UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
Commission File Number 0-21816
INFINITE GROUP INC.
(Exact name of small business issuer as specified in its charter)
Delaware 52-1490422
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
595 Blossom Rd. Suite 309
-------------------------
Rochester, New York 14610
-------------------------
(Address of principal executive office)
(585) 654-5525
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes |X| No | |
Number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of July 31, 2005, there were 19,206,965
shares of common stock outstanding.
Transitional Small Business Disclosure Format. Yes |_| No |X|
1
INFINITE GROUP INC.
FORM 10-QSB REPORT
Infinite Group Inc.
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheet - June 30, 2005 (unaudited)
and December 31, 2004 (audited) 3
Statements of Operations-(unaudited) for
the three and six month periods ended June
30, 2005 and 2004 4
Statements of Cash Flows-(unaudited) for
the six month periods ended June 30, 2005
and 2004 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of Operations 13
Item 3. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of 22
Security Holders
Item 5. Other Information 22
Item 6. Exhibits 22
SIGNATURES 23
FORWARD-LOOKING STATEMENTS
Certain statements made in this Quarterly Report on Form 10-QSB are
"forward-looking statements" within the meaning of Section 21E of the Securities
and Exchange Act of 1934 regarding the plans and objectives of management for
future operations and market trends and expectations. 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 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 continued
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 our 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. The terms
"we", "our", "us", or any derivative thereof, as used herein refer to Infinite
Group Inc., a Delaware corporation.
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
INFINITE GROUP, INC.
Consolidated Balance Sheets
June 30, December 31,
2005 2004
(unaudited) (audited)
----------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 338,205 $ 97,297
Restricted cash -- 30,327
Accounts receivable, net of allowance of $56,202 ($25,000 - 2004) 1,285,175 1,054,623
Current portion of notes receivable -- 270,347
Inventories 23,239 --
Other current assets 53,207 41,207
Assets of discontinued operations -- 205,921
-------------- --------------
Total current assets 1,699,826 1,699,722
Property and equipment, net 275,442 239,907
Other assets:
Note receivable 73,897 1,940,857
Intangible assets, net
-- 50,526
-------------- --------------
Total other assets 73,897 1,991,383
-------------- --------------
Total assets $ 2,049,165 $ 3,931,012
============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Notes payable:
Bank -- 50,207
Other 175,427 176,184
Related parties 9,906 9,906
Accounts payable 537,272 504,327
Accrued expenses 823,653 542,066
Current maturities of long-term obligations 11,725 2,128,572
Current maturities of long-term obligations-related party 44,000 44,000
Liabilities of discontinued operations -- 217,300
-------------- --------------
Total current liabilities 1,601,983 3,672,562
Long-term obligations
Bank notes payable 57,425 64,133
Notes payable-related parties 1,100,124 1,100,124
Accrued pension expense 2,236,687 2,177,287
-------------- --------------
Total liabilities 4,996,219 7,014,106
-------------- --------------
Commitments and contingencies
Stockholders' deficiency:
Common stock, $.001 par value, 20,000,000 shares authorized;
19,206,965 (17,561,965 in 2004) shares issued and outstanding 19,207 17,562
Additional paid-in capital 28,455,803 28,375,198
Accumulated deficit (28,666,173) (28,719,963)
Accumulated other comprehensive loss (2,755,891) (2,755,891)
-------------- --------------
Total stockholders' deficiency (2,947,054) (3,083,094)
-------------- --------------
Total liabilities and stockholders' deficiency $ 2,049,165 $ 3,931,012
============== ==============
See notes to consolidated financial statements.
3
INFINITE GROUP, INC.
Consolidated Statements of Operations (Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
---------------------------------------------------------------
2005 2004 2005 2004
--------------------------------------------------------------------------------------------------------------------
Sales $ 4,134,550 $ 1,829,823 $ 2,009,823 $ 1,269,388
Cost of goods and services 2,886,028 1,193,950 1,371,147 833,965
------------ ------------ ------------ ------------
Gross profit 1,248,522 635,873 638,676 435,423
Costs and expenses:
General and administrative 787,554 574,954 399,711 310,775
Depreciation and amortization 23,749 12,517 12,568 5,911
Write-off of capitalized financing costs 44,857 -- 44,857 --
Selling 140,072 4,364 139,178 4,195
Research and development 161,924 142,955 90,243 74,309
------------ ------------ ------------ ------------
Total costs and expenses 1,158,156 734,790 686,557 395,190
------------ ------------ ------------ ------------
Operating income (loss) 90,366 (98,917) (47,881) 40,233
Other income (expense):
Interest income 66,255 -- 32,193 --
Interest expense:
Related parties (44,333) (36,653) (22,476) (19,565)
Other (69,431) -- (33,889)
------------ ------------ ------------ ------------
(113,764) (36,653) (56,365) (19,565)
------------ ------------ ------------ ------------
Total other expense (47,509) (36,653) (24,172) (19,565)
------------ ------------ ------------ ------------
Income (loss) from continuing operations before
income tax expense 42,857 (135,570) (72,053) 20,668
Income tax expense
(1,300) (350) -- --
------------ ------------ ------------ ------------
Income (loss) from continuing operations 41,557 (135,920) (72,053) 20,668
Discontinued operations:
Income (loss) from discontinued operations 12,233 (74,731) 4,979 13,938
------------ ------------ ------------ ------------
Net income (loss) $ 53,790 $ (210,651) $ (67,074) $ 34,606
============ ============ ============ ============
Net income (loss) per share-basic:
Income (loss) from continuing operations $ .00 $ (.01) $ (.00) $ .00
Income (loss) from discontinued operations .00 (.01) .00 .00
------------ ------------ ------------ ------------
Net income (loss) $ .00 $ (.02) $ (.00) $ .00
============ ============ ============ ============
Net income (loss) per share-diluted:
Income (loss) from continuing operations $ .00 $ (.01) $ (.00) $ .00
Income (loss) from discontinued operations
.00 (.01) .00 .00
------------ ------------ ------------ ------------
Net income (loss) $ .00 $ (.02) $ (.00) $ .00
============ ============ ============ ============
Weighted average number of shares outstanding:
Basic 18,910,805 13,692,968 19,206,965 13,769,822
============ ============ ============ ============
Diluted 20,181,583 13,692,968 19,206,965 14,807,219
============ ============ ============ ============
See notes to consolidated financial statements.
