INFINITE GROUP INC 10-Q for FY2024 Q3
INFINITE GROUP INC (IMCI)
About this 10-Q
INFINITE GROUP INC filed this 10-Q on November 3, 2025, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.64M
- down 4.2% from $1.71M a year earlier
- Net loss
- $387.3K
- compared with a net loss of $854.04K a year earlier
- Diluted EPS
- -$0.74
- compared with -$1.65 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________
FORM
_________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
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:
_________________________________________
(Exact name of registrant as specified in its charter) |
_________________________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
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(Address of principal executive offices) | (Zip Code) |
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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 ☐
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 ☐
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 | ☐ |
☒ | Smaller reporting company | ||
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| 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
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
Infinite Group, Inc.
Quarterly Report on Form 10-Q
For the Period Ended September 30, 2024
Table of Contents
| 2 |
| Table of Contents |
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, 2023, 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.
| 3 |
| Table of Contents |
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
INFINITE GROUP, INC.
BALANCE SHEETS
ASSETS | ||||||||
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Current assets: |
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Cash |
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Accounts receivable, net of allowances for expected credit losses of $ |
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Prepaid expenses and other current assets |
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Total current assets |
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Right of Use Asset Operating Lease, net |
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Property and equipment, net |
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Software, net |
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Deposits |
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Total assets |
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||||
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Current liabilities: |
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Accounts payable |
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Accrued payroll |
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Accrued interest payable |
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Accrued retirement |
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Deferred revenue |
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Accrued expenses other and other current liabilities |
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Operating lease liability - Short-term |
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Current maturities of long-term obligations |
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Current maturities of long-term obligations - related parties |
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Notes payable, net |
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Notes payable - related parties |
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Total current liabilities |
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Long-term obligations: |
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Notes payable: |
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Other |
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Related parties |
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Operating lease liability - long-term |
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Total liabilities |
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Commitments and contingencies |
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Stockholders' deficiency: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' deficiency |
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Total liabilities and stockholders' deficiency |
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See notes to unaudited financial statements.
| 4 |
| Table of Contents |
INFINITE GROUP, INC.
STATEMENTS OF OPERATIONS (Unaudited)
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Revenue |
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Cost of revenue |
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Gross profit |
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Costs and expenses: |
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General and administrative |
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Selling |
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Total costs and expenses |
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Operating loss |
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Other income (expense) |
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Interest Income |
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Interest expense: |
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Related parties |
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Other |
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Total interest expense |
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Debt forgiveness |
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Gain on partial termination of lease |
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ERC tax refund |
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Total other income (expense) |
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Net loss |
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Net loss per share – basic and diluted |
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Weighted average shares outstanding |
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– basic and diluted |
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See notes to unaudited financial statements.
| 5 |
| Table of Contents |
INFINITE GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY (Unaudited)
Nine Months Ended September 30, 2024 and 2023
Nine Months Ended September 30, 2024
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| Additional |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Total |
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Balance - December 31, 2023 |
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Stock based compensation |
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Net loss |
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Balance - March 31, 2024 |
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Net loss |
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Balance - June 30, 2024 |
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Net loss |
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Balance - September 30, 2024 |
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Nine Months Ended September 30, 2023
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| Additional |
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Balance - December 31, 2022 |
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Stock based compensation |
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Warrants issued |
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Cashless exercise of warrants |
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Net loss |
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Balance - March 31, 2023 |
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Stock Issued |
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Net income |
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Balance - June 30, 2023 |
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Stock based compensation |
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Cashless exercise of warrants |
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Net loss |
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Balance - September 30, 2023 |
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See notes to unaudited financial statements.
