefits of salaried employees who support our managed services and cybersecurity projects.  This reduction of payroll was due to normal attrition without replacement.  There was no impact on performance, as we were able to absorb the staff reduction with efficiency improvements to our processes and tools.

Our gross profit increased by $148,408 for the three months ended June 30, 2022 to 2023, from $636,853 to $785,261. For the six months ended June 30, 2023, gross profit of $1,583,048 represents a 34% increase over gross profits for the same period in 2022 of $1,182,683.  The increase was due to the combination of increased sales and the decrease in salary and benefits previously referenced above.

General and Administrative Expenses

General and administrative expenses include corporate overhead such as compensation and benefits for executive, administrative and finance personnel, rent, insurance, professional fees, travel, and office expenses. General and administrative expenses of $465,177 for the three months ended June 30, 2023 decreased approximately 24% from $613,317 for the same quarter of 2022. For the six months ended June 30, 2023, general and administrative expenses were $996,822, down from $1,217,300 for the same period in 2022.  The decrease was primarily due to the reduction in legal, accounting, and other related fees associated with the S-1 filing in 2022, down approximately $135,000 for the comparative three month periods, and down approximately $265,000 for the comparative six month periods.  During the three month period comparison, the decrease was partially offset by an increase in bad debt expense of approximately $10,000, and $26,000 for the six month period comparison.

Selling Expenses

Selling expenses of $761,365 for the three months ended June 30, 2023 increased approximately 24% from $612,957 for the same quarter of 2022. For the six months ended June 30, 2023, selling expenses were $1,454,475; an increase of 15% over $1,260,582 for the same period in 2022.  For the three month period, approximately $220,000 of the increase was due to marketing spending, partially offset by reductions in staffing and related benefits.  For the six month period, approximately $260,000 of the increase was due to an increase in marketing spending, partially offset by reductions in staffing and related benefits.

Operating Income (Loss)

For the three months ended June 30, 2023 and June 30, 2022, operating loss was $441,281 and $589,421, respectively, for an improvement in the loss by $148,140. For the six months ended June 30, 2023 and June 30, 2022, the operating loss was $868,249 and $1,295,199, respectively.  The improvement in our operating loss from the previous year is principally attributable to the growth of sales as referenced above, the reduction in cost of sales as referenced above, the reduction of general and administrative expenses as referenced above, partially offset by the increase in selling expenses as referenced above.

Interest Expense

Net interest expense of $647,564 for the three months ended June 30, 2023 increased 166% from expense of $243,779 for the same quarter of 2022. For the six months ended June 30, 2023, net interest expense of $1,174,567 represents an increase of $768,332 over the same period in 2022.  The increase in interest expense is primarily attributable to the bridge loans entered into during 2022 and the first quarter of 2023 and penalty interest accrued on the defaulted loans of approximately $130,000 for the three months ended June 30, 2023 and approximately $347,000 for the six months ended June 30, 2023.

Other Income

For the three and six months ended June 30, 2023, other income included a one-time refund of taxes of $1,662,698 related to the approval of the Employee Retention Credit by the IRS as well as the gain of $95,131 related to debt forgiveness.

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Net Profit (Loss)

For the three months ended June 30, 2023, net profit was $668,984.  For the same period in 2022, we showed a net loss of $833,200. For the six months ended June 30, 2023 and June 30, 2022, the net loss was $284,987 and $1,701,434, respectively.  The primary reasons for this improvement in both periods was the one-time other income recognized during the three months ended June 30, 2023 associated with the Employee Retention Credit mentioned above.

Liquidity and Capital Resources

At June 30, 2023, we had cash of $17,339 available for working capital needs and planned capital asset expenditures. At June 30, 2023, we had a working capital deficit of approximately $6.6 million and a current ratio of 0.10.

During 2023, our primary source of liquidity is cash provided by collections of accounts receivable and our factoring line of credit. We maintain an accounts receivable financing line of credit with an independent financial institution that allows us to sell selected accounts receivable invoices to the financial institution with full recourse against us in the amount of $2,000,000, including a sublimit for one major client of $1,500,000. This provides us with the cash needed to finance certain of our on-going costs and expenses. At June 30, 2023, based on eligible accounts receivable, we had $20,000 available under this arrangement. We expect sales during 2023 to generate additional accounts receivable eligible for factoring, that will support our operations. We pay fees based on the length of time that the invoice remains unpaid.

At June 30, 2023, we had current notes payable of $199,000 to related parties. $100,000 of this debt was due on January 1, 2023. The remaining $99,000 are in the form of demand notes with an interest rate of 6%.

At June 30, 2023, we have current notes payable of approximately $1,491,000 to third parties, which includes convertible notes payable of approximately $150,000. Also included is $12,500 in principal amount of a note payable due on June 30, 2016 but not paid by then. This note was issued in payment of software we purchased in February 2016 and secured by a security interest in the software. To date, the holder has not taken any action to collect the amount past due on this note or to enforce the security interest in the software.

Also included in the current notes payable to third parties at June 30, 2023, are five bridge loans with Mast Hill Fund, L.P., for $1,449,902. All five loans bear interest at 8%.  We used the proceeds from the bridge loans to substantially enhance our marketing of CyberLabs’ Nodeware solution, in order to significantly increase its growth.

Notes payable to third parties at June 30, 2023, also includes a loan balance with Celtic Bank for $105,696.  This loan does not bear interest, and instead incurred a one-time fee of $12,464 at origination.  The payments consist of 30% of the Company’s receivables processed through Stripe, Inc.’s payment processing platform until the loan is repaid.

In the first six months of 2023, a total of approximately $404,000 was recorded as deferred note costs. At June 30, 2023, the unamortized balance of the deferred note costs for all notes payable to third parties was approximately $227,000. See Notes 5 and 6 of the 2022 Audited Financial Statements for more information.

We entered into unsecured lines of credit financing agreements (the “LOC Agreements”) with two related parties in previous years. The LOC Agreements provide for working capital of up to $100,000 through July 31, 2022 and $75,000 through January 2, 2023. At June 30, 2023, we had approximately $15,000 of availability under the LOC Agreements.

During 2021, we issued demand notes to three board members for $79,000 in total. The demand notes bear a 6% interest rate. The amount outstanding as of June 30, 2023 is $49,000.

We have $549,000 of current maturities of long-term obligations to third parties. This is comprised of various notes including long-term notes to third parties of $265,000 due on January 1, 2018 (plus accrued interest of approximately $260,000), and approximately $284,000 due on January 1, 2024.

At June 30, 2023, we have $659,300 of current maturities of long-term obligations to related parties. $270,000 was due on January 1, 2023, $25,000 was due June 30, 2023, $90,000 is due on July 31, 2023, and$274,300 is due January 1, 2024.

We plan to renegotiate the terms of the various notes payable, seek funds to repay the notes or use a combination of both alternatives. We cannot provide assurance that we will be able to repay current notes payable or obtain extensions of maturity dates for long-term notes payable when they mature or that we will be able to repay or otherwise refinance the notes at their scheduled maturities.

We have a note payable agreement for up to $500,000 with a related party. The note has an interest rate of 7.5% and is due on August 31, 2026. The balance is $499,000 at June 30, 2023.

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The following table sets forth our cash flow information for the periods presented:
---	---	---	---	---	---	---
	Six Months Ended June 30,
	2023			2022
Net cash provided (used) by operating activities	$	796,922		$	(636,906	)
Net cash provided (used) by investing activities		1,297,405			(111,347	)
Net cash provided (used) by financing activities		(2,100,175	)		650,415
Net decrease in cash	$	(5,848	)	$	(97,838	)

Cash Flows Provided by (Used in) Operating Activities

Our operating cash flow is primarily affected by the overall profitability of our contracts, our ability to invoice and collect from our clients in a timely manner, and our ability to manage our vendor payments. We bill our clients weekly or monthly after services are performed as well as collect down payments depending on the contract terms. Our net loss of $284,987 for the six months ended June 30, 2023 was offset by non-cash expenses and credits of $695,641. In addition, our net loss was offset by an increase in accounts receivable and other assets of $102,727, an increase in accrued payroll, deferred revenue and other expenses payable of $570,630 and a decrease in accounts payable of $81,635 resulting in cash provided by operating activities of $796,922.

We are increasing our marketing of Nodeware to our IT channel partners who resell to their customers. We are making investments in our cyber security team for penetration testing, CISOTaaS and other services. Due to the lengthy lead times typically needed to generate these new sales, we expect a delay before realizing a return from our sales and marketing efforts, of one or more quarters. As a result, we may continue to experience operating income or operating losses from these resource expenditures until sufficient sales are generated. We expect to fund the cost for the new expenditures from our operating cash flows, the equity raise and incremental borrowings, as needed.

Cash Flows Provided by (Used in) Investing Activities

During the six months ended June 30, 2023, we received approximately $1,413,000 for the aforementioned Risk Participation of ERC (Employee Retention Credit) Claim Agreement.  We also incurred capital expenditures for computer hardware as well as software development labor for the enhancements to Nodeware. We expect to continue to invest in computer hardware and software to update our technology to support the growth of our business. We do not anticipate our continued investment to be significant in these two categories.

