10-Q

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 March 31, 2019

Commission file number: 0-21816

_________________________________________

INFINITE GROUP, INC.

(Exact name of registrant as specified in its charter)

_________________________________________

175 Sully’s Trail, Suite 202

Pittsford, New York 14534

(585) 385-0610

A Delaware Corporation

IRS Employer Identification Number: 52-1490422

_________________________________________

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

Common Stock, $0.001 par value per share	IMCI	OTC Bulletin Board
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)

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 ☐ Non-accelerated filer ☐ Accelerated 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. There were 29,061,883 shares of the issuer’s common stock, par value $.001 per share, outstanding as of July 1, 2019.

Infinite Group, Inc.
Quarterly Report on Form 10-Q
For the Period Ended March 31, 2019
Table of Contents
PART I - FINANCIAL INFORMATION			PAGE
	Item 1. Financial Statements
		Balance Sheets – March 31, 2019 (Unaudited) and December 31, 2018	3
		Statements of Operations (Unaudited) for the three months ended March 31, 2019 and 2018	4
		Statements of Stockholders’ Deficiency (Unaudited) for the three months ended March 31, 2019 and 2018	5
		Statements of Cash Flows (Unaudited) for the three months ended March 31, 2019 and 2018	6
		Notes to Financial Statements – (Unaudited)	7
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		14
	Item 4. Controls and Procedures		14
PART II - OTHER INFORMATION
	Item 6. Exhibits		15
SIGNATURES			15

FORWARD-LOOKING STATEMENTS

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” regarding the plans and objectives of management for future operations and market trends and expectations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the expansion of our business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. See “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (“SEC”), for a more detailed discussion of uncertainties and risks that may have an impact on future results. The terms “we”, “our”, “us”, or any derivative thereof, as used herein refer to Infinite Group, Inc., a Delaware corporation.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

INFINITE GROUP, INC. BALANCE SHEETS
	March 31,	December 31,
	2019 (Unaudited)	2018
ASSETS
Current assets:
Cash	$12,503	$29,716
Accounts receivable, net of allowances of $22,000	390,786	286,187
Prepaid expenses and other current assets	11,861	2,906
Total current assets	415,150	318,809
Right of Use Asset – Lease, net	248,612	0
Property and equipment, net	7,305	8,627
Deposits	6,667	6,667
Total assets	$677,734	$334,103
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities:
Accounts payable	$286,529	$367,536
Accrued payroll	275,278	218,328
Accrued interest payable	865,222	839,189
Accrued retirement	246,867	244,423
Accrued expenses - other	140,903	87,581
Operating Lease liability - Short-term	70,196	0
Current maturities of long-term obligations	950,000	686,000
Current maturities of long-term obligations - related parties	543,135	34,350
Notes payable	332,500	332,500
Notes payable - related parties	102,000	102,000
Total current liabilities	3,812,630	2,911,907
Long-term obligations:
Notes payable:
Other	481,974	744,335
Related parties	169,000	677,955
Total notes payable	650,974	1,422,290
Operating Lease liability - Long-term	178,928	0
Total liabilities	4,642,532	4,334,197
Stockholders' deficiency:
Common stock, $.001 par value, 60,000,000 shares authorized; 29,061,883 shares issued and outstanding	29,061	29,061
Additional paid-in capital	30,593,626	30,593,366
Accumulated deficit	(34,587,485)	(34,622,521)
Total stockholders’ deficiency	(3,964,798)	(4,000,094)
Total liabilities and stockholders’ deficiency	$677,734	$334,103
See notes to unaudited financial statements.

3

INFINITE GROUP, INC. STATEMENTS OF OPERATIONS (Unaudited)
	Three Months Ended March 31,
	2019	2018
Sales	$1,687,794	$1,594,518
Cost of sales	1,057,170	1,079,154
Gross profit	630,624	515,364
Costs and expenses:
General and administrative	277,605	299,486
Selling	253,306	241,198
Total costs and expenses	530,911	540,684
Operating income (loss)	99,713	(25,320)
Interest expense:
Related parties	(16,638)	(14,371)
Other	(48,039)	(47,309)
Total interest expense	(64,677)	(61,680)
Net income (loss)	$35,036	$(87,000)
Net loss per share – basic and diluted	$.00	$.00
Weighted average shares outstanding – basic and diluted	29,061,883	29,061,883

  See notes to unaudited financial statements.

4

INFINITE GROUP, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY (Unaudited)

Three Months Ended March 31, 2019 and 2018

Three Months Ended March 31, 2019

			Additional
	Common Stock		Paid-in	Accumulated
	Shares	Amount	Capital	Deficit	Total
Balance - December 31, 2018	29,061,883	$29,061	$30,593,366	$(34,622,521)	$(4,000,094)
Stock based compensation	0	0	260	0	260
Net income	0	0	0	35,036	35,036
Balance - March 31, 2019	29,061,883	$29,061	$30,593,626	$(34,587,485)	$(3,964,798)

  Three Months Ended March 31, 2018

			Additional
	Common Stock		Paid-in	Accumulated
	Shares	Amount	Capital	Deficit	Total
Balance - December 31, 2017	29,061,883	$29,061	$30,591,896	$(34,659,521)	$(4,038,564)
Net loss	0	0	0	(87,000)	(87,000)
Balance - March 31, 2018	29,061,883	$29,061	$30,591,896	$(34,746,521)	$(4,125,564)

  See notes to unaudited financial statements.