| 6 |
| Table of Contents |
INFINITE GROUP, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
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Cash flows from operating activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash provided (used) by operating activities: |
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Depreciation and amortization |
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Amortization of debt discount |
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Amortization of common stock expensed for services |
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Stock based compensation |
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Bad debt expense (recovery) |
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Forgiveness of debt |
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Gain on partial termination of lease |
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(Increase) decrease in assets: |
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Accounts receivable |
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Prepaid expenses and other assets |
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Increase (decrease) in liabilities: |
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Accounts payable |
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Deferred revenue |
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Accrued expenses |
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Accrued retirement |
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Net cash provided (used) by operating activities |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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Sale of ERC claim |
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Capitalization of software development costs |
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Net cash provided (used) by investing activities |
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Cash flows from financing activities: |
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Proceeds from notes payable |
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Debt issuance costs |
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Proceeds from issuance of notes payable - related parties |
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Repayment of ERC Claim Agreement |
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Repayments of note payable-related parties |
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Repayments of note payable |
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Net cash provided (used) by financing activities |
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Net decrease in cash |
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Cash - beginning of period |
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Cash - end of period |
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Supplemental Disclosures of Cash Flow Information: |
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Cash payments for interest |
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Non-cash investing and financing activities: |
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Warrant issued in conjunction with debts |
| $ |
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| $ |
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Common stock issued via exercise of warrant |
| $ |
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| $ |
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Common stock issued in conjunction with services |
| $ |
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| $ |
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See notes to unaudited financial statements.
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| Table of Contents |
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, 2023 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, 2023 filed with the U.S. Securities and Exchange Commission (SEC). Results of operations for the three and nine months ended September 30, 2024, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2024.
Note 2. Management Plans - Capital Resources
The Company reported net losses of $
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, there is substantial doubt about the Company’s ability to continue as a going concern within one year of issuance of the financial statements.
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, 2023 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 period amounts to conform with the current period 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 September 30, 2024 or 2023 for contracts with an expected original duration of more than one year. The following table summarizes the revenue recognized by the major services:
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| Three Months Ended |
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| Nine Months Ended |
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| September 30, |
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| September 30, |
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| 2024 |
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| 2023 |
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| 2024 |
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| 2023 |
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Managed support services |
| $ |
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| $ |
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| $ |
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| $ |
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Cybersecurity projects |
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Software |
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Total Revenue |
| $ |
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| $ |
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| $ |
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| $ |
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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.
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 approximately half of 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 nine months ended September 30, 2024, sales to one client, including sales under subcontracts for services to several entities, accounted for
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.
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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 Accounting Standards Update (“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 Company adopted this standard on January 1, 2023. The adoption of this new accounting standard increased the reserve by approximately $
Recently Issued Accounting Pronouncements - In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (CODM), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in the update and existing segment disclosures in Topic 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company will adopt this standard beginning with our fiscal 2024 annual filing. The Company is currently evaluating these new disclosure requirements and the impact of adoption.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). The amendments in this ASU are intended to enhance the transparency of income tax information by updating income tax disclosure requirements. The guidance is effective for public entities for annual periods beginning after December 15, 2024, and early adoption is permitted. The amendments in this ASU should be applied on a prospective basis; however, retrospective application is permitted. The Company will adopt this standard with our fiscal 2025 annual filing. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires disclosure in the notes to financial statements, at each interim and annual reporting period, of specified information about certain costs and expenses including purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption. Also required is a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated. This ASU is effective for all public entities for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, and early adoption is permitted. This ASU should be applied either prospectively to financial statements issued after the effective date of this update or retrospectively to all prior periods presented in the financial statements. The Company will adopt this standard with our fiscal 2027 annual filing. The Company is currently evaluating these new disclosure requirements and the impact of adoption.
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
The financing line provides the Company the ability to finance up to $
| 10 |
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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 $
Note 5. Capitalization of Software for Resale
As of September 30, 2024, there was $
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.
Revenue recognized during the three months ended September 30, 2024 and 2023, that was included in the deferred revenue balances at the beginning of the respective periods, was approximately $
Revenue recognized during the nine months ended September 30, 2024 and 2023, that was included in the deferred revenue balances at the beginning of the respective periods was approximately $
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 September 30, 2024, total remaining non-cancelable performance obligations under the Company’s contracts with customers was approximately $
Note 7. Debt Obligations
Future Receivables Purchase Agreement - On February 16, 2024, the Company received funding from a future receivables purchase agreement with UFS West LLC. The purchase price amount was $
Subordinated Business Loan - On March 14, 2024, the Company received funding from a subordinated business loan and security agreement with Agile Lending LLC. The term loan amount was $
Revised Financing Arrangement - During June 2024, the Company entered into a revised financing arrangement with Celtic Bank which originally loaned the Company $
Related Party Loan- On August 16, 2024, the Company entered into an amended and restated loan and security agreement (the “Agreement”), dated as of August 16, 2024, by and between the Company and the Company’s President’s brother, Harry Hoyen (the “Lender”), pursuant to which the Company may borrow up to an aggregate amount of $
Commencing on September 1, 2024, the Company may borrow up to an additional $
On September 30, 2024, the Company did not make the scheduled payment due under its financing agreement with the Lender, resulting in a technical default under the terms of the agreement as well as violating several other loan covenants. The payment default and violated covenants have been waived by the Lender through November 15, 2026.
