Delaware
|
52-1490422
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(State
or other jurisdiction of
|
(IRS
Employer
|
incorporation
or organization)
|
Identification
No.)
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Large
Accelerated filer ¨
Non-accelerated
filer ¨
|
Accelerated
filer ¨
Smaller
reporting company x
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PAGE
|
||||
PART
I – FINANCIAL INFORMATION
|
||||
Item
1.
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Consolidated
Financial Statements
|
|||
Consolidated
Balance Sheets – June 30, 2010 (Unaudited) and December 31,
2009 (Audited)
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3
|
|||
Consolidated
Statements of Operations (Unaudited) for the three and six months ended
June 30, 2010 and 2009
|
4
|
|||
Consolidated
Statements of Cash Flows (Unaudited) for the six months ended June 30,
2010 and 2009
|
5
|
|||
Notes
to Consolidated Financial Statements – (Unaudited)
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6
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|||
Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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9
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||
Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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15
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||
Item
4.
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Controls
and Procedures
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15
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||
PART
II – OTHER INFORMATION
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15
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|||
Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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15
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||
Item
6.
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Exhibits
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15
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||
SIGNATURES
|
|
16
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June 30,
2010
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December 31,
2009
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|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 27,354 | $ | 196,711 | ||||
Accounts
receivable, net of allowance of $70,000
|
761,036 | 1,118,580 | ||||||
Prepaid
expenses and other current assets
|
70,099 | 56,622 | ||||||
Total
current assets
|
858,489 | 1,371,913 | ||||||
Property
and equipment, net
|
82,778 | 58,777 | ||||||
Deposits
and other assets
|
18,424 | 21,544 | ||||||
Total
assets
|
$ | 959,691 | $ | 1,452,234 | ||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 572,516 | 686,457 | |||||
Accrued
payroll
|
313,870 | 388,131 | ||||||
Accrued
interest payable
|
308,185 | 275,563 | ||||||
Accrued
retirement and pension
|
3,313,431 | 3,078,361 | ||||||
Accrued
expenses - other
|
29,049 | 61,632 | ||||||
Current
maturities of long-term obligations-bank
|
42,350 | 32,243 | ||||||
Notes
payable
|
470,000 | 295,000 | ||||||
Notes
payable-related parties
|
179,000 | 154,000 | ||||||
Total
current liabilities
|
5,228,401 | 4,971,387 | ||||||