5

INFINITE GROUP, INC.

STATEMENTS OF CASH FLOWS (Unaudited)

	Three Months Ended March 31,
	2019	2018
Cash flows from operating activities:
Net income (loss)	$35,036	$(87,000)
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Stock based compensation	260	0
Depreciation and amortization	5,313	6,488
Allowance for bad debts	-	(4,000)
(Increase) decrease in assets:
Accounts receivable	(104,599)	214,684
Prepaid expenses and other assets	(8,955)	(9,232)
Increase (decrease) in liabilities:
Accounts payable	(81,007)	(356,577)
Accrued expenses	136,305	157,239
Accrued retirement	2,444	2,349
Net cash used by operating activities	(15,203)	(76,049)
Cash flows from financing activities:
Proceeds from notes payable - related party	0	20,000
Repayments of notes payable - related party	(2,010)	(670)
Net cash (used) provided by financing activities	(2,010)	19,330
Net decrease in cash	(17,213)	(56,719)
Cash - beginning of period	29,716	73,734
Cash - end of period	$12,503	$17,015
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest	$35,490	$28,214

  See notes to unaudited financial statements.

6

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, 2018 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, 2018 filed with the U.S. Securities and Exchange Commission (SEC). Results of operations for the three months ended March 31, 2019 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2019.

Note 2. Management Plans - Capital Resources

The Company reported net income of $35,036 and a net loss of $87,000 for the three months ended March 31, 2019 and 2018, respectively, and stockholders’ deficiencies of $3,964,798 and $4,000,094 at March 31, 2019 and December 31, 2018, respectively. Current maturities of long-term obligations were approximately $1,490,000 and $720,000 at March 31, 2019 and December 31, 2018, respectively. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern and this substantial doubt has not been alleviated.

The Company's goal is to increase sales and generate cash flow from operations on a consistent basis. The Company uses a formal financial review and budgeting process as a tool for improvement that has aided expense reduction and internal performance. The Company’s business plans require improving the results of its operations in future periods.

The Company believes the capital resources available under its factoring line of credit, cash from additional related party and third-party loans and cash generated by improving the results of its operations provide sources to fund its ongoing operations and to support the internal growth of the Company. Although the Company has no assurances, the Company believes that related parties, who have previously provided working capital, and third parties will continue to provide working capital loans on similar terms, as in the past, as may be necessary to fund its on-going operations for at least the next 12 months. 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.

              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, 2018 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 - The Company reclassifies amounts in its financial statements to comply with recently adopted accounting pronouncements.

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.

Revenue - Effective January 1, 2018, the Company adopted Topic 606 using the modified retrospective approach and applied the guidance to those contracts which were not completed as of January 1, 2018. Adoption of Topic 606 did not impact the timing of revenue recognition in the Company’s financial statements for the current or prior periods. Accordingly, no adjustments have been made to opening retained earnings or prior period amounts.

7

The Company’s total revenue recognized from contracts from customers was comprised of three major services: Managed support services, Cybersecurity projects and software and Other IT consulting services. 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 March 31, 2019 or 2018 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 March 31,
	2019	2018
Managed support services	$1,228,747	$1,270,182
Cybersecurity projects and software	310,608	283,056
Other IT consulting services	148,439	41,280
Total sales	$1,687,794	$1,594,518

Managed support services

Managed support services consist of revenue primarily from our subcontracts 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 and testing.

● 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, revenues 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.

● 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 recognized.

Other IT consulting services

Other IT consulting services consists of services such as project management and general IT consulting services. 

● 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 months ended March 31, 2019, sales to one client, including sales under subcontracts for services to several entities, accounted for 65.0% of total sales (69.9% - 2018) and 29.5% of accounts receivable at March 31, 2019 (10.5% - December 31, 2018).

8

Leases - In February 2016, the FASB issued amended guidance for lease arrangements to increase transparency and comparability by providing additional information to users of financial statements regarding an entity's leasing activities. The new standard requires entities to recognize a liability for their lease obligations and a corresponding right-of-use asset, initially measured at the present value of the lease payments. Subsequent accounting depends on whether the agreement is deemed to be a financing or operating lease. For operating leases, a lessee recognizes its total lease expense as an operating expense over the lease term. For financing leases, a lessee recognizes amortization of the right-of-use asset as an operating expense over the lease term separately from interest on the lease liability. The ASU requires that assets and liabilities be presented and disclosed separately, and the liabilities must be classified appropriately as current and noncurrent. The ASU further requires additional disclosure of certain qualitative and quantitative information related to lease agreements. The ASU was effective for the Company beginning on January 1, 2019, at which time we adopted the new standard using the modified retrospective approach as of the date of adoption.Upon adoption, we recognized a right-of-use asset of $265,825 and a lease liability of $265,825 related to the existing office lease that is classified as an operating lease. A summary of the impact to the Balance Sheet on January 1, 2019 and the balances as of March 31, 2019 is as follows:

	December 31, 2018	Effect of Change	January 1, 2019	March 31, 2019
Right of Use Asset – Lease, net	$0	$265,825	$265,825	$248,612
Operating Lease liability – Short-term	$0	$68,848	$68,848	$70,196
Operating Lease liability – Long-term	$0	$196,977	$196,977	$178,928

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 9.1% at March 31, 2019) 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, 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 three months ended March 31, 2019, the Company sold approximately $1,082,000 ($1,526,000 - March 31, 2018) of its accounts receivable to the Purchaser. As of March 31, 2019, approximately $286,000 ($363,000 - December 31, 2018) of these receivables remained outstanding. Additionally, as of March 31, 2019, the Company had approximately $94,000 available under the financing line with the financial institution ($0 - December 31, 2018). After deducting estimated fees, allowance for bad debts and advances from the Purchaser, the net receivable from the Purchaser amounted to $28,600, at March 31, 2019 ($36,213 - December 31, 2018), and is included in accounts receivable in the accompanying balance sheets.