Cash Flows Provided by (Used in) Financing Activities

During the six months ended June 30, 2023, we received $257,645 from various debt products, including a fifth Mast Hill Fund L.P. loan for $118,000, and a restructured loan with Celtic Bank for 139,645.  We paid the ERC Claim with the amounts received from the IRS of $1,662,698, principal of $369,786 on short term debt and $30,000 of related party short term debt.  There were debt issuance costs of $295,336 during the period.

Credit Resources

We maintain an accounts receivable financing line of credit from an independent financial institution that allows us to sell selected accounts receivable invoices to the financial institution with full recourse against us in the amount of $2,000,000, including a sublimit for one major client of $1,500,000. This provides us with the cash needed to finance certain costs and expenses. At June 30, 2023, we had financing availability, based on eligible accounts receivable, of approximately $20,000 under this line. We pay fees based on the length of time that the invoice remains unpaid. We also have approximately $16,000 of available credit under various lines of credit as of June 30, 2023.

During May 2019, we originated a line of credit note payable for a $500,000 with a related party and borrowed $499,000 and have $1,000 available to borrow for working capital. This agreement matures in August 2026.

During 2017, we originated two lines of credit with related parties totaling $175,000. At June 30, 2023, we had $15,000 available under these financing agreements which matured in January 2023 and July 2023, respectively.

We believe the capital resources available under our factoring line of credit, cash from additional related party loans and cash generated by improving the results of our operations will be sufficient to fund our ongoing operations for at least the next 12 months. The funds from the equity raise will allow us to support and accelerate the internal growth of our operations and offer additional opportunities if they arise.

We anticipate financing growth from acquisitions of other businesses, if any, and our longer-term internal growth through one or more of the following sources: issuance of equity: cash from collections of accounts receivable; additional borrowing from related and third parties; use of our existing accounts receivable credit facility; or a refinancing of our accounts receivable credit facility.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, the chief executive officer and chief financial officer concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us or our business.

Item 1A. Risk Factors

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for a comprehensive listing of the Company’s other risk factors. There are no material changes for the three and six months ended June 30, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the six months ended June 30, 2023, warrants were exercised, resulting in 6,515 shares of common stock being issued.

The securities described above were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), as set forth in Section 4(a)(2) of the Securities Act relative to transactions by an issuer not involving any public offering, to the extent an exemption from registration was required. The recipients of the securities described in the transactions above acquired the securities for their own account for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof.

Item 3. Defaults Upon Senior Securities.

The Company is in default on convertible notes to third parties of $150,000 due on December 31, 2016. The accrued interest on these notes is approximately $123,000 at June 30, 2023.

The Company is in default on long-term notes to third parties of $265,000 due on January 1, 2018. The accrued interest on these notes is approximately $261,000 at June 30, 2023.

The Company is in default on a note payable to third parties of $355,000 due on December 31, 2022. The accrued interest on the note is approximately $111,000 at June 30, 2023.

The Company is in default on a note payable to third parties of $566,000 due on March 22, 2023. The accrued interest on the note is approximately $121,000 at June 30, 2023.

The Company is in default on a note payable to third parties of $118,000 due on June 3, 2023. The accrued interest on the note is approximately $22,000 at June 30, 2023.

The Company is in default on a note payable to third parties of $170,000 due on June 30, 2023. The accrued interest on the note is approximately $121,000 at June 30, 2023.

The Company is in default on a note payable to third parties of $240,902 due on June 30, 2023. The accrued interest on the note is approximately $105,000 at June 30, 2023.

Item 6. Exhibits

Exhibits required to be filed by Item 601 of Regulation S-K.

For the exhibits that are filed herewith or incorporated herein by reference, see the Index to Exhibits located below in this report. The Index to Exhibits is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Infinite Group, Inc.
	(Registrant)
Date: October 16, 2023	/s/ James Villa
	James Villa
	Chief Executive Officer
	(Principal Executive Officer)
Date: October 16, 2023	/s/ Richard Glickman
	Richard Glickman<br><br>Finance and Chief Accounting Officer<br><br>VP Finance and Chief Accounting Officer
25
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INDEX TO EXHIBITS
---	---
Exhibit
No.	Description
10.1	Business Loan Agreement, dated August, 23, 2023, between Infinite Group, Inc. and WebBank
10.2	Financing and Security Agreement, dated September 14, 2023, between Infinite Group, Inc. and Celtic Bank Corporation
10.3	Loan Agreement between the Infinite Group, Inc.and Celtic Bank dated October 12, 2023
31.1	Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. *
31.2	VP Finance 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	VP Finance 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.*

* Filed as an exhibit hereto.

26

igi_ex101.htm EXHIBIT 10.1

Merchant ID: 1242693

Agreement #: APP-0000241413

BUSINESS LOAN AGREEMENT

Weekly Payments

This Business Loan Agreement (this “Agreement”) dated August 23, 2023 is between WebBank (“Lender”) and the borrower listed below (“Borrower”).

A. BORROWER INFORMATION

BUSINESS LEGAL NAME<br> <br><br> <br>Infinite Group Inc.		D/B/A<br> <br><br> <br>IGI

| FEDERAL TAX ID#<br> <br><br> <br>521490422 | | STATE OF INCORPORATION / ORGANIZATION<br> <br><br> <br>NY | | |

| PHYSICAL ADDRESS (BUSINESS LOCATION)<br> <br><br> <br>175 Sully's Trail  Suite 202 | | CITY<br> <br><br> <br>Pittsford | STATE<br> <br><br> <br>NY | ZIP<br> <br><br> <br>14534 |

| BUSINESS START DATE (MM/YY)<br> <br><br> <br>10/86 | BUSINESS ENTITY TYPE (check one):<br> <br>Corporation                ☒     Limited Liability Company         ☐      Partnership                  ☐<br> <br>Limited Partnership    ☐     Limited Liability Partnership      ☐      Sole Proprietorship    ☐ | | | |

B. PAYMENT INFORMATION

NAME<br> <br><br> <br>James Villa	BUSINESS TITLE<br> <br><br> <br>Owner

| | CITY | STATE | ZIP |

C. SIGNING PRINCIPAL/GUARANTOR INFORMATION

Principal Amount	150,000.00	$2,671.15

| | | |

| | | 78 |

| | | 540 |

| Cost-of-Funds | 58,350.00 | |

| Repayment Amount | 208,350.00 = Principal Amount + Cost-of-Funds (not including Origination Fee) | |

| Origination Fee | 2.99 %   of the Principal Amount (excluding any portion of the Principal Amount being applied to repay an existing loan balance owed to us) | |

| Other Up Front Fees | 0.00 Florida Documentary Stamp Tax (tax rate is .35 per 100 of Principal Amount) | |

All values are in US Dollars.

Business Loan Agreement (Weekly Payment) | Rev. 12.22 | Page 1 of 14

D. CONTACT INFORMATION

EMAIL ADDRESS<br> <br><br> <br>jvilla@igius.com	PHONE NUMBER<br> <br><br> <br>5852604777

E. KEY TERMS & CONDITIONS

You should read this entire Agreement before signing it, but we want you to be aware of the following terms and conditions:<br> <br><br> <br>1. ARBITRATION: Section 19 gives you and us the right to require any dispute to be resolved through BINDING INDIVIDUAL ARBITRATION rather than in court. Individual arbitration means that neither you nor we can assert claims on behalf of a class or in a representative capacity. You can opt out of this provision, without penalty, for a limited time.<br> <br><br> <br>2. FEES: Section 5.5 requires you to pay certain fees and charges in addition to the Repayment Amount. These fees and charges include, but are not limited to, the Origination Fee, which is equal to a percentage of the Principal Amount (excluding any portion of the Principal Amount being applied to repay an existing loan balance owed to us or our Assignees) as specified in Table C above, late fees, dishonored payment fees and site visit fees.<br> <br><br> <br>3. PREPAYMENT: Section 6 gives you the right to prepay your remaining obligation under this Agreement once 90 days have passed from the Effective Date. If you choose to exercise this right, you may be eligible for a discount of your remaining obligation reduced by an amount that is 30% of the outstanding Cost-of-Funds portion of your loan.<br> <br><br> <br>4. CREDIT REPORTS: Among other things, Section 10.11 allows us to pull your credit reports in connection with this loan and to determine your eligibility for other financial products.<br> <br><br> <br>5. COLLATERAL: Section 9 grants us a lien on your properties, assets and rights, which we may secure by the filing of a financing statement, and Section 21 restricts what you can do with such Collateral.<br> <br><br> <br>6. SIMULTANEOUS FUNDING RESTRICTION: Section 22 restricts your ability to seek certain types of additional financing before you have paid off your obligation to us.<br> <br><br> <br>7. TELEPHONE CONTACT: Section 14 allows us to contact you in certain ways and to record our telephone calls with you. 8. BANK HOLIDAYS: Section 5.3 states, among other things, that if your Weekly Payment Amount falls on a bank holiday, then we will debit the Designated Account for that week on the first weekday following the bank holiday.

| WARNING REGARDING THIRD PARTY FEES: Please note, if you worked with a third-party to facilitate this loan, we may directly pay such third-party a referral fee, but we do not permit third parties to charge you fees in connection with the funding of your loan. Please notify CAN Capital, Inc., our Servicer, at 877-500-8282 immediately if any third party has charged you a fee for your loan.<br> <br><br> <br>IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT<br> <br><br> <br>To help the government fight the funding of terrorism and laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.<br> <br><br> <br>What this means for you: When you open an account, we will ask for the name, address, date of birth (for any natural person), and other information that will allow us to identify the Signing Principal and your company. We may also ask to see the Signing Principal's driver’s license or other identifying documents about the Signing Principal and your company. |

Business Loan Agreement (Weekly Payment) | Rev. 12.22 | Page 2 of 14

Capitalized terms not defined below will have the meanings given to such terms in the above.