4
INFINITE GROUP, INC.
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended
June 30,
2005 2004
----------------------------------------------------------------------------------------------------------
Operating activities:
Net income (loss) $ 53,790 $ (210,651)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
(Income) loss from discontinued operations (12,233) 74,731
Depreciation and amortization 24,019 12,517
Write-off of capitalized financing costs 44,587 --
Increase in:
Accounts receivable (230,552) (481,156)
Inventories (23,239) --
Other current assets (12,000) (16,097)
Increase (decrease) in:
Accounts payable 35,195 (59,974)
Accrued expenses 281,587 316,747
Accrued pension obligations 59,400 80,773
------------ ------------
Net cash provided by (used in) operating activities
of continuing operations 220,554 (283,110)
Net cash provided by (used in) operating activities
of discontinued operations 854 161,952
------------ ------------
Net cash provided by (used in) operating activities 221,408 (121,158)
------------ ------------
Investing activities:
Decrease in restricted funds 30,327 12,179
Purchase of property and equipment (53,615) (3,768)
Proceeds from notes receivable 2,137,307 --
------------ ------------
Net cash provided by (used in) investing activities 2,114,019 8,411
------------ ------------
Financing activities:
Net repayments of bank notes payable (50,207) (53,930)
Net repayments of notes payable-other (757) --
Proceeds from issuance of long-term obligations-related parties -- 463,000
Repayment of notes payable-related parties -- (188,000)
Repayments of long-term obligations (2,123,555) (158,585)
Proceeds from issuance of common stock, net of costs 80,000 163,126
------------ ------------
Net cash provided by (used in) financing activities (2,094,519) 225,611
------------ ------------
Net increase in cash 240,908 112,864
Cash - beginning of period 97,297 16,515
------------ ------------
Cash - end of period $ 338,205 $ 129,379
============ ============
Supplemental disclosure:
Cash paid for:
Interest $ 103,196 $ 7,057
============ ============
Income taxes $ 1,300 $ 350
============ ============
See notes to consolidated financial statements.
5
INFINITE GROUP INC.
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated 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 for interim financial information and
with instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America 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 accompanying unaudited consolidated financial statements should be
read in conjunction with the Company's audited consolidated financial statements
and footnotes for the year ended December 31, 2004 and the notes thereto
included in the Company's Annual report on Form 10-KSB filed with the United
States Securities and Exchange Commission. Results of consolidated operations
for the six month period ended June 30, 2005 are not necessarily indicative of
the operating results to be attained in the year ending December 31, 2005. The
consolidated financial statements herein include the accounts of the Company and
its wholly owned subsidiaries. All material inter-company accounts and
transactions have been eliminated.
Note 2. Summary of Significant Accounting Policies
Critical Accounting Policies and Estimates
There are several accounting policies that we believe are significant to the
presentation of our consolidated financial statements. These policies require
management to make complex or subjective judgments about matters that are
inherently uncertain. Note 3 to our audited consolidated financial statements
presents a summary of significant accounting policies. The most critical
accounting policies follow.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of component parts for the TouchThru(TM) biometric product.
Revenue Recognition
Beginning in the second quarter of 2003, we commenced providing services in the
field of information technology (IT) consulting services through our IT Services
Group. Consulting revenues are recognized as the consulting services are
provided. Customer deposits received in advance are recorded as liabilities
until associated services are completed.
Stock-Based Compensation
We disclose the pro forma compensation cost relating to stock options granted
under employee stock option plans, based on the fair value of those options at
the date of grant. This valuation is determined utilizing the Black-Scholes
option-pricing model, which takes into account certain assumptions, including
the expected life of the option and the expected stock volatility and dividend
yield over this life. These assumptions are made based on past experience and
expected future results. In the event the actual performance varies from the
estimated amounts, the value of these options may be misstated.
6
Effect of New Accounting Pronouncements
In February 2003, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation: A Comparison of FASB Statement No. 123, Accounting for Stock-Based
Compensation, and Its Related Interpretations, and IASB Proposed IFRS,
Share-based Payments." SFAS 148 amends SFAS 123 to provide alternative methods
of transition for an entity that voluntarily changes to the fair value based
method of accounting for stock-based employee compensation. It also amends the
disclosure provisions of that Statement to require prominent disclosure about
the effects on reported net income of an entity's accounting policy decisions
with respect to stock-based compensation. The statement also amends APB Opinion
No. 28, "Interim Financial Reporting", to require disclosure about those effects
in interim financial information. We have chosen not to voluntarily change to
the fair value based method of accounting for stock-based employee compensation
but have adopted the disclosure rules under SFAS 148.
In December 2004, the FASB issued SFAS No. 123R (revised 2004), "Share-Based
Payment". For public companies, the cost of employee services received in
exchange for equity instruments generally should be measured at fair value at
the grant date. The cost of employee services received in exchange for an award
of liability instruments should be measured initially at fair value and
re-measured subsequently at each reporting date through the settlement date.
