UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30,2022~~June 30, 2023

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐

~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~ For the transition period from ________ to ________

Commission file number: 000-21816

INFINITE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

52-1490422

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

175 Sully’s Trail, Suite 202, Pittsford, New York		14534
(Address of principal executive offices)		(Zip Code)

(585) 385-0610

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act

Title of each class

Trading

Symbol

Name of each exchange

on which registered

N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☐ No ☐☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filer	☐
Non-accelerated ~~Filer~~filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The Registrant had ~~453,263~~521,175 shares of the issuer’s common stock, par value $.001 per share, outstanding as of ~~November 14, 2022.~~October 10, 2023.

Infinite Group, Inc.

Quarterly Report on Form 10-Q

For the Period Ended ~~September~~June 30, ~~2022~~2023

~~Table of Contents~~

Table of Contents					~~PAGE~~

PART I - FINANCIAL INFORMATION			PAGE

Item 1.	Financial Statements		4

	Balance Sheets – ~~September~~June 30, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022		4

	Statements of Operations (Unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022		5

	Statements of ~~Changes in~~ Stockholders’ Deficiency (Unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022		6

	Statements of Cash Flows (Unaudited) for the ~~nine~~three and six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022		7

	Notes to Financial Statements – (Unaudited)		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		23

Item 4.	Controls and Procedures		23

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings		24

Item 1A.	Risk Factors		24

~~Item 2~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~		25

Item 3	Defaults Upon Senior Securities.		26	24

Item 6.	Exhibits		26	24

SIGNATURES		27	25

Table of Contents

FORWARD-LOOKING STATEMENTS

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements.” All statements other than statements of historical facts contained in this report, including among others, our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth and trends are forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” ~~“targets,~~“target,” “potential,” “is likely,” “will,” ~~“expect,” “seek”~~“expect” and similar expressions are intended to identify forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the expansion of our business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Therefore, you should not rely on any of these forward-looking statements. All forward-looking statements in this report are made only as of the date hereof or as indicated and represent our views as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise, except as required by law. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report, our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, and our other filings with the Securities and Exchange Commission (the “SEC”). The terms “IGI”, the “Company”, “we”, “our”, “us”, or any derivative thereof, as used herein refer to Infinite Group, Inc., a Delaware corporation.

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

~~INFINITE GROUP, INC.~~

~~BALANCE SHEETS~~

INFINITE GROUP, INC.								INFINITE GROUP, INC.
BALANCE SHEETS								BALANCE SHEETS

ASSETS	ASSETS							ASSETS

		September 30,			December 31,				June 30,			December 31,
		2022			2021				2023			2022
		(Unaudited)							(Unaudited)
Current assets:
Cash		$	6,584		$	99,432			$	17,339		$	23,187
Accounts receivable, net of allowances of $14,710 and $9,710, as of September 30, 2022 and December 31, 2021, respectively			585,825			727,297
Accounts receivable, net of allowances for expected credit losses of 32,692
as of June 30, 2023 and $36,710 as of December 31, 2022, respectively										212,890			406,005
Prepaid expenses and other current assets			177,475			218,821				462,260			144,218
Total current assets			769,884			1,045,550				692,489			573,410

Right of Use Asset Operating Lease, net			664,980			41,490				604,366			645,095
Property and equipment, net			25,436			41,138				11,640			19,996
Software, net			422,882			417,650				420,897			417,325
Deposits			10,144			6,937				10,144			10,144
Total assets		$	1,893,326		$	1,552,765			$	1,739,536		$	1,665,970

LIABILITIES AND STOCKHOLDERS' DEFICIENCY	LIABILITIES AND STOCKHOLDERS' DEFICIENCY							LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
Accounts payable		$	1,293,870		$	536,863			$	1,605,944		$	1,687,579
Accrued payroll			346,658			425,839				420,602			386,289
Accrued interest payable			955,107			594,241				1,301,144			783,581
Accrued retirement			283,767			275,422				292,366			286,605
Deferred revenue			514,327			497,734				451,738			550,523
Accrued expenses other and other current liabilities			229,455			167,310				230,336			138,639
Current maturities of long-term obligations										549,000			515,000
Operating lease liability - Short-term			74,911			42,347				80,762			76,826
Current maturities of long-term obligations			765,000			765,000
Current maturities of long-term obligations - related parties			295,000			190,000				659,300			385,000
Notes payable, net			1,247,617			383,824				1,491,004			1,572,857
Notes payable - related parties			229,000			229,000				199,000			229,000
Total current liabilities			6,234,712			4,107,580				7,281,196			6,611,899

Long-term obligations:
Notes payable:
Other			458,713			458,309				416,473			458,849
Related parties			974,664			1,084,765				499,000			886,876
Operating lease liability - Long-term			592,521			0
Operating lease liability - long-term										531,374			572,560
Total liabilities			8,260,610			5,650,654				8,728,043			8,530,184

Commitments and contingencies

Stockholders' deficiency:
Common stock, $.001 par value, 60,000,000 shares authorized; 453,263 and 436,125 as of September 30, 2022 and December 31, 2021, respectively, issued and outstanding.			453			436
Common stock, $.001 par value, 60,000,000 shares authorized; 506,608 and 470,093 shares issued and outstanding, June 30, 2023 and December 31, 2022, respectively.										507			470
Additional paid-in capital			31,888,350			31,369,036				32,324,991			32,164,334
Accumulated deficit			(38,256,087	)		(35,467,361	)			(39,314,005	)		(39,029,018	)
Total stockholders' deficiency			(6,367,284	)		(4,097,889	)			(6,988,507	)		(6,864,214	)
Total liabilities and stockholders' deficiency		$	1,893,326		$	1,552,765			$	1,739,536		$	1,665,970

See notes to unaudited financial statements.

Table of Contents

~~INFINITE GROUP, INC.~~

~~STATEMENTS OF OPERATIONS~~~~(Unaudited)~~

INFINITE GROUP, INC.													INFINITE GROUP, INC.
STATEMENTS OF OPERATIONS (Unaudited)													STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021				2023			2022			2023			2022

Revenue	$	1,712,212		$	1,836,740		$	5,075,774		$	5,458,586			$	1,783,476		$	1,696,492		$	3,547,469		$	3,363,562
Cost of revenue		1,060,872			1,136,931			3,241,751			3,319,069				998,215			1,059,639			1,964,421			2,180,879
Gross profit		651,340			699,809			1,834,023			2,139,517				785,261			636,853			1,583,048			1,182,683

Costs and expenses:
General and administrative		529,695			528,424			1,746,995			1,534,527				465,177			613,317			996,822			1,217,300
Selling		713,173			502,389			1,973,755			1,397,156				761,365			612,957			1,454,475			1,260,582
Total costs and expenses		1,242,868			1,030,813			3,720,750			2,931,683				1,226,542			1,226,274			2,451,297			2,477,882

Operating income (loss)		(591,528	)		(331,004	)		(1,886,727	)		(792,166	)
Operating loss															(441,281	)		(589,421	)		(868,249	)		(1,295,199	)

Other Income and Expense
Interest income		0			0			18			3
Other income (expense)
Interest Income															71,324			10			71,624			18

Interest expense:
Related parties		(22,765	)		(19,293	)		(68,907	)		(50,348	)			(30,755	)		(22,728	)		(57,700	)		(46,142	)
Other		(472,999	)		(40,014	)		(833,109	)		(116,530	)			(688,133	)		(221,061	)		(1,188,491	)		(360,111	)
Total interest expense		(495,764	)		(59,307	)		(902,016	)		(166,878	)			(718,888	)		(243,789	)		(1,246,191	)		(406,253	)

Other income (expense)		0			120,505			0			120,505
Debt forgiveness															95,131			0			95,131			0
ERC tax refund															1,662,698			0			1,662,698			0
Total other income (expense)		(495,764	)		61,198			(901,998	)		(46,370	)			1,110,265			(243,779	)		583,262			(406,235	)

Net loss	$	(1,087,292	)	$	(269,806	)	$	(2,788,725	)	$	(838,536	)
Net profit (loss)														$	668,984		$	(833,200	)	$	(284,987	)	$	(1,701,434	)

Net loss per share basic and diluted	$	(2.41	)	$	(0.67	)	$	(6.28	)	$	(2.14	)
Net profit (loss) per share – basic														$	1.35		$	(1.88	)	$	(0.59	)	$	(3.87	)

Weighted average shares outstanding basic		451,345			399,829			443,901			392,398
Net profit (loss) per share – diluted														$	1.07		$	(1.88	)	$	(0.59	)	$	(3.87	)

Weighted average shares outstanding diluted		451,345			399,829			443,901			392,398
Weighted average shares outstanding
– basic															494,960			443,953			483,243			440,004

Weighted average shares outstanding
– dilluted															638,776			443,953			483,243			440,004

See notes to unaudited financial statements.

Table of Contents

~~INFINITE GROUP, INC.~~

~~STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY (Unaudited)~~

~~Three and Nine Months Ended September 30, 2022 and 2021~~

~~Three and Nine Months Ended September 30, 2022~~

Additional

Common Stock

Paid-in

Accumulated

Shares

Amount

Capital

Deficit

Total

Balance - December 31, 2021

436,125

$ 436

$ 31,369,036

$ (35,467,361 )

$ (4,097,889 )

Stock based compensation

0

0

923

0

923

Warrants issued

0

0

148,334

0

148,334

Net loss

0

0

0

(868,234 )

(868,234 )

Balance - March 31, 2022

436,125

436

31,518,293

(36,335,595 )

(4,816,866 )

Exercise of warrants

11,470

11

(11 )

0

0

Stock based compensation

0

0

51,708

0

51,708

Warrants issued

0

0

210,816

0

210,816

Net loss

0

0

0

(833,200 )

(833,200 )

Balance - June 30, 2022

447,595

$ 447

$ 31,780,806

$ (37,168,795 )

$ (5,387,542 )

Exercise of stock options

5,668

6

16,994

0

17,000

Stock based compensation

0

0

90,550

0

90,550

Net loss

0

0

0

(1,087,292 )

(1,087,292 )

Balance - September 30, 2022

453,263

$ 453

$ 31,888,350

$ (38,256,087 )

$ (6,367,284 )

~~Three and Nine Months Ended September 30, 2021~~

Additional

Common Stock

Paid-in

Accumulated

Shares

Amount

Capital

Deficit

Total

Balance - December 31, 2020

387,600

$ 387

$ 30,792,391

$ (33,898,548 )

$ (3,105,770 )

Stock based compensation

0

0

28,248

0

28,248

Net loss

0

0

0

(152,227 )

(152,227 )

Balance - March 31, 2021

387,600

387

30,820,639

(34,050,775 )

(3,229,749 )

Issuance of common stock

3,334

3

58,122

0

58,125

Exercise of stock options

3,788

4

14,926

0

14,930

Stock based compensation

0

0

81,920

0

81,920

Net loss

0

0

0

(416,503 )

(416,503 )

Balance - June 30, 2021

394,722

$ 394

$ 30,975,607

$ (34,467,278 )

$ (3,491,277 )

Issuance of common stock

27,135

27

81,873

0

81,900

Exercise of stock options

0

0

7,296

0

7,296

Stock based compensation

0

0

0

0

0

Net loss

0

0

0

(269,806 )

(269,806 )

Balance - September 30, 2021

421,857

$ 421

$ 31,064,776

$ (34,737,084 )

$ (3,671,887 )

INFINITE GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY (Unaudited)
Six Months Ended June 30, 2023 and 2022

Six Months Ended June 30, 2023

					Additional
	Common Stock				Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total

Balance - December 31, 2022		470,093	$	470	$	32,164,334		$	(39,029,018	)	$	(6,864,214	)

Stock based compensation		0		0		26,159			0			26,159
Warrants issued		0		0		107,834			0			107,834
Cashless exercise of warrants		6,515		7		(7	)		0			0
Net loss		0		0		0			(953,971	)		(953,971	)

Balance - March 31, 2023		476,608	$	477	$	32,298,320		$	(39,982,989	)	$	(7,684,192	)

Stock Issued		30,000		30		26,671			0			26,701
Net income		0		0		0			668,984			668,984

Balance - June 30, 2023		506,608	$	507	$	32,324,991		$	(39,314,005	)	$	(6,988,507	)

Six Months Ended June 30, 2022

					Additional
	Common Stock				Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total

Balance - December 31, 2021		436,012	$	436	$	31,369,036		$	(35,467,361	)	$	(4,097,889	)

Stock based compensation		0		0		923			0			923
Warrants issued		0		0		148,334			0			148,334
Net loss		0		0		0			(868,234	)		(868,234	)

Balance - March 31, 2022		436,012	$	436	$	31,518,293		$	(36,335,595	)	$	(4,816,866	)

Stock based compensation		0		0		51,708			0			51,708
Warrants issued		0		0		210,816			0			210,816
Cashless exercise of warrants		11,470		11		(11	)		0			0
Net loss		0		0		0			(833,200	)		(833,200	)

Balance - June 30, 2022		447,482	$	447	$	31,780,806		$	(37,168,795	)	$	(5,387,542	)

See notes to unaudited financial statements.