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Loan Forgiveness- In September 2024, CAN Capital LLC forgave the remaining payments on the subordinated business loan for $
Obligations in Default– As of September 30, 2024, the Company is in default with the Mast Hill financing arrangements dated November 3, 2021, February 11, 2022, May 31, 2022, November 23, 2022, and February 3, 2023. Per the arrangements, the Company has accrued approximately $
Note 8. 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 nine months ended September 30, 2024:
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Numerator for basic and diluted net loss per share: |
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Net loss |
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Basic and diluted net loss per share |
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Weighted average common shares outstanding |
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Anti-dilutive shares excluded from |
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per share calculation |
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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 9. 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
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. No options were granted during the nine months ended September 30, 2024.
| 12 |
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The Company recorded expense for options issued to employees and independent service providers of $
A summary of all stock option activity for the nine months ended September 30, 2024 follows:
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Note 11. Lease
Beginning on June 1, 2022, the Company leases its headquarters facility under an operating lease agreement that expires on
On January 9, 2024, the Company partially terminated the lease agreement. The lease reduced the rentable square footage from
Rent due is $
Upon entering the lease amendment, the Company adjusted the right-of-use asset from $
Supplemental balance sheet information related to the lease on September 30, 2024 and December 31, 2023 is as follows:
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Note 12. Related Party Accrued Interest Payable
Included in accrued interest payable at September 30, 2024 are amounts due to related parties of approximately $
at December 31, 2023).
| 13 |
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Note 13. Subsequent Events
In October 2024, Celtic Bank Corporation forgave the remaining payments on the subordinated business loan for $
In October 2024, Fresh Funding forgave the remaining payments on the subordinated business loan for $
On December 6, 2024, ASM Technologies Division LLC. was organized in the state of Delaware.
On January 1, 2025, Infinite Group Inc. was admitted as the initial member with
On March 12, 2025, the Company received funding from a loan agreement with Stripe and Celtic Bank. The loan amount was $
On March 12, 2025, Infinite Group, Inc. (the “Company”) entered into an Asset Purchase Agreement (this “Agreement”) with Opti9 Technologies LLC, a Delaware limited liability company (“Buyer”) for the sale of assets related to the division of business known as the Ace Server Management division. Under this division the Company provides IT managed infrastructure services, to a US government agency as a subcontractor to Peraton Enterprise Solutions LLC (f/k/a Perspecta Enterprise Solutions LLC (“Peraton”)).
The purchase price was $
The closing was expected to take place in June 2025. The closing of the transaction was subject to customary conditions, including, among other things, (i) approval by the Company’s stockholders; (ii) consent of Peraton; (iii) consent of a number of the Company’s debtholders; (iv) no temporary or permanent judgment issued by any governmental entity of competent jurisdiction or law or other legal restraint or prohibition preventing or prohibiting the consummation shall be in effect; (v) that no event or circumstance with a material adverse effect on the Ace server management business division shall have occurred; and, (vi) other customary conditions for a transaction of this nature.
The Agreement contained representations, warranties and covenants of the parties customary for a transaction of this type, including a 4 year non-competition covenant from competing with the Buyer in providing services to the U.S. government agency that was subject of the Peraton subcontract, and providing 24x7x365 Windows and/or Linux operating system and hardware support and monitoring services to other parties.