Publicly traded companies, other than small business issuers, must apply this
Standard as of the beginning of the first interim or annual period that begins
after June 15, 2005. Public entities that file as small business issuers must
comply as of the beginning of the first interim or annual reporting period that
begins after December 15, 2005.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
- an amendment of APB Opinion No. 29". This amendment to Opinion No. 29
eliminates the fair value exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. The Statement is
effective for nonmonetary asset exchanges occurring in periods beginning after
June 15, 2005.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3".
This Statement replaces APB Opinion No. 20, "Accounting Changes", and FASB
Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements",
and changes the requirements for the accounting for and reporting of a change in
accounting principle. This Statement applies to all voluntary changes in
accounting principle. It also applies to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include
specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed. This statement is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005.
Note 3. Discontinued Operations and Reclassifications
The statements of operations and cash flows for the three and six months ended
June 30, 2005 and 2004 account for the discontinued operations of the Photonics
Group, consisting of Infinite Photonics, Inc. (IP), which business was suspended
in 2002 as a result of the loss of the DARPA contract, and Laser Group (LF),
which was sold as discussed below.
7
On October 30, 2002, IP received a Notice of Termination of its DARPA contract
for the government's convenience under the contract provisions entitled
Termination, Federal Acquisition Regulation (FAR) 52.249.6. The DARPA contract
had provided substantially all of the revenue of the Photonics Group. As of
December 31, 2004, the contract termination process was substantially complete.
We have been reimbursed for substantially all costs associated with the
termination. The termination of the contract had a detrimental effect on the
development of our technology. During 2002, all of our Photonics Group employees
were released and the operations of the Photonics Group ceased. We also
determined that our Photonics Group intellectual property and property and
equipment were impaired, and consequently recorded impairment losses in the
fourth quarter of 2002 of approximately $468,000 and $148,000 respectively,
which were included in loss on disposal of discontinued operations in the
consolidated statement of operations for the year ended December 31, 2002.
On December 31, 2003, the Company and LF entered into an asset purchase
agreement with LFI, Inc. ("LFI") relating to the purchase by LFI of certain
assets and the assumption of certain liabilities of LF relating to the laser
engraving and medical products manufacturing and assembly businesses of LF (the
"Purchase Agreement"). The principals of LFI are former employees of LF,
including the former chairman and chief executive officer of the Company. The
purchase price for the assets was assumed liabilities of LF and the Company. On
December 31, 2004, the Company completed the sale of the remaining assets,
including the assumption of certain liabilities, to an affiliate of LFI,
relating to all the remaining laser businesses of LF. The purchase price was the
assumed liabilities of LF plus the issuance of several notes by the buyer to LF.
LF recorded a loss on sale of approximately $99,000 for the year ended December
31, 2003. LF reclassified the operating assets and liabilities to assets and
liabilities held for sale at December 31, 2003.
In accordance with FASB 144, the disposal of the Photonics and Laser segments
have been accounted for as a disposal of business segments and accordingly, the
assets and liabilities for IP and LF have been segregated from continuing
operations in the accompanying consolidated balance sheets and classified as
assets and liabilities of discontinued operations. The operating results for
both segments are segregated and reported as discontinued operations in the
accompanying consolidated statements of operations and cash flows.
The following is a summary of financial position at June 30, 2005 and December
31, 2004 and results of operations for the three and six months ended June 30,
2005 and 2004 for the disposed Photonics (IP) and Laser (LF) segments:
June 30, December 31,
Financial Position 2005 2004
---------------- ----------------
Current assets and total assets of
discontinued operations $ -- $ 205,921
================ ================
Liabilities of discontinued operations:
Accounts payable and accrued
expenses $ -- $ 212,300
Unsecured note payable -- 5,000
---------------- ----------------
Total liabilities of discontinued
operations $ -- $ 217,300
================ ================
Three Months Ended
June 30,
--------
Results of Operations 2005 2004
---------------- ----------------
Revenue from discontinued operations $ -- $ 821,648
================ ================
Income (loss) from discontinued operations $ 4,979 $ 13,938
================ ================
Six Months Ended
June 30,
--------
Results of Operations 2005 2004
---------------- ----------------
Revenue from discontinued operations $ -- $ 1,492,158
================ ================
Income (loss) from discontinued operations $ 12,233 $ (74,731)
================ ================
8
Certain other amounts in the 2004 financial statements have been reclassified to
conform with the 2005 financial statements.
Note 4. Stock Option Plan and Stock Warrants
As of June 30, 2005 the Company's Stock Option Plans (the "Plan"), as approved
by shareholders, provided for the grant of incentive or non-qualified stock
options for the purchase of common stock for up to approximately 1,840,000
shares to employees, directors and consultants. The Company's board of directors
has approved the grant of incentive stock options for the purchase of common
stock for up to 4,000,000 shares to employees, directors and consultants, which
is subject to approval by shareholders. The Plan is administered by the
compensation committee established by the Company's board of directors, which
determines the terms of options including the exercise price, expiration date,
number of shares, and vesting provisions.
