Delaware
|
52-1490422
|
(State
or other jurisdiction
of
incorporation or organization)
|
(I.R.S.
Employer
Identification
No.)
|
PAGE
|
|||
|
|||
PART
I - FINANCIAL INFORMATION
|
|||
Item
1.
|
Consolidated
Financial Statements
|
3
|
|
Balance
Sheet - June 30, 2007 (Unaudited) and December 31, 2006 (Audited)
|
4
|
||
Statements
of Operations (Unaudited) for the three and six months ended June
30, 2007
and 2006
|
4
|
||
Statements
of Cash Flows (Unaudited) for the six months ended June 30, 2007
and
2006
|
5
|
||
Notes
to Consolidated Financial Statements - (Unaudited)
|
6
|
||
Item
2.
|
Management’s
Discussion and Analysis or Plan of Operations
|
9
|
|
Item
3.
|
Controls
and Procedures
|
17
|
|
PART
II - OTHER INFORMATION
|
|||
.
|
Item
1.
|
Legal
Proceedings
|
17
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
17
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
17
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
17
|
|
Item
5.
|
Other
Information
|
17
|
|
Item
6.
|
Exhibits
|
17
|
|
SIGNATURES
|
18
|
INFINITE
GROUP, INC.
|
|||||||
Consolidated
Balance Sheets
|
|||||||
June
30,
|
December
31,
|
||||||
2007
|
2006
|
||||||
(Unaudited)
|
(Unaudited)
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
|
$
|
5,908
|
$
|
73,786
|
|||
Accounts
receivable, net of allowance of $53,000 ($53,000 - 2006)
|
520,320
|
487,240
|
|||||
Notes
receivable, current portion
|
2,336
|
4,968
|
|||||
Prepaid
expenses and other current assets
|
91,080
|
38,600
|
|||||
Total
current assets
|
619,644
|
604,594
|
|||||
Property
and equipment, net
|
49,812
|
80,612
|
|||||
Other
assets -
security deposits
|
19,523
|
19,523
|
|||||
Total
assets
|
$
|
688,979
|
$
|
704,729
|
|||
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
195,000
|
224,051
|
|||||
Accrued
payroll
|
204,946
|
216,397
|
|||||
Accrued
interest payable
|
211,810
|
176,734
|
|||||
Accrued
pension and retirement
|
1,868,948
|
1,807,524
|
|||||
Accrued
expenses - other
|
90,844
|
62,042
|
|||||
Notes
payable -
bank
|
19,660
|
50,354
|
|||||
Note
payable
|
30,000
|
30,000
|
|||||
Notes
payable-related parties
|
143,209
|
148,663
|
|||||
Total
current liabilities
|
2,764,417
|
2,715,765
|
|||||
Long-term
obligations:
|
|||||||
Notes
payable-related parties
|
1,096,124
|
1,146,124
|
|||||
Accrued
pension expense
|
792,054
|
706,196
|
|||||
Total
liabilities
|
4,652,595
|
4,568,085
|
|||||
Commitments
and contingencies
|
|||||||
Stockholders’
deficiency:
|
|||||||
Common
stock, $.001 par value, 60,000,000 shares authorized;
|
|||||||
23,524,965
(22,414,965 - 2006) shares issued and outstanding
|
23,525
|
22,415
|
|||||
Additional
paid-in capital
|
29,200,402
|
28,981,059
|
|||||
Accumulated
deficit
|
(30,608,904
|
)
|
(30,288,191
|
)
|
|||
Accumulated
other comprehensive loss
|
(2,578,639
|
)
|
(2,578,639
|
)
|
|||
Total
stockholders’ deficiency
|
(3,963,616
|
)
|
(3,863,356
|
)
|
|||
Total
liabilities and stockholders’ deficiency
|
$
|
688,979
|
$
|
704,729
|
See
notes to consolidated financial
statements.
|
INFINITE
GROUP, INC.
