Delaware
|
52-1490422
|
(State
or other jurisdiction of
|
(IRS
Employer
|
incorporation
or organization)
|
Identification
No.)
|
Large
Accelerated filer ¨
Non-accelerated
filer ¨
|
Accelerated
filer ¨
Smaller
reporting company x
|
PAGE
|
||
PART
I – FINANCIAL INFORMATION
|
||
Item
1.
|
Consolidated
Financial Statements
|
|
Balance
Sheets – September 30, 2008 (Unaudited) and December 31, 2007
(Audited)
|
3
|
|
Statements
of Operations (Unaudited) for the three and nine months ended September
30, 2008 and 2007
|
4
|
|
Statements
of Cash Flows (Unaudited) for the nine months ended September 30,
2008 and
2007
|
5
|
|
Notes
to Consolidated Financial Statements – (Unaudited)
|
6
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
10
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
16
|
Item
4T.
|
Controls
and Procedures
|
16
|
PART
II – OTHER INFORMATION
|
||
Item
1A. Risk Factors
|
16
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
16
|
|
Item
6. Exhibits
|
17
|
|
SIGNATURES
|
17
|
September 30,
|
December 31,
|
||||||
2008
(Unaudited)
|
2007
(Audited)
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
|
$
|
39,307
|
$
|
28,281
|
|||
Accounts
receivable, net of allowance of $35,000
|
1,206,999
|
669,607
|
|||||
Prepaid
expenses and other current assets
|
58,932
|
59,381
|
|||||
Total
current assets
|
1,305,238
|
757,269
|
|||||
Property
and equipment, net
|
60,539
|
70,723
|
|||||
Other
assets –
security deposits
|
12,641
|
19,523
|
|||||
Total
assets
|
$
|
1,378,418
|
$
|
847,515
|
|||
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
431,210
|
$
|
299,519
|
|||
Accrued
payroll
|
434,646
|
262,453
|
|||||
Accrued
interest payable
|
268,645
|
269,530
|
|||||
Accrued
pension and retirement
|
2,352,191
|
2,081,508
|
|||||
Accrued
expenses – other
|
69,802
|
86,197
|
|||||
Current
maturities of notes payable
|
4,325
|
4,077
|
|||||
Notes
payable
|
30,000
|
30,000
|
|||||
Notes
payable-related parties
|
258,846
|
140,332
|
|||||
Total
current liabilities
|
3,849,665
|
3,173,616
|
|||||
Long-term
obligations:
|
|||||||
Notes
payable
|
232,502
|
29,706
|
|||||
Notes
payable-related parties
|
890,624
|
1,091,624
|
|||||
Accrued
pension expense
|
302,395
|
408,419
|
|||||
Total
liabilities
|
5,275,186
|
4,703,365
|
|||||
Commitments
and contingencies (note 6)
|
|||||||
Stockholders’
deficiency:
|
|||||||
Common
stock, $.001 par value, 60,000,000 shares authorized;24,935,328
(23,614,965 – 2007) shares issued and outstanding
|
24,935
|
23,615
|
|||||
Additional
paid-in capital
|
29,646,038
|
29,386,215
|
|||||
Accumulated
deficit
|
(31,340,052
|
)
|
(31,037,991
|
)
|
|||
Accumulated
other comprehensive loss
|
(2,227,689
|
)
|
(2,227,689
|
)
|
|||
Total
stockholders’ deficiency
|
(3,896,768
|
)
|
(3,855,850
|
)
|
|||
Total
liabilities and stockholders’ deficiency