A summary of all stock option activity for the six months ended June 30, 2005 is
as follows:
Weighted
Number Exercise Average
Of Options Price Exercise Price
--------- ------------- --------------
Outstanding at December 31, 2004 1,895,482 $ .01 - $2.50 $ .13
============= =====
Options issued 2,428,000 $ .09 - $.25 $ .18
============= =====
Options expired (676,982) $ .09 - $2.50 $ .42
--------- ============= =====
Outstanding at June 30, 2005 3,646,500 $ .01 - $.25 $ .11
========= ============= =====
Exercisable at June 30, 2005 3,646,500 $ .01 - $ .25 $ .11
========= ============= =====
At December 31, 2004, the Company had 425,000 warrants outstanding at an average
exercise price of $2.50 per share. During the six months ended June 30, 2005,
350,000 warrants expired. At June 30, 2005, the Company had 75,000 warrants
outstanding at an average exercise price of $2.40.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123 -"Accounting for Stock-Based Compensation, "
and, accordingly, does not recognize compensation cost for stock option grants
under fixed awards. If the Company had elected to recognize compensation costs
based on the fair value of the options granted at grant date as prescribed by
SFAS No.123, net income (loss) and income (loss) per share from continuing
operations would have changed as follows:
9
Three Months Ended
June 30,
--------
Results of Operations 2005 2004
---------- ----------
Net income (loss)-as reported (000's) $ (67) $ 35
Total stock based employee compensation
expense determined under the fair value
method for all awards (000's) $ (119) $ (8)
---------- ----------
Net income (loss) - pro forma (000's) $ (186) $ 27
========== ==========
Income (loss) per share as reported-basic and diluted $ (.00) $ .00
========== ==========
Income (loss) per share pro forma-basic and diluted $ (.01) $ .00
========== ==========
Six Months Ended
June 30,
--------
Results of Operations 2005 2004
---------- ----------
Net income (loss)-as reported (000's) $ 54 $ (211)
Total stock based employee compensation
expense determined under the fair value
method for all awards (000's) $ (251) $ (15)
---------- ----------
Net loss- pro forma (000's) $ (197) $ (226)
========== ==========
Income (loss) per share as reported-basic and diluted $ .00 $ (.02)
========== ==========
Loss per share pro forma-basic and diluted $ (.01) $ (.02)
========== ==========
Note 5. Business Segments
Prior to 2002, our business was organized, managed and internally reported as
three segments. The segments were determined based on differences in products,
production processes and internal reporting. During the fourth quarter of 2002,
our contract with DARPA was terminated and as a result of the termination,
management decided to suspend the activities of the Photonics Group in 2002 and
liquidate the remaining assets. During the fourth quarter of the year ended
December 31, 2003, we approved the sale of the assets and certain liabilities of
our Laser Fare, Inc. subsidiary, referred to as the Laser Group. As a result, in
accordance with FASB 144, the disposal of the Plastics, Photonics, and Laser
segments have been accounted for as disposals of business segments and
accordingly, the respective assets and liabilities have been segregated from
continuing operations and classified as assets and liabilities of discontinued
operations and the operating results for all three segments are segregated and
reported as discontinued operations.
Beginning in 2003, we revised our business strategy and began operating our
newly formed IT Services Group.
10
All of our business segments operate entirely within the United States. Revenues
from customers in foreign countries are minimal. Transactions between reportable
segments are recorded at cost. We rely on inter-segment cooperation and
management does not represent that these segments, if operated independently,
would report the results shown. A summary of selected consolidated information
for our industry segments during the periods ended June 30, 2005 and 2004,
respectively, is set forth as follows.
------------------------------ ----------- ----------- ----------- -----------
IT Services
Photonics Group Laser Group Group Consolidated
------------------------------ ----------- ----------- ----------- -----------
Three Months ended June 30, 2004
------------------------------ ----------- ----------- ----------- -----------
Sales to unaffiliated $ -- $ -- $ 1,269,388 $ 1,269,388
customers
------------------------------ ----------- ----------- ----------- -----------
Operating income $ -- $ -- $ 40,233 $ 40,233
------------------------------ ----------- ----------- ----------- -----------
Income (loss) from
discontinued operations $ (19,752) $ 33,690 $ -- $ 13,938
------------------------------ ----------- ----------- ----------- -----------
Three Months ended June 30, 2005
------------------------------ ----------- ----------- ----------- -----------
Sales to unaffiliated
customers $ -- $ -- $ 2,009,823 $ 2,009,823
------------------------------ ----------- ----------- ----------- -----------
Operating (loss) $ -- $ (46,486) $ (1,395) $ (47,881)
------------------------------ ----------- ----------- ----------- -----------
Income (loss) from
discontinued operations $ 4,979 $ -- $ -- $ 4,979
------------------------------ ----------- ----------- ----------- -----------
------------------------------ ----------- ----------- ----------- -----------
IT Services
Photonics Group Laser Group Group Consolidated
------------------------------ ----------- ----------- ----------- -----------
Six Months ended June 30, 2004
------------------------------ ----------- ----------- ----------- -----------
Sales to unaffiliated
customers $ -- $ -- $ 1,829,823 $ 1,829,823
------------------------------ ----------- ----------- ----------- -----------
Operating loss $ -- $ -- $ (98,917) $ (98,917)
------------------------------ ----------- ----------- ----------- -----------
Income (loss) from
discontinued operations $ (59,930) $ (14,801) $ -- $ (74,731)
------------------------------ ----------- ----------- ----------- -----------
Six Months ended June 30, 2005
------------------------------ ----------- ----------- ----------- -----------
Sales to unaffiliated
customers $ -- $ -- $ 4,134,550 $ 4,134,550
------------------------------ ----------- ----------- ----------- -----------
Operating income
(loss) $ -- $ (48,087) $ 138,453 $ 90,366
------------------------------ ----------- ----------- ----------- -----------
Income (loss) from
discontinued operations $ 12,233 $ -- $ -- $ 12,233
------------------------------ ----------- ----------- ----------- -----------
11
Note 6. Supplemental Cash Flow Information
Non-cash investing and financing transactions, including non-monetary exchanges,
consist of the following:
Six Months Ended
June 30,
--------
2005 2004
----------- -----------
Conversion of accounts payable to common
stock $ 2,250 $ --
=========== ===========
Common stock authorized not issued,
transferred to issued $ -- $ 75,000
=========== ===========
Purchase of equipment through long-term
lease obligation $ -- $ 45,120
=========== ===========
Note 7. Earnings Per Share
Basic income per share is based on the weighted average number of common shares
outstanding during the periods presented. Diluted income per share is based on
the weighted average number of common shares outstanding, as well as dilutive
potential common shares which, in our case, comprise shares issuable under the
stock options and stock warrants. 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 assumed to be exercised.