|
|||||||||||||
Consolidated
Statements of Operations (Unaudited)
|
|||||||||||||
Six
Months Ended
|
Three
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Sales
|
$
|
3,944,669
|
$
|
2,964,002
|
$
|
1,812,262
|
$
|
1,340,566
|
|||||
Cost
of services
|
2,751,949
|
2,354,776
|
1,343,342
|
1,048,917
|
|||||||||
Gross
profit
|
1,192,720
|
609,226
|
468,920
|
291,649
|
|||||||||
Costs
and expenses:
|
|||||||||||||
General
and administrative
|
392,479
|
522,422
|
176,267
|
195,627
|
|||||||||
Defined
benefit pension plan
|
189,018
|
91,783
|
73,493
|
45,340
|
|||||||||
Selling
|
702,764
|
816,191
|
366,166
|
403,657
|
|||||||||
Research
and development
|
87,253
|
140,710
|
41,990
|
72,588
|
|||||||||
Depreciation
and amortization
|
18,117
|
43,627
|
8,810
|
30,588
|
|||||||||
Total
costs and expenses
|
1,389,631
|
1,614,733
|
666,726
|
747,800
|
|||||||||
Operating
loss
|
(196,911
|
)
|
(1,005,507
|
)
|
(197,806
|
)
|
(456,151
|
)
|
|||||
Other
income (expense):
|
|||||||||||||
Interest
income
|
212
|
501
|
84
|
233
|
|||||||||
Interest
expense:
|
|||||||||||||
Related
parties
|
(70,279
|
)
|
(58,035
|
)
|
(34,654
|
)
|
(28,739
|
)
|
|||||
Other
|
(59,721
|
)
|
(29,156
|
)
|
(30,746
|
)
|
(15,522
|
)
|
|||||
Total
interest expense
|
(130,000
|
)
|
(87,191
|
)
|
(65,400
|
)
|
(44,261
|
)
|
|||||
Other
income
|
6,591
|
498,088
|
6,591
|
-
|
|||||||||
Total
other income (expense)
|
(123,197
|
)
|
411,398
|
(58,725
|
)
|
(44,028
|
)
|
||||||
Loss
before income tax expense
|
(320,108
|
)
|
(594,109
|
)
|
(256,531
|
)
|
(500,179
|
)
|
|||||
Income
tax expense
|
(605
|
)
|
(7,300
|
)
|
-
|
-
|
|||||||
Net
loss
|
$
|
(320,713
|
)
|
$
|
(601,409
|
)
|
$
|
(256,531
|
)
|
$
|
(500,179
|
)
|
|
Net
loss per share - basic and diluted
|
$
|
(.01
|
)
|
$
|
(.03
|
)
|
$
|
(.01
|
)
|
$
|
(.02
|
)
|
|
Weighted
average number of shares outstanding
- basic and diluted
|
22,803,805
|
20,397,940
|
23,188,372
|
20,933,053
|
See
notes to consolidated financial
statements.
|
INFINITE
GROUP, INC.
|
|||||||
Consolidated
Statements of Cash Flows (Unaudited)
|
|||||||
For
the Six Months Ended
|
|||||||
June
30,
|
|||||||
2007
|
2006
|
||||||
Operating
activities:
|
|||||||
Net
loss
|
$
|
(320,713
|
)
|
$
|
(601,409
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
Stock
based compensation
|
132,453
|
107,921
|
|||||
Depreciation
and amortization
|
18,117
|
43,627
|
|||||
Gain
on disposal of equipment
|
(6,591
|
)
|
-
|
||||
(Increase)
decrease in assets:
|
|||||||
Accounts
receivable
|
(33,080
|
)
|
560,182
|
||||
Inventories
|
-
|
(2,013
|
)
|
||||
Other
assets
|
(14,980
|
)
|
(12,524
|
)
|
|||
Increase
(decrease) in liabilities:
|
|||||||
Accounts
payable
|
(29,051
|
)
|
(245,751
|
)
|
|||
Accrued
expenses
|
52,427
|
18,322
|
|||||
Accrued
pension and retirement
|
147,282
|
116,594
|
|||||
Net
cash used in operating activities
|
(54,136
|
)
|
(15,051
|
)
|
|||
Investing
activities:
|
|||||||
Purchase
of property and equipment
|
(5,365
|
)
|
(14,315
|
)
|
|||
Proceeds
from notes receivable
|
2,632
|
2,559
|
|||||
Net
cash used in investing activities
|
(2,733
|
)
|
(11,756
|
)
|
|||
Financing
activities:
|
|||||||
Net
repayments of bank notes payable
|
(6,055
|
)
|
(6,445
|
)
|
|||
Net
repayments of note payable-related party
|
(5,454
|
)
|
-
|
||||
Proceeds
from exercise of stock options
|
500
|
420
|
|||||
Net
cash used in financing activities
|
(11,009
|
)
|
(6,025
|
)
|
|||
Net
decrease in cash
|
(67,878
|
)
|
(32,832
|
)
|
|||
Cash
- beginning of period
|
73,786
|
109,090
|
|||||
Cash
- end of period
|
$
|
5,908
|
$
|
76,258
|
|||
Supplemental
disclosure:
|
|||||||
Cash
paid for:
|
|||||||
Interest
|
$
|
100,856
|
$
|
71,894
|
|||
Income
taxes
|
$
|
605
|
$
|
7,300
|
See
notes to consolidated financial
statements.