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 $13,782 for the three months ended March 31, 2019 ($12,576 - March 31, 2018). These financing line fees are classified on the statements of operations as interest expense.

Note 5. 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 income (loss) per share for the three months ended:

	Three Months Ended March 31,
	2019	2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss)	$35,036	$(87,000)
Denominator for basic and diluted net income (loss) per share:
Weighted average common shares outstanding	29,061,883	29,061,883
Basic and diluted net income (loss) per share	$.00	$.00
Anti-dilutive shares excluded from net income (loss) per share calculation	28,123,143	28,402,990

9

Certain common shares issuable under stock options and convertible notes payable have been omitted from the diluted net income (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 6. Stock Option Plans and Agreements

The Company has approved stock options plans and agreements covering up to an aggregate of 7,265,000 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.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. 50,000 options were granted for the three months ended March 31, 2019. No options were granted for the three months ended March 31, 2018. The following assumptions were used for the three months ended March 31, 2019.

Risk-free interest rate	1.50%
Expected dividend yield	0%
Expected stock price volatility	100%
Expected life of options	2.50 years

The Company recorded expense for options issued to employees and independent service providers of $260 and $0 for the three months ended March 31, 2019 and 2018, respectively.

At March 31, 2019, there was no unrecognized compensation cost related to non-vested options. No options vested during the three months ended March 31, 2019.

A summary of all stock option activity for the three months ended March 31, 2019 follows:

	Number of Options Outstanding	Weighted Average Exercise Price	Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2018	7,920,000	$.09
Granted	50,000	.05
Forfeited	(938,000)	.23
Expired	(65,000)	.18
Outstanding at March 31, 2019	6,967,000	$.07	3.5 years	$2,000
At March 31, 2019 - vested or
expected to vest and exercisable	6,942,000	$.06	3.5 years	$2,000

Note 7. Related Party Accounts Receivable and Accrued Interest Payable

Accrued Interest Payable - Included in accrued interest payable is accrued interest payable to related parties of $157,626 at March 31, 2019 ($148,703 - December 31, 2018).

Note 8. Subsequent Event

Subsequent to March 31, 2019, the Company entered into 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 Company borrowed $200,000 which remains outstanding. As consideration for providing this financing, the Company granted a stock option to purchase a total of 2,500,000 common shares at an exercise price of $.02 or a total expense of $14,250.

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

10

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 disclaim any obligation to update information contained in any forward-looking statements.

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.

Business

Headquartered in Pittsford, New York, Infinite Group, Inc. is a provider of managed IT and virtualization services and a developer and provider of cybersecurity tools and solutions to private businesses and government agencies. As part of these services we:

●

focus on key security services (virtual CISO, compliance review and assessment, incident response, penetration testing, and vulnerability assessments) to solve and simplify security for small and medium sized enterprises (SMEs), government agencies, and certain large commercial enterprises. We act as the security layer to both internal IT andthird party IT organizations. We work with both our channel partners and direct customers to provide these services;

●

developed and brought to market our automated vulnerability management solution through our OEM business, Nodeware™, which we sell through distribution and channel partners. We are also a master distributor for other security solutions such as Webroot, a cloud-based endpoint security platform solution, where we market to and provide support for over 300 reseller partners across North America;

●

provide level 2 technical and security support across the application layer and physical and virtual infrastructure including software-based managed services supporting enterprise and federal government customers through our partnership with Perspecta; and

●

are an Enterprise Level sales and professional services partner with VMware selling virtualization licenses and solutions and providing virtualization services support to commercial and government customers including the New York State and Local Government and Education (SLED) entities and the New York State Office of General Services (NYS OGS). These activities take place in our virtualization sales organization in conjunction with support from our professional services organization (PSO).

Business Strategy

Our strategy is to build our business by designing, developing, and marketing cybersecurity based services, products and solutions that fill technology gaps in cybersecurity. We brought one patent pending product to market and intend to bring other proprietary products and solutions to market through a channel of domestic and international partners and distributors. Our products and solutions are designed to simplify the security needs in customer and partner environments, with a focus on the mid-tier Enterprise market and below. We enable our partners by providing recurring revenue based business models for both recurring services and through our automated and continuous security solutions. Products may be sold as standalone solutions or integrated into existing environments to further automate the management of security and related IT functions. 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 cybersecurity business is comprised of three components: managed security services, product development and deployment, and integration of third-party security solutions into our security offerings to our channel and customers. We provide cybersecurity services and technical consulting resources to support both our channel partners and end customers. For example, we sell our proprietary product, Nodeware, through both our direct partners and through other 3rd party partner distribution and agents so they can either sell it as a standalone solution or part of other technical services they provide to their customers. This enables the channel partner to develop a base of recurring revenue. We also provide our cybersecurity services through our channel partners as a cybersecurity overlay to the technical services they already provide.