Table of Contents

~~INFINITE GROUP, INC.~~

~~STATEMENTS OF CASH FLOWS (Unaudited)~~

INFINITE GROUP, INC.							INFINITE GROUP, INC.
STATEMENTS OF CASH FLOWS (Unaudited)							STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended September 30,							Six Months Ended June 30,
	2022			2021				2023			2022
Cash flows from operating activities:
Net loss	$	(2,788,725	)	$	(838,536	)		$	(284,987	)	$	(1,701,434	)
Adjustments to reconcile net loss to net cash used by operating activities:
Adjustments to reconcile net loss to net cash used
by operating activities:
Stock based compensation		143,181			117,464				26,159			52,631
Depreciation and amortization		178,471			136,533				124,154			117,686
Amortization of debt discount		453,892			0				635,960			255,042
Increase in accounts receivable allowance		5,000			(0)
Forgiveness of indebtedness		(0)			(120,505	)
Amortization of common stock expensed for services									8,517			0
Bad debt recovery									(4,018	)		0
Foregiveness of debt									(95,131	)		0
(Increase) decrease in assets:
Accounts receivable		136,472			221,406				197,132			76,894
Prepaid expenses and other assets		38,139			6,007				(299,859	)		17,394
Increase (decrease) in liabilities:
Accounts payable		757,007			172,175				(81,635	)		549,665
Deferred revenue		16,593			(55,270	)			(98,785	)		(22,334	)
Accrued expenses		352,521			268,450				663,654			12,014
Accrued retirement		8,345			8,020				5,761			5,536
Net cash used by operating activities		(699,104	)		(84,256	)
Net cash provided (used) by operating activities									796,922			(636,906	)

Cash flows from investing activities:
Purchase of property and equipment		(969	)		(12,437	)			(2,099	)		(969	)
Sale of ERC claim									1,413,294			0
Capitalization of software development costs		(165,436	)		(180,374	)			(113,790	)		(110,378	)

Net cash used by investing activities		(166,405	)		(192,811	)
Net cash provided (used) by investing activities									1,297,405			(111,347	)

Cash flows from financing activities:
Gross proceeds from notes payable		1,171,552			0
Proceeds from notes payable									257,645			918,900
Debt issuance costs		(166,697	)		0				(295,336	)		(53,445	)
Proceeds from notes payable - related parties		0			404,000
Repayment of notes payable - short-term		(249,194	)		0
Proceeds from the exercise of common stock options		17,000			96,830
Repayment of long-term obligations		0			(200,000	)
Repayment of ERC Claim Agreement									(1,662,698	)		0
Repayments of note payable-related parties									(30,000	)		0
Repayments of note payable-short-term									(369,786	)		(215,040	)

Net cash provided by financing activities		772,661			300,830
Net cash provided (used) by financing activities									(2,100,175	)		650,415

Net (decrease) increase in cash		(92,848	)		23,763
Net decrease in cash									(5,848	)		(97,838	)

Cash - beginning of period		99,432			32,313				23,187			99,432

Cash - end of period	$	6,584		$	56,076			$	17,339		$	1,594

Supplemental Disclosures of Cash Flow Information:
Cash payments for interest	$	91,521		$	66,908			$	248,549		$	54,826

Non-cash investing and financing activities:
Warrant issued in conjunction with debts								$	107,834		$	359,150
Common stock issued via exercise of warrant								$	7		$	11
Common stock issued in conjunction with services								$	30		$	0

See notes to unaudited financial statements.

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INFINITE GROUP, INC.

Notes to Financial Statements - (Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited financial statements of Infinite Group, Inc. (“Infinite Group, Inc.” or the “Company”) included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (U.S.) (“GAAP”) for interim financial information and with instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. The December 31, ~~2021~~2022 balance sheet has been derived from the audited financial statements at that date but does not include all disclosures required by GAAP. The accompanying unaudited financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the U.S. Securities and Exchange Commission (SEC). Results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, are not necessarily indicative of the operating results that may be expected for the year ending December 31, ~~2022.~~2023.

Note 2. Management Plans - Capital Resources

The Company reported net losses of ~~$2,788,725~~$284,987 and ~~$838,536~~$1,701,434 for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and stockholders’ deficiencies of ~~$6,367,284~~$6,988,507 and ~~$4,097,889~~$6,864,214 at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The Company ~~had~~has a working capital deficit of approximately ~~$5.46~~$6.6 million at ~~September~~June 30, ~~2022. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern within one year of issuance of the financial statements.~~2023.

The Company’s mission is to drive shareholder value by developing and bringing to market automated, cost effective, and innovative cybersecurity technologies. The Company’s strategy is to build its business by designing, developing, and marketing IT security-based products and solutions that fill technology gaps in cybersecurity.

The ~~Company’s~~Company's goal is to increase sales and generate cash flow from operations on a consistent basis. The Company’s business plans require improving the results of its operations in future periods. The Company has renegotiated the terms of some certain obligations, using operational cash flow to pay down balances and extending terms, and provided financing with the issuance of new loans.

At September 30, 2022, the Company is in default on principal and interest payments on the Mast Hill Fund, L.P. and Talos Victory Fund, LLC, financing arrangements. The noteholders have been notified of the failure to pay and have taken no action against the Company at this time.

During the first quarter of 2022, the Company filed an S-1 for a public offering of $15 million of common stock and redeemable warrants, a portion of the net proceeds of which was expected to be used for the Pratum Acquisition. Following the termination of the Pratum Agreement, the Company determined to proceed with the offering.

In October 2022, the Company filed an amended S-1 for a public offering of $15.3 million of common stock and redeemable warrants, which was expected to be used for working capital needs including software development and repayment of debt. The completion of this offering did not occur. The Company ~~is reevaluating its capital needs~~plans to issue stock, restructure certain debt and anticipates ~~that it will continue to scale down spending to reduce costs and to increase cash flow while continuing to grow the operations at a slower pace.~~significant growth of business.

The Company believes the capital resources generated by ~~anticipated~~the improving ~~operational~~ results ~~due to reduction~~ of ~~expenses, increased bookings and deposits in our Services business, and an influx of new Nodeware orders under contract at September 30, 2022~~its operations as well as cash available under its factoring line of credit and from additional ~~funding from the public~~related parties and ~~private markets including related party~~third-party loans, if needed, provide sources to fund its ongoing operations and to support the internal growth of the Company. The Company ~~is evaluating and is in process of extending~~may need to extend existing debt agreements in order to provide resources for other purposes. If the Company experiences significant growth in its sales, the Company believes that this may require it to increase its financing line, finance additional accounts receivable, or obtain additional working capital from other sources to support its sales growth.

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The Company plans to continue to evaluate alternatives which may include continuing to renegotiate the terms of other notes, seeking conversion of the notes to shares of common stock and seeking funds to repay the notes. The Company continues to evaluate repayment of ~~its~~our remaining notes payable based on its cash flow. ~~Therefore, unless~~

As a result, for the ~~Company~~foreseeable future, there is ~~successful with some of these alternatives, the~~ substantial doubt about ~~our~~the Company’s ability to continue as a going ~~concern will not be alleviated.~~concern.

Note 3. Summary of Significant Accounting Policies

There are several accounting policies that the Company believes are significant to the presentation of its financial statements. These policies require management to make complex or subjective judgments about matters that are inherently uncertain. Note 3 to the Company’s audited financial statements for the year ended December 31, ~~2021~~2022 presents a summary of significant accounting policies as included in the Company’s Annual Report on Form 10-K as filed with the SEC.

Reclassifications – It is the Company’s policy to reclassify prior year amounts to conform with the current year presentation.

Fair Value of Financial Instruments - The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, and accrued expenses approximate fair value because of the immediate short-term maturity of these financial instruments. The carrying value of notes payable and convertible notes payable approximates the fair value based on rates currently available from financial institutions and various lenders.

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Revenue

The Company’s total revenue recognized from contracts from customers was comprised of three major services: Managed support services, Cybersecurity projects, ~~software~~ and ~~Other IT consulting services.~~Software. The categories depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. There were no material unsatisfied performance obligations at ~~September~~June 30, ~~2022~~2023 or ~~2021~~2022 for contracts with an expected original duration of more than one year. The following table summarizes the revenue recognized by the major services:

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Managed support services

$ 1,138,418

$ 1,114,851

$ 3,343,032

$ 3,243,183

Cybersecurity projects and software

573,794

704,889

1,732,742

2,096,403

Other IT consulting services

0

17,000

0

119,000

Total sales

$ 1,712,212

$ 1,836,740

$ 5,075,774

$ 5,458,586

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

Managed support services

1,122,084

1,115,607

2,248,882

2,204,614

Cybersecurity projects

353,937

300,456

676,000

626,917

Software

307,455

280,429

622,587

532,031

Total Revenue

1,783,476

1,696,492

3,547,469

3,363,562

Managed support services

Managed support services consist of revenue primarily from our subcontracts with Peraton ~~(which purchased Perspecta in May 2021)~~ for services to its end clients, principally a major establishment of the U.S. Government for which we manage one of the nation’s largest physical and virtual Microsoft Windows environments.

We generate revenue primarily from these subcontracts through fixed price service and support agreements. Revenues are earned and billed weekly and are generally paid within 45 days. The revenues are recognized at time of service.

Cybersecurity projects ~~and software~~

Cybersecurity projects ~~and software revenue~~ includes ~~the selling of licenses of Nodeware® and third-party software, principally Webroot™ as well as~~ performing cybersecurity assessments, testing and consulting as a CISO (Chief Information Security Officer).

Nodeware® and Webroot™ software offerings consist of fees generated from the use of the respective software by our customers. Revenue is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Substantially all customers are billed in the month of the service and is cancellable upon notice per the respective agreements. Substantially all payments are electronically billed, and the billed amounts are paid to the Company instantaneously via an online payment platform. If payments are made in advance, revenue related to the term associated with our software licenses is recognized ratably over the contractual period.

Some of our customers have the option to purchase additional subscription and support services at a stated price. These options generally do not provide a material right as they are priced at our standalone selling price.

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Cybersecurity assessments and testing services are considered distinct performance obligations when sold stand alone or with other products. These contracts generally have terms of one year or less. For substantially all these contracts, revenue is recognized when the specific performance obligation is satisfied. If the contract has multiple performance obligations, the revenue is recognized when the performance obligations are satisfied. Depending on the nature of the service, the amounts recognized are based on an allocation of the transaction price to each performance obligation based on a relative standalone selling price of the products sold.

In substantially all agreements, a 50% to 75% down payment is required before work is initiated. Down payments received are deferred until revenue is earned. Upon completion of performance obligation of service, payment terms are 30 days.

~~Other IT consulting services~~Software

~~Other IT consulting services consists~~Software revenue includes the selling of licenses of Nodeware® and third-party software, principally Webroot™.

Nodeware and Webroot software offerings consist of fees generated from the use of the respective software by our customers. Revenue is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer. For Webroot, substantially all customers are billed in the month of the service and is cancellable upon notice per the respective agreements. The majority of Webroot billing is electronic, and those billed amounts are paid to the Company instantaneously via an online payment platform. For Nodeware, billings generally occur annually or monthly in advance of services ~~such as project management and general IT consulting services.~~for clients with recurring subscriptions. In some instances, billing is made monthly in arrears based on actual consumption in the prior month. For payments made in advance, revenue related to the term associated with our software licenses is recognized ratably over the contractual period.

We generate revenue via fixed price service agreements. These are based on periodic billings of a fixed dollar amount for recurring services of a similar nature performed according to the contractual arrangements with clients. The revenues are recognized at time of service.

Based on historical experience, the Company believes that collection is reasonably assured.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, sales to one client, including sales under subcontracts for services to several entities, accounted for ~~66.5% and 65.9%, respectively,~~63% of total sales ~~(60.7%~~in both periods, (65% for both periods in 2022) and ~~59.0%, respectively for the three and nine months ended September 30, 2021) and 11.0%~~27% of accounts receivable at ~~September~~June 30, ~~2022 (15.6%~~2023 (27% at December 31, ~~2021)~~2022).

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Capitalization of Software for Resale - The Company capitalizes the software development costs for software to be sold, leased, or otherwise ~~marketed.Capitalization~~marketed.Capitalization begins upon the establishment of technological feasibility of a new product or enhancements to an existing product, which is generally the completion of a working prototype that has been certified as having no critical bugs and is a release candidate. Costs incurred after the enhancement has reached technological feasibility and before it is released in the market are capitalized and are primarily labor costs related to coding and testing. Amortization begins once the software is ready for its intended use, generally based on the pattern in which the economic benefits will be consumed. Costs associated with major upgrade releases begin amortization in the month after release. The amortization period is three years. See Note 5 for further disclosure regarding capitalization of software for resale.

Leases - At contract inception, the Company determines whether the arrangement is or contains a lease and determines the lease classification. The lease term is determined based on the non-cancellable term of the lease adjusted to the extent optional renewal terms and termination rights are reasonably certain. Lease expense is recognized evenly over the lease term. Variable lease payments are recognized as period costs. The present value of remaining lease payments is recognized as a liability on the balance sheet with a corresponding right-of-use asset adjusted for prepaid or accrued lease payments. The Company uses its incremental borrowing rate for the discount rate, unless the interest rate implicit in the lease contract is readily determinable. The Company has adopted the practical expedients to not separate non-lease components from lease components and to not present short-term leases on the balance sheet. See Note 11 for further disclosure regarding lease accounting.

Recently Adopted Accounting Guidance - In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments”, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The adoption of this new accounting standard increased the reserve by approximately $21,600, which was deemed immaterial to adjust beginning accumulated deficit.

Note 4. Sale of Certain Accounts Receivable

The Company has available a financing line with a financial institution (the Purchaser), which enables the Company to sell accounts receivable to the Purchaser with full recourse against the Company. Pursuant to the provisions of FASB ASC 860, the Company reflects the transactions as a sale of assets and establishes an accounts receivable from the Purchaser for the retained amount less the costs and fees of the transaction and less any anticipated future loss in the value of the retained asset.

The retained amount is 10% of the total accounts receivable invoice sold to the Purchaser. The fee is charged at prime plus 3.6% (effective rate of ~~9.85%~~11.85% at ~~September~~June 30, ~~2022)~~2023) against the average daily outstanding balance of funds advanced. The estimated future loss reserve for each receivable included in the estimated value of the retained asset is based on the payment history of the accounts receivable customer and is included in the allowance for ~~doubtful accounts,~~expected credit losses, if any. As collateral, the Company granted the Purchaser a first priority interest in accounts receivable and a blanket lien, which may be junior to other creditors, on all other assets.

The financing line provides the Company the ability to finance up to $2,000,000 of selected accounts receivable invoices, which includes a sublimit for one of the Company’s customers of $1,500,000. During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company sold approximately ~~$3,098,000~~$1,916,000 ($~~2,471,000~~1,062,000 – ~~for the nine months ended September~~June 30, ~~2021)~~2022) of its accounts receivable to the Purchaser. As of ~~September~~June 30, ~~2022,~~2023, approximately ~~$228,000~~$343,000 ($~~148,000~~228,000 - December 31, ~~2021)~~2022) of these receivables remained outstanding. Additionally, as of ~~September~~June 30, ~~2022,~~2023, the Company had $0$20,000 available under the financing line with the Purchaser ($~~66,000~~144,000 at December 31, ~~2021)~~2022). After deducting estimated fees, allowance for ~~bad debts~~expected credit losses and advances from the Purchaser, the net receivable from the Purchaser amounted to approximately ~~$23,000~~$34,000 at ~~September~~June 30, ~~2022~~2023 ($~~15,000~~23,000 at December 31, ~~2021)~~2022), and is included in accounts receivable in the accompanying balance sheets.