1.PARTIES. In this Agreement, the words “you” and “your” refer to Borrower. The words “we”, “us” and “our” refer to Lender and its successors or assigns, including any “Assignee” as defined in Section 11. “Principal” refers to each one of Borrower’s owners, shareholders, partners, members, principals, officers, directors and employees. “Signing Principal” refers to each Principal that has executed this Agreement or a Personal Guaranty of this Agreement.

2.EFFECTIVE DATE; TERM. The term of this Agreement (the “Term”) begins on the date we accept it at our home office in Utah by signing it or sending you the Principal Amount, whichever is earlier (the “Effective Date”). We may accept this Agreement without signing it by sending you the Principal Amount. You understand and agree that we are not required to send you the Principal Amount until: (a) you have provided us with all documents and fully met all conditions required by this Agreement; and (b) the security interests we are entitled to receive under this Agreement have been perfected. If there is a delay in your receipt of the Principal Amount for these or any other reasons, you agree that there will be no adverse consequence to you or us. If any Weekly Payment Amounts, or fees and other charges under Section 5.5 below, remain due and unpaid at the end of the Term, then the Term is automatically extended and the Term shall end when we have collected the Repayment Amount and all other amounts due under this Agreement. In addition, upon payment to us of the Repayment Amount and all other amounts due under this Agreement, and provided that you have done everything else you are required to do under this Agreement, the Term will end and you will have no further obligations to us under this Agreement except as otherwise stated below.

3.PRINCIPAL AMOUNT; USE OF LOAN PROCEEDS. You represent to us and agree that the Principal Amount will be used only: (a) to buy merchandise, inventory or related goods you will rent or sell to your customers, (b) to buy equipment or other goods for use in your business, (c) for training or other services needed by your business, and/or (d) to make improvements to your business location (but not to buy real estate). REGARDLESS OF ANYTHING ELSE STATED IN THIS AGREEMENT, YOU ACKNOWLEDGE AND AGREE THAT: (A) YOU WILL USE THE PRINCIPAL AMOUNT (AND THE GOODS OR SERVICES YOU BUY WITH THE PRINCIPAL AMOUNT) SOLELY FOR BUSINESS PURPOSES AND NOT FOR CONSUMER, PERSONAL, FAMILY OR HOUSEHOLD PURPOSES; (B) YOU WILL NOT USE THE PRINCIPAL AMOUNT TO FUND DIVIDENDS OR DISTRIBUTIONS TO ANY OF YOUR SHAREHOLDERS, PARTNERS, MEMBERS OR ANY OTHER OWNER OF ANY EQUITY INTEREST IN YOUR BUSINESS OR TO PURCHASE STOCK OR OTHER SECURITIES OF ANY KIND; (C) YOU WILL NOT PURCHASE STOCK OR OTHER SECURITIES WITH THE PROCEEDS OF THIS LOAN AND THIS LOAN MAY NOT BE SECURED BY ANY STOCK OR OTHER SECURITIES PURCHASED ON MARGIN; AND (D) THE LOAN DOCUMENTED BY THIS AGREEMENT IS NOT A "CONSUMER TRANSACTION" AS DEFINED IN THE UNIFORM COMMERCIAL CODE (“UCC”).

4.PROMISE TO PAY. In exchange for us loaning you the Principal Amount, you unconditionally promise to pay us the Repayment Amount and all other amounts this Agreement requires you to pay. You agree to make payments to us in the manner stated in Section 5 of this Agreement. As part of your agreement to repay us without conditions, you waive (both as to the original loan and any renewal, extension, refinancing, modification or consolidation of the loan): (a) protest, demand and presentment: (b) notice of dishonor, protest or suit; (c) all other notices or requirements necessary to hold you liable hereunder; and (d) all rights of exemption under the constitution or laws of any state as to real or personal property. YOU AGREE THAT YOUR OBLIGATIONS UNDER THIS AGREEMENT ARE ABSOLUTE AND UNCONDITIONAL, MAY NOT BE PREPAID EXCEPT AS SPECIFICALLY STATED HEREIN, AND SHALL CONTINUE IN FULL FORCE AND EFFECT REGARDLESS OF ANY CIRCUMSTANCE WHATSOEVER, AND THAT SUCH OBLIGATIONS SHALL NOT BE AFFECTED BY ANY COUNTERCLAIM, SET-OFF, RECOUPMENT, OFFSET, DEFENSE OR OTHER ALLEGED RIGHT AGAINST US.

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5.METHOD OF REPAYMENT.

5.1 Designated Account. The “Designated Account” is the account into which we deposit the Principal Amount based on the business bank account information you provide us by way of a voided check or bank notice, or any successor account(s) to such account of which you provide us notice, subject to our approval. You represent, warrant and agree that the Designated Account (i) is and shall be a business bank account during the Term of this Agreement, (ii) is not and will not be during the Term of this Agreement an account established primarily for personal, family or household purposes or otherwise an “account” as defined in 15 U.S.C. 1693a and Regulation E, and (iii) shall have sufficient funds during the Term of this Agreement for all debits and other withdrawals contemplated by this Agreement to be made on our behalf. If the Designated Account at any time lacks sufficient funds for any debit or other withdrawal required by this Agreement to be made on our behalf, you agree to immediately transfer sufficient funds to the Designated Account or pay to us such funds.

5.2 Payment through Weekly ACH Debits. Except as set forth in Section 5.3, you shall pay us the Weekly Payment Amount (set forth under “Payment Information” on page 1, Table C) on the same weekday each calendar week during the Term of the loan (each a “Payment Date”), by authorizing and allowing Lender and/or Operator (defined below) to debit or otherwise withdraw the Weekly Payment Amount from the Designated Account on each Payment Date. Borrower hereby authorizes and requests Lender and/or each Operator to debit or otherwise withdraw the Weekly Payment Amounts from the Designated Account on each Payment Date until we have received the entire Repayment Amount and all amounts due and/or owed under this Agreement, including without limitation each Weekly Payment Amount and all late fees, taxes, non-sufficient funds charges, reimbursements and other amounts due pursuant to this Agreement. Borrower further: (a) authorizes Lender and each Operator to deliver a copy of this Agreement to the Bank as evidence of Borrower’s authorization, and (b) agrees that, except to the extent prohibited by applicable law, Borrower’s authorizations to Lender and each Operator hereunder may be revoked only with Lender’s prior written consent. For purposes of this Agreement, the term “Operator” shall mean any person or entity we designate to debit or otherwise withdraw (via the Automated Clearing House (“ACH”) system, electronic checks, wires, or otherwise) any amounts from your accounts as authorized or permitted by this Agreement.

5.3 Bank Holidays and Other Exceptions. Lender and/or Operator will debit the Designated Account for Weekly Payment Amounts only on Payment Dates on which the Bank is open and able to process ACH transactions. If the Bank is not open or not able to process ACH transactions for reasons other than an insufficient Designated Account balance, then Lender or Operator will debit the Designated Account for the Weekly Payment Amount due on the next available day.

5.4 Authorization to Access and Withdraw from Designated Account. You authorize and request Lender and/or Operator to debit or otherwise withdraw (via the ACH system, electronic checks, wires or otherwise) the Weekly Payment Amounts from the Designated Account each week until we have received the entire Repayment Amount and all other amounts you owe to us under this Agreement. You agree that, except to the extent prohibited by applicable law, you will not revoke this authorization and instruction without our prior written consent.

In the event a withdrawal fails for non-sufficient funds in your Designated Account, Lender and/or Operator reserve the right to resubmit the ACH payment request, and you hereby authorize us to either reinitiate that debit up to two (2) additional times until the debit is paid, and, to the extent such debit remains unpaid, to add all or a portion of the Weekly Payment Amount associated with the unpaid debit to a debit for a subsequent Weekly Payment Amount. You acknowledge and agree that we and Operator may issue pre-notifications to your Bank with respect to such debits, withdrawals and other transactions. You agree that Operator may rely upon our instructions, without any independent verification, in making the transactions described above. You waive any claim for damages you may have against Operator in connection with actions taken based on our instructions, unless such damages were due to Operator’s failure to follow our instructions. You acknowledge and agree that (a) Operator will be acting on our behalf with respect to the Designated Account, (b) Operator may or may not be our affiliate, and (c) we are not responsible and shall not be liable for, and you agree to hold us harmless for, the actions of Operator. You understand and agree that this Agreement allows us to access the Designated Account. Within two business days of any request by us, you shall provide, or cause Operator or the Bank to provide, us with records and/or other information regarding the Designated Account. You hereby authorize and direct the Bank to provide us with all such information.