Our goal is to maintain our base of opportunities in our VMware business in both the public and commercial sector. Opportunistically, we will continue to identify license and services engagements as they arise.

We are working to expand our managed services business with our prime partner, Perspecta, and the current federal enterprise customer and its customers. The following sections define specific strategic components of our business strategy.

11

Results of Operations

Comparison of the Three Months Ended March 31, 2019 and 2018

The following table compares our statements of operations data for the three months ended March 31, 2019 and 2018. The trends suggested by this table are not indicative of future operating results.

	Three Months Ended March 31,
						2019 vs. 2018
		As a % of		As a % of		Amount of	% Increase
	2019	Sales	2018	Sales		Change	(Decrease)
Sales	$1,687,794	100.0%	$1,594,518	100.0	%	$93,276	5.8	%
Cost of sales	1,057,170	62.6	1,079,154	67.7		(21,984)	(2.0)
Gross profit	630,624	37.4	515,364	32.3		115,260	22.4
General and administrative	277,605	16.4	299,486	18.8		(21,881)	(7.3)
Selling	253,306	15.0	241,198	15.1		12,108	5.0
Total costs and expenses	530,911	31.4	540,684	33.9		(9,773)	(1.7)
Operating income (loss)	99,713	5.9	(25,320)	(1.6)		125,033	493.8
Interest expense	(64,677)	(3.8)	(61,680)	(3.9)		2,997	4.9
Net income (loss)	$35,036	2.1%	$(87,000)	(5.5)	%	$122,036	140.3	%
Net income (loss) per share - basic and diluted	$.00		$.00			$.00

Sales

Our managed support service sales comprised approximately 73% of our sales in 2019 and approximately 75% in 2018. Our cybersecurity projects and software sales, primarily to SMEs, were approximately 18% of our total sales as compared to approximately 17% for 2018.

Sales of virtualization subcontract projects have continued to decrease since 2015 because VMware has continued to assign fewer projects to us. Our virtualization subcontract project sales decrease of approximately 15% from 2018 to 2019 was offset in part by sales growth of approximately 10% from our cybersecurity projects and software business during the three months ended March 31, 2019 as compared to 2018. Our goal is to expand our cybersecurity projects and software business by using our expanding salesforce as well as channel partners. We also hope to grow our VMware business in both the public and commercial sector by building VMware license sales volume and services concurrently directly with customers rather than relying on subcontract project services. Other IT projects comprised the balance of our sales.

Cost of Sales and Gross Profit

Cost of sales principally represents the cost of employee services related to our IT Services Group. We terminated multiple support personnel in the last year. In smaller amounts, we also incurred cost of sales for third party software licenses for our commercial SME partners. As virtualization project sales decreased, related personnel cost of sales also decreased.

Our gross profit improved by $115,260 primarily due to improved sales and better cost containment of salaries as noted.

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 decreased due primarily to less professional fees for legal and accounting services.

Selling Expenses

The increase in selling expenses is due to the hiring of salespeople in late 2018 to sell our cybersecurity services and software as well as a Marketing manager to enhance the Company’s marketing activities.

Operating Income (loss)

The increase in our operating income from the previous year’s operating loss is principally attributable to an improved gross margin and decreases in other expenses for the three months ended March 31, 2019 as compared to 2018.

12

Interest Expense

The increase in interest expense is principally attributable to the increase in interest rates over the last year.

Net Income (loss)

The increase is attributable to the items discussed above for the three months ended March 31, 2019 as compared to 2018.

Liquidity and Capital Resources

At March 31, 2019, we had cash of $12,503 available for working capital needs and planned capital asset expenditures. During 2019, we financed our business activities principally through cash flows provided by operations and sales with recourse of our accounts receivable. Our primary source of liquidity is cash provided by collections of accounts receivable 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 March 31, 2019, we had financing availability, based on eligible accounts receivable, of approximately $94,000 under this line. We pay fees based on the length of time that the invoice remains unpaid.

We entered into unsecured lines of credit financing agreement (the “LOC Agreements”) with three related parties in previous years. The LOC Agreements provide for working capital of up to $400,000 through January 1, 2020, $100,000 through July 31, 2022 and $75,000 through January 2, 2023. At March 31, 2019, we had approximately $38,000 of availability under the LOC Agreements.

At March 31, 2019, we had a working capital deficit of $3,409,000 and a current ratio of .11.

At March 31, 2019, we have current notes payable of $332,500 to third parties, which includes convertible notes payable of $290,000. Also included is $12,500 in principal amount of a note payable due on June 30, 2016 but not paid. 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.

We have current maturities of long-term obligations to third parties of $264,000 due on January 1, 2020. We also have current maturities of long-term obligations of approximately $246,000 to the Pension Benefit Guaranty Corporation (the PBGC) with all principal due by September 15, 2018, which the due date has not been extended. We have maturities of our long-term notes to third parties of $265,000 due on January 1, 2018, which has not been renewed or amended and $175,000 due on August 31, 2018. Previously, we have extended certain notes totaling $440,000 with certain lenders.