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There were no gains or losses on the sale of the accounts receivable because all were collected. The cost associated with the financing line totaled ~~$38,128~~$9,838 for the ~~nine~~three months ended ~~September~~June 30, ~~2022~~2023 ($~~24,247~~12,195 – June 30, 2022). The cost associated with the financing line totaled $24,510 for the ~~nine~~six months ended ~~September~~June 30, ~~2021)~~2023 ($22,306 – June 30, 2022). These financing line fees are classified on the statements of operations as interest expense.

Note 5. Capitalization of Software for Resale

As of ~~September~~June 30, ~~2022,~~2023, there ~~were $844,410~~was $1,007,817 of costs capitalized ($~~678,973~~894,027 as of December 31, ~~2021)~~2022) and ~~$421,528~~$586,920 of accumulated amortization ($~~261,323~~472,702 as of December 31, ~~2021)~~2022). During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, there was ~~$53,402~~$49,389 and ~~$160,205~~$110,218, respectively, of amortization expense recorded ($~~42,291~~53,402 and ~~$117,085~~$106,803, respectively, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021)~~2022). Costs incurred prior to reaching technological feasibility are expensed as incurred. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, there was approximately ~~$55,100~~$15,000 and $165,400, respectively, of labor amounts capitalized related to these development costs ($59,200 and $176,200, respectively, for the three and nine months ended September 30, 2021). During the three and nine months ended September 30, 2022, there was approximately $13,405 and $29,521,$21,700, respectively, of labor amounts expensed related to these development costs ($~~43,800~~7,800 and ~~$131,500,~~$16,100, respectively ~~for the three and nine months ended September 30, 2021)~~in 2022).

Note 6. Deferred Revenue and Performance Obligations

Deferred Revenue

Deferred revenue, which is a contract liability, consists primarily of payments received and accounts receivable recorded in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met.

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Revenue recognized during the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, that was included in the deferred revenue balances at the beginning of the respective periods, was approximately ~~$201,600~~$123,000 and ~~$233,400,~~$136,000, respectively.

Revenue recognized during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022, that was included in the deferred revenue balances at the beginning of the respective periods was approximately ~~$331,500~~$307,000 and ~~$323,800,~~$278,000, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

Transaction price allocated to the remaining performance obligations represents all future, non-cancelable contracted revenue that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.

As of ~~September~~June 30, ~~2022,~~2023, total remaining non-cancelable performance obligations under the Company’s contracts with customers was approximately ~~$1,068,000.~~$882,000. The Company expects to recognize ~~$808,500~~all but approximately $90,000 of this revenue over the next 12 months.

Note 7. Debt Obligations

Mast Hill Loan #5 - On ~~November~~February 3, ~~2021, the Company~~2023, Infinite Group, Inc. (the “Company”), as borrower, entered into a financing arrangement (the ~~“First Mast Hill Loan”~~“Loan”) with Mast Hill Fund, L.P. ~~(“Mast Hill”~~(the “Lender”), a Delaware limited partnership. In exchange for a promissory note, ~~Mast Hill~~Lender agreed to lend the Company ~~$448,000,~~$118,000.00, which bears interest at a rate of eight percent (8%) per annum, less ~~$44,800~~$11,800.00 original issue discount. Under the terms of the ~~First Mast Hill~~ Loan, amortization payments ~~of $53,760, including principal~~are due beginning June 3, 2023, and interest, came due on February 3, 2022, and continue for each month thereafter with the final payment due on November 3, 2022. Debt issuance cost of $69,960 were incurred and are being amortized over a twelve-month period ending October 2022. At September 30, 2022, the Company paid the first three payments per the terms of the First Mast Hill Loan. 7.50 per share. At September 30, 2022, the principal and accrued interest amount was approximately $302,000.

During the nine months ended September 30, 2022, the Company entered into a financing arrangement (the “Second Mast Hill Loan”) with Mast Hill Fund. In exchange for a promissory note, Mast Hill agreed to lend the Company $370,000, which bears interest at a rate of eight percent (8%) per annum, less $37,000 original issue discount. Under the terms of the Second Mast Hill Loan, payments of $44,400, including principal and interest, came due on June 15, 2022, and continue for each month thereafter with the final payment due on February ~~15, 2023.Debt issuance cost~~3, 2024. Additionally, in the event of ~~$54,650 were incurred and are being amortized over~~ a ~~twelve-month period ending February 2023. At September 30, 2022,~~default under the Loan or if the Company ~~is in default on principal and interest payments. Mast Hill~~elects to pre-pay the Loan, the Lender has ~~been notified of~~ the ~~failure~~right to pay and has taken no action against the Company at this time. The principal or interest on this loan which is not paid when due shall bear interest at the rate 12% per annum. Per the Second Mast Hill Loan, upon the occurrence of default, this note shall become immediately due and payable, and the Company shall pay to Mast Hill, in full satisfaction of its obligations hereunder, an amount equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by 115% or accept payment part in common stock and part in cash. The default provisions in the Second Mast Hill Loan allows for the conversion of all orconvert any portion or all of the ~~then~~ outstanding and unpaid principal and ~~accrued~~ interest into fully paid and non-assessable shares of ~~Common Stock~~the Company’s common stock at ~~$7.50~~a conversion price of $2.00 per share. ~~At September 30, 2022,~~The conversion price is subject to adjustment under certain circumstances, including issuances of Company common stock below the conversion price. The Company is not required to issue additional shares to Lender in the event an adjustment to the conversion price occurs. Except for the option to convert the note in the event of a pre-payment, there is no pre-payment penalty associated with the promissory note. The Loan is subject to customary events of default, including cross-defaults on the Loan agreements and on other indebtedness of the Company, violations of securities laws (including Regulation FD), and failure to issue shares upon a conversion of the note. Amounts due under the Loan are subject to a 15% penalty in the event of a default. As additional consideration for the financing, the Company issued Lender a 5-year warrant to purchase 59,000 shares of Company common stock at a fixed price of $2.00 per share, subject to price adjustments for certain actions, including dilutive issuances, representing 100% warrant coverage on the principal amount of the Loan. The Company has granted the Lender customary “piggy-back” registration rights with respect to the shares issuable upon conversion of the promissory note and ~~accrued~~exercise of the warrant. No material relationship exists between the Company or its affiliates and Lender, other than in respect of the Loan and similar loans between the Company and Lender entered into on November 3, 2021, February 11, 2022, May 31, 2022, and November 23, 2022, respectively. This loan was in default at June 30, 2023 and the amount of interest ~~amount~~expense recorded as penalties during the three months ended June 30, 2023 was approximately ~~$450,000.~~$18,900.

~~The Company also entered into a financing arrangement (the “Talos Loan”) with Talos Victory Fund, LLC (“Talos”~~J.H. Darbie & Co., Inc. ( “Finder”), a ~~Delaware limited liability company. In exchange~~registered broker-dealer, acted as a finder in connection with the Loan, and was paid a cash fee of $3,100 (2.92% of the gross proceeds of the Loan) and issued a 5-year warrant to purchase 3,098 shares of Company common stock at a fixed price of $2.40 per share (120% of the exercise price of the warrant issued in connection with the Loan), subject to price adjustments for ~~a promissory note, Talos agreed~~certain actions, including dilutive issuances, representing 7% warrant coverage on the gross proceeds of the Loan. The Company has granted the Finder customary “piggy-back” registration rights with respect to ~~lend~~the shares issuable upon exercise of the warrant.

Amended and Restated Line of Credit Note - On March 17, 2023, the Company, ~~$296,000,~~as borrower, entered into an Amended and Restated Line of Credit Note and Agreement (the “New Note”) effective as of October 1, 2022, which ~~bears~~amended and restated that certain Line of Credit Note and Agreement dated March 14, 2016 (the “Original Note”) by and between the Company and James V. Leonardo (the “Holder”). The New Note has a principal amount of $250,000 (the ‘Principal Amount”) and accrues interest on the unpaid Principal Amount at a rate of ~~eight~~ten percent ~~(8%~~(10%) per ~~annum, less $29,600 original issue discount.~~ annum. Also on March 17, 2023, James Villa, the Company’s Chief Executive Officer, entered into a personal guarantee with the Holder to personally guarantee the obligations of the Company under the New Note.

Under the terms of the ~~Talos Loan,~~New Note, the Company agreed to make a one-time payment of $16,667 for interest accrued on the Original Note for the four-month period covering June 2022 through September 2022 during the first quarter of 2023. The Company has also agreed to make quarterly interest payments of ~~$35,520, including principal and interest, came due~~$6,250, commencing on ~~August 12,~~December 31, 2022, and ~~continue for each month thereafter with the final payment due on April 12, 2023. Debt issuance cost of $45,920 were incurred~~continuing through and ~~are being amortized over a twelve-month period ending April 2023. At~~including September 30, 2022, the Company is in default on principal and interest payments. Talos has been notified of the failure to pay and has taken no action against the Company at this time. The principal or interest on this loan which is not paid when due shall bear interest at the rate 12% per annum. Per the Talos Loan, upon the occurrence of default, this note shall become immediately due and payable, and the Company shall pay to Talos, in full satisfaction of its obligations hereunder, an amount equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by 115% or accept payment part in common stock and part in cash. The default provisions in the Talos Loan allows for the conversion of all or any portion of the then outstanding and unpaid principal and accrued interest into fully paid and non-assessable shares of Common Stock at $7.50 per share. At September 30, 2022, the principal and accrued interest amount was approximately $354,000.2024.

~~The Company also entered into a financing arrangement (the “Third Mast Hill Loan”) with Mast Hill. In exchange for a promissory note, Mast Hill agreed to lend~~Revised Financing Arrangement - During March 2023, the Company $355,000, which bears interest at a rate of eight percent (8%) per annum, less $35,500 original issue discount. Under the terms of the Third Mast Hill Loan, payments of $42,600, including principal and interest, came due on September 27, 2022, and continue for each month thereafter with the final payment due on May 26, 2023. Debt issuance costs of $54,975 were incurred and are being amortized over a twelve-month period ending May 2023. At September 30, 2022, the Company is in default on the principal and interest payment. Mast Hill has been notified of the failure to pay and has taken no action against the Company at this time. The principal or interest on this loan which is not paid when due shall bear interest at the rate 12% per annum. Per the Third Mast Hill Loan, upon the occurrence of default, this note shall become immediately due and payable, and the Company shall pay to Mast Hill, in full satisfaction of its obligations hereunder, an amount equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by 115% or accept payment part in common stock and part in cash. The default provisions in the First Mast Hill Loan allows for the conversion of all or any portion of the then outstanding and unpaid principal and accrued interest into fully paid and non-assessable shares of Common Stock at $7.50 per share. At September 30, 2022, the principal and accrued interest amount was approximately $419,000.

~~On August 8, 2022,~~ Company entered into a revised financing arrangement ~~(the “Celtic Bank Loan Agreement”)~~ with Celtic Bank ~~a Utah corporation. Pursuant to the Celtic Bank Loan Agreement, Celtic Bank agreed to lend~~which originally loaned the Company ~~$139,400.00~~$139,400 with a one-time fixed loan fee of $11,152 for a total obligation of ~~$150,552.~~$150,552 in 2022. Under the terms of the ~~agreement,~~revised financing arrangement, the lender loaned the Company $155,800 with a one-time fixed loan fee of $12,464 for a total obligation of $168,264. The balance of the original loan of $27,559 was paid to the lender as part of the revised financing agreement. The lender payments became due on ~~August 15, 2022,~~March 24, 2023, and consisted of ~~25%~~30% of the Company’s receivables processed through Stripe, Inc.’s payment processing platform and then due and owing to the Company or ~~$16,728~~$18,696 over a sixty day period, whichever is higher. As of September 30, 2022, the outstanding balance was $124,267. Subsequent payments shall also consist of 25% of the Company’s receivables processed through Stripe, Inc.’s payment processing platform and then due and owing to the Company or $16,728 over a sixty daysixty-day period, whichever is higher, with the final payment due on ~~February 6,~~September 14, 2024. ~~The loan is subject to customary events~~At June 30, 2023, the balance of ~~default. No material relationship exists between~~this revised financing arrangement was $105,696.

Extinguishment of Convertible Promissory Note - On April 12, 2023, the Company ~~or its affiliates~~entered into an agreement with Talos Victory Fund to accept final payment in the amount of $200,000 on the convertible promissory note dated April 12, 2022. The debt was forgiven at that time and ~~Lender, other than~~approximately $95,000 was recorded as forgiveness of debt in ~~respect to~~ the ~~processing~~Statements of ~~credit card payments through Stripe, Inc.’s payment processing platform, and the Celtic Bank Loan Agreement.~~Operations.

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Payment to Board Member – On ~~September 6, 2022,~~April 11, 2023, the Company ~~and Donald W. Reeve,~~paid off a ~~director~~demand note to one board member. The payment was for $30,000 plus $2,891 of accrued interest.

Obligations in Default – As of June 30, 2023, the Company ~~entered into two note modification agreements~~is in default with ~~respect to~~ the ~~Promissory Note originally~~Mast Hill financing arrangements dated ~~December 30, 2020~~November 3, 2021, February 11, 2022, May 31, 2022, and November 23, 2022 and February 3, 2023. Per the Promissory Note originally dated May 25, 2021. There were two payments of principal of $100,000 each due September 1, 2022. The Modification agreements each extended the previously amended due dates from September 1, 2022 to January 1, 2023.

~~On July 29, 2022, the “Company and Andrew Hoyen (“Lender”), a director and executive officer of~~arrangements, the Company ~~entered into a note modification agreement (the “Modification”) with respect to~~has accrued approximately $130,000 and $347,000 in default and penalty interest expense during the ~~Line of Credit Note~~three months and Agreement in the original principal sum of up to $100,000.00, dated July 18, 2017, issued by the Company to the Lender (the “Hoyen Note”). The Note and the Modification Agreement was approved by the disinterested members of the Company’s Board of Directors. The Modification Agreement extends the due date of the Note to July 31,six months ended June 30, 2023, on which date the current outstanding principal balance of $90,000 and accrued and unpaid interest will be due. Pursuant to the Modification Agreement, the Company agreed to repay to Lender $16,000 of the accrued interest on the Hoyen Note and off-set such repayment against the exercise on July 29, 2022 by Lender of certain options to acquire 5,334 shares of the Company’s common stock. The remaining accrued and unpaid interest on the Hoyen Note was $11,862 as of September 30, 2022. Except as set forth in the Modification Agreement, the terms of the Hoyen Note remain the same.respectively.