5.5 Fees. In addition to the Repayment Amount, you agree to pay us the following fees and charges: (a) a one-time, nonrefundable Origination Fee in an amount calculated as set forth on page 1, Table C; (b) a fee of $30 (or such lesser amount as permitted by applicable law) for each returned, rejected or dishonored payment, ACH debit, or wire transfer withdrawal, it being understood that we have the right to receive such fee for each business day on which we or our designee attempted and were unable to debit or otherwise withdraw from your accounts the amount we were entitled to receive as of such date; (c) the cost of any site visit that confirms a violation of this Agreement, not to exceed $500 for each such visit; (d) a monthly late fee equal to $50.00 if any Weekly Payment Amount(s) are due but unpaid as of the last day of each calendar month, with such late fee due and debited on any Payment Date thereafter; (e) a fee of $250 if you block us from deducting the Weekly Payment Amount from your Designated Account, and (f) charges for providing copies and other documentation you request from us (a list of such charges will be made available upon request or online). Borrower hereby authorizes and requests Lender and/or each Operator to withdraw the Origination Fee from the Designated Account on or after the Effective Date. If any Weekly Payment Amount(s), fees, charges or other amounts owed under this Agreement are due and unpaid at the end of the loan Term, the Term shall be automatically extended (without notice to you) and we may continue to withdraw the Weekly Payment Amount (and any other additional amounts or fees due hereunder) from the Designated Account each Payment Date until all amounts due to us under this Agreement have been paid in full.

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6.PREPAYMENT. Beginning 90 calendar days after the Effective Date, you may, upon notice and request to us, prepay in full all of your remaining obligations under this Agreement, which amount shall include any accrued or unpaid payments, fees and charges due as of the date of repayment (your “Remaining Obligation”). IF, AND ONLY IF, YOU MAKE YOUR PREPAYMENT VIA THE DESIGNATED ACCOUNT, YOU WILL ALSO QUALIFY FOR AN EARLY REPAYMENT DISCOUNT. This discount will be communicated to you by letter as an “Early Repayment Amount” calculated as of the date of that letter. The Early Repayment Amount will be your Remaining Obligation reduced by an amount that is 30% of the outstanding Cost-of-Funds portion of your loan. Your outstanding Cost-of-Funds will be calculated from our internal loan amortization schedule. You must pay the Early Repayment Amount exactly as specified in the letter we provide you. Your account will then be reconciled as of the date that your payment is actually received, and any excess payment amount will be handled in accordance with Section 8.3.

7.DEFAULT; REMEDIES.

7.1 Events of Default. Each of the following shall constitute an “Event of Default” under this Agreement: (a) at any given time during the Term of the Agreement any Weekly Payment Amount has become due but remains unpaid for at least 5 calendar days; (b) you fail to pay any amount you owe us under this Agreement (other than Weekly Payment Amounts) within 30 days after we request in writing that you do so; (c) you revoke or cancel any authorization for Lender or Operator to debit or otherwise withdraw from or access the Designated Account (but only to the extent that the prohibition on your revoking or canceling such authorization contained in this Agreement is not prohibited by applicable law); (d) you fail to maintain insurance required hereunder; (e) any warranty, representation or statement made or furnished to us by you or Signing Principal or on your or Signing Principal’s behalf under this Agreement is or becomes false or misleading in any material respect; (f) this Agreement ceases to be in full force and effect at any time and for any reason (including failure to create a validly perfected security interest or Lien); (g) you: (i) legally dissolve, are adjudicated insolvent or bankrupt or cease to pay your debts as they mature, (ii) make a general assignment for the benefit of or enter into an arrangement with creditors, (iii) apply for or consent to the appointment of a receiver, trustee or liquidator of you or a substantial part of your property, (iv) take action to dissolve or terminate your legal existence, or authorize; (v) file a voluntary petition in bankruptcy or under any similar law, or suffer such a petition or proceeding to be instituted against you; or (vi) if an individual operating as a sole proprietorship, you die or become legally incompetent; (h) commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any of your creditors or by any governmental agency against any Collateral (as defined in Section 9), including a garnishment of any of your accounts or deposit accounts; (i) you fail to perform or comply with any other term, provision, condition, covenant or agreement contained in this Agreement or any other documentation related to this Agreement; (j) you default under any other agreement with us, any Assignee or any affiliate of either us or any Assignee, or under any agreement with any third party material to your business or providing for the lease of real or personal property or the repayment of money borrowed; (k) we reasonably deem ourselves insecure with respect to your performance hereunder or in our rights with respect to the Collateral; and (l) any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of your obligations hereunder.

7.2 Remedies. Upon the occurrence of an Event of Default under Section 7.1(g)(v), the unpaid balance of the Repayment Amount and all other amounts you owe us under this Agreement shall automatically become immediately due and payable. Upon the occurrence of any other Event of Default, we shall have the right, but not the obligation, to declare the unpaid balance of the Repayment Amount and all other amounts you owe us under this Agreement to be immediately due and payable. We shall have and may exercise all the rights and remedies of a secured creditor under the UCC. In addition, we shall have and may exercise any and all other rights and remedies available to us at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of our rights and remedies, whether evidenced by this Agreement or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by us to pursue any remedy will not constitute a waiver of our rights to pursue other remedies. No forbearance or delay by us shall be deemed to waive any of our rights or remedies or create a course of dealing between or among the parties hereto. Any election by us to make expenditures or to take action to perform one or more of your obligations under this Agreement, after your failure to perform, shall not affect our right to declare an Event of Default and exercise our remedies.

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8.ADDITIONAL REPAYMENT TERMS.

8.1 Other Payment Methods. Subject to Section 6, you may make payments to us in addition to Weekly Payment Amounts to satisfy your obligations under this Agreement. All such payments must be made in immediately available funds and U.S. Dollars paid by check, money order, wire transfer, ACH credit or any payby-phone or on-line service that we offer. Any payments sent by mail or overnight courier must be addressed to WebBank, c/o CAN Capital, Inc. at the address set forth in Section 15, Attn: Customer Service Department. You acknowledge and agree that payments sent to any other address may not be timely processed or credited. Any payments made pursuant to this Section 8.1 shall not affect in any way your obligation to pay Weekly Payment Amounts. We may accept late, postdated or partial payments without losing any of our rights under this Agreement or otherwise. We have no obligation to hold postdated checks and may process any postdated check on the date we receive it without being liable to you for any damages or other claims you may assert, which you hereby expressly waive. You agree not to mark any partial payment “paid in full,” “without recourse,” “in full satisfaction” or with any similar language, and you agree that any such notations shall have no force or effect and that we will not lose any of our rights under this Agreement if we accept any such payments.

8.2 Application of Payments. Subject to applicable law, we reserve the right to allocate the Weekly Payment Amounts or any other payments received between the Principal Amount, Cost-ofFunds and fees in any manner we chose in our sole discretion, it being understood and agreed that any fees and Cost-of-Funds will generally be paid during the earlier portion of the Term.

8.3 Excess Cash. In the event the amount of cash remitted by you pursuant to this Agreement exceeds the sum of the Repayment Amount and any other amounts we are entitled to receive hereunder (such excess being the “Excess Cash”) by at least $20.00, we agree to pay the full amount of such Excess Cash to you within 30 days after our receipt thereof. In the event the Excess Cash is less than $20.00, you agree to forfeit such Excess Cash to us in consideration for administrative costs associated with handling Excess Cash. You acknowledge and agree that we have no obligation to take any action (including against Operator) with respect to any cash being held by Operator, which will become Excess Cash once it is paid by Operator to us, prior to our receipt of such Excess Cash.

8.4 Reliance on Terms. The provisions of this Agreement are for the benefit of you, Signing Principal, us, and Operator. Notwithstanding the fact that Operator is not a party to this Agreement, Operator may rely upon the terms of this Agreement and raise them as defenses in any action by you or Signing Principal.

8.5 Indemnification; Limitation of Liability. You shall indemnify and hold each of us, Operator, its and our respective officers, directors, affiliates, employees, agents, attorneys, representatives, successors and assigns (collectively, the “Indemnified Parties”) harmless from and against all losses, damages, claims, liabilities, obligations, penalties, suits, actions, controversies, or proceedings of any kind, imposed upon, incurred by, or asserted against any of the Indemnified Parties, in any way arising from, in connection with, relating to, or incident to your breach of this Agreement or any and all actions taken by Operator in reliance upon information or instructions provided to Operator by us, including the payment of all costs and expenses of every kind for the enforcement of our rights and remedies hereunder, including reasonable attorneys’ fees, costs of any trial, arbitration, appellate court proceeding, administrative proceeding, or any negotiations or consultations (the “Indemnified Amounts”). Such Indemnified Amounts will bear interest at the rate for prejudgment interest prevailing in your jurisdiction until paid. IN NO EVENT WILL WE OR ANY OPERATOR BE LIABLE FOR ANY CLAIMS ASSERTED BY YOU UNDER ANY THEORY OF LAW, INCLUDING ANY TORT OR CONTRACT THEORY FOR LOST PROFITS, LOST REVENUES, LOST BUSINESS OPPORTUNITIES, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH YOU HEREBY EXPRESSLY WAIVE.