Concurrently with the execution of the Agreement, certain stockholders were to enter into voting agreements (the “Voting Agreements”) with Buyer. Pursuant to the terms of the Voting Agreements, these stockholders were to agree to vote their shares in favor of the transaction and the Company’s upcoming stockholders meeting, to not solicit any other acquisition proposals and to vote their shares against any competing acquisition proposals. The shares subject to the Voting Agreements comprised approximately 28% of all outstanding shares. The Voting Agreements would terminate in certain circumstances, including upon termination of the Agreement.
The Company planned to present the transaction for the sale of these assets for approval at its upcoming annual meeting of stockholders tentatively scheduled for June 4, 2025.
On April 22, 2025, the Company received verbal communication from Peraton that the ASM contract was to be cancelled for convenience on May 17, 2025.
On May 8, 2025, the Company received a request in writing to answer an RFP that would retain certain employees of the Company that previously provided service under the ASM contract and would move the Company to a time and materials subcontract with Peraton serving the US government agency.
During April and May 2025, the Company executed layoffs constituting a material reduction in the workforce because of this change. During 2025, the Company received task orders and executed time and materials subcontracts with Peraton to retain certain employees serving the US Government agency.
On July 31, 2025, the Company received a notice of termination of the Asset Purchase Agreement.
On August 15, 2025, the Company received funding from Business Loan and Security Agreement with WebBank. The funding provided was $
On September 23, 2025, the Company received funding from a business installment loan with OnDeck Capital, LLC. The funding provided was $
************
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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
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, Nodeware, Inc., 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 135 channel partners across North America;
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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.
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; |
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- | designing, developing, and marketing cybersecurity SaaS solutions, including Nodeware; and |
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- | 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 2023 we made significant investments in IGI and Nodeware, Inc. 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 2024.
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.
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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.
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.
On April 3, 2024. The Company formed Nodeware Inc. in the state of Delaware. It is a wholly owned subsidiary to support Nodeware’s go to market.
On May 22, 2024, the Company formed Nodeware Inc. in the state of Nevada. It is a wholly owned subsidiary to support the Company’s Nodeware solution.
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.
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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 Nine Months Ended September 30, 2024 and 2023
The following tables compare our statements of operations data for the three and nine months ended September 30, 2024 and 2023. The trends suggested by this table are not indicative of future operating results.
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| Three Months Ended September 30, |
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| 2024 vs 2023 |
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| As a % of |
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| As a % of |
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| 2024 |
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| Sales |
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| 2023 |
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| Sales |
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| Change |
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Sales |
| $ | 1,635,958 |
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|
| 100.0 | % |
| $ | 1,707,711 |
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|
| 100.0 | % |
| $ | (71,753 | ) |
|
| (4.2 | )% |
Cost of sales |
|
| 944,914 |
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|
| 57.8 |
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|
| 1,005,043 |
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|
| 58.9 |
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|
| (60,129 | ) |
|
| (6.0 | ) |
Gross profit |
|
| 691,044 |
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|
| 42.2 |
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|
| 702,668 |
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|
| 41.1 | % |
|
| (11,624 | ) |
|
| (1.7 | ) |
General and administrative |
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| 453,407 |
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|
| 27.7 |
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|
| 620,180 |
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|
| 36.3 |
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|
| (166,773 | ) |
|
| (26.9 | ) |
Selling |
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| 499,869 |
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|
| 30.6 |
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|
| 665,571 |
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|
| 39.0 |
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|
| (165,702 | ) |
|
| (24.9 | ) |