Note 8. Short-term Obligation

ERC Claim and Risk Participation Agreement – In January 2023, the Company filed for the Employee Retention Credit (“ERC”) for $1,662,698. The ERC is a refundable tax credit for businesses that continued to pay employees while sustaining a full or partial suspension of operations limiting commerce, travel or group meetings due to COVID-19 pandemic and orders from an appropriate governmental authority or had significant declines in gross receipts from March 13, 2020 to September 30, 2021. The Company sustained a partial suspension of operations during this time due to governmental orders. Eligible employers can claim the ERC on an original or adjusted employment tax return for a period within those dates. The Company did not record the calculated quarterly credits as income at December 31, 2022 because as of December 31, 2022 it was not reasonably certain the amounts would be collected.

On March 29, 2023, Company, as seller, received $1,330,464 as a purchase price (the “Purchase Price”) for the sale of the Company’s rights, title and interest per a Risk Participation of ERC Claim Agreement, dated March 27, 2023 (“Agreement”) by and between the Company and 1861 Acquisition LLC (the “Buyer”). On April 21, 2023, the Company received an additional $82,830 from the Buyer which was held in escrow.

The Agreement transferred all of the Company’s rights to receive any and all payments, proceeds or distributions of any kind (without set-off, deduction or withholding of any kind), including interest, from the United States Internal Revenue Service (the “IRS”) in respect of the employee retention credits duly and timely claimed by Seller on account of qualified wages paid by Seller and identified as a “Claim for Refund” under Form 941-X Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund for the third (3rd) and fourth (4th) quarters of 2020, and the first (1st), second (2nd) and third (3rd) quarters of 2021 (the “Tax Refund Claim”) in the aggregate amount of $1,662,698 (“Transferred Interests”).

During June 2023, the Company received checks for the ERC from the IRS. The amount received was the $1,662,698 plus $70,699 of interest. These checks were forwarded to the Buyer as per the Agreement. The Company recorded the Transferred Interests amount as other income and the interest as interest income and interest expense. In the Statements of Cash Flows the amounts received from the IRS were recorded as an operating activity and the amounts forwarded to the Buyer were recorded as a financing activity.

Note 9. Earnings per Share

Basic earnings per share is based on the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is based on the weighted average number of common shares outstanding, as well as dilutive potential common shares which, in the Company’s case, comprise shares issuable under convertible notes payable and stock options. The treasury stock method is used to calculate dilutive shares, which reduces the gross number of dilutive shares by the number of shares purchasable from the proceeds of the options and warrants assumed to be exercised. In a loss period, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.

The following table sets forth the computation of basic and diluted net ~~loss~~profit (loss) per share for the three and ~~nine~~six months ~~ended:~~ended June 30, 2023:

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Numerator for basic and diluted net loss per share:

Net loss

$ (1,087,292 )

$ (269,806 )

$ (2,788,725 )

$ (838,536 )
Basic and diluted net loss per share

$ (2.41 )

$ (0.67 )

$ (6.28 )

$ (2.14 )

Weighted average common shares outstanding

Basic and diluted shares

451,345

399,829

443,901

392,398

Anti-dilutive shares excluded from net loss per share calculation

311,977

302,717

311,977

302,717

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	Three Months Ended June 30,					Six Months Ended June 30,
	2023		2022			2023			2022
Numerator for basic net profit (loss) per share:
Net profit (loss)	$	668,984	$	(833,200	)	$	(284,987	)	$	(1,701,434	)

Net profit (loss) per share - basic	$	1.35	$	(1.88	)	$	(0.59	)	$	(3.87	)

Numerator for diluted net profit (loss) per share:
Net profit (loss)	$	681,001	$	(833,200	)	$	(284,987	)	$	(1,701,434	)

Net profit (loss) per share - diluted	$	1.07	$	(1.88	)	$	(0.59	)	$	(3.87	)

Weighted average common shares outstanding
Basic		494,960		443,953			483,243			440,004

Weighted average common shares outstanding
Diluted		638,776		443,953			483,243			440,004

Anti-dilutive shares excluded from
per share calculations		325,634		319,350			505,770			319,350

Certain common shares issuable under stock options and convertible notes payable have been omitted from the diluted net loss per share calculation because their inclusion is considered anti-dilutive because the exercise prices were greater than the average market price of the common shares or their inclusion would have been anti-dilutive.

Note 9.10. Stock Option Plans and Agreements

At the annual meeting of stockholders of the Company held on January 26, 2022; the Company’s stockholders voted to approve the Company’s 2021 Equity Incentive Plan (“2021 Plan”). The maximum number of shares of Common Stock available for grant and issuance under the 2021 Plan will be (a) 60,000, plus (b) any shares of Common Stock that are subject to options granted under the Prior Plans that expire, are forfeited or canceled or terminate for any other reason without the issuance of shares under the Prior Plans on or after January 26, 2022, plus (c) any shares of Common Stock that are subject to options granted under the Prior Plans that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any option under the Prior Plans on or after January 26, 2022.

The Company has approved stock ~~option~~options plans and agreements covering up to an aggregate of ~~217,260~~249,113 shares of common stock. Such options may be designated at the time of grant as either incentive stock options or nonqualified stock options. Stock based compensation consists of charges for stock option awards to employees, directors and consultants.

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The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. ~~1,403~~47,600 options were granted ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2022. 23,274~~2023. 1,267 options were granted ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The following assumptions were used for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023:

Risk-free interest rate	~~1.26%-3.35~~3.57% - 3.98		%
Expected dividend yield	0	%
Expected stock price volatility	~~110%-130~~	110	%
Expected life of options (years)	2.75

The Company recorded expense for options issued to employees and independent service providers of ~~$91,153~~$26,159 for both the three and ~~$143,784~~six months ended June 30, 2023, and $51,708 and $52,631, for the three and ~~nine~~six months ~~ended September~~June 30, 2022, ~~respectively ($7,296 and $117,464 for the three and nine months ended September 30, 2021).~~respectively.

~~11,605~~32,600 options vested during the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

The Company issued ~~10,000~~15,000 performance-based stock options during ~~2021~~the six months ended June 30, 2023 at ~~$18.375~~$1.17 per share to an executive of the Company. Certain ~~revenue~~bookings targets must be made ~~to grant~~for the options in three tranches of 3,334 shares each. In the three months ended June 30, 2022, the Company amended the targets for these options and recognized one third of the compensation in the amount of $45,275. In the three months ended September 30, 2022, the remainingto vest. The unrecognized compensation expense for these options ~~in the amount of $90,550 was recognized due to likelihood of meeting the targets.~~

~~A summary of all stock option activity for the nine months ended September 30, 2022 follows:~~

Number of

Weighted

Remaining

Aggregate

Options

Average

Contractual

Intrinsic

Outstanding

Exercise Price

Term

Value

Outstanding at December 31, 2021

143,427

$ 5.85

Granted

1,403

9.49

Exercised

(5,668 )

3.00

Expired

(7,106 )

4.87

Outstanding at September 30, 2022

132,506

$ 6.06

2.9 years

$ 289,700

At September 30, 2022- vested or

expected to vest

132,056

$ 6.06

2.9 years

$ 289,700

Exercisable

131,922

$ 6.06

2.9 years

$ 289,700

~~Note 10. Warrants~~

On April 29, 2022, Mast Hill Fund, LP elected to purchase 18,667 warrant shares in a cashless exercise per the terms of the warrant agreement dated November 3, 2021. Based on the calculation per the agreement, 11,470 shares were issued to Mast Hill Fund, LP.

~~Note 11. Lease~~

~~Beginning on August 1, 2016, the Company leased its headquarters facility under an operating lease agreement that was scheduled to expire on~~is approximately $12,000 at June 30, 2022. Rent expense was $80,000 annually during the first year of the lease term and increased by 1.5% annually thereafter. The lease was terminated one month early, and a new lease agreement, at the existing headquarters location, commenced on June 1, 2022. The term of the new lease agreement is 84 months. The first year’s rent will be $118,487 and will increase by 2% annually thereafter.2023.

~~Supplemental balance sheet information related to the leases on September 30, 2022 and December 31, 2021 is as follows:~~

Description

Classification

September 30,
2022

December 31,
2021

Right of Use Asset - Lease, net

Other assets (non-current)

$ 664,980

$ 41,490

Operating Lease Liability - Short Term

Accrued liabilities

74,911

42,347

Operating Lease Liability - Long Term

Other long-term liabilities

592,521

0

Total Operating Lease Liability

$ 667,432

$ 42,347

Discount Rate - Operating Lease

7.0 %

6.0 %

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A summary of all stock option activity for the six months ended June 30, 2023 follows:

	Number of			Weighted		Remaining	Aggregate
	Options			Average		Contractual	Intrinsic
	Outstanding			Exercise Price		Term	Value
Outstanding at December 31, 2022		131,789		$	6.03
Granted		47,600			1.20
Expired		(6,335	)		3.85

Outstanding at June 30, 2023		173,054		$	5.14	2.9 years	$	0.00

At June 30, 2023- vested or
expected to vest		158,054		$	5.14	2.7 years	$	0.00

Exercisable		158,054		$	5.14	2.7 years	$	0.00

Note 11. Lease

Beginning on June 1, 2022, the Company leases its headquarters facility under an operating lease agreement that expires on May 31, 2029. Rent due is $118,487 annually during the first year of the lease term, and increases by 2.0% annually thereafter.

Upon entering the lease agreement, the Company recognized a right-of-use asset of $691,009 and a lease liability of $691,009.

Supplemental balance sheet information related to the lease on June 30, 2023 and December 31, 2022 is as follows:

		June 30,			December 31,
Description	Classification	2023			2022
Right of Use Asset – Lease, net	Other assets (non-current)	$	604,366		$	645,095

Operating Lease liability – Short-term	Accrued liabilities		80,762			76,826
Operating Lease liability – Long-term	Other long-term liabilities		531,374			572,560
Total operating lease liability		$	612,136		$	649,386

Discount rate – operating lease			7.00	%		7.00	%

Note 12. Related Party Accrued Interest Payable

Included in accrued interest payable isare amounts due to related parties of approximately ~~$152,200,~~$345,000, at ~~September~~June 30, ~~2022~~2023 ($~~107,000~~299,000 at December 31, ~~2021)~~2022). ~~An additional $111,364 of accrued interest to related parties is included with short and long-term debt and is due to be paid after September 30, 2023.~~

Note 13. Subsequent Events

On ~~October 17, 2022,~~July 13, 2023, Donald Reeve, Chairman of the Board, and the Company, entered into a short term note wherein the Company borrowed $40,000 from Mr. Reeve. Interest will accrue monthly at a rate of ~~Directors (the “Board”)~~10% per annum. The note was due in full with interest on August 14, 2023 and has been extended to a new term date of ~~Infinite Group, Inc. (the “Company”) approved a 75 to 1 reverse stock split~~September 13, 2023. This note remains outstanding as of the Company’s issued and outstanding common stock and treasury stock, effective at 12:01 a.m. Eastern Time on October 19, 2022 (the “Effective Date”) (the “Reverse Stock Split”). On October 18, 2022, the Company filed a Certificate of Amendment to amend the Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect the Reverse Stock Split.filing date.

The Reverse Stock Split was previously approved by the Company’s shareholders at the Company’s January 26, 2022 annual meeting of stockholders and does not affect the total number of shares of Common Stock that the Company is authorized to issue.

The Reverse Stock Split was announced by FINRA (the Financial Industry Regulatory Authority) on October 18, 2022, and becomes effective at the commencement of trading on the Effective Date, whereupon theIn July 2023, warrants were exercised via a cashless exercise, resulting in 14,567 shares of common stock ~~will begin trading on a split adjusted basis.~~being issued.

AsOn August 7, 2023, the Company received legal notice from a ~~result~~former employee, that he is suing the Company for alleged violations of Oregon labor law, related to his July 2023 termination. The Company believes this lawsuit is without merit and will defend it vigorously.

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On August 25, 2023, the Company, as borrower, entered into a business loan arrangement (the “Loan”) with WebBank (the “Lender”). In exchange for the Loan, Lender agreed to lend the Company $150,000.00, with a payment plan of $2,671.15 per week for 78 weeks effective August 28, 2023. The effective interest rate of the ~~Reverse Stock Split, every seventy-five (75) shares~~Loan is 46.8%. If Loan is prepaid, the unpaid portion of the ~~issued~~finance charge of $58,350 will be due to Lender.

On September 14, 2023, the Company, as borrower, entered into a Financing and ~~outstanding common stock~~Security Agreement ("Agreement") with Celtic Bank Corporation (the “Celtic”). In exchange for a line of credit (“LOC”), Celtic agreed to lend the Company $200,000.00, with a payment plan of $20,892.15 per month for 12 months effective October 16, 2023. The annual percentage rate of the ~~Company~~LOC is 48.4%, If LOC is prepaid, the unpaid interest accrued will be ~~converted into one (1) share~~due to Celtic. If an additional draw on the LOC is requested, a draw fee will be imposed.

On October 13, 2023, the Company received funding from a loan agreement with Stripe and Celtic Bank. The loan amount was $140,200 plus a fixed fee of ~~common stock. Any and all fractional shares resulting~~$16,403. The repayment amount of $156,603 will be repaid at a repayment rate of 20% of the Company’s receivables automatically withheld by Stripe. There is no financing percentage. The repayment start date is October 19, 2023, with a minimum payment amount of $17,400 over every 60-day period. The final repayment date is April 25, 2025, if total repayment amount is not paid as of that date. This loan agreement also eliminates the remaining balance of $35,754 from the ~~Reverse Split will be rounded up to~~previous Stripe loan dated March 16, 2023, as the ~~nearest whole share.~~

~~All share and per share data in the accompanying financial statements have been retroactively restated to reflect the effect of the reverse stock split.~~remaining balance was rolled into this new loan.

************

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion contains forward-looking statements, the accuracy of which involves risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons including, but not limited to, those discussed under the heading “Forward Looking Statements” above and elsewhere in this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our financial statements and the notes thereto appearing elsewhere in this report.