Long-term
obligations:
|
||||||||
Notes
payable:
|
||||||||
Banks
and other
|
178,249 | 334,029 | ||||||
Related
parties
|
501,324 | 501,324 | ||||||
Accrued
pension expense
|
735,012 | 735,012 | ||||||
Total
liabilities
|
6,642,986 | 6,541,752 | ||||||
Commitments
and contingencies (Note 5)
|
||||||||
Stockholders’
deficiency:
|
||||||||
Common
stock, $.001 par value, 60,000,000 shares authorized;
25,661,883
(25,661,883 – 2009) shares issued and outstanding
|
25,661 | 25,661 | ||||||
Additional
paid-in capital
|
29,929,422 | 29,870,506 | ||||||
Accumulated
deficit
|
(32,833,338 | ) | (32,180,645 | ) | ||||
Accumulated
other comprehensive loss
|
(2,805,040 | ) | (2,805,040 | ) | ||||
Total
stockholders’ deficiency
|
(5,683,295 | ) | (5,089,518 | ) | ||||
Total
liabilities and stockholders’ deficiency
|
$ | 959,691 | $ | 1,452,234 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Sales
|
$ | 2,223,493 | $ | 2,908,099 | $ | 4,993,288 | $ | 5,564,029 | ||||||||
Cost
of services
|
1,708,864 | 2,285,969 | 3,765,668 | 4,278,679 | ||||||||||||
Gross
profit
|
514,629 | 622,130 | 1,227,620 | 1,285,350 | ||||||||||||
Costs
and expenses:
|
||||||||||||||||
General
and administrative
|
307,833 | 315,417 | 616,130 | 612,208 | ||||||||||||
Defined
benefit pension plan
|
119,795 | 131,877 | 245,948 | 296,746 | ||||||||||||
Selling
|
397,090 | 437,770 | 881,047 | 893,139 | ||||||||||||
Total
costs and expenses
|
824,718 | 885,064 | 1,743,125 | 1,802,093 | ||||||||||||
Operating
loss
|
(310,089 | ) | (262,934 | ) | (515,505 | ) | (516,743 | ) | ||||||||
Interest
expense:
|
||||||||||||||||
Related
parties
|
(12,667 | ) | (12,772 | ) | (24,677 | ) | (25,594 | ) | ||||||||
Other
|
(57,145 | ) | (65,123 | ) | (111,281 | ) | (121,171 | ) | ||||||||
Total
interest expense
|
(69,812 | ) | (77,895 | ) | (135,958 | ) | (146,765 | ) | ||||||||
Loss
before income tax expense
|
(379,901 | ) | (340,829 | ) | (651,463 | ) | (663,508 | ) | ||||||||
Income
tax expense
|
- | - | (1,230 | ) | (4,000 | ) | ||||||||||
Net
loss
|
$ | (379,901 | ) | $ | (340,829 | ) | $ | (652,693 | ) | $ | (667,508 | ) | ||||
Net
loss per share – basic and diluted
|
$ | (.02 | ) | $ | (.02 | ) | $ | (.03 | ) | $ | (.03 | ) | ||||
Weighted
average number of shares outstanding – basic and diluted
|
25,661,883 | 25,469,078 | 25,661,883 | 25,350,293 |
Six Months Ended
|
||||||||
June 30,
|
||||||||
2010
|
2009
|
|||||||
Operating
activities:
|
||||||||
Net
loss
|
$ | (652,693 | ) | $ | (667,508 | ) | ||
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
||||||||
Stock
based compensation
|
58,916 | 88,891 | ||||||
Depreciation
|
17,744 | 15,620 | ||||||
Decrease
(increase) in assets:
|
||||||||
Accounts
receivable
|
357,544 | (38,765 | ) | |||||
Other
assets
|
(10,357 | ) | (18,475 | ) | ||||
(Decrease)
increase in liabilities:
|
||||||||
Accounts
payable
|
(113,941 | ) | 315,104 | |||||
Accrued
expenses
|
(74,222 | ) | 41,001 | |||||
Accrued
pension and retirement
|
235,070 | 233,123 | ||||||
Net
cash used by operating activities
|
(181,939 | ) | (31,009 | ) | ||||
Investing
activities:
|
||||||||
Purchase
of property and equipment
|
(3,070 | ) | (3,410 | ) | ||||
Net
cash used by investing activities
|
(3,070 | ) | (3,410 | ) | ||||
Financing