|
Six
Months ended
June
30, 2007
|
Six
Months ended
June
30, 2006
|
Three
Months ended
June
30, 2007
|
Three
Months ended
June
30, 2006
|
||||||||||
Employee
stock options
|
$
|
83,059
|
$
|
96,527
|
$
|
44,815
|
$
|
72,942
|
|||||
Consultants
- stock warrants
|
36,894
|
8,385
|
19,713
|
4,193
|
|||||||||
Consultant
- shares of common stock
|
12,500
|
-
|
12,500
|
-
|
|||||||||
Consultant
-stock options
|
-
|
3,009
|
-
|
1,504
|
|||||||||
Total
expense
|
$
|
132,453
|
$
|
107,921
|
$
|
77,028
|
$
|
78,639
|
Number
of Options
|
Weighted
Average
Exercise
Price
|
Weighted-Average
Remaining Contractual Term
|
Aggregate
Intrinsic
Value
|
||||||||||
Outstanding
at December 31, 2006
|
4,380,000
|
$
|
.24
|
||||||||||
Options
granted
|
95,000
|
$
|
.55
|
||||||||||
Options
expired
|
(14,500
|
)
|
$
|
.41
|
|||||||||
Options
exercised
|
(10,000
|
)
|
$
|
.05
|
|||||||||
Outstanding
at June 30, 2007
|
4,450,500
|
$
|
.25
|
7.6
years
|
$
|
1,627,060
|
|||||||
Exercisable
at June 30, 2007
|
3,724,167
|
$
|
.22
|
7.3
years
|
$
|
1,484,327
|
Number
of Nonvested
Options
|
Weighted
Average
Fair
Value
at
Grant Date
|
||||||
Nonvested
outstanding at December 31, 2006
|
784,000
|
$
|
.30
|
||||
Options
granted
|
95,000
|
$
|
.37
|
||||
Options
vested
|
(144,667
|
)
|
$
|
.23
|
|||
Options
forfeited
|
(8,000
|
)
|
$
|
.37
|
|||
Nonvested
outstanding at June 30, 2007
|
726,333
|
$
|
.32
|
Six
Months Ended
June
30,
|
|||||||
2007
|
2006
|
||||||
Conversion
of notes payable to common stock
|
$
|
50,000
|
$
|
100,000
|
|||
Issuance
of 100,000 shares of common stock in exchange for consulting services
to
be provided over one year
|
$
|
50,000
|
$
|
-
|
Six
Months Ended June 30,
|
Three
Months Ended June 30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Weighted
average number of shares outstanding
|
22,803,805
|
20,397,940
|
23,188,372
|
20,933,053
|
|||||||||
Common
stock equivalents
|
19,452,855
|
5,334,160
|
19,056,808
|
8,794,621
|
Six
Months ended
June
30, 2007
|
Six
Months ended
June
30, 2006
|
Three
Months ended
June
30, 2007
|
Three
Months ended
June
30, 2006
|
||||||||||
Interest
cost
|
$
|
160,693
|
$
|
151,745
|
$
|
84,821
|
$
|
75,872
|
|||||
Expected
return on plan assets
|
(137,055
|
)
|
(137,055
|
)
|
(68,527
|
)
|
(68,527
|
)
|
|||||
Service
cost
|
32,500
|
32,500
|
16,250
|
16,250
|
|||||||||
Expected
expenses
|
65,125
|
65,125
|
32,563
|
32,563
|
|||||||||
Net
periodic pension cost
|
$
|
121,263
|
$
|
112,315
|
$
|
65,107
|
$
|
56,158
|
Three
Months Ended June 30,
|
|||||||||||||||||||
2007
vs. 2006