Overview

Impact of COVID-19

The COVID-19 pandemic has resulted, and is likely to continue to result, in ~~significant~~ economic ~~disruption.~~disruption on a global basis. It has already ~~disrupted~~changed traditional global travel and supply chains and adversely impacted global commercial activity. Considerable uncertainty still surrounds COVID-19 and its potential long-term economic effects, as well as the effectiveness of any responses taken by government authorities and businesses. ~~The~~While the travel restrictions, limits on hours of operations and/or closures of non-essential businesses, and other efforts to curb the spread of COVID-19, ~~has continued~~have been generally lifted, there continues to ~~disrupt~~be a disruption in business activity globally. New strains and variants of the coronavirus continue to spread around the world. The ~~ongoing~~ rollout of vaccines around the globe is encouraging, but their long-term impact on the political environment, business environment, and the Company is still uncertain. ~~Please see Part II Item 1A of this Report and our other filings with the SEC for additional information regarding certain risks associated with the COVID-19 pandemic.~~

During ~~the first six months of 2022,~~2023, our managed support services, cybersecurity projects and software ~~license~~ revenues were minimally ~~affected~~impacted by the impact of the COVID-19 pandemic on our customers’ operational priorities. However, the many governmental restrictions that were in place in 2020 and 2021, which limited in-person and group meetings, constrained our ability to interact with new clients in the area of cybersecurity projects, and this has had a material impact on our 2022 cybersecurity project revenue. We are continuing to adapt our operations to meet the challenges of ~~this uncertain and rapidly evolving situation, including~~these changing priorities. While employees at our headquarters are physically present in the office, other locations have had to go fully remote ~~working arrangements for our employees, limiting non-essential business travel, and utilizing virtual sales and marketing events.~~due to the changing nature of IT work during the pandemic. Our sales and marketing expenses increased significantly during the first ~~six months~~two quarters of ~~2022. We~~2023, and we expect these expenses to continue to ~~grow, but we expect these expenses will be lower compared to prior year periods pre-COVID-19 pandemic on travel and in-person marketing events.~~grow. We will continue to actively monitor the nature and extent of the impact to our business, operating results, and financial condition.

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Our Business

Headquartered in Pittsford, New York, ~~IGI~~Infinite Group is a developer of cybersecurity software and related cybersecurity consulting, advisory, and managed information security services. We principally sell our software and services through indirect channels such as Managed Service Providers (“MSPs”), Managed Security Services Providers (“MSSPs”), agents and distributors and government contractors, whom we refer to collectively as our channel partners. We also sell directly to end customers.

We believe our ability to succeed depends on how successful we are in differentiating ourselves in the cybersecurity market at a time when competition and consolidation in these markets are on the rise. Our strategy to differentiate our cybersecurity software and services from our competitors is to combine customized software and professional services, and grow our business by designing, developing, and marketing cybersecurity software-as-a-service (“SaaS”) solutions that can be deployed in myriad environments. Software and services are initially developed in our wholly-owned subsidiary, IGI CyberLabs (“CyberLabs”), to fill technology gaps we identify, and then we bring these software and services to market through our existing channel partner and customer relationships. Our software and services are designed to simplify and manage the security needs of our customers and channel partners in a variety of environments. We focus on the small and medium-sized enterprises market. We support our channel partners by providing recurring-revenue business models for both services and through our cybersecurity SaaS solutions. Products may be sold as standalone solutions or integrated into existing environments to further automate the management of cybersecurity and related IT functions.

As part of these software and service offerings we:

Internally developed and brought to market Nodeware®, a patented SaaS solution that automates network asset identification, and cybersecurity vulnerability management and monitoring. Nodeware simply and affordably enhances security by proactively identifying, monitoring, and addressing potential cybersecurity vulnerabilities on networks, which creates enhanced security to safeguard against hackers and ransomware. Nodeware provides an economical solution for small and medium-sized enterprises as compared to more costly solutions focused on enterprise-sized customers and is designed to accommodate the varying network needs of our end customers’ organizations and networks. Nodeware’s flexibility allows it to span from a single network to several subnetworks, as well as accommodating larger, more complex organizations with more advanced network needs. Nodeware is sold as a SaaS solution and continuously releases enhancements, updates, and upgrades to stay current with security needs and changes in the market. Nodeware is also designed to be integrated into other technology platforms. We primarily sell Nodeware through our channel partners, with a small percentage being sold directly to end customers. We intend to continue to develop our intellectual property to serve as the core to our proprietary software and services. In addition to our proprietary software and services we also act as a master distributor for other cybersecurity software, principally Webroot a cloud-based endpoint security platform solution, where we market to and provide support for over 225 small and medium-sized enterprises as compared to more costly solutions focused on enterprise-sized customers and is designed to accommodate the varying network needs of our end customers’ organizations and networks. Nodeware’s flexibility allows it to span from a single network to several subnetworks, as well as accommodating larger, more complex organizations with more advanced network needs. Nodeware is sold as a SaaS solution and continuously releases enhancements, updates, and upgrades to stay current with security needs and changes in the market. Nodeware is also designed to be integrated into other technology platforms. We primarily sell Nodeware through our channel partners, with a small percentage being sold directly to end customers. We intend to continue to develop our intellectual property to serve as the core to our proprietary software and services. In addition to our proprietary software and services we also act as a master distributor for other cybersecurity software, principally Webroot a cloud-based endpoint security platform solution, where we market to and provide support for over 250 channel partners across North America;

Provide cybersecurity consulting and advisory services to channel partners and direct customers across different markets, including banking, manufacturing, supply chain, and technology. As part of our consulting and advisory services, we are contracted to support existing information technology and executive teams at both the customer and channel partner level and provide security leadership and guidance. We validate overall corporate and infrastructure cybersecurity with the goal of maintaining and securing the integrity of confidential client information, preserving the continuity of services, and minimizing potential data damage from threats and incidents; and

Provide managed support services related to information security, principally as a subcontractor for Peraton, a large information technology provider and U.S. government contractor, by providing in-depth troubleshooting, backend analysis, and technical and security support, commonly referred to as Level 2 support, for mission critical technical infrastructure from the server level to the end user interface application in a critical government environment.


16

	·	~~Provide cybersecurity consulting and advisory services to channel partners and direct customers across different markets, including banking, manufacturing, supply chain, and technology. As part~~Table of our consulting and advisory services, we are contracted to support existing information technology and executive teams at both the customer and channel partner level and provide security leadership and guidance. We validate overall corporate and infrastructure cybersecurity with the goal of maintaining and securing the integrity of confidential client information, preserving the continuity of services, and minimizing potential data damage from threats and incidents;

	·	Provide managed support services related to information security, principally as a subcontractor for Peraton, a large information technology provider and U.S. government contractor, by providing in-depth troubleshooting, backend analysis, and technical and security support, commonly referred to as Level 2 support, for mission critical technical infrastructure from the server level to the end user interface application in a critical government environmentContents

Business Strategy

We have a threefold business strategy composed of:

-	·	providing differentiated cybersecurity software and services to small to mid-sized enterprises who lack the internal resources to focus on cybersecurity related matters by combining customized software and professional services;
	·
-	designing, developing, and marketing cybersecurity SaaS solutions, including ~~our Nodeware solution;~~Nodeware; and
	·
-	identifying other cybersecurity companies to acquire as part of a strategic roll-up strategy.

We believe our ability to succeed depends on how successful we are in differentiating ourselves in the market at a time when competition and consolidation in these markets is on the rise.

Our software and services are designed to simplify the security needs of our customers and channel partners, with a focus on the small to mid-sized enterprises, and we believe our ability to integrate our product and service offerings differentiates them from our competitors. In addition, we support our channel partners by providing ~~recurring-revenue~~recurring -revenue business models for both services and our cybersecurity SaaS solutions.

Cybersecurity is a constantly evolving field, so we devote significant efforts in developing proprietary software and services to meet our customer and channel partners’ evolving needs. These efforts have resulted in the development of our patented and patent-pending Nodeware solution. We expect to continue to make significant investments in developing other intellectual property to serve as the core to other proprietary software and services.

~~Table of Contents~~

Historically, a significant portion of our revenues has been derived through our managed support services, however, we believe our cybersecurity SaaS solutions, including Nodeware, present an opportunity for significant growth. We believe that Nodeware’s ability to be deployed ~~in an underserved market segment,~~ across a wide variety of networks and the ability to integrate it into existing and new cybersecurity ~~software and services,~~solutions, will allow us to significantly grow this segment of our business. Similarly, we believe Nodeware’s SaaS recurring revenue business model and its flexibility as a standalone or integrated solution makes it an attractive part of our channel partners’ portfolio of products. Accordingly, in ~~2021~~2022 we made significant investments in ~~Nodeware~~IGI and CyberLabs sales and marketing to grow our team of cybersecurity sales and technical consultants. As a result, we believe we are seeing the pipeline growth expected from focused efforts, which we anticipate will convert to revenue growth in ~~2022 and beyond.~~2023.

We believe the market for cybersecurity services for small and medium-sized enterprises is fragmented and does not currently meet the needs of this customer base. The market is fragmented and is beginning to consolidate, which is why we are seeking to strategically acquire other cybersecurity technology and services companies.

The following sections define specific components of our business strategy.

Nodeware®

In May 2016, we filed a provisional patent application for our proprietary product, Nodeware and launched it commercially in November 2016. In May 2017, we filed a utility patent application for Nodeware.

U.S. Patent No. 10,999,307, was issued on May 4, 2021, for NETWORK ASSESSMENT SYSTEMS AND METHODS THEREOF U. S. Patent Application Serial No. 15/600,297, filed May 19, 2017, claiming priority of U.S. Provisional Patent Application Serial No. 62/338,904, filed May 19, 2016.

Nodeware is ~~a patented SaaS solution that automates network~~an automated asset identification and ~~cybersecurity~~ vulnerability management and ~~monitoring. Nodeware simply and affordably~~monitoring solution that enhances security by proactively identifying, monitoring, and addressing potential ~~cybersecurity~~ vulnerabilities on both internal and external facing networks, ~~which creates enhanced security to~~creating a safeguard against ~~hackers~~malicious intent to exploit known problems in a customer’s network with simplicity and ~~ransomware. Nodeware’s flexibility allows it to span from a single network to several subnetworks, as well as accommodating larger, more complex organizations with more advanced network needs.~~affordability. Nodeware assesses vulnerabilities in a computer network using ~~proprietary~~ scanning technology to capture a comprehensive view of the security exposure of a network infrastructure. Users receive alerts and view network information through a proprietary, web enabled dashboard. Continuous and automated internal scanning and external on demand scanning are components of this offering. As described below, Nodeware has one patent and one patent pending. We intend to develop other intellectual property that serve as the core to other proprietary software and services to market through a channel of domestic and international partners and distributors.

The Cloud based SaaS platform has an agile and continuous development process that is flexible to react to customer and market needs. In December 2019, we filed a second provisional patent application and in December 2020 we filed the subsequent action on the institutional patent on the Nodeware ~~provides an economical solution for small~~platform. In 2020 and ~~medium-sized enterprises as compared~~2021, we created many new feature updates and improvements to ~~costly solutions focused on enterprise sized customers,~~the platform in response to COVID-19 needs and ~~is designed to accommodate the varying network needs of our end customers’ organizations and networks. Nodeware is sold~~impact such as a ~~SaaS solution~~downloadable Windows executable version along with Windows, Mac, and ~~continuously releases~~Linux Agents that could be downloaded to a remote PC or server. A number of enhancements ~~updates,~~related to data management, threat intelligence, and ~~upgrades to stay current with security needs and changes in~~user functionality were part of the market. Nodeware is also designed to be integrated into other technology platforms. We primarily sell Nodeware through our channel partners, with a small percentage being sold directly to end customers. 2020/21 continued evolution of Nodeware.

Nodeware creates an opportunity for ~~our channel partners~~resellers, including managed service providers, managed security service providers, distributors, and value-added resellers to ~~sell and~~ use a product that provides greater visibility into the network security of an ~~end customer.~~organization. We sell Nodeware in the commercial sector through channel partners and agents. Since 2018, we have continued to expand our ~~portfolio~~channel of ~~channel partners,~~direct resellers, which now includes Telarus, TD SYNNEX, ~~Staples,~~ and ~~a growing list of MSPs, MSSPs, agents and distributors and government contractors.~~Staples.

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In June 2021, we created IGI CyberLabs, LLC, a wholly owned subsidiary to support our Nodeware solution and continued software development. ~~CyberLabs’s~~Cyberlabs’ overarching mission is to drive sales of our Nodeware Cloud security platform, which ~~we believe~~ will drive monthly and annualized recurring revenue. CyberLabs will also drive product and platform enhancements ~~across other current future subsidiaries as IGI’s roll up~~in Nodeware and continue to enhance our rapid scale Go-to-Market capabilities. Additionally, CyberLabs is chartered with development of ~~cybersecurity companies comes to fruition. This also enhances our ability to bring new~~ cloud and SaaS cybersecurity related ~~solutions~~products that will be brought to market through our growing channel ~~partner~~ relationships.

Intellectual Property

We believe that our intellectual property is an asset that will contribute to the growth and profitability of our business. We rely on a combination of patented, patent-pending and confidentiality procedures, trademarks and contractual provisions to establish and protect our intellectual property rights in the United States and abroad. We intend to rely on both registration and common law protection for our trademarks.

In May 2016, we filed a provisional patent application for our proprietary product, Nodeware, and launched it commercially in November 2016. In May 2017, we filed a utility patent application for Nodeware: U.S. Patent No. 10,999,307, was issued on May 4, 2021, for NETWORK ASSESSMENT SYSTEMS AND METHODS THEREOF U.S. Patent Application Serial No. 15/600,297, filed May 19, 2017, claiming priority of U.S. Provisional Patent Application Serial No. 62/338,904, filed May 19, 2016. The patent will remain in effect for four years from the date of issue and may be extended for up to twenty years from the filing date. Therefore, the expiration date of the subject patent, assuming all milestones to extend are met, is July 19, 2037.

In December 2019, we filed a second provisional patent application and in December 2020 we filed the subsequent action on the patent on Nodeware. In 2020 and 2021, we created updates and improvements to the platform in response to COVID-19 needs and impact such as a downloadable Windows executable version along with Windows, Mac, and Linux Agents that could be downloaded to a remote PC or server. A number of enhancements related to data management, threat intelligence, and user functionality were part of these updates.

The efforts we have taken to protect our intellectual property may not be sufficient or effective. As a result of this uncertainty and overall significance to the financial statements, these costs have been expensed.