In a loss year, 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 earnings per
share for those periods with net income from continuing operations as follows:
Six Months Three Months
Ended Ended
June 30, 2005 June 30, 2004
------------- -------------
Numerator:
Income available to common stockholders
from continuing operations $ 53,790 $ 20,668
============= =============
Weighted average shares outstanding 18,910,805 13,769,822
============= =============
Denominator for diluted income per share:
Weighted average shares outstanding 18,910,805 13,769,822
Common stock options and stock warrants 1,270,778 1,037,397
------------- -------------
Weighted average shares and conversions 20,181,583 14,807,219
============= =============
For the three months ended June 30, 2005 and six months ended June 30, 2004 all
outstanding stock options and warrants have not been considered common stock
equivalents because their assumed exercise would be anti-dilutive.
12
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
On January 3, 2003, our former president and chief executive officer, Clifford
G. Brockmyre II, resigned and was replaced by Michael S. Smith, one of our board
members. At the same time, we moved our corporate headquarters from Rhode Island
to Rochester, New York. On May 6, 2003, Dr. Allan Robbins and Paul Delmore were
appointed to fill two existing vacancies on our board. Mr. Brockmyre remained on
our board of directors until October 30, 2003 at which time he resigned. On
March 15, 2004, Brian Corridan resigned from our board.
In the fourth quarter of 2003, we decided to dispose of our Laser Fare, Inc.
subsidiary (LF) and to restructure our business. We sold a portion of the
business of LF (primarily the medical and engraving business) as of December 31,
2003 and the remaining business as of December 31, 2004, although we continued
to operate the business during the disposal process.
The purchase price for the assets consisted of LFI's assumption of certain of
our liabilities in the aggregate amount of approximately $358,000. On December
31, 2004, we sold the remaining assets of LF to Rolben Acquisition Corporation
(Rolben), a company affiliated with LFI. The purchase price for the remaining
assets consisted of Rolben's assumption of substantially all of the liabilities
of LF and the delivery of promissory notes in the aggregate amount of
approximately $2.1 million. Because certain required consents were not yet
obtained at December 31, 2004, we remained obligated under several notes to UPS
Capital Business Credit (UPS) and the Rhode Island Industrial Facilities
Corporation (RIIFC) in the same amounts as the notes from Rolben. In May 2005,
the UPS and RIIFC notes were paid in full and we were released from all of our
obligations thereunder. At the same time, the notes from Rolben to us
terminated.
During the second quarter of 2003, we commenced providing services in the field
of information technology (IT) consulting services through our IT Services
Group. We provide business and technology integration and systems support to
government clients. We focus on aligning business processes with technology for
delivery of solutions meeting the client's exact needs.
Results of Operations
Comparison of Three Months ended June 30, 2005 and 2004
We commenced the operations of our IT services Group in the second quarter of
2003. The trends suggested by the following table are not necessarily indicative
of future operating results due to the startup nature of our IT Services Group.
13
Three Months Ended June 30,
---------------------------
As a % of Net As a % of Net Increase
2005 Revenues 2004 Revenues (Decrease)
----------- ----- ---------- ------ -------
Sales $ 2,009,823 100.0% $ 1,269,388 100.0% 58.3%
Cost of sales 1,371,147 68.2 833,965 65.7 64.4
----------- ----- ---------- ------ -------
Gross profit 638,676 31.8 435,423 34.3 46.7
----------- ----- ---------- ------ -------
General and administrative 399,711 19.9 310,775 24.5 28.6
Depreciation and amortization 12,568 0.6 5,911 0.5 112.6
Write-off of capitalized financing costs 44,857 2.2 -- 0.0
Selling 139,178 6.9 4,195 0.3 3,217.7
Research and development 90,243 4.5 74,309 5.9 21.4
----------- ----- ---------- ------ -------
Total operating expenses 686,557 34.2 395,190 31.1 73.7
----------- ----- ---------- ------ -------
Operating income( loss) (47,881) (2.4) 40,233 3.2 (219.0)
Other income (expense) and income taxes, net (24,172) (1.2) (19,565) (1.5) (23.5)
----------- ----- ---------- ------ -------
Income (loss) from continuing operations (72,053) (3.6) 20,668 1.6 (448.6)
Income from discontinued operations 4,979 0.2 13,938 1.1 (64.3)
----------- ----- ---------- ------ -------
Net income (loss) $ (67,074) (3.3)% $ 34,606 2.7% (293.8)%
=========== ===== ========== ====== =======
Sales
Sales for the three months ended June 30, 2005 were $2,009,823 which was a
substantial increase of $740,435 or 58.3% as compared to sales for the three
months ended June 30, 2004 of $1,269,388. The increase was due to the continued
development of our IT Services Group, which began operations in the second
quarter of 2003. We realized sales increases in 2005 from new and expanded
contracts with prime contractors for the U.S. Government.
Cost of Sales and Gross Profit
Cost of sales represents the cost of employee services related to the IT
Services Group. Cost of sales for the three months ended June 30, 2005 was
$1,371,147 or 68.2% of sales as compared to $833,965 or 65.7% of sales for the
three months ended June 30, 2004. Gross profit was $638,676 or 31.8% of sales
for the three months ended June 30, 2005 compared to $435,423 or 34.3% of sales
from the three months ended June 30, 2004. We experienced a decrease in gross
profit margin as a percent of sales due to the competitive nature of our
business, which generally provides for lower gross profit margins on larger
sales volume contracts. As the mix of different projects changes, our gross
profit margin changes. In the future we may submit bids on new work with lower
gross profit margins to generate opportunities for long-term, larger volume
contracts and more stable sales.