Total cost and expenses |
|
| 953,276 |
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|
| 58.3 |
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|
| 1,285,751 |
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|
| 75.3 |
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|
| (332,475 | ) |
|
| (25.9 | ) |
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Operating loss |
|
| (262,232 | ) |
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| (16.0 | ) |
|
| (583,083 | ) |
|
| (34.1 | ) |
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| 320,851 |
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|
| 55.0 |
|
Interest expense (net) |
|
| (196,802 | ) |
|
| (12.0 | ) |
|
| (270,958 | ) |
|
| (15.9 | ) |
|
| 74,156 |
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|
| 27.4 |
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Other income |
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| 71,736 |
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|
| 4.4 |
|
|
| - |
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|
| - |
|
|
| 71,736 |
|
|
| - |
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Net loss |
| $ | (387,298 | ) |
|
| (23.7 | )% |
| $ | (854,041 | ) |
|
| (50.0 | )% |
| $ | 466,743 |
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|
| 54.7 | % |
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Net loss per share - basic and diluted |
| $ | (0.74 | ) |
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|
|
|
| $ | (1.65 | ) |
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|
|
|
| $ | 0.91 |
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| Nine Months Ended September 30, |
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| 2024 vs 2023 |
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| As a % of |
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| 2024 |
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| Sales |
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| 2023 |
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| Sales |
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| Change |
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| (Decrease) |
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Sales |
| $ | 4,842,422 |
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|
| 100.0 | % |
| $ | 5,255,180 |
|
|
| 100.0 | % |
| $ | (412,758 | ) |
|
| (7.9 | )% |
Cost of sales |
|
| 2,842,848 |
|
|
| 58.7 |
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|
| 2,969,464 |
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|
| 56.5 |
|
|
| (126,616 | ) |
|
| (4.3 | ) |
Gross profit |
|
| 1,999,574 |
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|
| 41.3 |
|
|
| 2,285,716 |
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|
| 43.5 | % |
|
| (286,142 | ) |
|
| (12.5 | ) |
General and administrative |
|
| 1,349,433 |
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|
| 27.9 |
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|
| 1,617,002 |
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|
| 30.8 |
|
|
| (267,569 | ) |
|
| (16.5 | ) |
Selling |
|
| 1,294,277 |
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|
| 26.7 |
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|
| 2,120,046 |
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|
| 40.3 |
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|
| (825,769 | ) |
|
| (39.0 | ) |
Total cost and expenses |
|
| 2,643,710 |
|
|
| 54.6 |
|
|
| 3,737,048 |
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|
| 71.1 |
|
|
| (1,093,338 | ) |
|
| (29.3 | ) |
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|
|
|
|
|
|
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Operating loss |
|
| (644,136 | ) |
|
| (13.3 | ) |
|
| (1,451,332 | ) |
|
| (27.6 | ) |
|
| 807,196 |
|
|
| 55.6 |
|
Interest expense (net) |
|
| (671,028 | ) |
|
| (13.9 | ) |
|
| (1,445,525 | ) |
|
| (27.5 | ) |
|
| 774,497 |
|
|
| 53.6 |
|
Other Income |
|
| 87,086 |
|
|
| 1.8 |
|
|
| 1,757,829 |
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|
| 33.4 |
|
|
| (1,670,743 | ) |
|
| - |
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Net loss |
| $ | (1,228,078 | ) |
|
| (25.4 | )% |
| $ | (1,139,028 | ) |
|
| (21.7 | )% |
| $ | (89,050 | ) |
|
| (7.8 | )% |
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Net loss per share - basic and diluted |
| $ | (2.36 | ) |
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|
|
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| $ | (2.30 | ) |
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| $ | (0.06 | ) |
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| Table of Contents |
Sales
Our managed support service sales decreased by 1% from $1,127,707 during the three months ended September 30, 2023 to $1,113,968 during the corresponding period of 2024. For the nine month period ended September 30, managed support service sales decreased 3% from $3,376,589 in 2023, to $3,268,608 for the same period in 2024. Managed support service sales comprised approximately 68% of our sales during the three months ended September 30, 2024, and approximately 66% for the same period in 2023. For the nine months ended September 30, managed support service sales comprised approximately 67% of sales in 2024, and 64% for the same period in 2023. The change in our managed support service sales during the three and nine months ended September 30, 2024 was due to the termination of smaller projects during the third quarter of 2023.
Our cybersecurity projects revenue decreased by 28%, from $263,562 for the three months ended September 30, 2023, to $188,391 for the same period ended September 30, 2024. For the nine months ended September 30, 2024, cybersecurity projects decreased 36% to $598,332 from $939,563 in the same prior year period. These changes were due to less engagements in 2024.