activities:
|
||||||||
Repayments
of notes payable
|
(9,348 | ) | (28,600 | ) | ||||
Repayments
of note payable-related party
|
(25,000 | ) | (50,000 | ) | ||||
Proceeds
from note payable-related party
|
50,000 | - | ||||||
Net
cash provided by (used by) financing activities
|
15,652 | (78,600 | ) | |||||
Net
decrease in cash
|
(169,357 | ) | (113,019 | ) | ||||
Cash
- beginning of period
|
196,711 | 153,336 | ||||||
Cash
- end of period
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$ | 27,354 | $ | 40,317 | ||||
Supplemental
disclosure:
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||||||||
Cash
paid for:
|
||||||||
Interest
|
$ | 106,024 | $ | 120,771 | ||||
Income
taxes
|
$ | 1,230 | $ | 4,000 |
2010
|
2009
|
|||||
Risk-free
interest rate
|
2.39% - 2.93%
|
2.09% - 2.47%
|
||||
Expected
dividend yield
|
0%
|
0%
|
||||
Expected
stock price volatility
|
75%
|
75%
|
||||
Expected
life of options
|
5.75 years
|
5.75 years
|
Three Months
ended
June 30, 2010
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Three Months
ended
June 30, 2009
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Six Months
ended
June 30, 2010
|
Six Months
ended
June 30, 2009
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|||||||||||||
Employee
stock options
|
$ | 17,905 | $ | 38,981 | $ | 58,916 | $ | 91,060 | ||||||||
Consultants –
common stock warrants
|
- | 1,023 | - | (2,169 | ) | |||||||||||
Total
expense
|
$ | 17,905 | $ | 40,004 | $ | 58,916 | $ | 88,891 |
Number of
Options
|
Weighted
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic Value
|
||||||||||
Outstanding
at December 31, 2009
|
5,491,500 | $ | .26 | ||||||||||
Options
granted
|
1,416,000 | $ | .15 | ||||||||||
Options
expired
|
(468,000 | ) | $ | .28 | |||||||||
Outstanding
at June 30, 2010
|
6,439,500 | $ | .24 |
6.4 years
|
$ | 124,430 | |||||||
Exercisable
at June 30, 2010
|
4,809,167 | $ | .25 |
5.3 years
|
$ | 124,430 |
Number of
Nonvested
Options
|
Weighted Average
Fair Value
at Grant Date
|
|||||||
Nonvested
outstanding at December 31, 2009
|
866,333 | $ | .15 | |||||
Options
granted
|
1,416,000 | $ | .10 | |||||
Options
vested
|
(497,000 | ) | $ | .25 | ||||
Options
forfeited
|
(155,000 | ) | $ | .14 | ||||
Nonvested
outstanding at June 30, 2010
|
1,630,333 | $ | .12 |
Three Months
ended
June 30, 2010
|
Three Months
ended
June 30, 2009
|
Six Months
ended
June 30, 2010
|
Six Months
ended
June 30, 2009
|
|||||||||||||
Interest
cost
|
$ | 72,531 | $ | 71,996 | $ | 145,062 | $ | 143,993 | ||||||||
Expected
return on plan assets
|
(39,148 | ) | (42,115 | ) | (78,296 | ) | (84,231 | ) | ||||||||
Service
cost
|
12,500 | 17,750 | 25,000 | 35,500 | ||||||||||||
Actuarial
loss
|
31,882 | 37,343 | 63,764 | 74,687 | ||||||||||||
Net
periodic pension cost
|
$ | 77,765 | $ | 84,974 | $ | 155,530 | $ | 169,949 |
Three Months Ended June 30,
|
||||||||||||||||||||||||
2010
vs. 2009
|
||||||||||||||||||||||||
As a
% of
|
As a
% of
|
Amount
of
|
%
Increase
|
|||||||||||||||||||||
2010
|
Sales
|
2009
|
Sales
|
Change
|
(Decrease)
|
|||||||||||||||||||
Sales
|
$ | 2,223,493 | 100.0 | % | $ | 2,908,099 | 100.0 | % | $ | (684,606 | ) | (23.5 |
)%
|
|||||||||||
Cost
of services
|
1,708,864 | 76.9 | 2,285,969 | 78.6 | (577,105 | ) | (25.2 | ) | ||||||||||||||||