General and Administrative Expenses
General and administrative expenses include corporate overhead such as
compensation and benefits for administrative and finance personnel, rent,
insurance, professional fees, travel, and office expenses. General and
administrative expenses for the three months ended June 30, 2005 were $399,711
which was an increase of $88,938 or 28.6% as compared to $310,775 for the three
months ended June 30, 2004. As a percentage of sales, general and administrative
expenses were 19.9 % for the three months ended June 30, 2005 as compared to
24.5% for the three months ended June 30, 2004. We anticipate that general and
administrative expenses will increase as we continue to grow our business and
incur travel and other expenses associated with managing a larger business. We
also experienced increases in accounting and legal expenses in 2005 due to our
focus on completing audits of our financial statements and related regulatory
filings.
14
General and administrative expenses include expenses (including professional
services and interest costs) associated with the Osley & Whitney defined benefit
retirement plan of approximately $48,000 and $54,000 for the three months ended
June 30, 2005 and 2004, respectively.
Depreciation and Amortization
Depreciation and amortization expense was $12,568 for the three months ended
June 30, 2005 compared to $5,911 for the three months ended June 30, 2004. This
increase is due to depreciation of equipment and software that were added in
2004 and 2005.
Write-off of Capitalized Closing Costs
In the second quarter of 2005, the buyer of the assets and businesses of LF
obtained new bank financing. The buyer paid all of its notes receivables to us,
which proceeds were used to pay off all of LF's bank promissory notes and LF's
capital lease obligation. As a result we wrote off the balance of LF's
capitalized financing costs of $44,857.
Selling Expenses
For the three months ended June 30, 2005 we incurred selling expenses of
$139,178 associated with growing business in our IT Services Group as compared
to $4,195 for the three months ended June 30, 2004. We added new employees and
changed the work assignment of one employee in the second quarter of 2005 to
focus on generating new sales leads and new contract opportunities. We expect
that selling expenses will increase as we devote more resources to increasing
our sales.
Research and Development
For the three months ended June 30, 2005 we continued to incur research and
development expenses associated with growing business in our IT Services Group
related to our biometrics applications and recorded $90,243 of expense compared
to $74,309 for the three months ended June 30, 2004. These expenses are
principally related to the development of an access control terminal and related
software called TouchThru(TM). TouchThru(TM) is a self-contained terminal
enabling physical access control using biometric identification. It incorporates
fingerprint matching technology licensed from Ultra-Scan Corporation, a private
technology company headquartered in Buffalo, New York. TouchThru(TM) will be the
first biometric product we introduce, and we intend to be in a position to
market and sell that product beginning in 2006. We plan to market and sell
TouchThru(TM) in a variety of industries and markets, including the federal,
state and local government, health care, travel and general security, and access
control.
Operating Income (Loss)
The non-recurring write off of capitalized financing costs of $44,857 recorded
in the three months ended June 30, 2005 had a significant impact in the
reduction of net operating income from $40,233 for the three months ended June
30, 2004 to a net operating loss of $47,881 for the three months ended June 30,
2005. For the three months ended June 30, 2005, we experienced increases in
operating expenses of $291,367 as discussed above, offset in part by an
improvement in gross margin of $203,253.
15
Other Income (Expense)
Other income and expense consists of interest expense on indebtedness for the
three months ended June 30, 2005. Interest expense was $56,365 (including
$32,193 of interest expense on notes payable of LF) for the three months ended
June 30, 2005 compared to interest expense of $19,565 for the three months ended
June 30, 2004, which was an increase of $36,800. This increase is principally
offset by $32,193 of interest income from the notes receivable due from the
buyer of LF's businesses.
Income (Loss) from Discontinued Operations
We recorded income from discontinued operations of $4,979 for the three months
ended June 30, 2005 compared to income of $13,938 for the three months ended
June 30, 2004. The income is the result of the Laser Group and the Photonics
Group which were reclassified as discontinued operations.
Net Income (Loss)
For the three months ended June 30, 2005, we recorded a loss from continuing
operations of $72,053 or breakeven per share, and a net loss of $67,074 or
breakeven per share. This compares to net income from continuing operations of
$20,668 or breakeven per share and a net income of $34,606, or breakeven per
share for the three months ended June 30, 2004. The decrease in profitability is
attributable to the write off of capitalized financing costs of $44,857 and
increases in other expenses, especially selling expenses during the three months
ended June 30, 2005.
Comparison of Six Months ended June 30, 2005 and 2004
The following table compares our statements of operations data for the first six
months of 2005 and 2004. We commenced the operations of our IT Services Group in
the second quarter of 2003. The trends suggested by this table are not
indicative of future operating results due to the startup nature of our IT
Services Group, our termination of the DARPA contract and our decision to sell
the business of our Laser Group and focus on our IT Services Group.
Six Months Ended June 30,
---------------------------
As a % of Net As a % of Net Increase
2005 Revenues 2004 Revenues (Decrease)
------------- ---------- ------------- ------------- -------------
Sales $ 4,134,550 100.0% $ 1,829,823 100.0% 126.0%
Cost of sales 2,886,028 69.8 1,193,950 65.2 141.7
------------- ---------- ------------- ------------- -------------
Gross profit 1,248,522 30.2 635,873 34.8 96.3
------------- ---------- ------------- ------------- -------------
General and administrative 787,554 19.0 574,954 31.4 37.0
Depreciation and amortization 23,749 0.6 12,517 0.7 89.7
Write-off of capitalized financing costs 44,857 1.1 -- 0.0
Selling 140,072 3.4 4,364 0.2 3,109.7
Research and development 161,924 3.9 142,955 7.8 13.3
------------- ---------- ------------- ------------- -------------
Total operating expenses 1,158,156 28.0 734,790 40.2 57.6
------------- ---------- ------------- ------------- -------------
Operating income (loss) 90,366 2.2 (98,917) (5.4) 191.4
Other income (expense) and income taxes, net (48,809) (1.2) (37,003) (2.0) (31.9)
------------- ---------- ------------- ------------- -------------
Income (loss) from continuing operations 41,557 1.0 (135,920) (7.4) 130.6
Income (loss) from discontinued operations 12,233 0.3 (74,731) (4.1) 116.4
------------- ---------- ------------- ------------- -------------
Net income (loss) $ 53,790 1.3% $ (210,651) (11.5)% 125.5%
------------- ---------- ------------- ------------- -------------
16
Sales
Sales for the six months ended June 30, 2005 increased substantially by
$2,304,727 or 126% to $4,134,550 as compared to sales for the six months ended
June 30, 2004 of $1,829,823. The increase was due to the continued development
of our IT Services Group, which began operations in the second quarter of 2003.