|
$
|
1,378,418
|
$
|
847,515
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||
September 30,
|
September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Sales
|
$
|
2,478,978
|
$
|
2,063,644
|
$
|
7,109,403
|
$
|
6,008,314
|
|||||
Cost
of services
|
1,795,927
|
1,570,556
|
5,164,602
|
4,322,505
|
|||||||||
Gross
profit
|
683,051
|
493,088
|
1,944,801
|
1,685,809
|
|||||||||
Costs
and expenses:
|
|||||||||||||
General
and administrative
|
265,694
|
238,890
|
779,849
|
631,370
|
|||||||||
Defined
benefit pension plan
|
67,082
|
84,017
|
166,074
|
273,035
|
|||||||||
Selling
|
296,597
|
415,325
|
1,045,747
|
1,118,089
|
|||||||||
Depreciation
|
9,201
|
7,892
|
27,523
|
26,009
|
|||||||||
Research
and development
|
-
|
1,553
|
-
|
88,807
|
|||||||||
Total
costs and expenses
|
638,574
|
747,677
|
2,019,193
|
2,137,310
|
|||||||||
Operating
income (loss)
|
44,477
|
(254,589
|
)
|
(74,392
|
)
|
(451,501
|
)
|
||||||
Other
income (expense):
|
|||||||||||||
Interest
income
|
-
|
43
|
-
|
255
|
|||||||||
Interest
expense:
|
|
||||||||||||
Related
parties
|
(30,638
|
)
|
(34,834
|
)
|
(95,015
|
)
|
(105,113
|
)
|
|||||
Other
|
(41,087
|
)
|
(34,833
|
)
|
(132,039
|
)
|
(94,555
|
)
|
|||||
Total
interest expense
|
(71,725
|
)
|
(69,667
|
)
|
(227,054
|
)
|
(199,668
|
)
|
|||||
Other
income (expense)
|
-
|
(1,634
|
) |
-
|
4,957
|
||||||||
Total
other income (expense)
|
(71,725
|
)
|
(71,258
|
)
|
(227,054
|
)
|
(194,456
|
)
|
|||||
Loss
before income tax expense
|
(27,248
|
)
|
(325,847
|
)
|
(301,446
|
)
|
(645,957
|
)
|
|||||
Income
tax expense
|
-
|
-
|
(615
|
)
|
(605
|
)
|
|||||||
Net
loss
|
$
|
(27,248
|
)
|
$
|
(325,847
|
)
|
$
|
(302,061
|
)
|
$
|
(646,562
|
)
|
|
Net
loss per share – basic and diluted
|
$
|
(.00
|
)
|
$
|
(.01
|
)
|
$
|
(.01
|
)
|
$
|
(.03
|
)
|
|
Weighted
average number of shares outstanding – basic and
diluted
|
24,783,698
|
23,524,965
|
24,348,508
|
23,046,833
|
For the Nine Months Ended
|
|||||||
September 30,
|
|||||||
2008
|
2007
|
||||||
Operating
activities:
|
|||||||
Net
loss
|
$
|
(302,061
|
)
|
$
|
(646,562
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
Stock
based compensation
|
197,727
|
255,056
|
|||||
Depreciation
|
27,523
|
26,009
|
|||||
Gain
on disposal of equipment
|
-
|
(4,957
|
)
|
||||
Increase
in assets:
|
|||||||
Accounts
receivable
|
(537,392
|
)
|
(139,003
|
)
|
|||
Other
assets
|
(5,169
|
)
|
(10,641
|
)
|
|||
Increase
in liabilities:
|
|||||||
Accounts
payable
|
131,690
|
29,452
|
|||||
Accrued
expenses
|
204,163
|
222,413
|
|||||
Accrued
pension and retirement
|
164,659
|
238,378
|
|||||
Net
cash used in operating activities
|
(118,860
|
)
|
(29,855
|
)
|
|||
Investing
activities:
|
|||||||
Purchase
of property and equipment
|
(17,339
|
)
|
(22,686
|
)
|
|||
Proceeds
from notes receivable
|
-