Gross
profit
|
514,629 | 23.1 | 622,130 | 21.4 | (107,501 | ) | (17.3 | ) | ||||||||||||||||
General
and administrative
|
307,833 | 13.8 | 315,417 | 10.8 | (7,584 | ) | (2.4 | ) | ||||||||||||||||
Defined
benefit pension plan
|
119,795 | 5.4 | 131,877 | 4.5 | (12,082 | ) | (9.2 | ) | ||||||||||||||||
Selling
|
397,090 | 17.9 | 437,770 | 15.1 | (40,680 | ) | (9.3 | ) | ||||||||||||||||
Total
costs and expenses
|
824,718 | 37.1 | 885,064 | 30.4 | (60,346 | ) | (6.8 | ) | ||||||||||||||||
Operating
loss
|
(310,089 | ) | (13.9 | ) | (262,934 | ) | (9.0 | ) | 47,155 | 17.9 | ||||||||||||||
Interest
expense
|
(69,812 | ) | (3.1 | ) | (77,895 | ) | (2.7 | ) | (8,083 | ) | (10.4 | ) | ||||||||||||
Net
loss
|
$ | (379,901 | ) | (17.1 | ) % | $ | (340,829 | ) | (11.7 | ) % | $ | 39,072 | 11.5 |
%
|
||||||||||
Net
loss per share – basic and diluted
|
$ | (.02 | ) | $ | (.02 | ) | $ | - |
Six
Months Ended June 30,
|
||||||||||||||||||||||||
2010
vs. 2009
|
||||||||||||||||||||||||
As a
% of
|
As a
% of
|
Amount
of
|
%
Increase
|
|||||||||||||||||||||
2010
|
Sales
|
2009
|
Sales
|
Change
|
(Decrease)
|
|||||||||||||||||||
Sales
|
$ | 4,993,288 | 100.0 | % | $ | 5,564,029 | 100.0 | % | $ | (570,741 | ) | (10.3 |
)%
|
|||||||||||
Cost
of services
|
3,765,668 | 75.4 | 4,278,679 | 76.9 | (513,011 | ) | (12.0 | ) | ||||||||||||||||
Gross
profit
|
1,227,620 | 24.6 | 1,285,350 | 23.1 | (57,730 | ) | (4.5 | ) | ||||||||||||||||
General
and administrative
|
616,130 | 12.3 | 612,208 | 11.0 | 3,922 | .6 | ||||||||||||||||||
Defined
benefit pension plan
|
245,948 | 4.9 | 296,746 | 5.3 | (50,798 | ) | (17.1 | ) | ||||||||||||||||
Selling
|
881,047 | 17.6 | 893,139 | 16.1 | (12,092 | ) | (1.4 | ) | ||||||||||||||||
Total
costs and expenses
|
1,743,125 | 34.9 | 1,802,093 | 32.4 | (58,968 | ) | (3.3 | ) | ||||||||||||||||
Operating
loss
|
(515,505 | ) | (10.3 | ) | (516,743 | ) | (9.3 | ) | (1,238 | ) | (.2 | ) | ||||||||||||
Interest
expense
|
(135,958 | ) | (2.7 | ) | (146,765 | ) | (2.6 | ) | (10,807 | ) | (7.4 | ) | ||||||||||||
Income
tax expense
|
(1,230 | ) | (4,000 | ) | (.1 | ) | (2,770 | ) | (69.3 | ) | ||||||||||||||
Net
loss
|
$ | (652,693 | ) | (13.1 | ) % | $ | (667,508 | ) | (12.0 | ) % | $ | (14,815 | ) | (2.2 |
)%
|
|||||||||
Net
loss per share - basic and diluted
|
$ | (.03 | ) | $ | (.03 | ) | $ | - |
Six Months Ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
Net
cash used by operating activities
|
$ | (181,939 | ) | $ | (31,009 | ) | ||
Net
cash used by investing activities
|
(3,070 | ) | (3,410 | ) | ||||
Net
cash provided/(used) by financing activities
|
15,652 | (78,600 | ) | |||||
Net
decrease in cash
|
$ | (169,357 | ) | $ | (113,019 | ) |
Exhibit
No.
|
Description
|
|
10.30
|
Promissory
Note between Northwest Hampton Holdings, LLC and the Company dated May 27,
2010.*
|
|
31.1
|
Certification
of Chief Executive Officer 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 Chief Executive Officer 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: August 12,
2010
|
/s/ Michael S.
Smith
|
Michael
S. Smith
|
|
Chief
Executive Officer
|
|
(Principal
Executive Officer)
|
|
Date: August 12,
2010
|
/s/ James
Witzel
|
James
Witzel
|
|
Chief
Financial Officer
|
|
(Principal
Financial Officer)
|