We realized sales increases from new and expanded contracts with prime
contractors for the U.S. Government.
Cost of Sales and Gross Profit
Cost of sales represents the cost of employee services related to the IT
Services Group. Cost of sales for the six months ended June 30, 2005 was
$2,886,028 or 69.8% of sales as compared to $1,193,950 or 65.2% of sales for the
six months ended June 30, 2004. Gross profit was $1,248,522 or 30.2% of sales
for the six months ended June 30, 2005 compared to $635,873 or 34.8% of sales
for the six months ended June 30, 2004. We experienced a decrease in gross
profit margin as a percent of sales due to the competitive nature of our
business, which generally provides for lower gross profit margins on larger
sales volume contracts. As the mix of different projects changes, our gross
profit margin changes. In the future we may submit bids on new work with lower
gross profit margins to generate opportunities for long-term, larger volume
contracts and more stable sales.
General and Administrative Expenses
General and administrative expenses include corporate overhead such as
compensation and benefits for administrative and finance personnel, rent,
insurance, professional fees, travel, and office expenses. General and
administrative expenses for the six months ended June 30, 2005 increased by
$212,600 or 37.0% due to the increases in employee compensation and related
fringe benefits expenses as well as increased operating expenses as we manage a
larger volume of business. As a percentage of sales, general and administrative
expense was 19.0% for the six months ended June 30, 2005 and 31.4% for the six
months ended June 30, 2004. We anticipate that general and administrative
expenses will increase as we continue to implement our business strategy and
incur travel and other expenses associated with managing a larger business. We
experienced increases in accounting and legal expenses in 2005 due to our focus
on completing audits of our financial statements and related regulatory filings.
General and administrative expenses include expenses (including professional
services and interest costs) associated with the Osley & Whitney defined benefit
retirement plan of approximately $123,000 and $108,000 for the six months ended
June 30, 2005 and 2004, respectively.
Depreciation and Amortization
Depreciation and amortization expense was $23,949 for the six months ended June
30, 2005. Beginning in the second quarter of 2003, we purchased equipment
related to our Rochester headquarters office, acquired a technology license and
capitalized software development costs related to our TouchThru TM products. The
increase is due to depreciations and amortization of these assets.
Write-off of Capitalized Closing Costs
In the second quarter of 2005, the buyer of the assets and businesses of LF
obtained new bank financing. The buyer paid all of its notes receivable to us,
which proceeds were used to pay off all of LF's bank promissory notes and LF's
capital lease obligation. As a result we wrote off the balance of LF's
capitalized financing costs of $44,857.
17
Selling Expenses
For the six months ended June 30, 2005 we incurred selling expenses of $140,072
associated with growing business in our IT Services Group compared to $4,364 for
the six months ended June 30, 2004. We expect that selling expenses will
increase in the future as we hire additional personnel and expand our
development of new contract opportunities. We added new employees and changed
the work assignment of one employee in the second quarter of 2005 to focus on
generating new sales leads and new contract opportunities.
Research and Development
For the six months ended June 30, 2005 we continued to incur research and
development expenses associated with growing business in our IT Services Group
related to our biometrics applications and recorded $161,924 of expense compared
to $142,955 for the six months ended June 30, 2004. These expenses are
principally related to the development of an access control terminal and related
software called TouchThru(TM). TouchThru(TM) is a self-contained terminal
enabling physical access control using biometric identification. It incorporates
fingerprint matching technology licensed from Ultra-Scan Corporation, a private
technology company headquartered in Buffalo, New York. TouchThru(TM) will be the
first biometric product we introduce, and we intend to be in a position to
market and sell that product beginning in 2006. We plan to market and sell
TouchThru(TM) in a variety of industries and markets, including the federal,
state and local government, health care, travel and general security, and access
control.
Operating Income (Loss)
For the six months ended June 30, 2005 our operating income was $90,366 compared
to a $98,917 loss from operations in the comparable period of 2004. This is
primarily attributable to our focus on our new IT Services Group and the growth
of IT sales which provided gross profit of $1,248,522, an increase of $612,649
over the six months ended June 30, 2004, to fund research and development,
general and administrative expenses and interest expenses. Operating expenses
were $1,158,156, for the six months ended June 30, 2005, an increase of $423,366
over the six months ended June 30, 2004.
Other Income (Expense)
Other income and expense consists of interest expense on indebtedness for the
six months ended June 30, 2005. Interest expense was $113,764 (including $66,255
of interest expense on notes payable of LF) for the six months ended June 30,
2005 compared to $36,653 for the six months ended June 30, 2004. The increase of
$77,111 is principally offset by $66,255 of interest income from the notes
receivable due from the buyer of LF's business. Interest expense for notes
payable to related parties increased by $7,680 to $44,333 due to an increase in
the average outstanding principal balance of notes payable to related parties.
Income (Loss) from Discontinued Operations
We recorded income from discontinued operations of $12,233 for the six months
ended June 30, 2005 compared to a loss of $74,731 for the six months ended June
30, 2004. These results are from the Laser Group and the Photonics Group which
were reclassified as discontinued operations.