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The U.S. patent system permits the filing of provisional and non-provisional patent applications. A non-provisional patent application is examined by the United States Patent and Trademark Office and can mature into a patent once that office determines that the claimed invention meets the standards for patentability.

Our current patent and trademark portfolio consists of a patent for the Nodeware solution and process for scanning for vulnerabilities and a pending patent covering the methodologies associated with identifying and cataloging the assets on or across any physical or cloud network, together with a registered trademark for the “Nodeware” name and other trademarks and tradenames associated with our company and products. We intend to continue to work to enhance our intellectual property position on the Nodeware solution and in other appropriate cybersecurity technology we generate.

Technology and Product Development

Our goal is to position our products and solutions to enable vertical and other Application Programming Interface (API) based integration, with other industry solutions. We have a technology and product development strategy aligned with our business strategy. We continue to identify other technical partners in the cybersecurity market to integrate Nodeware into, through either API or full stack integration.

Cybersecurity Services

~~In addition to Nodeware, we~~We provide cybersecurity consulting services that include incident response, security awareness training, ~~cybersecurity~~ risk management, IT governance and compliance, security assessment services, ~~(CISOTaaS ™) and PenLogic™~~ penetration testing, ~~services~~and Chief Information Security Officer Team as a Service (CISOTaaS™) offerings to channel partners and direct customers across different vertical markets ~~including banking, manufacturing,~~(banking, supply chain, ~~and technology,~~manufacturing, healthcare, legal, etc.) in North America. Our cybersecurity ~~consulting~~ projects leverage different technology platforms and processes such as Nodeware to create ~~documentation and processes~~a living document that a customer can use to ~~continually improve~~go forward on a path of continuous improvement for its overall Information security. We support both internal and external organizations with our cybersecurity overlay that allows us to stay agnostic in the process, especially for compliance while enabling the IT ~~governance and corporate security.~~organization to address the issues discovered. We validate overall network ~~and infrastructure~~ security with the goal of maintaining the integrity of confidential client information, preserving the continuity of services, and minimizing potential data damage from ~~cybersecurity~~attempted threats and incidents. We continue to enhance our cybersecurity services ~~based on feedback from customers~~when opportunities materialize and ~~changes in~~as the ~~market.~~market evolves.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2023 and 2022

The following tables compare our statements of operations data for the three and six months ended June 30, 2023 and 2022. The trends suggested by this table are not indicative of future operating results.

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	Three Months Ended June 30,

													2023 vs 2022
				As a % of						As a % of			Amount of			% Increase
	2023			Sales			2022			Sales			Change			(Decrease)

Sales	$	1,783,476			100.0	%	$	1,696,492			100.0	%	$	86,984			5.1	%
Cost of sales		998,215			56.0			1,059,639			62.5			(61,424	)		(5.8	)
Gross profit		785,261			44.0			636,853			37.5	%		148,408			23.3
General and administrative		465,177			26.1			613,317			36.2			(148,140	)		(24.2	)
Selling		761,365			42.7			612,957			36.1			148,408			24.2
Total cost and expenses		1,226,542			68.8			1,226,274			72.3			268			0.0

Operating loss		(441,281	)		(24.7	)		(589,421	)		(34.7	)		148,140			25.1
Interest expense (net)		(647,564	)		(36.3	)		(243,779	)		(14.4	)		(403,785	)		(165.6	)
Other income		1,757,829			98.6			0			-			1,757,829			-
Net profit (loss)	$	668,984			37.5	%	$	(833,200	)		(49.1	)%	$	1,502,184			180.3	%

Net profit (loss) per share - basic	$	1.35					$	(1.88	)				$	3.23

Net profit (loss) per share - diluted	$	1.07					$	(1.88	)				$	2.95

	Six Months Ended June 30,

													2023 vs 2022
				As a % of						As a % of			Amount of			% Increase
	2023			Sales			2022			Sales			Change			(Decrease)

Sales	$	3,547,469			100.0	%	$	3,363,562			100.0	%	$	183,907			5.5	%
Cost of sales		1,964,421			55.4			2,180,879			64.8			(216,458	)		(9.9	)
Gross profit		1,583,048			44.6			1,182,683			35.2	%		400,365			33.9
General and administrative		996,822			28.1			1,217,300			36.2			(220,478	)		(18.1	)
Selling		1,454,475			41.0			1,260,582			37.5			193,893			15.4
Total cost and expenses		2,451,297			69.1			2,477,882			73.7			(26,585	)		(1.1	)

Operating loss		(868,249	)		(24.5	)		(1,295,199	)		(38.5	)		426,950			33.0
Interest expense (net)		(1,174,567	)		(33.1	)		(406,235	)		(12.1	)		(768,332	)		(189.1	)
Other Income		1,757,829			49.6			0			-			1,757,829			-
Net loss	$	(284,987	)		(8.0	)%	$	(1,701,434	)		(50.6	)%	$	1,416,447			83.3	%

Net loss per share - basic and diluted	$	(0.59	)				$	(3.87	)				$	3.28

~~Results of Operations~~Sales

~~Comparison of~~Our managed support service sales increased by 1% from $1,115,607 during the ~~Three and Nine Months Ended September~~three months ended June 30, 2022 to $1,122,084 during the corresponding period of 2023. For the six month period ended June 30, managed support service sales increased 2% from $2,204,614 in 2022, to $2,248,882 for the same period in 2023. Managed support service sales comprised approximately 63% of our sales in three months ended June 30, 2023, and ~~2021~~approximately 66% for the same period in 2022. For the six months ended June 30, managed support service sales comprised approximately 63% of sales in 2023, and 66% for the same period in 2022. The increase in our managed support service sales during the three and six months ended June 30, 2023 was due to additional projects requested by Perspecta.

~~The following table compares our statements of operations data~~Our cybersecurity projects revenue increased by 18%, from $300,456 for the three ~~and nine~~ months ended ~~September~~June 30, 2022, to $353,937 for the same period ended June 30, 2023. For the six months ended June 30, 2023, cybersecurity projects increased 8% to $676,000 from $626,917 in the same prior year period. These increases were due to increased sales efforts and ~~2021. The trends suggested by this table are not indicative~~the timing of ~~future operating results.~~the completion of the engagements.

Three Months Ended September 30,

2022 vs 2021

As a % of

As a % of

Amount of

% Increase

2022

Sales

2021

Sales

Change

(Decrease)

Sales

$ 1,712,212

100.0 %

$ 1,836,740

100.0 %

$ (124,528 )

(6.8 )%
Cost of sales

1,060,872

62.0

1,136,931

61.9

(76,059 )

(6.7 )
Gross profit

651,340

38.0

699,809

38.1 %

(48,469 )

(6.9 )

General and administrative

529,695

30.9

528,424

28.8

1,271

0.2

Selling

713,173

41.7

502,389

27.4

210,784

42.0

Total cost and expenses

1,242,868

72.6

1,030,813

56.1

212,055

20.6

Operating loss

(591,528 )

(34.5 )

(331,004 )

(18.0 )

(260,524 )

(78.7 )
Other income

-

-

120,505

6.6

(120,505 )

100.0

Interest expense (net)

(495,764 )

(29.0 )

(59,307 )

(3.2 )

(436,457 )

(735.9 )
Net loss

$ (1,087,292 )

(63.5 )%

$ (269,806 )

(14.7 )%

$ (817,486 )

(303.0 )%

Net loss per share - basic and diluted

$ (2.41 )

$ (0.67 )

$ (1.74 )

Nine Months Ended September 30,

2022 vs 2021

As a % of

As a % of

Amount of

% Increase

2022

Sales

2021

Sales

Change

(Decrease)

Sales

$ 5,075,774

100.0 %

$ 5,458,586

100.0 %

$ (382,812 )

(7.0 )%
Cost of sales

3,241,751

63.9

3,319,069

60.8

(77,318 )

(2.3 )
Gross profit

1,834,023

36.1

2,139,517

39.2 %

(305,494 )

(14.3 )

General and administrative

1,746,995

34.4

1,534,527

28.1

212,468

13.8

Selling

1,973,755

38.9

1,397,156

25.6

576,599

41.3

Total cost and expenses

3,720,750

73.3

2,931,683

53.7

789,067

26.9

Operating loss

(1,886,727 )

(37.2 )

(792,166 )

(14.5 )

(1,094,561 )

(138.2 )
Other income

-

-

120,505

2.2

(120,505 )

100.0

Interest expense (net)

(901,998 )

(17.8 )

(166,875 )

(3.1 )

(735,123 )

(440.5 )
Net loss

$ (2,788,725 )

(54.9 )%

$ (838,536 )

(15.4 )%

$ (1,950,189 )

(232.6 )%

Net loss per share - basic and diluted

$ (6.28 )

$ (2.14 )

$ (4.17 )

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~~Sales~~

~~Our managed support service~~Software sales, which includes the selling of licenses of Nodeware and third-party software Webroot, increased by ~~2.1%~~10% from ~~$1,114,851 during~~ the three months ended ~~September~~June 30, ~~2021~~2022 to ~~$1,138,418 during~~ the ~~corresponding~~same period ~~of 2022. For~~in 2023. Sales for the ~~nine month~~ period ~~ended September 30, managed support service sales~~in 2022 were $280,429 and increased ~~3.1% from $3,243,183 in 2021~~by $27,026 to ~~$3,343,032~~$307,455 for the same period in ~~2022. Managed support service sales comprised approximately 66% of our sales in both~~2023. For the ~~three and nine~~six months ended ~~September~~June 30, 2022 and ~~approximately 61%~~2023, sale were $532,031 and $622,587, respectively, for ~~the three months ended September 30, 2021, and 59% for the nine months ended September 30, 2021.~~an increase of 17%. The increase ~~in our managed support service~~was primarily attributable to improving sales ~~during the three~~of Nodeware, and ~~nine months ended September 30, 2022 was due to additional projects requested by Perspecta,~~slightly offset by ~~the continued decline~~decreasing sales of ~~virtualization subcontract projects assigned to us by VMWare due to projects coming to a conclusion in 2021.~~

Our cybersecurity projects and software sales, primarily to SMEs, decreased by 18.5% to $573,794 during the three months ended September 30, 2022, from $704,889 during the corresponding period in 2021. These same sales decreased by 17.3% to $1,732,742 during the nine months ended September 30, 2022, from $2,096,403 for the nine month period ended September 30, 2021, respectively. The decrease in cybersecurity projects and software sales during the three and nine months ended September 30, 2022 was attributable to the timing of the completion of projects for revenue recognition.Webroot. We expect ~~the revenue~~this trend to ~~grow due to increased projects in the sales pipeline, completion of projects in the coming months, and increased orders for~~continue throughout 2023 as we focus our resources on Nodeware.

Other IT consulting services sales declined during the three months ended September 30, 2022, decreasing by $17,000 from the same period in 2021. These same sales declined during the nine months ended September 30, 2022 by $119,000 from the same period in 2021. The decline in other IT consulting services sales for the three and nine months ended September 30, 2022 was due to the termination of a consulting contract, which occurred during the second quarter of 2021.

Cost of Sales and Gross Profit

Cost of sales principally represents compensation expense for our employees. Cost of sales decreased by ~~6.7%~~6% to ~~$1,060,872~~$998,215 during the three months ended ~~September~~June 30, ~~2022~~2023 from ~~$1,136,772~~$1,059,639 during the corresponding period of ~~2021.~~2022. For the six month periods ended June 30 2022 and 2023, cost of sales decreased from $2,180,879 in 2022 to $1,964,421 in 2023; a decrease of 10%. The decrease in cost of sales during the three and six months ended ~~September~~June 30, 2023 from 2022 ~~from 2021~~was primarily due to a decrease in payroll and benefits of salaried employees who support our managed services and cybersecurity projects. This reduction of payroll was due to anormal attrition without replacement. There was no impact on performance, as we were able to absorb the staff reduction ~~in headcount of marketing~~with efficiency improvements to our processes and ~~sales personnel. Cost of sales decreased during the nine months ended September 30, 2022 from the same period in 2021, by 2.3%, decreasing from $3,318,989 to $3,241,751.~~tools.

Our gross profit ~~decreased~~increased by ~~$48,468 to $651,341 from~~$148,408 for the three months ended ~~September~~June 30, ~~2021~~2022 to ~~2022. Gross profit decreased by $305,494~~2023, from $636,853 to ~~$1,834,023 from~~$785,261. For the ~~nine~~six months ended ~~September~~June 30, ~~2021 to 2022. In both periods,~~2023, gross profit of $1,583,048 represents a 34% increase over gross profits for the ~~decrease~~same period in 2022 of $1,182,683. The increase was ~~primarily~~ due to the combination of increased sales and the decrease in ~~sales~~salary and benefits previously referenced above.

General and Administrative Expenses

General and administrative expenses include corporate overhead such as compensation and benefits for executive, administrative and finance personnel, rent, insurance, professional fees, travel, and office expenses. General and administrative expenses of ~~$529,695~~$465,177 for the three months ended ~~September~~June 30, ~~2022 increased slightly~~2023 decreased approximately 24% from ~~$528,424~~$613,317 for the same quarter of ~~2021. During~~2022. For the six months ended June 30, 2023, general and administrative expenses were $996,822, down from $1,217,300 for the same period in 2022. The decrease was primarily due to the reduction in legal, accounting, and other related fees associated with the S-1 filing in 2022, down approximately $135,000 for the comparative three month periods, ~~there~~and down approximately $265,000 for the comparative six month periods. During the three month period comparison, the decrease was partially offset by an increase in ~~legal~~bad debt expense of approximately $10,000, and accounting expenses including other public company related fees, of $70,000. Rental and lease expenses also increased $21,000. These were offset in part by decreases in consulting fees of $39,000, corporate marketing expenses of $13,000, and salary expense reductions of $45,000 resultant from$26,000 for the ~~transfer of certain personnel from the administrative group to the sales group. The balance of the changes were minor and distributed across multiple expense categories.~~

~~For the nine months ended September 30, 2022, general and administrative costs were 13.8% higher than the same~~six month period in 2021, increasing to $1,746,995 from $1,534,527. These were primarily due to an increase in legal and accounting expenses including other public company related fees, of $363,000. Rental and lease expenses also increased $42,000. These were offset in part by decreases in consulting fees of $65,000, a decrease in corporate marketing expenses of $41,000, and salary expense reductions of $80,000 resultant from the transfer of certain personnel from the administrative group to the sales group. The balance of the changes were minor and distributed across multiple expense categories.comparison.