We also have current maturities of our long-term debt to related parties in the amount of approximately $524,000 due on January 1, 2020.

We have a note payable of $25,000 due to our Chief Operating Officer which matured on March 31, 2018 and a note payable of $20,000 to a related party which matured on December 31, 2017. We plan to renegotiate the terms of the notes payable, seek funds to repay the notes or use a combination of both alternatives.

On July 12, 2018, we borrowed $70,000 from an officer of the Company under the terms of an unsecured demand promissory note with interest at 6%. The balance of this note is $82,000 at March 31, 2019.

We borrowed $20,000 from the unsecured line of credit financing agreement with a related party during the first quarter of 2018. The LOC Agreement was entered into on September 17, 2017 and provides for working capital of up to $75,000 with interest at 6% due quarterly through January 2, 2023. The balance is $70,000 at March 31, 2019.

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 long-term obligations to third parties of $500,000 due on December 31, 2021. We have a long-term obligation of $9,000 to a related party due January 1, 2021.

We have an unsecured line of credit financing agreement with our Chief Operating Officer. It provides for working capital of up to $100,000 with an interest rate of prime plus 1.5% due quarterly through July 31, 2021. The balance is $90,000 at March 31, 2019.

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

	Three Months Ended March 31,
	2019	2018
Net cash used by operating activities	$(15,203)	$(76,049)
Net cash used by investing activities	0	0
Net cash (used) provided by financing activities	(2,010)	19,330
Net decrease in cash	$(17,213)	$(56,719)

13

Cash Flows Used by 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. Our net income of $35,036 for 2019 was offset in part by non-cash expenses and credits of $5,573. In addition, a increase in accounts receivable and other assets of $113,554, an increase in accrued payroll and other expenses payable of $138,749 was offset by decreases in accounts payable of $81,007 resulting in a use of funds of $15,203.

We are marketing Webroot and Nodeware to our IT channel partners who resell to their customers. We have grown our sales team to sell our various cybersecurity services and products including Nodeware and Webroot. We are making investments in expanding our virtualization sales of projects and VMware licenses to commercial and SLED customers. Due to the lengthy lead times typically needed to generate these new sales, we do not expect to realize a return from our sales and marketing personnel for one or more quarters. As a result, we may continue to experience operating losses from these investments in personnel until sufficient sales are generated. We expect to fund the cost for the new sales personnel from our operating cash flows and incremental borrowings, as needed.

Cash Flows Used by Investing Activities

No cash was used by investing activities during the three months ended March 31, 2019. We expect to continue to invest in computer hardware and software to update our technology to support our business.

Cash Flows (Used) Provided by Financing Activities

Cash used by financing activities was $2,010 for the three months ended March 31, 2019 consisted of principal repayments to a related party.

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 March 31, 2019, we had financing availability, based on eligible accounts receivable, of approximately $94,000 under this line. We pay fees based on the length of time that the invoice remains unpaid.

We believe the capital resources available under our factoring line of credit, cash from additional related party and third-party loans and cash generated by improving the results of our operations provide sources to fund the ongoing operations and to support our internal growth. Although we cannot give any assurances, we believe that related parties, who have previously provided working capital, and third parties will continue to provide working capital loans on similar terms, as in the past, as may be necessary to fund our on-going operations for at least the next 12 months. However, substantial doubt about our ability to continue as a going concern has not been alleviated. If we experience significant growth in sales, we believe that this may require us to increase our financing line, finance additional accounts receivable, or obtain additional working capital from other sources to support the sales growth.

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: cash from collections of accounts receivable; additional borrowing from related and third parties; issuance of equity; use of our existing accounts receivable credit facility; or a refinancing of our accounts receivable credit facility.

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.

14

PART II - OTHER INFORMATION

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.

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: July 3, 2019	/s/ James Villa
	James Villa
	Chief Executive Officer
	(Principal Executive Officer)
Date: July 3, 2019	/s/ James Witzel
	James Witzel
	Chief Financial Officer
	(Principal Financial Officer)

	INDEX TO EXHIBITS
Exhibit No.	Description
31.1	Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. *
31.2	Chief Financial Officer 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	Chief Financial Officer 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.

15

EX-31

EXHIBIT 31.1

CERTIFICATION

I, James Villa, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Infinite Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 3, 2019

                                                     /s/ James Villa

James Villa

Chief Executive Officer

(Principal Executive Officer)

EX-31

EXHIBIT 31.2

CERTIFICATION

I, James Witzel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Infinite Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 3, 2019

                                  /s/ James Witzel

 James Witzel

 Chief Financial Officer

(Principal Financial Officer)

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the quarterly report of Infinite Group, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2019 as filed with the Securities and Exchange Commission (the "Report"), I, James Villa, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: July 3, 2019

/s/ James Villa

James Villa

Chief Executive Officer

(Principal Executive Officer)

A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the quarterly report of Infinite Group, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2019 as filed with the Securities and Exchange Commission (the "Report"), I, James Witzel, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: July 3, 2019

 /s/ James Witzel

James Witzel

Chief Financial Officer

(Principal Financial and Accounting Officer)

A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2019	Jul. 01, 2019
Document And Entity Information [Abstract]
Entity Registrant Name	INFINITE GROUP INC
Entity Central Index Key	0000884650
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Is Entity's Reporting Status Current?	No
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		29,061,883
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019