|
4,015
|
|||||
Net
cash used in investing activities
|
(17,339
|
)
|
(18,671
|
)
|
|||
Financing
activities:
|
|||||||
Proceeds
from note payable
|
200,000
|
-
|
|||||
Repayments
of notes payable
|
(2,956
|
)
|
(10,114
|
)
|
|||
Repayments
of notes payable-related parties
|
(66,486
|
)
|
(7,003
|
)
|
|||
Proceeds
from exercise of stock options
|
16,667
|
500
|
|||||
Net
cash provided by (used in) financing activities
|
147,225
|
(16,617
|
)
|
||||
Net
increase (decrease) in cash
|
11,026
|
(65,143
|
)
|
||||
Cash –
beginning of period
|
28,281
|
73,786
|
|||||
Cash –
end of period
|
$
|
39,307
|
$
|
8,643
|
|||
Supplemental
disclosure:
|
|||||||
Cash
paid for:
|
|||||||
Interest
|
$
|
182,909
|
$
|
140,890
|
|||
Income
taxes
|
$
|
615
|
$
|
605
|
Nine Months
ended
September 30,
2008
|
Nine Months
ended
September 30,
2007
|
Three Months
ended
September 30,
2008
|
Three Months
ended
September 30,
2007
|
||||||||||
Employee
stock options
|
$
|
159,244
|
$
|
180,068
|
$
|
61,027
|
$
|
97,009
|
|||||
Consultants –
common stock warrants
|
25,983
|
49,988
|
19,886
|
13,095
|
|||||||||
Consultant –
shares of common stock
|
12,500
|
25,000
|
-
|
12,500
|
|||||||||
Total
expense
|
$
|
197,727
|
$
|
255,056
|
$
|
80,913
|
$
|
122,604
|
Number of
Options
|
Weighted
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic Value
|
||||||||||
Outstanding
at December 31, 2007
|
4,914,500
|
$
|
.27
|
||||||||||
Options
granted
|
525,000
|
$
|
.56
|
||||||||||
Options
expired
|
(674,333
|
)
|
$
|
.46
|
|||||||||
Options
exercised
|
(66,667
|
)
|
$
|
.25
|
|||||||||
Outstanding
at September 30, 2008
|
4,698,500
|
$
|
.28
|
6.8
years
|
$
|
1,193,095
|
|||||||
|
|||||||||||||
Exercisable
at September 30, 2008
|
4,164,167
|
$
|
.24
|
6.5
years
|
$
|
1,185,475
|
Number of
Nonvested
Options
|
Weighted Average
Fair Value
at Grant Date
|
||||||
Nonvested
outstanding at December 31, 2007
|
662,333
|
$
|
.30
|
||||
Options
granted
|
525,000
|
$
|
.36
|
||||
Options
vested
|
(585,667
|
)
|
$
|
.31
|
|||
Options
forfeited
|
(67,333
|
)
|
$
|
.38
|
|||
Nonvested
outstanding at September 30, 2008
|
534,333
|
$
|
.34
|
Nine Months Ended
September 30,
|
|||||||
2008
|
2007
|
||||||
Conversion
of note payable-related party and related accrued interest payable
to
1,185,000 shares of common stock
|
$
|
59,250
|
$
|
-
|
|||
Conversion
of notes payable-related party to 1,000,000 shares of common
stock
|
$
|
-
|
$
|
50,000
|
|||
Issuance
of 100,000 shares of common stock in exchange for consulting services
to
be provided over one year
|
$
|
-
|
$
|
50,000
|
Nine Months Ended
September 30,
|
Three Months Ended
September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Common
stock equivalents
|
19,573,817
|
19,381,198
|
19,605,103
|
19,399,238
|
Nine Months
ended
September 30,
2008
|
Nine Months