Selling Expenses

Selling expenses of ~~$713,173~~$761,365 for the three months ended ~~September~~June 30, ~~2022~~2023 increased ~~42%~~approximately 24% from ~~$502,389~~$612,957 for the same quarter of 2021. The hiring of new personnel contributed approximately $32,000 to the quarter over quarter increase, while increased marketing expenses were $90,000, and stock option expenses of approximately $91,000 were recognized in the third quarter of 2022. For the ~~nine~~six months ended ~~September~~June 30, ~~2022, Selling~~2023, selling expenses were $1,454,475; an increase of ~~$1,973,755 increased 41% from $1,397,156~~15% over $1,260,582 for the same period in ~~2021. This~~2022. For the three month period, approximately $220,000 of the increase ~~is primarily~~was due to marketing spending, partially offset by reductions in staffing and related tobenefits. For the ~~hiring~~six month period, approximately $260,000 of ~~additional salespeople during 2021 which resulted in~~the increase was due to an increase ~~over the prior year of approximately $281,000. In addition,~~in marketing ~~expenses were up~~spending, partially offset by ~~$184,000 over the same nine months~~reductions in ~~2021,~~staffing and ~~recognition of stock option expenses were up by approximately $106,000 over the prior year. The balance of the changes were minor and distributed across multiple expense categories.~~related benefits.

Operating Income (Loss)

For the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~June 30, 2022, operating loss was ~~$591,528~~$441,281 and ~~$331,004,~~$589,421, respectively, for an ~~increase~~improvement in the loss by ~~$260,524.~~$148,140. For the ~~nine~~six months ended ~~September~~June 30, 2023 and June 30, 2022, the operating loss was ~~$1,886,727, an increase in the loss by $1,094,561 from $792,166 in the same period of 2021.~~$868,249 and $1,295,199, respectively. The ~~increase~~improvement in our operating loss from the previous year is principally attributable to the ~~decrease in sales,~~ growth of ~~our~~ sales ~~team~~as referenced above, the reduction in cost of sales as referenced above, the reduction of general and administrative expenses as referenced above, partially offset by the increase in selling expenses as referenced above.

Interest Expense

Net interest expense of $647,564 for the three months ended June 30, 2023 increased 166% from expense of $243,779 for the same quarter of 2022. For the six months ended June 30, 2023, net interest expense of $1,174,567 represents an increase of $768,332 over the same period in 2022. The increase in interest expense is primarily attributable to the bridge loans entered into during 2022 and the ~~associated costs,~~first quarter of 2023 and ~~investment in~~penalty interest accrued on the ~~growth~~defaulted loans of ~~our business~~approximately $130,000 for the three months ended June 30, 2023 and approximately $347,000 for the six months ended June 30, 2023.

Other Income

For the three and six months ended June 30, 2023, other income included a one-time refund of taxes of $1,662,698 related to the approval of the Employee Retention Credit by the IRS as well as ~~professional fees incurred for~~ the ~~nine months ended September 30, 2022 as compared~~gain of $95,131 related to ~~2021, as discussed above.~~debt forgiveness.

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~~Interest Expense~~

Net interest expense of $495,764 for the three months ended September 30, 2022, increased 736% from expense of $59,307 for the same quarter of 2021. Net interest expense of $901,998 for the nine months ended September 30, 2022, increased 441% from expense of $166,875 for the same period of 2021. The increase in interest expense is primarily attributable to the bridge loans taken in the last four quarters. The net interest expense for the three months ended September 30, 2022 included additional interest due to the default on the four bridge loans. The amount of this additional interest was approximately $205,000.

~~Net Loss~~Profit (Loss)

For the three months ended ~~September~~June 30, 2023, net profit was $668,984. For the same period in 2022, we showed a net loss of $833,200. For the six months ended June 30, 2023 and June 30, 2022, ~~and 2021,~~the net loss was ~~$1,087,292~~$284,987 and ~~$269,806, respectively, an increase~~$1,701,434, respectively. The primary reasons for this improvement in both periods was the ~~loss by $817,486. For~~one-time other income recognized during the ~~nine~~three months ended ~~September~~June 30, ~~2022 and 2021, net loss was $2,788,725 and $838,536, respectively. The increase is in both comparable periods is attributable primarily to~~2023 associated with the ~~selling, general and administrative, and interest items discussed~~Employee Retention Credit mentioned above.

Liquidity and Capital Resources

At ~~September~~June 30, ~~2022,~~2023, we had cash of ~~$6,584.~~$17,339 available for working capital needs and planned capital asset expenditures. At ~~September~~June 30, ~~2022,~~2023, we had a working capital deficit of approximately ~~$5,460,000~~$6.6 million and a current ratio of ~~0.12.~~0.10.

During ~~2022,~~2023, our primary source of liquidity is cash provided by collections of accounts receivable ~~bridge loans~~ and our factoring line of credit. We maintain an accounts receivable financing line of credit with an independent financial institution that allows us to sell selected accounts receivable invoices to the financial institution with full recourse against us in the amount of $2,000,000, including a sublimit for one major client of $1,500,000. This provides us with the cash needed to finance certain of our on-going costs and expenses. At ~~September~~June 30, ~~2022,~~2023, based on eligible accounts receivable, we had $0$20,000 available under this arrangement. We expect sales during ~~2022~~2023 to generate additional accounts receivable eligible for factoring, that will support our operations. We pay fees based on the length of time that the invoice remains unpaid.

At ~~September~~June 30, ~~2022,~~2023, we had current notes payable of ~~$229,000~~$199,000 to related parties. $100,000 of this debt iswas due on January 1, 2023. The remaining ~~$129,000~~$99,000 are in the form of demand notes with an interest rate of 6%.

At ~~September~~June 30, ~~2022,~~2023, we ~~had~~have current notes payable of approximately ~~$1,248,000~~$1,491,000 to third parties, which includes convertible notes payable of approximately $150,000. Also included is $12,500 in principal amount of a note payable due on June 30, 2016 but not paid by then. This note was issued in payment of software we purchased in February 2016 and secured by a security interest in the software. To date, the holder has not taken any action to collect the amount past due on this note or to enforce the security interest in the software.

Also included in the current notes payable to third parties at June 30, 2023, are ~~three Bridge Loans~~five bridge loans with Mast Hill Fund, ~~L.P, which each~~L.P., for $1,449,902. All five loans bear interest at ~~a rate of~~ 8%. We ~~plan to use~~used the proceeds from the ~~Bridge Loans~~bridge loans to substantially enhance our marketing of ~~CyberLab’s~~CyberLabs’ Nodeware solution, in order to significantly increase its growth. A

Notes payable to third parties at June 30, 2023, also includes a loan balance with Celtic Bank for $105,696. This loan does not bear interest, and instead incurred a one-time fee of $12,464 at origination. The payments consist of 30% of the Company’s receivables processed through Stripe, Inc.’s payment processing platform until the loan is repaid.

In the first six months of 2023, a total of approximately ~~$658,000~~$404,000 was recorded as deferred note ~~costs associated with these transactions.~~costs. At ~~September~~June 30, 2022, the unamortized balance of the deferred notes costs was approximately $221,000. See Note 6 of the 2021 Audited Financial Statements for more information regarding the first Bridge Loan. See our Form 8-K from February 15, 2022 for more information regarding the second Bridge Loan. See our Form 8-K from May 31, 2022 for more information regarding the third Bridge Loan. The gross notes payable to Mast Hill amount at September 30, 2022 was approximately $963,000. Currently, we are in default on principal and interest payments on these loans for a total of approximately $381,000 at September 30, 2022. The noteholder has taken no action against the Company at this time.

Notes payable also includes a bridge loan from Talos Victory Fund, LLC., with an initial principal amount of $296,000, which bears interest at a rate of 8%. A total of approximately $129,000 was recorded as deferred note costs associated with the loan. As of September 30, 2022,2023, the unamortized balance of the deferred note ~~cost~~costs for all notes payable to third parties was approximately ~~$69,000.~~$227,000. See ~~our Form 8-K from April 12,~~Notes 5 and 6 of the 2022 Audited Financial Statements for more information regarding this loan. The gross note payable to Talos amount at September 30, 2022 was approximately $296,000. Currently, we are in default on principal and interest payments on this loan of approximately $71,000 at September 30, 2022. The noteholder has taken no action against the Company at this time.

Notes payable also includes a loan from Celtic Bank, with an initial obligation amount of $150,552. This includes funds received of $139,400 plus a fixed one-time loan fee of $11,152. See our Form 8-K from August 8, 2022, for more information regarding this loan. As of September 30, 2022, the gross note payable to Celtic Bank was approximately $124,000.information.

We entered into unsecured lines of credit financing agreements (the “LOC Agreements”) with two related parties in previous years. The LOC Agreements provide for working capital of up to $100,000 through July 31, 2022 and $75,000 through January 2, ~~2023 and $100,000 through July 31, 2022.~~2023. At ~~September~~June 30, ~~2022,~~2023, we had approximately $15,000 of availability under the LOC Agreements.

During ~~the~~ 2021, we issued demand notes to ~~two~~three board members for ~~$55,000~~$79,000 in total. The demand notes bear a 6% interest rate. ~~These were~~The amount outstanding as of ~~September~~June 30, ~~2022.~~2023 is $49,000.

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~~At September 30, 2022, we had $765,000~~We have $549,000 of current maturities of long-term obligations to third parties. This is comprised of various notes including long-term notes to third parties of $265,000 due on January 1, 2018 (plus accrued interest of approximately ~~$240,700)~~$260,000), and approximately ~~$500,000~~$284,000 due on ~~December 31, 2021 which have not been renewed or amended.~~January 1, 2024.

At ~~September~~June 30, ~~2022,~~2023, we ~~had $295,000~~have $659,300 of current maturities of long-term obligations to related parties. ~~$200,000 is~~$270,000 was due on January 1, ~~2023. $70,000~~2023, $25,000 was due June 30, 2023, $90,000 is due on ~~January 2, 2023. $25,000~~July 31, 2023, and$274,300 is due ~~on June 30, 2023.~~January 1, 2024.

We plan to renegotiate the terms of the various notes payable, seek funds to repay the notes or use a combination of both alternatives. We cannot provide assurance that we will be able to repay current notes payable or obtain extensions of maturity dates for long-term notes payable when they mature or that we will be able to repay or otherwise refinance the notes at their scheduled maturities.

We have a note payable agreement for up to $500,000 with a related party. The note has an interest rate of 7.5% and is due on August 31, 2026. The balance ~~was~~is $499,000 at ~~September~~June 30, ~~2022.~~2023.

~~The following table sets forth our cash flow information for the periods presented:~~

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Nine Months Ended September 30,

2022

2021

Net cash used by operating activities

$ (699,104 )

$ (84,256 )
Net cash used by investing activities

(166,405 )

(192,811 )
Net cash provided by financing activities

772,661

300,830

Net increase (decrease) in cash

$ (92,848 )

$ 23,763

The following table sets forth our cash flow information for the periods presented:

	Six Months Ended June 30,
	2023			2022
Net cash provided (used) by operating activities	$	796,922		$	(636,906	)
Net cash provided (used) by investing activities		1,297,405			(111,347	)
Net cash provided (used) by financing activities		(2,100,175	)		650,415
Net decrease in cash	$	(5,848	)	$	(97,838	)

Cash Flows ~~Used~~Provided by (Used in) Operating Activities

Our operating cash flow is primarily affected by the overall profitability of our contracts, our ability to invoice and collect from our clients in a timely manner, and our ability to manage our vendor payments. We bill our clients weekly or monthly after services are performed as well as collect down payments depending on the contract terms. ~~The cash impact of our~~Our net loss of ~~$2,788,725~~$284,987 for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 was offset ~~in part~~ by non-cash expenses and credits of ~~$780,544.~~$695,641. In addition, ~~the cash impact of~~ our net loss was ~~further~~ offset by ~~a decrease~~an increase in accounts receivable and other assets of ~~$174,611. Combined with increases~~$102,727, an increase in accrued payroll, deferred revenue and other expenses payable ~~for~~of $570,630 and a ~~total of $377,460, and an increase~~decrease in accounts payable of ~~$757,007, resulted~~$81,635 resulting in cash ~~used~~provided by operating activities of ~~$699,103.~~$796,922.

We ~~have increased~~are increasing our marketing of Nodeware to our IT channel partners who resell to their customers. We ~~have made~~are making investments in our cyber security team for penetration testing, CISOTaaS and other services. Due to the lengthy lead times typically needed to generate these new sales, we ~~do not~~ expect ~~to realize~~a delay before realizing a return from our sales and marketing ~~personnel for~~efforts, of one or more quarters. As a result, we may continue to experience operating income or operating losses from these ~~investments in personnel~~resource expenditures until sufficient sales are generated. We expect to fund the cost for the new ~~sales personnel~~expenditures from our operating cash flows, the equity raise and incremental borrowings, ~~and funds from the planned offering,~~ as needed.

Cash Flows ~~Used~~Provided by (Used in) Investing Activities

InDuring the ~~quarters~~six months ended ~~September~~June 30, ~~2022 and 2021,~~2023, we received approximately $1,413,000 for the aforementioned Risk Participation of ERC (Employee Retention Credit) Claim Agreement. We also incurred capital expenditures for computer hardware as well as software development labor for the enhancements to Nodeware. ~~The decrease of $26,405 from 2021 was primarily due to less development activities in 2022 that were capitalized.~~ We expect to continue to invest in computer hardware and software to update our technology to support the growth of our business. We do not anticipate our continued investment to be ~~significant.~~significant in these two categories.

Cash Flows Provided by (Used in) Financing Activities

On August 8, 2022, the Company entered into a loan agreement with Celtic Bank. We received $139,400 from this loan, which is comprised of a gross obligation of $150,552, less one-time fees of $11,152. Through September 30, 2022, we have paid $26,285 against the obligation.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we received ~~$865,455~~$257,645 from various ~~bridge loans from the~~debt products, including a fifth Mast Hill Fund L.P. loan for $118,000, and ~~Talos Victory Fund, LLC. This is comprised~~a restructured loan with Celtic Bank for 139,645. We paid the ERC Claim with the amounts received from the IRS of ~~gross proceeds~~$1,662,698, principal of ~~$1,021,000 less~~$369,786 on short term debt and $30,000 of related party short term debt. There were debt issuance costs of ~~$155,545. We also paid principal of approximately 210,000 on~~$295,336 during the ~~Mast Hill Fund L.P. bridge loan established in November 2021.~~period.