9.GRANT OF SECURITY INTEREST. Capitalized terms used in this Section 9 without definition which are not defined elsewhere in this Agreement have the meanings defined in the UCC. For valuable consideration and to secure the prompt payment and performance in full of all of your, any Principal’s or any of your affiliates’ indebtedness, liabilities and obligations to us, whether direct or indirect, joint or several, absolute or contingent, due or to become due, now existing or hereafter arising, whether or not such indebtedness, liabilities and obligations relate to the loan described in this Agreement and whether or not contemplated by the parties hereto at the time of the granting of this security interest, regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument and including obligations to perform acts and refrain from taking action as well as obligations to pay money, including all principal, interest, other fees and expenses, you hereby grant to us a security interest in the following properties, assets and rights (the “Collateral”), wherever located, whether now owned or hereafter acquired or arising and howsoever your interest therein may arise or appear (whether by ownership, lease, security interest, claim, or otherwise): (a) any and all amounts owing to you now or in the future from any merchant processor; (b) all Accounts; (c) all Chattel Paper (including Tangible Chattel Paper and Electronic Chattel Paper); (d) all Instruments; (e) all Goods, including, without limitation, Equipment, motor vehicles, Inventory, Farm Products, Accessions, and As Extracted Collateral; (f) all Documents; (g) all General Intangibles (including, without limitation, Payment Intangibles and software); (h) all Deposit Accounts; (i) all Letter of Credit Rights; (j) all Investment Property; (k) all Supporting Obligations; (l) all trademarks, trade names, service marks, logos and other sources of business identifiers, and all registrations, recordings and applications with the U. S. Patent and Trademark Office (“USPTO”) and all renewals, reissues and extensions thereof (collectively “IP”); (m) any records and data relating to any of the foregoing, whether in the form of a writing, photograph, microfilm, microfiche, or electronic media, together with all of your right, title and interest in and to all computer software required to utilize, create, maintain, and process any such records or data on electronic media; and (n) any and all proceeds of any of the foregoing, including insurance proceeds or other proceeds from the sale, destruction, loss, or other disposition of any of the foregoing, and sums due from a third party who has damaged or destroyed any of the foregoing or from that party’s insurer, whether due to judgment, settlement or other process. You irrevocably authorize us and our designees at any time and from time to time to file: (i) in any filing office in any jurisdiction any initial financing statements and amendments thereto that indicate the collateral therein as all of your assets or words of similar effect, regardless of whether such description is greater in scope than the Collateral pledged to us hereunder; and (ii) such recordations with the USPTO we deem necessary or desirable to evidence the security interest in IP described above.

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10.REPRESENTATIONS, WARRANTIES AND COVENANTS.

You and Signing Principal represent, warrant and covenant the following as of the Effective Date and during the Term of this Agreement:

10.1 Your Business and Operations. You shall: (a) not materially change the nature of your business from what was originally disclosed to us in connection with this Agreement; and (b) not sell or otherwise transfer your business without: (i) our express prior written consent, which we may withhold in our sole discretion for any reason or no reason, and (ii) the assumption by transferee of all of your obligations under this Agreement using documentation reasonably satisfactory to us, provided such assumption will not release you from liability under this Agreement.

10.2 Name, Location, Authority, Etc. (a) You are and shall remain duly organized, licensed, validly existing and in good standing under the laws of your state or jurisdiction of organization and are and shall remain duly qualified, licensed and in good standing in each and every other state and jurisdiction in which the failure to do so could have a material adverse effect on your financial condition, business or operations; (b) your exact legal name set forth under “Borrower Information” on page 1, Table A, is true and correct and you do not and shall not conduct your business under any other name; (c) you shall not change your place of business, your legal name, entity type or state or jurisdiction of organization, unless you have provided us with at least 60 days’ prior written notice and you, at your sole cost and expense, provide such documents, agreements and information we request and take such other actions as we deem necessary or desirable to protect our interests hereunder and in the Collateral; (d) you are authorized and permitted, by law, your organizational documents, contracts to which you or Signing Principal is a party and otherwise, to execute, deliver and perform this Agreement and all related documents; (e) all of your organizational and formation documents and all amendments thereto have been duly filed and are in proper order and any capital stock, membership interests or other ownership interest issued by you and outstanding was and is properly issued and all of your books and records are accurate and up to date and will be so maintained; (f) you are subject to no charter, corporate or other legal restriction, or any judgment, award, decree, order, governmental rule or regulation or contractual restriction that could have a material adverse effect on your financial condition, business or prospects; (g) you are and will continue to be in compliance with your organizational and formation documents, all contractual requirements by which you may be bound, and all applicable federal, state and local laws, statutes, regulations, ordinances and rules pertaining to the conduct of your business, including without limitation the regulations of card associations and payment networks; (h) there is no action, suit, proceeding or investigation pending or, to your knowledge, threatened against or affecting you or any of your assets before or by any court or other governmental authority which, if determined adversely to you, would have a material adverse effect on your financial condition, business or prospects or the value of the Collateral; and (i) you possess and are in compliance with all permits, licenses, approvals, consents, registrations and other authorizations necessary to own, operate and/or lease your properties and to conduct your business.

10.3 Location of the Collateral. You agree to keep the Collateral (or, to the extent the Collateral consists of intangible property such as Accounts or General Intangibles, the records concerning the Collateral) at the location(s) shown under “Borrower Information” on page 1, Table A, or at such other locations as we have agreed to in advance in writing. Upon our request, you will deliver to us in form satisfactory to us a schedule describing the Collateral in such detail as we reasonably request. You shall not remove the Collateral from its existing location without our prior written consent.

10.4 Repairs and Maintenance. You shall: (a) only use Collateral in a prudent, businesslike manner for its originallyintended purpose and solely for business purposes and NOT for any consumer, personal, household or family purpose; (b) comply promptly with all applicable insurance policies, laws, ordinances, rules, regulations and requirements of all governmental authorities, now or hereafter in effect, applicable to the ownership, production or disposition thereof; and (c) pay when due all taxes and claims for work done on, or services or material furnished in connection with, the Collateral.

10.5 Inspection of Collateral and Place of Business. We or our designated representatives and agents shall have the right during your normal business hours and at any other reasonable time to examine the Collateral where located and the interior and exterior of any of your places of business. During an examination of any of your places of business, we may examine, among other things, whether you (a) have a place of business that is separate from any personal residence, (b) are open for business, and (c) have sufficient inventory to conduct your business. When performing an examination, we may photograph the interior and exterior of any your places of business, including any signage, and may photograph any Principal.

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10.6 Insurance. You shall maintain insurance in such amounts and against such risks as are consistent with past practice and shall show proof of such insurance upon our request. You shall promptly notify us of any loss or damage to the Collateral.

10.7 Business Information; Reliance; Compliance. All information (financial and other) provided by or on your or Signing Principal’s behalf to us in connection with or pursuant to this Agreement is true, accurate and complete in all respects. You and Signing Principal shall furnish us and Operator such information as we may request from time to time. You acknowledge and agree that all information (financial and other) provided by or on behalf of you and/or Signing Principal has been relied upon by us in connection with our decision to loan you the Principal Amount. You acknowledge and agree that neither we nor Operator will provide you with any tax, accounting, legal or other professional or expert advice of any kind, nor will you treat or rely on any information provided to you by us or Operator as such.

10.8 Solvency. You do not presently intend to close or cease operating your business, in whole or in part, temporarily or permanently. As of the date of this Agreement, you are solvent and are not contemplating any insolvency or bankruptcy proceeding. During the four months preceding the date of this Agreement, neither you nor any Principal has discussed with or among your management, with counsel, or with any other advisor or creditor, any potential insolvency, bankruptcy, receivership, or assignment for the benefit of your creditors and no such action or proceeding has been filed or is pending. Other than as disclosed to us in a writing attached to this Agreement, no eviction or foreclosure is pending or threatened against you.

10.9 Confidentiality. You and Signing Principal understand and agree that the terms and conditions of the products and services we offer, including this Agreement and any other documentation provided by us (“Confidential Information”) are our proprietary and confidential information. Accordingly, unless disclosure is required by applicable law or court order, you and Signing Principal shall not disclose (and you and Signing Principal shall cause each Principal not to disclose) Confidential Information to any person other than your attorneys, accountants, financial advisors or employees who need to know such information for the purpose of advising you (“Advisors”), provided that such Advisors use such information solely to advise you and first agree in writing to keep such information confidential.

10.10 Publicity. You and Signing Principal authorize us to use your, his or her name in a listing of clients and in advertising and marketing materials.

10.11 Credit Reports and Information Sharing. YOU AND SIGNING PRINCIPAL HEREBY AUTHORIZE US, OUR AGENTS AND REPRESENTATIVES, AND ANY CREDIT REPORTING AGENCY ENGAGED BY ANY OF THE FOREGOING, TO (A) INVESTIGATE ANY REFERENCES GIVEN OR ANY OTHER STATEMENTS OR DATA OBTAINED FROM OR ABOUT YOU OR SIGNING PRINCIPAL FOR THE PURPOSE OF THIS AGREEMENT, AND (B) OBTAIN YOUR AND SIGNING PRINCIPAL’S BUSINESS AND PERSONAL CREDIT BUREAU REPORTS FROM TIME TO TIME, (I) AT ANY TIME NOW OR FOR SO LONG AS YOU OR SIGNING PRINCIPAL CONTINUE TO HAVE ANY OBLIGATION TO US AS A CONSEQUENCE OF THIS AGREEMENT, OR (II) AT ANY TIME IN ORDER FOR US TO DETERMINE YOUR ELIGIBILITY FOR A FINANCIAL PRODUCT OFFERED BY US. By entering into this Agreement, you hereby authorize us to share information regarding you and/or Signing Principal and relating to your application, the loan, and the status of your account (including amount repaid, eligibility for additional funding, collections and payment statuses, etc.) to credit bureaus, any service providers we utilize in connection with performing our due diligence, our affiliates and any broker or other third party that you and/or Signing Principal may be working with or represented by (including brokers, independent sales organizations & other representatives). Such parties may use the shared information when considering whether to offer financial or other products or services in the future. You and Signing Principal hereby waive to the maximum extent permitted by law any claim for damages against us and our affiliates, agents, employees and representatives relating to (i) any investigation undertaken by such person and/or entities as permitted by this Agreement or (ii) disclosure of information as permitted by this Agreement. You also agree that we may release any such information if we believe it is required to comply with any governmental or legal action, whether or not such release is actually required, or when it is necessary or desirable in connection with a transaction or investigation of a potential loss. If you or Signing Principal fails to satisfy the terms of your respective credit obligations hereunder, we may submit a negative credit report to a credit reporting agency that adversely effects the credit score or record of you and/or the Signing Principal.