18
Net Income (Loss)
For the six months ended June 30, 2005, we recorded income from continuing
operations of $41,557, or breakeven per share and net income of $53,790 or
breakeven per share. This compares to a net loss from continuing operations of
$135,920 or $(.01) per share and a net loss of $210,651 or $(.02) per share (the
difference of $(.01) per share is from discontinued operations) for the six
months ended June 30, 2004. The improvement in profitability is attributable to
growth of sales and gross profit from our expanding IT Services which allowed us
to fund our research and development, general and administrative, and interest
expenses.
Liquidity and Capital Resources
As of June 30, 2005 we had unrestricted cash of $338,205, which is available for
working capital and property and equipment acquisitions. Approximately $220,000
of this cash was used to fund June 2005 payroll accruals which were paid in July
2005.
At June 30, 2005 we had working capital of $97,843. In previous periods we
reported a working capital deficit. The improvement from a deficit of $1,972,840
at December 31, 2004 is a result of the buyer of the assets and businesses of LF
obtaining new bank financing and paying off all of LF's notes receivable, which
proceeds were used to pay off LF's bank promissory notes and capital lease
obligation (which were all classified as current liabilities due to violations
of certain loan covenants).
We have financed the activity of our new IT Services Group through the issuance
of notes payable to related parties, private placements of common stock and
financing of our accounts receivable. In the future, we may issue additional
debt or equity securities to satisfy our cash needs. Any debt incurred or issued
may be secured or unsecured, at a fixed or variable interest rates and may
contain other terms and conditions that our board of directors deems prudent.
Any sales of equity securities may be at or below current market prices. We
cannot assure you that we will be successful in generating sufficient capital to
adequately fund our working capital needs.
Risk Factors
You should consider the risk factors included in our annual report on Form
10-KSB for the year ended December 31, 2004 in evaluating our business and us.
Additional risks and uncertainties not presently known to us, which we currently
deem immaterial or that are similar to those faced by other companies in our
industry or business in general, such as competitive conditions, may also impair
our business operations. If any of the results of the risks occur, our business,
financial condition, or results of operations could be materially adversely
affected.
19
Item 3. 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, providing
them with material information relating to the company as required to be
disclosed in the reports we file or submit under the Exchange Act on a timely
basis.
Changes in Internal Control over Financial Reporting. There were no changes in
our internal controls over financial reporting, known to our chief executive
officer and chief financial officer, that occurred during our fiscal second
quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
20
PART II
OTHER INFORMATION
Item 1: Legal Proceedings.
We are the plaintiff in a lawsuit filed in the Superior Court, State of Rhode
Island on August 13, 1999 captioned Infinite Group, Inc. vs. Spectra Science
Corporation and Nabil Lawandy. In the action, we assert that by fraud and in
breach of fiduciary duties owed, Spectra and its president, Nabil Lawandy,
caused us to sell to Spectra shares of Spectra's Series A Preferred stock at a
substantial discount to fair market value. We allege that in entering into the
transaction we relied on various representations made by Spectra and Mr.
Lawandy, which were untrue at the time they were made. In the action, we seek
compensatory damages in the amount of $500,000 plus statutory interest, punitive
damages as well as an award of attorney's fees and costs. One of Spectra's
counterclaims was dismissed by the court in response to our motion for summary
judgment. The trial was completed in February 2005. The jury returned a verdict
and judgment in our favor in the amount of approximately $600,000. We have filed
a notice of appeal with respect to the damages portion of the verdict. On June
1, 2005, Spectra voluntarily dismissed with prejudice its remaining pending
counterclaim against us. We have entered into an escrow agreement with the
defendants pursuant to which approximately $600,000, representing the amount of
the judgment has been deposited. Withdrawal of the funds will be permitted only
upon the date that judgment, in the matter, becomes a final non-appealable
decision, or earlier upon the written agreement of all parties.
We are the respondent in an arbitration proceeding filed on December 10, 2002
captioned J. Terrence Feeley v. Infinite Group, Inc. Claimant, a former employee
and former member of our board of directors, alleges that the parties entered
into a consulting agreement dated June 27, 2002 relative to the early
termination of claimant's employment requiring certain cash payments to be made.
Claimant alleges that we have failed or refused to make such cash payments and
have breached the agreement and seeks all monies owed to him, said amount
alleged to be approximately $130,000. We answered the claim by admitting that a
letter agreement was entered into but denied all of the remaining allegations.
We also filed a counterclaim in the arbitration proceeding. We filed a related
claim against Mr. Feeley in the Superior Court, State of Rhode Island on
September 5, 2003. We claim that he breached certain provisions of his
employment agreement, breached fiduciary duties he owed to us and violated
several provisions of the June 27, 2002 letter agreement. We seek compensatory
damages in amounts to be shown at trial, and preliminary and permanent
injunctive relief and other relief as may be appropriate.
Mr. Feeley's arbitration claims are pending before the American Arbitration
Association and an arbitrator selected by the parties. Our claims against Mr.
Feeley are pending in the Rhode Island Superior Court. In January of 2004, the
parties agreed to stay arbitration proceedings and to mediate all the disputes
under procedures available through the Superior Court. To date, neither party
has initiated mediation proceedings.
Other than the foregoing proceeding, we are not a party to any material legal
proceeding.
21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits.
a. Exhibits:
Exhibit No. Description
----------- -----------
31.1 Certification of Chief Executive Officer and 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.
22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Infinite Group Inc.
-------------------
(Registrant)
Date: August 11, 2005 /s/ Michael S. Smith
--------------------
Chief Executive Officer
Date: August 11, 2005
/s/ Michael S. Smith
--------------------
Chief Financial Officer
(Principal Financial Officer)
23