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Credit Resources

We maintain an accounts receivable financing line of credit from an independent financial institution that allows us to sell selected accounts receivable invoices to the financial institution with full recourse against us in the amount of $2,000,000, including a sublimit for one major client of $1,500,000. This provides us with the cash needed to finance certain costs and expenses. At ~~September~~June 30, ~~2022,~~2023, we had financing availability, based on eligible accounts receivable, of approximately $0$20,000 under this line. We pay fees based on the length of time that the invoice remains unpaid. We also have approximately $16,000 of available credit under various lines of credit as of ~~September~~June 30, ~~2022.~~2023.

During May 2019, we originated a line of credit note payable for a $500,000 with a related party and borrowed $499,000 and have $1,000 available to borrow for working capital. This agreement matures in August 2026.

During 2017, we originated two lines of credit with related parties totaling $175,000. At June 30, ~~2021,~~2023, we had $15,000 available under these financing ~~agreements. The maturity date of~~agreements which matured in January 2023 and July 2023, respectively.

We believe the ~~$75,000~~capital resources available under our factoring line of credit, ~~is January 2023, whereas~~cash from additional related party loans and cash generated by improving the ~~maturity date~~results of our operations will be sufficient to fund our ongoing operations for at least the ~~$100,000 line~~next 12 months. The funds from the equity raise will allow us to support and accelerate the internal growth of ~~credit has been extended to July 2023.~~our operations and offer additional opportunities if they arise.

We anticipate financing growth from acquisitions of other businesses, if any, and our longer-term internal growth through one or more of the following sources: issuance of ~~equity;~~equity: cash from collections of accounts receivable; additional borrowing from related and third parties; use of our existing accounts receivable credit facility; or a refinancing of our accounts receivable credit facility.

We plan to evaluate alternatives which may include renegotiating the terms of our notes, seeking conversion of the notes to shares of common stock and seeking funds to repay our notes. We continue to evaluate repayment of our notes payable based on our cash flow. Therefore, there is currently substantial doubt about our ability to continue as a going concern.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, the chief executive officer and chief financial officer concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us or our business.

Item 1A. Risk Factors

As of the date of this Report, other than as set forth below, there have been no material changes with respect to those risk factors previously disclosed in our (i) Registration Statement on Form S-1 initially filed with the SEC on January 14, 2022, as amended (File No. 333-262167) (the "Registration Statement"), (ii) Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 15, 2022, and (iii) Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, and June 30, 2022, as filed with the SEC on May 16, 2022, August 15, 2022, respectively. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our results of operations or financial condition. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

~~Although our unaudited f~~inancial statements have been prepared on a going concern basis, our management believes that our recurring losses and negative cash flows from operations and other factors have raised substantial doubt about our ability to continue as a going concern as o~~f September 30, 2022.~~

As of September 30, 2022, we had a working capital deficit of $5,464,828 and a stockholders' deficiency of $6,367,284. We reported a net loss of approximately $2,789,000 for the nine months ended September 30, 2022. These factors raise substantial doubt about our ability to continue as a going concern.

Our unaudited financial statements for the three and nine months ended September 30, 2022 were prepared on a going concern basis in accordance with generally accepted accounting principles in the United States. The going concern basis assumes that we will continue in operation for the next 12 months and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business. Thus, our consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Our recurring losses, negative cash flow, need for additional capital, and the uncertainties surrounding our ability to raise such capital raise substantial doubt about our ability to continue as a going concern. For us to continue operations beyond the next 12 months and be able to discharge our liabilities and commitments in the normal course of business, we must establish profitable operations through increased sales, decrease expenses, generate cash from operations or raise additional funds when needed. We intend to improve our financial condition and ultimately improve our financial results by increasing revenues through expanding sales and reducing expenses. If we are unable to raise additional capital, increase sales or reduce expenses, we will be unable to continue to fund our operations, develop our products, realize value from our assets, and discharge our liabilities in the normal course of business. If we become unable to continue as a going concern, we could have to liquidate our assets, and potentially realize significantly less than the values at which they are carried on our financial statements, and stockholders could lose all or part of their investment in our common stock.

~~We will need to raise additional capital and if we are able to raise additional capital in the future, our shareholders could be diluted or securities we issue may have rights senior to~~ ~~the rights of a holder of common stock. If we fail to raise additional capital, it would materially and adversely affect our ability to continue to fund our operations and pursue our business plan.~~

As of September 30, 2022, we had approximately $6,600 in unrestricted cash and cash equivalents, which may not be sufficient to fund the Company's planned operations through one year after the date the unaudited financial statements are issued. We will need to raise additional capital in the short- and long-term in order to fund our operations and execute on our business strategy. Any potential financing may include common stock, preferred shares, warrants to purchase common stock or preferred shares, debt securities, convertible securities, rights to purchase the foregoing securities, equity investments from strategic partners, or some combination of the foregoing. Any issuance of equity we may undertake in the future to raise additional capital could cause the price of our common stock to decline, or require us to issue shares at a price that is lower than that paid by holders of our common stock in the past, which would result in those newly issued shares being dilutive, and such dilution could be significant. If we obtain funds through a credit facility or through the issuance of debt or preferred securities, these securities would likely have rights senior to the rights of a common stockholder, which could impair the value of our common stock.

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Due to our history of recurring losses from operations, negative cash flows from operations, and a significant accumulated deficit, our management concluded that there is substantial doubt about our ability to continue as a going concern. This determination could further materially limit our ability to raise additional funds. There can be no assurance that we will become profitable or be able to continue as a going concern. Further, we cannot assure that any additional financing, whether from the issuance of equity securities, debt or convertible debt financing, or other means of financing, will be available on a timely basis, in the amounts needed, on reasonable terms, on terms acceptable to us, or at all. If we fail to raise additional capital, it would materially and adversely affect our ability to continue to fund our operations and pursue our business plan, and may even lead to a bankruptcy filing and/or reorganization of our business and capital structure.

~~We are in default in payment of approximately $1.5 million in principal and interest payments due under the terms of unsecured bridge loans issued to the Company at various times during the past year.~~

Currently, we are in default on principal and interest payments with 2 different noteholders. The noteholders have been notified of the failure to pay and have taken no action against the Company at this time. There can be no assurances that these noteholders and other noteholders will not take any action against the Company. The noteholders may, in their sole discretion, determine to accept payment part in Common Stock and part in cash. Any action by these noteholders could have a material adverse effect on our liquidity, financial condition and results of operations, and could cause us to become bankrupt or insolvent. Since all of our assets are subject to liquidation by the creditors, liquidation could result in no assets being left for the shareholders after the creditors receive their required payment. As such, any failure to secure a resolution or an acceleration of our indebtedness will restrict our ability to operate as a going concern.

~~The COVID-19 pandemic could have a material adverse effect on our results of operations, financial position, and cash flows.~~

The COVID-19 pandemic has created significant uncertainty and economic disruption. Effects of the COVID-19 pandemic that may negatively impact our business in future periods include but are not limited to: limitations on the ability of our customers to conduct their business, purchase our products and services, and make timely payments; curtailed consumer spending; deferred purchasing decisions; delayed consulting services implementations; and decreases in cybersecurity services and software license revenues driven by channel partners. The primary effect of the shutdowns of conventions and conferences due to the COVID-19 pandemic has been the limitations on the Company’s ability to grow sales as fast as was originally anticipated. This has alleviated during 2022.

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021 and the Form S-1/A filed with the Securities and Exchange Commission on November 1,~~ 2022 for a comprehensive ~~listings~~listing of the Company’s other risk factors. ~~Except as set forth above, there~~There are no material changes for the ~~nine~~three and six months ended ~~September~~June 30, ~~2022.~~2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the ~~three~~six months ended ~~September~~June 30, ~~2022, a non-executive~~2023, warrants were exercised, ~~stock options~~resulting in 6,515 shares of ~~the Company. The issuance was for 334 shares at a price of $3.00.~~

~~During the three months ended September 30, 2022, Andrew Hoyen, President, exercised stock options for~~ common stock ~~of the Company. The issuance was for 5,334 shares at a price of $3.00, for a total of $16,000.~~being issued.

The securities described above were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), as set forth in Section 4(a)(2) of the Securities Act relative to transactions by an issuer not involving any public offering, to the extent an exemption from registration was required. The recipients of the securities described in the transactions above acquired the securities for their own account for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof.

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Item 3. Defaults Upon Senior Securities.

The Company is in default on convertible notes to third parties of $150,000 due on December 31, 2016. The accrued interest on these notes ~~was~~is approximately ~~$116,000~~$123,000 at ~~September~~June 30, ~~2022.~~2023.

The Company is in default on long-term notes to third parties of $265,000 due on January 1, 2018. The accrued interest on these notes ~~was~~is approximately ~~$241,000~~$261,000 at ~~September~~June 30, ~~2022.~~2023.

The Company is in default on ~~long-term notes~~a note payable to third parties of ~~$500,000~~$355,000 due on December 31, ~~2021.~~2022. The accrued interest on ~~these notes was~~the note is approximately ~~$82,000~~$111,000 at ~~September~~June 30, ~~2022.~~2023.

The Company is in default on ~~payments~~a note payable to third parties of $566,000 due ~~under a promissory note entered into with Mast Hill Fund, L.P., defined above as the First Mast Hill Loan, of $161,280 due September 3, 2022.~~on March 22, 2023. The ~~total principal and~~ accrued ~~interest, including default~~ interest on the ~~promissory~~ note ~~was~~is approximately ~~$302,000~~$121,000 at ~~September~~June 30, ~~2022. See Note 7 for further disclosure regarding the First Mast Hill Loan.~~2023.

The Company is in default on ~~payments~~a note payable to third parties of $118,000 due ~~under a promissory note entered into with Mast Hill Fund, L.P., defined above as the Second Mast Hill Loan, of $177,600 due as of September 15, 2022.~~on June 3, 2023. The ~~total principal and~~ accrued ~~interest, including default~~ interest on the ~~promissory notes was~~note is approximately ~~$450,000~~$22,000 at ~~September~~June 30, ~~2022. See Note 7 for further disclosure regarding the Second Mast Hill Loan.~~2023.

The Company is in default on ~~payments~~a note payable to third parties of $170,000 due ~~under a promissory note entered into with Mast Hill Fund, L.P., defined above as the Third Mast Hill Loan, of $42,600 due as of September 27, 2022.~~on June 30, 2023. The ~~total principal and~~ accrued ~~interest, including default~~ interest on the ~~promissory notes was~~note is approximately ~~$419,000~~$121,000 at ~~September~~June 30, ~~2022. See Note 7 for further disclosure regarding the Third Mast Hill Loan.~~2023.

The Company is in default on ~~payments~~a note payable to third parties of $240,902 due ~~under a promissory note entered into with Talos Victory Fund, LLC, defined above as the Talos Loan, of $71,040 due as of September 12, 2022.~~on June 30, 2023. The ~~total principal and~~ accrued ~~interest, including default~~ interest on the ~~promissory notes was~~note is approximately ~~$354,000~~$105,000 at ~~September~~June 30, ~~2022. See Note 7 for further disclosure regarding the Talos Loan.~~2023.

Item 6. Exhibits

Exhibits required to be filed by Item 601 of Regulation S-K.

For the exhibits that are filed herewith or incorporated herein by reference, see the Index to Exhibits located below in this report. The Index to Exhibits is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Infinite Group, Inc.
		~~(Registrant)~~

~~Date: November 17, 2022~~		~~/s/ James Villa~~
		~~James Villa~~ (Registrant)
		~~Chief Executive Officer~~
		~~(Principal Executive Officer)~~

~~Date: November 17, 2022~~		~~/s/ Richard Glickman~~
		~~Richard Glickman~~
Date: October 16, 2023		/s/ James Villa
		James Villa
		Chief Executive Officer
		(Principal Executive Officer)

Date: October 16, 2023		/s/ Richard Glickman
		Richard Glickman Finance and Chief Accounting Officer VP Finance and Chief Accounting Officer
		~~(Principal Financial Officer and Principal Accounting Officer)~~

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Table of Contents

~~INDEX TO EXHIBITS~~

INDEX TO EXHIBITS

Exhibit
No.		Description

10.1		~~Modification~~Business Loan Agreement, ~~to Line of Credit Note~~dated August, 23, 2023, between Infinite Group, Inc. and Agreement originally dated July 17, 2017 between the Company and Andrew Hoyen dated July 29, 2022 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 4, 2022).WebBank
10.2		~~Loan~~Financing and Security Agreement, dated September 14, 2023, between ~~the Company~~Infinite Group, Inc. and Celtic Bank ~~dated August 8, 2022 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 12, 2022).~~Corporation
10.3		~~Modification~~Loan Agreement ~~to Promissory Note originally dated December 30, 2020~~ between the ~~Company and Donald Reeve~~Infinite Group, Inc.and Celtic Bank dated ~~September 6, 2022 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 8, 2022).~~
~~10.4~~		Modification Agreement to Promissory Note originally dated May 25, 2021 between the Company and Donald Reeve dated September 6, 2022 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 8, 2022).October 12, 2023
31.1		Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. *
31.2		~~Principal Financial Officer~~VP Finance Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. *
32.1		Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. *
32.2		~~Principal Financial Officer~~VP Finance Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS		XBRL Instance Document.*
101.SCH		XBRL Taxonomy Extension Schema Document.*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.*
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.*

* Filed as an exhibit hereto.

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Numerator for basic and diluted net loss per share:
Net loss	$	(1,087,292	)	$	(269,806	)	$	(2,788,725	)	$	(838,536	)
Basic and diluted net loss per share	$	(2.41	)	$	(0.67	)	$	(6.28	)	$	(2.14	)

Weighted average common shares outstanding
Basic and diluted shares		451,345			399,829			443,901			392,398

Anti-dilutive shares excluded from net loss per share calculation		311,977			302,717			311,977			302,717

Description	Classification	September 30, 2022			December 31, 2021

Right of Use Asset - Lease, net	Other assets (non-current)	$	664,980		$	41,490

Operating Lease Liability - Short Term	Accrued liabilities		74,911			42,347
Operating Lease Liability - Long Term	Other long-term liabilities		592,521			0

Total Operating Lease Liability		$	667,432		$	42,347

Discount Rate - Operating Lease			7.0	%		6.0	%