Software sales, which includes the selling of licenses of Nodeware and third-party software Webroot, increased by 5% from the three months ended September 30, 2023 to the same period in 2024. Sales for the period in 2023 were $316,442 and increased by $16,157 to $332,599 for the same period in 2024. For the nine months ended September 30, 2023 and 2024, sales were $939,028 and $975,482, respectively, for an increase of 4%. The increase was primarily attributable to improving sales of Nodeware and slightly offset by decreasing sales of Webroot. We have expended significant sales and marketing resources on Nodeware in 2023 and 2024, while concurrently diverting resources from Webroot. We expect this trend to continue throughout 2024 and 2025 as we focus our resources on Nodeware.
Cost of Sales and Gross Profit
Cost of sales principally represents compensation expense for our employees of our managed support services and cybersecurity projects teams. Cost of sales decreased by 6% to $944,914 during the three months ended September 30, 2024 from $1,005,043 during the corresponding period of 2023. For the nine month periods ended September 30, 2023 and 2024, cost of sales decreased from $2,969,464 in 2023 to $2,842,848 in 2024; a decrease of 4%. The decrease in cost of sales during the three and nine months ended September 30, 2024 from 2023 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 decreased by $11,624 for the three months ended September 30, 2023 to 2024, from $702,668 to $691,044. For the nine months ended September 30, 2024, gross profit of $1,999,574 represents a 13% decrease in gross profits for the same period in 2023 of $2,285,716. The decrease was due to the combination of decreased sales offset by 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 $453,407 for the three months ended September 30, 2024 decreased approximately 27% from $620,180 for the same quarter of 2023. For the nine months ended September 30, 2024, general and administrative expenses were $1,349,433, down from $1,617,002 for the same period in 2023. The decrease was primarily due to the reduction in salaries and benefits in addition to lower rent due to downsizing the office space and marketing spending, with total year to date expenses in those categories down approximately $166,000 for the comparative nine month periods.
Selling Expenses
Selling expenses of $499,869 for the three months ended September 30, 2024 decreased approximately 25% from $665,571 for the same quarter of 2023. For the nine months ended September 30, 2024, selling expenses were $1,294,277; a decrease of 39% from $2,120,046 for the same period in 2023. For the three month period, approximately $54,000 of the decrease was due to reductions in number of trade shows attended as well as decreases in marketing of approximately $57,000. For the nine month period, approximately $305,000 of the decrease was due to a decrease in marketing and trade show spending and reductions in staffing and related benefits of approximately $240,000.
Operating Loss
For the three months ended September 30, 2024 and September 30, 2023, operating loss was $262,232 and $583,083, respectively, for an improvement in the loss by $320,851. For the nine months ended September 30, 2024 and September 30, 2023, the operating loss was $644,136 and $1,451,332, respectively. The improvement in our operating loss from the previous year is principally attributable to the reduction in cost of sales as referenced above, the reduction of general and administrative expenses as referenced above, and the decrease in selling expenses as referenced above.
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Interest Expense
Net interest expense of $196,802 for the three months ended September 30, 2024 decreased significantly from expense of $270,958 for the same quarter of 2023. For the nine months ended September 30, 2024, net interest expense of $671,028 represents a decrease of $774,497 from the same period in 2023. The decrease in interest expense is primarily attributable to the bridge loans entered into during 2022 and the first quarter of 2023 and the associated amortization of the warrants associated with the debt of approximately $110,000 for the three months ended September 30, 2023 and approximately $425,000 for the nine months ended September 30, 2023 versus none in 2024. There was also approximately $337,000 of interest expense associated with the loan associated with the Employee Retention Credit for the nine months ended September 30, 2023.
Other Income
For the three months ended September 30, 2024, other income included gain on the extinguishment of debts in the amount of $71,736. For the nine months ended September 30, 2024, other income included $15,350 was for the partial termination of the lease agreement for the corporate office in addition to the gain on the extinguishment of debts. For the nine months ended September 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 a gain of $95,131 related to debt forgiveness.
Net Loss
For the three months ended September 30, 2024, net loss was $387,298. For the same period in 2023, we showed a net loss of $854,041. For the nine months ended September 30, 2024 and September 30, 2023, the net loss was $1,228,078 and $1,139,028, respectively. The primary reasons for this approximate $467,000 improvement in the three month period was due to the effort to reign in operating expenses, the ending of debt amortization expenses and other income. For the nine month period the primary reason for the increase in loss was due to the larger other income amount in 2023 associated with the Employee Retention Credit in the second quarter of 2023.