10.12 D/B/As and Proxies. You and Signing Principal hereby acknowledge and agree that we may use “doing business as” or “d/b/a” names or third-party proxy services in connection with various matters relating to the transactions between you and us, including the filing of UCC-1 financing statements and other notices or filings.

10.13 Collection Costs and Fees. To the extent not prohibited by applicable law or applicable arbitration rules or procedures, you shall pay to us any and all expenses, including collection costs, attorneys’ fees and expenses, expert fees and expenses, and all other expenses which may be incurred by us in the prosecution, defense, settlement and/or other resolution of any claim, demand, action or proceeding arising out of or relating to this Agreement, the Collateral or any of our related rights or interests, regardless of whether you are a party to that action or proceeding or made aware of the claim or demand before it is resolved. Without limiting the generality of the foregoing, the expenses you shall pay to us include counsel fees and expenses incurred in any bankruptcy or insolvency proceedings and all costs and expenses (including search fees) incurred or paid by us for the purpose of administering, protecting or realizing our security under this Agreement. All amounts described in this Section 10.13 shall be considered advances to protect our security, and shall be secured by this Agreement.

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11.ASSIGNMENT. Without our prior written consent, you shall not pledge, cancel, revoke or assign this Agreement or your rights hereunder. Any prohibited assignment shall be void. No consent to an assignment by us shall release you from your obligations hereunder. We may assign, mortgage, pledge or otherwise transfer or delegate this Agreement or any of our rights or obligations hereunder to any party (each, an “Assignee”) without notifying you or obtaining your consent. Without limiting the generality of the foregoing, we may grant a security interest in any and all of our rights and interests pursuant to this Agreement, including our rights and interests in and to the Weekly Payment Amounts and the Repayment Amount, and including to parties from whom we may obtain financing (any such Assignee, a “Secured Party”), and you agree that any such Secured Party is entitled, to the extent of the applicable assignment or other agreement between us and such Secured Party, to enforce any and all of our rights, remedies and interests under this Agreement. Any Secured Party shall have all of our rights, but no liability for any of our obligations, under this Agreement, and you agree that you will not assert against any Secured Party any defense, counterclaim, set-off, recoupment, offset or other alleged right that you may have against us. Upon and following receipt of written notification by an Assignee to you, you are authorized and directed to remit any and all amounts then or thereafter payable by you under this Agreement directly to such Assignee. As between you and any such Assignee, any remittance sent to us following such receipt shall not constitute payment unless and until such payment is actually received by such Assignee.

12.RIGHT TO PERFORM; FURTHER ASSURANCES. If you fail to carry any insurance or render any other performance required by this Agreement, we may, at our sole option and without obligation, do so and you will reimburse us together with interest from the date of the expense to the date of reimbursement at the rate for prejudgment interest prevailing in your jurisdiction. You hereby appoint us as your true and lawful attorney and agent to, in your name, execute, file, communicate, record and deliver any documents we deem appropriate to protect our interest in this Agreement or any Collateral or the proceeds thereof. This power, being coupled with an interest, shall be irrevocable until all your obligations hereunder have been indefeasibly and fully paid and performed. YOU ACKNOWLEDGE THAT THE FEES WE CHARGE TO YOU FOR LATE PAYMENTS, DOCUMENTATION, ORIGINATION, ADMINISTRATION, TAX COMPLIANCE, INSURANCE OR ANY OTHER MATTER ASSOCIATED WITH THIS AGREEMENT MAY REPRESENT PROFIT TO US IN WHOLE OR IN PART AND MAY NOT BE MERELY A REIMBURSEMENT FOR ACTUAL COSTS. You agree to execute and deliver any additional writings and take any other actions we reasonably request to evidence or effect your agreements and obligations under this Agreement.

13.USURY SAVINGS CLAUSE. It is the intention of parties hereto to comply strictly with applicable usury laws and, accordingly, in no event shall we ever be entitled to receive, collect, or apply as interest any interest, fees, charges or other payments equivalent to interest, in excess of the maximum rate of interest, which we may lawfully charge under applicable law (the “Maximum Rate”). In the event that we ever receive, collect, or apply as interest any such excess, such amount which, but for this provision, would be excessive interest, shall be applied to the reduction of the principal balance owed hereunder; and if said principal balance, and all lawful interest thereon, is paid in full, any remaining excess shall forthwith be paid to you, or other party lawfully entitled thereto. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the highest rate which we may lawfully charge under applicable law, the parties hereto shall, to the maximum extent permitted under applicable law, characterize any non-principal payment as a reasonable loan charge, rather than as interest. Any provision hereof, or of any other agreement between the parties hereto, that operates to obligate or compel you to pay interest in excess of the Maximum Rate shall be construed to require payment of the Maximum Rate only. The provisions of this Section 13 shall prevail over any other provision herein or in any other agreement between the parties hereto that is in conflict with the provisions of this Section 13.

14.CONTACTING YOU; PHONE AND TEXT MESSAGES. You and Signing Principal authorize us and our affiliates, agents, representatives, assigns and service providers (collectively, the "Messaging Parties") to provide information about this Agreement and the loan (including without limitation information about upcoming payment due dates, missed payments, returned payments, the Messaging Parties' servicing and/or collection of amounts owed to the Messaging Parties or any other matter) using automatic telephone dialing systems, artificial or prerecorded voice message systems, text messaging systems, facsimile machines, automated email systems and any other method of communication. You and Signing Principal authorize the Messaging Parties to make such communications using any telephone numbers (including wireless, landline, residential, facsimile and VOIP numbers) or email addresses supplied in connection with this Agreement or the loan. Anyone with access to the telephone or email accounts supplied may listen to or read the messages the Messaging Parties leave or send, and you and Signing Principal agree that the Messaging Parties will have no liability for any such access. You and Signing Principal further agree that the Messaging Parties will have no liability for any charges from your telecommunications, wireless and/or Internet service providers for the telephone calls, facsimile or text messages or emails we make or send. You and Signing Principal expressly authorize the Messaging Parties to monitor and record your calls with the Messaging Parties. Consent to receive text messages and calls to a cell phone or to receive artificial or prerecorded voice message system calls may be withdrawn by calling 877-500-8282. To stop text messages, reply “STOP” to any text message from the Messaging Parties. To stop emails, follow the opt-out instructions included at the bottom of the Messaging Parties' emails.

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15.COMMUNICATIONS.

15.1 YOUR AUTHORIZED REPRESENTATIVES. You acknowledge that we will only communicate directly with your Principals, other persons you authorize us to communicate with or your authorized attorney-at-law (your “Authorized Representatives”) in discussing your loan and/or your obligations under this Agreement. You agree not to authorize any other third-party to contact us regarding this Agreement and any attempt to do so shall automatically be void. We shall have the right, in our sole discretion, to refuse to discuss this Agreement with any person who is not your Authorized Representative. We shall also have no obligation to comply with any instructions or directions provided by a person who is not an Authorized Representative.

15.2 NOTICES. Any notice or other communication required or desired to be given shall be in writing and shall be sent by certified mail, return receipt requested, by a nationally recognized express courier service (such as FedEx) or personally served, and shall be deemed to be duly given when postmarked by the United States Post Office, when deposited with a nationally recognized express courier service or when personally served. Each such notice to Borrower shall be at the address set forth under “Borrower Information” on page 1, Table A, and any such notice to Lender shall be at the following address (or to any other address as may be specified by either party by a notice given as provided herein):

WebBank c/o CAN Capital, Inc., as Servicer

1850 Parkway Place, Suite 1150 Marietta, GA 30067

Notwithstanding the foregoing, any notice, request or demand which you make pursuant to any statutory rights granted to debtors under Article 9 of the UCC shall only be effective upon receipt of a copy of said notice, request or demand by us at the address set forth above with the following caption “Attention: Manager- UCC Notice.”