XML

BALANCE SHEETS (Unaudited) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Current Assets
Cash	$ 12,503	$ 29,716
Accounts receivable, net of allowances of $22,000	390,786	286,187
Prepaid expenses and other current assets	11,861	2,906
Total current assets	415,150	318,809
Right of Use Asset – Lease, net	248,612	0
Property and equipment, net	7,305	8,627
Deposits	6,667	6,667
Total assets	677,734	334,103
Current Liabilities
Accounts payable	286,529	367,536
Accrued payroll	275,278	218,328
Accrued interest payable	865,222	839,189
Accrued retirement	246,867	244,423
Accrued expenses - other	140,903	87,581
Operating Lease liability - Short-term	70,196	0
Current maturities of long-term obligations	950,000	686,000
Current maturities of long-term obligations - related parties	543,135	34,350
Notes payable	332,500	332,500
Notes payable - related parties	102,000	102,000
Total current liabilities	3,812,630	2,911,907
Long-term obligations:
Notes payable - other	481,974	744,335
Notes payable - related parties	169,000	677,955
Operating Lease liability - Long-term	178,928	0
Total liabilities	4,642,532	4,334,197
Commitments
Stockholders' deficiency:
Common stock, $.001 par value, 60,000,000 shares authorized; 29,061,883 shares issued and outstanding	29,061	29,061
Additional paid-in capital	30,593,626	30,593,366
Accumulated deficit	(34,587,485)	(34,622,521)
Total stockholders' deficiency	(3,964,798)	(4,000,094)
Total liabilities and stockholders' deficiency	$ 677,734	$ 334,103

XML

BALANCE SHEETS (Parenthetical) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Allowances for accounts receivable	$ 22,000	$ 22,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	29,061,883	29,061,883
Common stock, shares outstanding	29,061,883	29,061,883

XML

STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Income Statement [Abstract]
Sales	$ 1,687,794	$ 1,594,518
Cost of sales	1,057,170	1,079,154
Gross profit	630,624	515,364
Costs and expenses:
General and administrative	277,605	299,486
Selling	253,306	241,198
Total costs and expenses	530,911	540,684
Operating income (loss)	99,713	(25,320)
Interest expense:
Related parties	(16,638)	(14,371)
Other	(48,039)	(47,309)
Total interest expense	(64,677)	(61,680)
Net income (loss)	$ 35,036	$ (87,000)
Net loss per share – basic and diluted	$ 0	$ 0
Weighted average shares outstanding – basic and diluted	29,061,883	29,061,883

XML

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) (Unaudited) - USD ($)	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total
Beginning balance, shares at Dec. 31, 2017	29,061,883
Beginning balance, amount at Dec. 31, 2017	$ 29,061	$ 30,591,896	$ (34,659,521)	$ (4,038,564)
Net income (loss)			(87,000)	(87,000)
Ending balance, shares at Mar. 31, 2018	29,061,883
Ending balance, amount at Mar. 31, 2018	$ 29,061	30,591,896	(34,746,521)	(4,125,564)
Beginning balance, shares at Dec. 31, 2018	29,061,883
Beginning balance, amount at Dec. 31, 2018	$ 29,061	30,593,366	(34,622,521)	(4,000,094)
Stock based compensation		260		260
Net income (loss)			35,036	35,036
Ending balance, shares at Mar. 31, 2019	29,061,883
Ending balance, amount at Mar. 31, 2019	$ 29,061	$ 30,593,626	$ (34,587,485)	$ (3,964,798)

XML

STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities:
Net income (loss)	$ 35,036	$ (87,000)
Adjustments to reconcile net loss to net cash used by operating activities:
Stock based compensation	260	0
Depreciation and amortization	5,313	6,488
Allowance for bad debts	0	(4,000)
(Increase) decrease in assets:
Accounts receivable	(104,599)	214,684
Prepaid expenses and other assets	(8,955)	(9,232)
Increase (decrease) in liabilities:
Accounts payable	(81,007)	(356,577)
Accrued expenses	136,305	157,239
Accrued retirement	2,444	2,349
Net cash used by operating activities	(15,203)	(76,049)
Cash flows from financing activities:
Proceeds from notes payable - related parties	0	20,000
Repayments of notes payable - related parties	(2,010)	(670)
Net cash (used) provided by financing activities	(2,010)	19,330
Net decrease in cash	(17,213)	(56,719)
Cash - beginning of period	29,716	73,734
Cash - end of period	12,503	17,015
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest	$ 35,490	$ 28,214

XML

1. Basis of Presentation

3 Months Ended

Mar. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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, 2018 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, 2018 filed with the U.S. Securities and Exchange Commission (SEC). Results of operations for the three months ended March 31, 2019 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2019.

XML

2. Management Plans - Capital Resources

3 Months Ended

Mar. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Management Plans - Capital Resources

The Company reported net income of $35,036 and a net loss of $87,000 for the three months ended March 31, 2019 and 2018, respectively, and stockholders’ deficiencies of $3,964,798 and $4,000,094 at March 31, 2019 and December 31, 2018, respectively. Current maturities of long-term obligations were approximately $1,490,000 and $720,000 at March 31, 2019 and December 31, 2018, respectively. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern and this substantial doubt has not been alleviated.