ended
September 30,
2007
|
Three Months
ended
September 30,
2008
|
Three Months
ended
September 30,
2007
|
||||||||||
Interest
cost
|
$
|
225,357
|
$
|
249,181
|
$
|
74,248
|
$
|
88,488
|
|||||
Expected
return on plan assets
|
(218,057
|
)
|
(205,581
|
)
|
(72,686
|
)
|
(68,527
|
)
|
|||||
Expected
expenses
|
48,750
|
97,689
|
16,250
|
32,563
|
|||||||||
Actuarial
loss
|
82,364
|
48,750
|
27,455
|
16,250
|
|||||||||
Net
periodic pension cost
|
$
|
138,414
|
$
|
190,039
|
$
|
45,267
|
$
|
68,774
|
Three
Months Ended September 30,
|
|||||||||||||||||||
2008
vs. 2007
|
|||||||||||||||||||
As
a % of
|
As
a % of
|
Amount
of
|
%
Increase
|
||||||||||||||||
2008
|
Sales
|
2007
|
Sales
|
Change
|
(Decrease)
|
||||||||||||||
Sales
|
$
|
2,478,978
|
100.0
|
%
|
$
|
2,063,644
|
100.0
|
%
|
$
|
415,334
|
20.1
|
%
|
|||||||
Cost
of services
|
1,795,927
|
72.4
|
1,570,556
|
76.1
|
225,371
|
14.3
|
|||||||||||||
Gross
profit
|
683,051
|
27.6
|
493,088
|
23.9
|
189,963
|
38.5
|
|||||||||||||
General
and administrative
|
265,694
|
10.7
|
238,890
|
11.6
|
26,804
|
11.2
|
|||||||||||||
Defined
benefit pension plan
|
67,082
|
2.7
|
84,017
|
4.1
|
(16,935
|
)
|
(20.2
|
)
|
|||||||||||
Selling
|
296,597
|
12.0
|
415,325
|
20.1
|
(118,728
|
)
|
(28.6
|
)
|
|||||||||||
Depreciation
|
9,201
|
.4
|
7,892
|
.4
|
1,309
|
16.6
|
|||||||||||||
Research
and development
|
-
|
-
|
1,553
|
.1
|
(1,553
|
)
|
(100.0
|
)
|
|||||||||||
Total
costs and expenses
|
638,574
|
25.8
|
747,677
|
36.2
|
(109,103
|
)
|
(14.6
|
)
|
|||||||||||
Operating
income (loss)
|
44,477
|
1.8
|
(254,589
|
)
|
(12.3
|
)
|
299,066
|
(117.5
|
)
|
||||||||||
Interest
expense, net
|
(71,725
|
)
|
(2.9
|
)
|
(69,624
|
)
|
(3.4
|
)
|
(2,101
|
)
|
3.0
|
||||||||
Other
expense
|
-
|
-
|
(1,634
|
)
|
(.1
|
)
|
1,634
|
(100.0
|
)
|
||||||||||
Net
loss
|
$
|
(27,248
|
)
|
(1.1)
|
%
|
$
|
(325,847
|
)
|
(15.8)
|
%
|
$
|
298,599
|
(91.6)
|
%
|
|||||
Net
loss per share - basic and diluted
|
$
|
(.00
|
)
|
$
|
(.01
|
)
|
$
|
.01
|
Nine Months Ended September 30,
|
|||||||||||||||||||
2008 vs. 2007
|
|||||||||||||||||||
As a % of
|
As a % of
|
Amount of
|
% Increase
|
||||||||||||||||
2008
|
Sales
|
2007
|
Sales
|
Change
|
(Decrease)
|
||||||||||||||
Sales
|
$
|
7,109,403
|
100.0
|
%
|
$
|
6,008,314
|
100.0
|
%
|
$
|
1,101,089
|
18.3
|
%
|
|||||||
Cost
of services
|
5,164,602
|
72.6
|
4,322,505
|
71.9
|
842,097
|
19.5
|
|||||||||||||
Gross
profit
|
1,944,801
|
27.4
|
1,685,809
|
28.1
|
258,992
|
15.4
|
|||||||||||||
General
and administrative
|
779,849
|
11.0
|
631,370
|
10.5
|
148,479
|
23.5
|
|||||||||||||
Defined
benefit pension plan
|
166,074
|
2.3
|
273,035
|
4.5
|
(106,961
|
)
|
(39.2
|
)
|
|||||||||||
Selling
|
1,045,747
|
14.7
|
1,118,089
|
18.6
|
(72,342
|
)
|
(6.5
|
)
|
|||||||||||
Depreciation
|
27,523
|
.4
|
26,009
|
.4
|