Liquidity and Capital Resources
At September 30, 2024, we had cash of $22,481 available for working capital needs and planned capital asset expenditures. At September 30, 2024, we had a working capital deficit of approximately $9.2 million and a current ratio of 0.07.
During 2024, 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 September 30, 2023, based on eligible accounts receivable, we had $37,000 available under this arrangement. We expect sales during 2024 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.
We entered into four loan agreements and a revised financing arrangement during the nine month period ended September 30, 2024.
On February 16, 2024, we received funding from a future receivables purchase agreement with UFS West LLC. The purchase price amount was $150,000 with a fixed fee of $4,500 and a payment plan of $5,824 per week for 34 weeks effective February 23, 2024. In August 2024, US West LLC forgave the remaining payments on the subordinated business loan for $51,500. This forgiveness of debt resulted in a gain of approximately $29,900.
On March 14, 2024, we received funding from a subordinated business loan and security agreement with Agile Lending, LLC. The term loan amount was $185,500with a fixed fee of $10,500. A payment plan of $11,285 per week for 24 weeks effective March 18, 2024. In August 2024, Agile Lending LLC forgave the remaining payments on the subordinated business loan for $60,000. This forgiveness of debt resulted in a gain of approximately $43,600.
During June 2024, we entered into a revised financing arrangement with Celtic Bank for $150,500 with a one-time fixed loan fee of $17,157 for a total obligation of $167,657. In 2023, under the terms of the previous revised financing arrangement, the lender loaned us $140,200 with a one-time fixed loan fee of $16,403 for a total obligation of $156,603. The balance of the previous loan of $33,815 was paid to the lender as part of the revised financing agreement. The lender payments became due on June 11, 2024, and consisted of 20% of the Company’s receivables processed through Stripe, Inc.’s payment processing platform. At September 30, 2024, the balance of this revised financing arrangement was $112,768.
On August 16, 2024, the Company entered into an amended and restated loan and security agreement (the “Agreement”), dated as of August 16, 2024, by and between the Company and the Company’s President’s brother, Harry Hoyen (the “Lender”), pursuant to which the Company may borrow up to an aggregate amount of $2,000,000 (the “Loan”) at 8% per annum. Pursuant to the Agreement, on August 16, 2024, the Company borrowed $1,200,000 from the Lender and issued to the Lender a secured promissory note evidencing such portion of the Loan having a maturity date of August 16, 2028. The Agreement’s payment plan is for 48 payments of $52,500 per month. Commencing on September 1, 2024, the Company may borrow up to an additional $800,000 from the Lender to be evidenced by another secured promissory note. Additional amounts of $80,000, $70,000, $550,000 and $50,000 were borrowed on October 15, 2024, October 16, 2024, November 13, 2024, and October 27, 2025 respectively.
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At September 30, 2024, we had current notes payable of $139,000 to related parties. $40,000 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 September 30, 2024, we have current notes payable of approximately $1,957,000 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 which has not been paid. 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 September 30, 2024, are five bridge loans with Mast Hill Fund, L.P., for $1,511,801. All five loans bear interest at an original rate of 8%. Since these loans are in default, the interest rate is 12%. We used the proceeds from the bridge loans to substantially enhance our marketing of Nodeware, Inc.’s Nodeware solution, in order to significantly increase its growth.
During the first nine months of 2024, approximately $17,000 was recorded as deferred note costs. At September 30, 2024, the unamortized balance of the deferred note costs for all notes payable to third parties was approximately $7,000. See Notes 5 and 6 of the 2023 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 September 30, 2024, 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 September 30, 2024 is $49,000.
We have approximately $965,000 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 $294,000), approximately $284,000 due on January 1, 2024, approximately $166,000 due August 24, 2024, $250,000 due September 30, 2025 and approximately $89,000 due in the next 12 months on an 18 month loan agreement ending on February 17, 2025.
At September 30, 2023, we have $1,264,000 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 was due on July 31, 2023,$274,300 is due January 1, 2024 and $604,223 due by September 30, 2025.