The Company's goal is to increase sales and generate cash flow from operations on a consistent basis. The Company uses a formal financial review and budgeting process as a tool for improvement that has aided expense reduction and internal performance. The Company’s business plans require improving the results of its operations in future periods.

The Company believes the capital resources available under its factoring line of credit, cash from additional related party and third-party loans and cash generated by improving the results of its operations provide sources to fund its ongoing operations and to support the internal growth of the Company. Although the Company has no assurances, the Company believes that related parties, who have previously provided working capital, and third parties will continue to provide working capital loans on similar terms, as in the past, as may be necessary to fund its on-going operations for at least the next 12 months. 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.

XML

3. Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

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, 2018 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 - The Company reclassifies amounts in its financial statements to comply with recently adopted accounting pronouncements.

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.

Revenue - Effective January 1, 2018, the Company adopted Topic 606 using the modified retrospective approach and applied the guidance to those contracts which were not completed as of January 1, 2018. Adoption of Topic 606 did not impact the timing of revenue recognition in the Company’s financial statements for the current or prior periods. Accordingly, no adjustments have been made to opening retained earnings or prior period amounts.

The Company’s total revenue recognized from contracts from customers was comprised of three major services: Managed support services, Cybersecurity projects and software and Other IT consulting services. 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 March 31, 2019 or 2018 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 March 31,
	2019		2018
Managed support services	$	1,228,747	$	1,270,182
Cybersecurity projects and software		310,608		283,056
Other IT consulting services		148,439		41,280
Total sales	$	1,687,794	$	1,594,518

Managed support services

Managed support services consist of revenue primarily from our subcontracts 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 and testing.

● 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, revenues 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.

● 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 recognized.

Other IT consulting services

Other IT consulting services consists of services such as project management and general IT consulting services. 

● 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 months ended March 31, 2019, sales to one client, including sales under subcontracts for services to several entities, accounted for 65.0% of total sales (69.9% - 2018) and 29.5% of accounts receivable at March 31, 2019 (10.5% - December 31, 2018).

Leases - In February 2016, the FASB issued amended guidance for lease arrangements to increase transparency and comparability by providing additional information to users of financial statements regarding an entity's leasing activities. The new standard requires entities to recognize a liability for their lease obligations and a corresponding right-of-use asset, initially measured at the present value of the lease payments. Subsequent accounting depends on whether the agreement is deemed to be a financing or operating lease. For operating leases, a lessee recognizes its total lease expense as an operating expense over the lease term. For financing leases, a lessee recognizes amortization of the right-of-use asset as an operating expense over the lease term separately from interest on the lease liability. The ASU requires that assets and liabilities be presented and disclosed separately, and the liabilities must be classified appropriately as current and noncurrent. The ASU further requires additional disclosure of certain qualitative and quantitative information related to lease agreements. The ASU was effective for the Company beginning on January 1, 2019, at which time we adopted the new standard using the modified retrospective approach as of the date of adoption. Upon adoption, we recognized a right-of-use asset of $265,825 and a lease liability of $265,825 related to the existing office lease that is classified as an operating lease. A summary of the impact to the Balance Sheet on January 1, 2019 and the balances as of March 31, 2019 is as follows:

	December 31, 2018		Effect of Change		January 1, 2019		March 31, 2019
Right of Use Asset – Lease, net	$	0	$	265,825	$	265,825	$	248,612
Operating Lease liability – Short-term	$	0	$	68,848	$	68,848	$	70,196
Operating Lease liability – Long-term	$	0	$	196,977	$	196,977	$	178,928

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4. Sale of Certain Accounts Receivable

3 Months Ended

Mar. 31, 2019

Accounts Receivable, after Allowance for Credit Loss [Abstract]

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 9.1% at March 31, 2019) 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, 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 three months ended March 31, 2019, the Company sold approximately $1,082,000 ($1,526,000 - March 31, 2018) of its accounts receivable to the Purchaser. As of March 31, 2019, approximately $286,000 ($363,000 - December 31, 2018) of these receivables remained outstanding. Additionally, as of March 31, 2019, the Company had approximately $94,000 available under the financing line with the financial institution ($0 - December 31, 2018). After deducting estimated fees, allowance for bad debts and advances from the Purchaser, the net receivable from the Purchaser amounted to $28,600, at March 31, 2019 ($36,213 - December 31, 2018), and is included in accounts receivable in the accompanying balance sheets.

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 $13,782 for the three months ended March 31, 2019 ($12,576 - March 31, 2018). These financing line fees are classified on the statements of operations as interest expense.

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5. Earnings Per Share

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

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 income (loss) per share for the three months ended:

	Three Months Ended March 31,
	2019		2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss)	$	35,036	$	(87,000	)
Denominator for basic and diluted net income (loss) per share:
Weighted average common shares outstanding		29,061,883		29,061,883
Basic and diluted net income (loss) per share	$	.00	$	.00
Anti-dilutive shares excluded from net income (loss) per share calculation		28,123,143		28,402,990

Certain common shares issuable under stock options and convertible notes payable have been omitted from the diluted net income (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.

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6. Stock Option Plans and Agreements

3 Months Ended

Mar. 31, 2019

Share-based Payment Arrangement [Abstract]

Stock Option Plans and Agreements

The Company has approved stock options plans and agreements covering up to an aggregate of 7,265,000 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.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. 50,000 options were granted for the three months ended March 31, 2019. No options were granted for the three months ended March 31, 2018. The following assumptions were used for the three months ended March 31, 2019.