1,514
|
5.8
|
|||||||||||||
Research
and development
|
-
|
-
|
88,807
|
1.5
|
(88,807
|
)
|
(100.0
|
)
|
|||||||||||
Total
costs and expenses
|
2,019,193
|
28.4
|
2,137,310
|
35.6
|
(118,117
|
)
|
(5.5
|
)
|
|||||||||||
Operating
loss
|
(74,392
|
)
|
(1.0
|
)
|
(451,501
|
)
|
(7.5
|
)
|
377,109
|
(83.5
|
)
|
||||||||
Interest
expense, net
|
(227,054
|
)
|
(3.2
|
)
|
(199,413
|
)
|
(3.3
|
)
|
(27,641
|
)
|
13.9
|
||||||||
Other
income
|
-
|
-
|
4,957
|
.1
|
(4,957
|
)
|
(100.0
|
)
|
|||||||||||
Income
tax expense
|
(615
|
)
|
-
|
(605
|
)
|
-
|
(10
|
)
|
1.7
|
||||||||||
Net
loss
|
$
|
(302,061
|
)
|
(4.2
|
)%
|
$
|
(646,562
|
)
|
(10.8
|
)%
|
$
|
344,501
|
(53.3
|
)%
|
|||||
Net
loss per share - basic and diluted
|
$
|
(.01
|
)
|
$
|
(.03
|
)
|
$
|
.02
|
Nine Months Ended September 30,
|
|||||||||||||||||||
2008
|
2008
|
2008
|
2007
|
2007
|
2007
|
||||||||||||||
As Reported
|
Adjustments
|
Pro Forma
|
As Reported
|
Adjustments
|
Pro Forma
|
||||||||||||||
Sales
|
$
|
7,109,403
|
$
|
-
|
$
|
7,109,403
|
$
|
6,008,314
|
$
|
-
|
$
|
6,008,314
|
|||||||
Cost
of services
|
5,164,602
|
(81,729
|
)
|
5,082,873
|
4,322,505
|
(67,702
|
)
|
4,254,803
|
|||||||||||
Gross
profit
|
1,944,801
|
81,729
|
2,026,530
|
1,685,809
|
67,702
|
1,753,511
|
|||||||||||||
General
and administrative
|
779,849
|
(20,194
|
)
|
759,655
|
631,370
|
(12,636
|
)
|
618,734
|
|||||||||||
Defined
benefit pension plan
|
166,074
|
-
|
166,074
|
273,035
|
-
|
273,035
|
|||||||||||||
Selling
|
1,045,747
|
(57,321
|
)
|
988,426
|
1,118,089
|
(99,730
|
)
|
1,018,359
|
|||||||||||
Depreciation
|
27,523
|
-
|
27,523
|
26,009
|
-
|
26,009
|
|||||||||||||
Research
and development
|
-
|
-
|
-
|
88,807
|
-
|
88,807
|
|||||||||||||
Total
costs and expenses
|
2,019,193
|
(77,515
|
)
|
1,941,678
|
2,137,310
|
(112,366
|
)
|
2,024,944
|
|||||||||||
Operating
loss
|
(74,392
|
)
|
159,244
|
84,852
|
(451,501
|
)
|
180,068
|
(271,433
|
)
|
||||||||||
Interest
expense, net
|
(227,054
|
)
|
-
|
(227,054
|
)
|
(199,413
|
)
|
-
|
(199,413
|
)
|
|||||||||
Other
income
|
-
|
-
|
-
|
4,957
|
-
|
4,957
|
|||||||||||||
Income
tax expense
|
(615
|
)
|
-
|
(615
|
)
|
(605
|
)
|
-
|
(605
|
)
|
|||||||||
Net
loss
|
$
|
(302,061
|
)
|
$
|
159,244
|
$
|
(142,817
|
)
|
$
|
(646,562
|
)
|
$
|
180,068
|
$
|
(466,494
|
)
|
Exhibit No.
|
|
Description
|
31.1
|
Certification
of President pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
32.1
|
Certification
of President pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.*
|
Infinite
Group, Inc.
|
||
(Registrant)
|
||
Date:
November 12, 2008
|
/s/
Michael S. Smith
|
|
Michael
S. Smith
|
||
Chief
Executive Officer
|
||
(Principal
Executive Officer)
|
||
Date:
November 12, 2008
|
/s/
James Witzel
|
|
James
Witzel
|
||
Chief
Financial Officer
|
||
(Principal
Financial Officer)
|