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 September 30, 2024.
The following table sets forth our cash flow information for the periods presented:
|
| Nine Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
| Net cash provided by (used in) operating activities |
| $ | (702,685 | ) |
| $ | 423,180 |
|
| Net cash provided by (used in) investing activities |
|
| (149,708 | ) |
|
| 1,241,308 |
|
| Net cash provided by (used in) financing activities |
|
| 849,401 |
|
|
| (1,678,538 | ) |
| Net decrease in cash |
| $ | (2,992 | ) |
| $ | (14,050 | ) |
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 $1,228,078 for the nine months ended September 30, 2024 was offset by non-cash expenses and credits of $223,331 and an addback of a gain of debt forgiveness of $71,736 and a gain on the partial termination of the lease of $15,350. In addition, our net loss was increased by an increase in accounts receivable and other assets of $315,637, and offset by increases in accounts payable, accrued payroll, and other expenses payable of $780,501 and a decrease in deferred revenue of $75,716 resulting in cash used in operating activities of $702,685.
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| Table of Contents |
We are continuing to increase 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 nine months ended September 30, 2024, we incurred capital expenditures of $149,144 for 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 nine months ended September 30, 2024, we received $1,686,000 from various debt products, including a future receivables purchase agreement with UFS West LLC for $150,000 which is paid in 34 weekly installments, a subordinated business loan and security agreement with Agile Lending, LLC for $185,500 payable over 24 weeks, a restructured loan with Celtic Bank for $167,657, and an amended and restated loan and security with a related party for $1,200,000. We paid the principal of $734,349 on notes payable, and $102,250 of related party short term debt.
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 September 30, 2024, we had financing availability, based on eligible accounts receivable, of approximately $37,000 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 September 30, 2024.
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 September 30, 2024, 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.
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.
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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| Table of Contents |
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, 2023 for a comprehensive listing of the Company’s other risk factors. There are no material changes for the three and nine months ended September 30, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the nine months ended September 30, 2024, no warrants were exercised.
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 $134,000 at September 30, 2024.
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 $294,000 at September 30, 2024.
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 $175,000 at September 30, 2024.
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 $237,000 at September 30, 2024.
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 $46,000 at September 30, 2024.
The Company is in default on a note payable to third parties of $213,772 due on July 15, 2023. The accrued interest on the note is approximately $117,000 at September 30, 2024.
The Company is in default on a note payable to third parties of $259,029 due on November 3, 2022. The accrued interest on the note is approximately $127,000 at September 30, 2024.
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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| Table of Contents |
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. |
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|
| (Registrant) |
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|
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|
Date: October 31, 2025 |
| /s/ James Villa |
|
|
| James Villa |
|
|
| Chief Executive Officer |
|
|
| (Principal Executive Officer) |
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|
|
|
|
Date: October 31, 2025 |
| /s/ Richard Glickman |
|
|
| Richard Glickman Finance and Chief Accounting Officer VP Finance and Chief Accounting Officer |
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| 24 |
| Table of Contents |
INDEX TO EXHIBITS
| Exhibit |
| |
| No. |
| Description |
| ||
| Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. * | |
| VP Finance Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. * | |
| Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. * | |
| 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.
| 25 |
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 |
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|
|
|
|
| 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 31, 2025
| /s/ James Villa | |||
|
|
| James Villa | |
| Chief Executive Officer | |||
| (Principal Executive Officer) |
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; |
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|
|
|
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| 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; |
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|
|
|
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| 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 |
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|
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| 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): |
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| 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 |
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|
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| 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 31, 2025
| /s/ Richard Glickman | |||
|
|
| Richard Glickman | |
| VP Finance and Chief Accounting Officer | |||
| (Principal Financial and Accounting Officer) |
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 September 30, 2024 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 31, 2025
| /s/ James Villa |
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|
| James Villa |
|
|
| Chief Executive Officer (Principal Executive Officer) |
|
|
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 September 30, 2024 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 31, 2025
| /s/ Richard Glickman |
|
|
| Richard Glickman |
|
|
| VP Finance and Chief Accounting Officer |
|
|
| (Principal Financial and Accounting Officer) |
|
|