16.GOVERNING LAW; JURISDICTION. THIS AGREEMENT AND ALL TRANSACTIONS IT CONTEMPLATES, INCLUDING ALL ISSUES CONCERNING THE VALIDITY OF THIS AGREEMENT AND ANY TRANSACTIONS IT CONTEMPLATES, THE CONSTRUCTION OF ITS TERMS, AND THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF US, YOU AND SIGNING PRINCIPAL SHALL BE GOVERNED BY AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF ANY OTHER LAW. Without limiting the generality of the foregoing, you, the Signing Principals and we agree that Utah law shall govern the entire relationship between and among all parties hereto, including without limitation, all issues or claims arising out of, relating to, in connection with, or incident to this Agreement and any transactions it contemplates, whether such claims are based in tort, contract, or arise under statute or in equity, including without limitation the law with respect to applicable statutes of limitations, laches, or similar time-based defenses. Subject to each party’s right to elect arbitration under Section 19 below, you and the Signing Principal further irrevocably and unconditionally consent and submit to the jurisdiction of any state or federal court located in Utah (where we are located) or Georgia (where Servicer is located) to resolve any suit, action, controversy, or proceeding of any kind (whether in contract, tort, statute, equity or otherwise) between or among any of the parties hereto, arising out of, related to, in connection with, or incident to this Agreement or any of the transactions it contemplates. You and the Signing Principal hereby agree that any of the above-named courts shall be a convenient forum for any such suit, action, controversy, or proceeding of any kind between or among the parties hereto, arising out of, related to, in connection with, or incident to this Agreement or any of the transactions it contemplates. You and the Signing Principal waive, to the fullest extent permitted by law, (a) any objection that you or the Signing Principal may now or later have to the laying of venue of any suit, action, controversy, or proceeding arising out of, relating to, in connection with, or incident to this Agreement or any of the transactions it contemplates in any of the above-named courts, (b) any objection to personal jurisdiction applying in any such court, and (c) any claim that any such suit, action, controversy or proceeding brought in any such court has been brought in an inconvenient forum. THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT IS MADE AND PERFORMED IN UTAH.

You and the Signing Principal understand and agree that: (i) we are located in Utah; (ii) we make all credit and other decisions from our office in Utah; and (iii) the loan hereunder is made in Utah (that is, no binding contract will be formed until we receive and accept your signed agreement in Utah).

17.FAX SIGNATURES; COUNTERPARTS. You and the Signing Principal agree that your faxed, scanned or other electronic signatures will be considered as good as your original signature and admissible in court as conclusive evidence. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which when taken together shall constitute one and the same agreement.

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18.INTERPRETATION; MISCELLANEOUS. This Agreement shall only be valid when accepted by us at our home office in Utah. Except as otherwise stated in Section 19, the provisions of this Agreement shall be severable and if any provision shall be invalid, void or unenforceable in whole or in part for any reason, the remaining provisions shall remain in full force and effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns (subject nevertheless to restrictions provided in Section 11). This Agreement, together with the other agreements and instruments mentioned herein or executed by you contemporaneously herewith, constitutes the entire agreement of the parties hereto and we shall not be charged with any agreement or representation not contained in a writing executed by us as provided herein. Any modifications to this Agreement, which is our form agreement used for all loans we make, must be made in a separate amending document signed by both parties. Absent manifest error, our records shall be conclusive evidence with respect to the matters governed by this Agreement (including the total amount of Weekly Payment Amounts and other amounts paid to us) but the failure to record any such amount in such records or otherwise shall not limit or affect your obligations or our rights hereunder. Whenever terms such as “include” or “including” are used herein, they shall mean “include” or “including,” as the case may be, without limiting the generality of any description or word preceding such term. Whenever terms such as “acceptable to us” or “to our satisfaction” are used or we are granted the contractual right to choose between alternatives or express our opinion, the satisfaction, choices and opinions are to be made in our sole and absolute discretion. The captions or headings herein are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of such document. As used herein, all masculine pronouns shall include the feminine or neuter, and all singular terms the plural forms thereof, and vice versa. Any exhibits annexed hereto are incorporated therein and made a part thereof as if contained in the body of this Agreement. All references to “Sections” shall be deemed to refer to the numbered sections of this Agreement, unless otherwise expressly provided, whether or not “hereof,” “above,” “below” or like words are used. This Agreement has been drafted by our counsel as a convenience to the parties hereto only and shall not, by reason of such action, be construed against us or any other party.

19.ARBITRATION AGREEMENT. You or we each may elect to resolve any and all claims and disputes relating in any way to this Agreement or our dealings with one another (“Claims”), except for Claims concerning the validity, scope or enforceability of this Arbitration Agreement, through BINDING INDIVIDUAL ARBITRATION. This Arbitration Agreement is made with respect to transactions involving interstate commerce and shall be governed by the Federal Arbitration Act, 9 U. S. C. §§ 1-16 (the “FAA”), and not by state law. SIGNING PRINCIPAL AGREES THAT SECTION 19 (INCLUDING SECTIONS 19.1 – 19.6) SHALL APPLY TO HIM/HER IN THE SAME MANNER AS BORROWER.

19.1 Individual Arbitration. If either of us elects to resolve a dispute by arbitration, this means that neither you nor we will be able to have the dispute settled by a court or jury trial or to participate in a class action or class arbitration. Other rights that you and we would have if you or we went to court will not be available or will be more limited in arbitration, including your and our right to appeal. YOU AND WE BOTH UNDERSTAND AND AGREE THAT BY ALLOWING EACH OTHER TO ELECT TO RESOLVE ANY DISPUTE THROUGH INDIVIDUAL ARBITRATION, WE ARE EACH WAIVING THE RIGHT TO A JURY TRIAL OR A TRIAL BEFORE A JUDGE IN A PUBLIC COURT. IF EITHER YOU OR WE ELECT TO RESOLVE A DISPUTE BY ARBITRATION, THAT DISPUTE SHALL BE ARBITRATED ON AN INDIVIDUAL BASIS. NEITHER YOU NOR WE MAY BRING A CLAIM UNDER THIS PROVISION AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE CAPACITY. THE ARBITRATOR(S) MAY NOT CONSOLIDATE MORE THAN ONE PARTY'S CLAIMS (except Claims by or against you and the Signing Principal with respect to a single Agreement or series of Agreements involving the same parties) AND MAY NOT OTHERWISE PRESIDE OVER ANY FORM OF A REPRESENTATIVE OR CLASS PROCEEDING.

19.2 Arbitration Rules. Arbitration of any dispute under this Arbitration Agreement shall be administered by the American Arbitration Association (“AAA”) pursuant to the Commercial Arbitration Rules and Mediation Procedures of AAA in effect at the time the arbitration is initiated. You may contact AAA to obtain information about arbitration, arbitration procedures and fees by calling 800-778-7879 or visiting www.adr.org. If AAA is unable or unwilling to administer the arbitration of a dispute, then a dispute may be referred to any other arbitration organization mutually agreed upon in writing by you and us or to an arbitration organization or arbitrator appointed pursuant to section 5 of the FAA, and the commercial arbitration rules and procedures of such other organization shall be applicable to such arbitration. The arbitrator shall apply applicable substantive law consistent with the FAA and applicable statutes of limitations and shall be authorized to award any relief that would have been available in court, including awarding costs and fees to the prevailing party, provided that the arbitrator’s authority to resolve claims and make awards is limited to you and us alone except as otherwise specifically stated herein. No arbitration award or decision will have any preclusive effect as to issues or claims in any dispute with anyone who is not a named party to the arbitration. The decision by the arbitrator shall be final and binding. You and we agree that this Arbitration Agreement extends to any other parties involved in any Claims, including but not limited to your Principals and our employees, affiliated companies and vendors. In the event of any conflict between this Arbitration Agreement and the AAA arbitration rules or the rules of any other arbitration organization or arbitrator, this Arbitration Agreement shall govern. The parties agree that the place of any arbitration pursuant to this Arbitration Agreement shall exclusively be Salt Lake City, Utah.

19.3 Arbitration Fees and Costs. You and we shall each pay its respective arbitration costs, fees and expenses as required pursuant to the applicable arbitration rules and procedures, including without limitation the party filing any Claims shall be responsible for payment of any initial arbitration filing fees, costs or expenses. Without limiting the foregoing, to the extent allowed under the applicable arbitration rules and procedures and/or applicable law, the prevailing party in any arbitration or dispute under or in connection with this Arbitration Agreement shall be entitled to recover all fees, expenses and costs arising from or relating to such proceeding, including without limitation reasonable attorneys’ fees incurred by such party in connection with any such proceeding or dispute.

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19.4 Exceptions. Notwithstanding any other provision of this Agreement, you or we may seek relief in a small claims court for Claims within the jurisdiction of that court. In addition, you and we agree that this Arbitration Agreement does not stop you or us from exercising any lawful rights to seek provisional remedies or self-help. You and we agree that we each may seek provisional remedies in court or self-help remedies out of court without waiving the right to arbitrate. Notwithstanding any other provision of this Agreement, if the foregoing prohibition against consolidated, class and/or representative arbitration is determined to be invalid or unenforceable, then this entire Arbitration Agreement shall not apply. If any portion of this Arbitration Agreement other than the prohibition on consolidated, class and representative arbitration is deemed invalid or unenforceable, it shall not invalidate the remaining portions of this Arbitration Agreement.

19.5 Arbitration Agreement Is Optional. YOU HAVE THE RIGHT TO REJECT THIS ARBITRATION AGREEMENT, BUT YOU MUST EXERCISE THIS RIGHT PROMPTLY. If you do not wish to be bound by this agreement to arbitrate, you must notify us in writing within sixty (60) days after the Effective Date. You must send your request to: WebBank, c/o CAN Capital, Inc. as Servicer, Customer Service Department, 1850 Parkway Place, Suite 1150, Marietta, GA 30067. The request must include your full name, address, account number, and the statement “I reject the Arbitration Agreement contained in my Business Loan Agreement.” If you exercise your right to reject arbitration, the other terms of this Agreement shall remain in full force and effect as if you had not rejected arbitration.