|
|||||||||||||||||||
As
a % of
|
As
a % of
|
Amount
of
|
%
Increase
|
||||||||||||||||
2007
|
Sales
|
2006
|
Sales
|
Change
|
(Decrease)
|
||||||||||||||
Sales
|
$
|
1,812,262
|
100.0
|
%
|
$
|
1,340,566
|
100.0
|
%
|
$
|
471,696
|
35.2
|
%
|
|||||||
Cost
of services
|
1,343,342
|
74.1
|
1,048,917
|
78.2
|
294,425
|
28.1
|
|||||||||||||
Gross
profit
|
468,920
|
25.9
|
291,649
|
21.8
|
177,271
|
60.8
|
|||||||||||||
General
and administrative
|
176,267
|
9.7
|
195,627
|
14.6
|
(19,360
|
)
|
(9.9
|
)
|
|||||||||||
Defined
benefit pension plan
|
73,493
|
4.1
|
45,340
|
3.4
|
28,153
|
62.1
|
|||||||||||||
Selling
|
366,166
|
20.2
|
403,657
|
30.1
|
(37,491
|
)
|
(9.3
|
)
|
|||||||||||
Research
and development
|
41,990
|
2.3
|
72,588
|
5.4
|
(30,598
|
)
|
(42.2
|
)
|
|||||||||||
Depreciation
and amortization
|
8,810
|
0.5
|
30,588
|
2.3
|
(21,778
|
)
|
(71.2
|
)
|
|||||||||||
Total
costs and expenses
|
666,726
|
36.8
|
747,800
|
55.8
|
(81,074
|
)
|
(10.8
|
)
|
|||||||||||
Operating
loss
|
(197,806
|
)
|
(10.9
|
)
|
(456,151
|
)
|
(34.0
|
)
|
258,345
|
(56.6
|
)
|
||||||||
Interest
expense, net
|
(65,316
|
)
|
(3.6
|
)
|
(44,028
|
)
|
(3.3
|
)
|
(21,288
|
)
|
48.4
|
||||||||
Other
income
|
6,591
|
0.4
|
-
|
0.0
|
6,591
|
||||||||||||||
Net
loss
|
$
|
(256,531
|
)
|
(14.2
|
)%
|
$
|
(500,179
|
)
|
(37.3
|
)%
|
$
|
243,648
|
(48.7
|
)%
|
|||||
Net
loss per share - basic and diluted
|
$
|
(.01
|
)
|
$
|
(.02
|
)
|
$
|
.01
|
Six
Months Ended June 30,
|
|||||||||||||||||||
2007
vs. 2006
|
|||||||||||||||||||
As
a % of
|
As
a % of
|
Amount
of
|
%
Increase
|
||||||||||||||||
2007
|
Sales
|
2006
|
Sales
|
Change
|
(Decrease)
|
||||||||||||||
Sales
|
$
|
3,944,669
|
100.0
|
%
|
$
|
2,964,002
|
100.0
|
%
|
$
|
980,667
|
33.1
|
%
|
|||||||
Cost
of services
|
2,751,949
|
69.8
|
2,354,776
|
79.4
|
397,173
|
16.9
|
|||||||||||||
Gross
profit
|
1,192,720
|
30.2
|
609,226
|
20.6
|
583,494
|
95.8
|
|||||||||||||
General
and administrative
|
392,479
|
9.9
|
522,422
|
17.6
|
(129,943
|
)
|
(24.9
|
)
|
|||||||||||
Defined
benefit pension plan
|
189,018
|
4.8
|
91,783
|
3.1
|
97,235
|
105.9
|
|||||||||||||
Selling
|
702,764
|
17.8
|
816,191
|
27.5
|
(113,427
|
)
|
(13.9
|
)
|
|||||||||||
Research
and development
|
87,253
|
2.2
|
140,710
|
4.7
|
(53,457
|
)
|
(38.0
|
)
|
|||||||||||
Depreciation
and amortization
|
18,117
|
0.5
|
43,627
|
1.5
|
(25,510
|
)
|
(58.5
|
)
|
|||||||||||
Total
costs and expenses
|
1,389,631
|
35.2
|
1,614,733
|
54.5
|
(225,102
|
)
|
(13.9
|
)
|
|||||||||||
Operating
loss
|
(196,911
|
)
|
(5.0
|