19.6 Cure Provision. You and we intend for both of us to have the right to arbitrate disputes on an individual basis as set forth above. In the event that a court finds any reason to invalidate or refuse to enforce this Arbitration Agreement, the party aggrieved by that decision shall have the right to take unilateral action to eliminate the basis for the court’s decision, such as by waiving any right or remedy it has under this Agreement or agreeing to additional fee or cost shifting. This cure right may be exercised during briefing of a motion to compel arbitration, during oral argument, or in a renewed motion to compel arbitration. If a renewed motion is filed, you and we agree that the exercise of cure rights hereunder shall constitute new facts permitting such a renewed motion.

20.POST-TERMINATION REQUESTS; SURVIVAL.

20.1 Post-Termination Requests. Once six (6) business days have passed since the date on which you have fulfilled all of your obligations to us under this Agreement, you may: (a) call or write to us to request a “zero balance letter” and/or a UCC-3 Release of the UCC-1 financing statements. Please note that depending on the Secretary of State’s office in your state a UCC-3 can take up to 30 business days to be created and returned to us.

20.2 Survival. The Personal Guaranty and the following Sections hereof shall survive the expiration or termination of this Agreement for any reason and/or the relationship between us, any bankruptcy by you or us and any transfer by us of this Agreement or our rights hereunder: 7.1, 7.2, 8.4, 8.5, 10.9, 10.10, 10.11, 10.13, 11, 13, 14, 15, 16, 17, 18, 19 (including Sections 19.1 – 19.6) and 20.

21. TRANSACTIONS INVOLVING COLLATERAL. You represent, warrant and agree that: (a) you shall not sell, offer to sell, or otherwise transfer or dispose of any Collateral, except for inventory sold or accounts collected in the ordinary course of your business, unless we otherwise agree in writing; (b) no one else has any interest in or claim against the Collateral that you have not disclosed to us in writing prior to the Effective Date; (c) you shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any security interests, liens, claims, charges, restrictions, conditions, options, rights, mortgages, equities, pledges and encumbrances of any kind or nature whatsoever (collectively, “Liens”) other than the security interest granted to us hereunder; and (d) you have, and at all times will have, good, complete and marketable title to all Collateral, free and clear of any and all Liens or any other rights or interests that may be inconsistent with the transactions contemplated with us under this Agreement, or adverse to our interests. You shall, at your sole cost and expense, defend our rights in the Collateral against the claims and demands of all other persons. All proceeds from any unauthorized disposition of the Collateral shall be held in trust for us, shall not be commingled with any other funds and shall be immediately delivered to us; provided, however that this requirement does not constitute our consent to any such disposition.

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AGREEMENT CONTINUES ON NEXT PAGE<br> <br><br> <br>22. SIMULTANEOUS FUNDING RESTRICTION. You shall not enter into any arrangement, agreement or commitment with any person or entity other than us (a) that involves the direct or indirect pledge or sale of any portion of payments by your customers with credit cards, debit cards, charge cards, bank cards and/or other payment cards (“Card Receivables”), whether in the form of a purchase of, a loan against, or the sale or purchase of credits against, Card Receivables; or (b) that requires or contemplates that you will make regular payments more frequently than monthly. You agree that financing statements we file to protect our interests in the Collateral and under this Agreement may contain a statement that you are prohibited from transferring Card Receivables or other Collateral to any person or entity other than us, granting any security interest in Card Receivables or other Collateral to any person or entity other than us, or entering into any financing arrangement requiring or contemplating regular payments more frequently than monthly, until you have fulfilled all of your obligations to us.<br> <br><br> <br>ARBITRATION NOTICE. THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION IN SECTION 19 (INCLUDING SECTIONS 19.1 – 19.6). THE ARBITRATION AGREEMENT AFFECTS YOUR LEGAL RIGHTS. READ IT CAREFULLY BEFORE SIGNING.

BORROWER SIGNATURE

I have read this entire Agreement, including the Arbitration Agreement in Section 19 (including Sections 19.1 – 19.6), and received a copy for my records. I understand that I have the right to consult with an attorney before signing this Agreement if I choose to do so. I am able to read and understand the English language. By signing below, on behalf of Borrower and in my individual capacity as a Signing Principal, I agree to all of the terms of this Agreement, including the Arbitration Agreement and the other “Key Terms and Conditions” summarized on Page 2, Table E, and offer to enter into the transaction it describes.

| BUSINESS LEGAL NAME (TYPE OR PRINT)<br> <br><br> <br>Infinite Group Inc. | | |

| AUTHORIZED SIGNATURE<br> <br> | NAME (TYPE OR PRINT)<br> <br><br> <br>James Villa | TITLE (TYPE OR PRINT)<br> <br><br> <br>Owner |

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PERSONAL GUARANTY ON NEXT PAGE MUST ALSO BE SIGNED

PERSONAL GUARANTY

THIS GUARANTY CREATES SPECIFIC PERSONAL LEGAL OBLIGATIONS FOR GUARANTOR AS AN INDIVIDUAL. PLEASE READ IT CAREFULLY BEFORE SIGNING.<br> <br><br> <br>I hereby personally and unconditionally guaranty for the benefit of WebBank and its successors and assigns (“Lender”) the prompt payment to Lender of all amounts owed by the Borrower referenced above (“Borrower”) under the above Agreement. The obligations of Signing Principal(s) pursuant to the foregoing guarantees are primary, joint and several, and irrevocable, irrespective of the genuineness, validity, regularity or enforceability of the Agreement, and without regard to any circumstance that might constitute a legal or equitable discharge of a guarantor. This is a guaranty of payment and performance and not a guaranty of collection. This is an absolute, unconditional, primary and continuing obligation and will remain in full force and effect until all amounts owed to Lender pursuant to the Agreement are satisfied in full. I agree to be bound by all of the terms and conditions contained in the Agreement and applicable to the Signing Principal. I further agree that Lender may extend, transfer and amend the Agreement and I agree to be bound by all such changes. I waive all defenses, legal or equitable, otherwise available to me, and I waive all notices to which I might otherwise be entitled by law, including notices of protest, presentment, transfer, demand and default. I agree Lender may proceed against me separately without first proceeding against Borrower, any collateral or any other Guarantor. This Guaranty will not be discharged or affected by my death and will bind my heirs and personal representatives. I hereby authorize Lender, its agents and representatives and any credit reporting agency engaged by Lender, to (a) investigate any references given or any other statements or data obtained from or about me for purposes of this guaranty, the Agreement, and any associated documentation, and (b) pull credit reports at any time now and for so long as Borrower or I may have any obligation to Lender as a consequence of this Guaranty or the Agreement, including for Lender’s collection processes and its credit evaluations, including to determine Borrower’s or my eligibility to enter into the Agreement or any future agreement with Lender. I hereby expressly consent to receive notices and transact business by electronic means.<br> <br><br> <br>I ACKNOWLEDGE AND AGREE THAT THIS GUARANTY, THE AGREEMENT AND ALL ASSOCIATED DOCUMENTATION SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH, APPLIED WITHOUT GIVING EFFECT TO CONFLICT-OF-LAWS PRINCIPLES.<br> <br><br> <br>I ACKNOWLEDGE AND AGREE THAT THIS GUARANTY IS GOVERNED BY THE ARBITRATION AGREEMENT SET FORTH ABOVE IN SECTION 19 (INCLUDING SECTIONS 19.1 – 19.6). WITH RESPECT TO ANY LEGAL ACTION OR PROCEEDING OF ANY KIND ARISING OUT OF, RELATED TO, IN CONNECTION WITH OR INCIDENT TO THIS GUARANTY, THE AGREEMENT, OR ANY ASSOCIATED DOCUMENTATION, I WAIVE MY RIGHT TO A JURY AND AGREE TO ARBITRATE ANY CLAIMS ON AN INDIVIDUAL BASIS AS SET FORTH IN THE ARBITRATION AGREEMENT ABOVE.

Guarantor Signatures

GUARANTOR SIGNATURE<br> <br>	NAME (TYPE OR PRINT)<br> <br><br> <br>James Villa

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igi_ex102.htm

EXHIBIT 10.2

igi_ex103.htm

EXHIBIT 10.3

igi_ex311.htm EXHIBIT 31.1

CERTIFICATION

I, James Villa, certify that:

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 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.

Date: October 16, 2023
	/s/ James Villa

| | James Villa |

| | Chief Executive Officer |

| | (Principal Executive Officer) |

igi_ex312.htm

EXHIBIT 31.2

CERTIFICATION

I, Richard Glickman, certify that:

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 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.

Date: October 16, 2023
	/s/ Richard Glickman

| | Richard Glickman |

| | VP Finance and Chief Accounting Officer |

| | (Principal Financial and Accounting Officer) |

igi_ex321.htm

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Infinite Group, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2023 as filed with the Securities and Exchange Commission (“SEC”) on the date hereof (the "Report"), I, James Villa, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(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 results of operations of the Company.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Dated: October 16, 2023

/s/ James Villa

| James Villa |

| Chief Executive Officer |

| (Principal Executive Officer) |

igi_ex322.htm

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Infinite Group, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2023 as filed with the Securities and Exchange Commission (“SEC”) on the date hereof (the "Report"), I, Richard Glickman, VP Finance and Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(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 results of operations of the Company.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Dated: October 16, 2023

/s/ Richard Glickman

| Richard Glickman |

| VP Finance and Chief Accounting Officer |

| (Principal Financial and Accounting Officer) |