)
|
(1,005,507
|
)
|
(33.9
|
)
|
808,596
|
(80.4
|
)
|
||||||||
Interest
expense, net
|
(129,788
|
)
|
(3.3
|
)
|
(86,690
|
)
|
(2.9
|
)
|
(43,098
|
)
|
49.7
|
||||||||
Other
income
|
6,591
|
0.2
|
498,088
|
16.8
|
(491,497
|
)
|
(98.7
|
)
|
|||||||||||
Income
tax expense
|
(605
|
)
|
(0.0
|
)
|
(7,300
|
)
|
(0.2
|
)
|
6,695
|
(91.7
|
)
|
||||||||
Net
loss
|
$
|
(320,713
|
)
|
(8.1
|
)%
|
$
|
(601,409
|
)
|
(20.3
|
)%
|
$
|
280,696
|
(46.7
|
)%
|
|||||
Net
loss per share - basic and diluted
|
$
|
(0.01
|
)
|
$
|
(0.03
|
)
|
$
|
0.02
|
Six
Months Ended June 30,
|
|||||||||||||||||||
2007
|
2007
|
2007
|
2006
|
2006
|
2006
|
||||||||||||||
As
Reported
|
Adjustments
|
Pro
Forma
|
As
Reported
|
Adjustments
|
Pro
Forma
|
||||||||||||||
Sales
|
$
|
3,944,669
|
$
|
-
|
$
|
3,944,669
|
$
|
2,964,002
|
$
|
-
|
$
|
2,964,002
|
|||||||
Cost
of services
|
2,751,949
|
(14,488
|
)
|
2,737,461
|
2,354,776
|
(16,596
|
)
|
2,338,180
|
|||||||||||
Gross
profit
|
1,192,720
|
14,488
|
1,207,208
|
609,226
|
16,596
|
625,822
|
|||||||||||||
General
and administrative
|
392,479
|
(4,251
|
)
|
388,228
|
522,422
|
(7,022
|
)
|
515,400
|
|||||||||||
Defined
benefit pension plan
|
189,018
|
-
|
189,018
|
91,783
|
-
|
91,783
|
|||||||||||||
Selling
|
702,764
|
(64,320
|
)
|
638,444
|
816,191
|
(72,909
|
)
|
743,282
|
|||||||||||
Research
and development
|
87,253
|
-
|
87,253
|
140,710
|
-
|
140,710
|
|||||||||||||
Depreciation
and amortization
|
18,117
|
-
|
18,117
|
43,627
|
-
|
43,627
|
|||||||||||||
Total
costs and expenses
|
1,389,631
|
(68,571
|
)
|
1,321,060
|
1,614,733
|
(79,931
|
)
|
1,534,802
|
|||||||||||
Operating
loss
|
(196,911
|
)
|
83,059
|
(113,852
|
)
|
(1,005,507
|
)
|
96,527
|
(908,980
|
)
|
|||||||||
Interest
expense, net
|
(129,788
|
)
|
-
|
(129,788
|
)
|
(86,690
|
)
|
-
|
(86,690
|
)
|
|||||||||
Other
income
|
6,591
|
-
|
6,591
|
498,088
|
-
|
498,088
|
|||||||||||||
Income
tax expense
|
(605
|
)
|
-
|
(605
|
)
|
(7,300
|
)
|
-
|
(7,300
|
)
|
|||||||||
Net
loss
|
$
|
(320,713
|
)
|
$
|
83,059
|
$
|
(237,654
|
)
|
$
|
(601,409
|
)
|
$
|
96,527
|
$
|
(504,882
|
)
|
Exhibit
No.
|
Description
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
||
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant
to Section
906 of the Sarbanes-Oxley Act of
2002.*
|
Infinite
Group, Inc.
(Registrant)
|
||
|
|
|
Date:
August 10, 2007
|
/s/
Michael S. Smith
|
|
Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
|
Date:
August 10, 2007
|
/s/
Michael S. Smith
|
|
Chief
Financial Officer
(Principal
Financial Officer)
|