Risk-free interest rate	1.50	%
Expected dividend yield	0	%
Expected stock price volatility	100	%
Expected life of options	2.50 years

The Company recorded expense for options issued to employees and independent service providers of $260 and $0 for the three months ended March 31, 2019 and 2018, respectively.

At March 31, 2019, there was no unrecognized compensation cost related to non-vested options. No options vested during the three months ended March 31, 2019.

A summary of all stock option activity for the three months ended March 31, 2019 follows:

	Number of Options Outstanding			Weighted Average Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2018		7,920,000		$	.09
Granted		50,000			.05
Forfeited		(938,000	)		.23
Expired		(65,000	)		.18
Outstanding at March 31, 2019		6,967,000		$	.07	3.5 years	$	2,000
At March 31, 2019 - vested or
expected to vest and exercisable		6,942,000		$	.06	3.5 years	$	2,000

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7. Related Party Accounts Receivable and Accrued Interest Payable

3 Months Ended

Mar. 31, 2019

Related Party Transactions [Abstract]

Related Party Accounts Receivable and Accrued Interest Payable

Accrued Interest Payable - Included in accrued interest payable is accrued interest payable to related parties of $157,626 at March 31, 2019 ($148,703 - December 31, 2018).

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8. Subsequent Event

3 Months Ended

Mar. 31, 2019

Subsequent Events [Abstract]

Subsequent Event

Subsequent to March 31, 2019, the Company entered into 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 Company borrowed $200,000 which remains outstanding. As consideration for providing this financing, the Company granted a stock option to purchase a total of 2,500,000 common shares at an exercise price of $.02 or a total expense of $14,250.

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3. Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Reclassifications

Reclassifications - The Company reclassifies amounts in its financial statements to comply with recently adopted accounting pronouncements.

Fair Value of Financial Instruments

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.

Revenue

Revenue - Effective January 1, 2018, the Company adopted Topic 606 using the modified retrospective approach and applied the guidance to those contracts which were not completed as of January 1, 2018. Adoption of Topic 606 did not impact the timing of revenue recognition in the Company’s financial statements for the current or prior periods. Accordingly, no adjustments have been made to opening retained earnings or prior period amounts.

The Company’s total revenue recognized from contracts from customers was comprised of three major services: Managed support services, Cybersecurity projects and software and Other IT consulting services. 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 March 31, 2019 or 2018 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 March 31,
	2019		2018
Managed support services	$	1,228,747	$	1,270,182
Cybersecurity projects and software		310,608		283,056
Other IT consulting services		148,439		41,280
Total sales	$	1,687,794	$	1,594,518

Managed support services

Managed support services consist of revenue primarily from our subcontracts 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 and testing.

● 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, revenues 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.

● 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 recognized.

Other IT consulting services

Other IT consulting services consists of services such as project management and general IT consulting services. 

● 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 months ended March 31, 2019, sales to one client, including sales under subcontracts for services to several entities, accounted for 65.0% of total sales (69.9% - 2018) and 29.5% of accounts receivable at March 31, 2019 (10.5% - December 31, 2018).

Leases

Leases - In February 2016, the FASB issued amended guidance for lease arrangements to increase transparency and comparability by providing additional information to users of financial statements regarding an entity's leasing activities. The new standard requires entities to recognize a liability for their lease obligations and a corresponding right-of-use asset, initially measured at the present value of the lease payments. Subsequent accounting depends on whether the agreement is deemed to be a financing or operating lease. For operating leases, a lessee recognizes its total lease expense as an operating expense over the lease term. For financing leases, a lessee recognizes amortization of the right-of-use asset as an operating expense over the lease term separately from interest on the lease liability. The ASU requires that assets and liabilities be presented and disclosed separately, and the liabilities must be classified appropriately as current and noncurrent. The ASU further requires additional disclosure of certain qualitative and quantitative information related to lease agreements. The ASU was effective for the Company beginning on January 1, 2019, at which time we adopted the new standard using the modified retrospective approach as of the date of adoption. Upon adoption, we recognized a right-of-use asset of $265,825 and a lease liability of $265,825 related to the existing office lease that is classified as an operating lease. A summary of the impact to the Balance Sheet on January 1, 2019 and the balances as of March 31, 2019 is as follows:

	December 31, 2018		Effect of Change		January 1, 2019		March 31, 2019
Right of Use Asset – Lease, net	$	0	$	265,825	$	265,825	$	248,612
Operating Lease liability – Short-term	$	0	$	68,848	$	68,848	$	70,196
Operating Lease liability – Long-term	$	0	$	196,977	$	196,977	$	178,928

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3. Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Disaggregation of revenue

	Three Months Ended March 31,
	2019		2018
Managed support services	$	1,228,747	$	1,270,182
Cybersecurity projects and software		310,608		283,056
Other IT consulting services		148,439		41,280
Total sales	$	1,687,794	$	1,594,518

Lease cost

	December 31, 2018		Effect of Change		January 1, 2019		March 31, 2019
Right of Use Asset – Lease, net	$	0	$	265,825	$	265,825	$	248,612
Operating Lease liability – Short-term	$	0	$	68,848	$	68,848	$	70,196
Operating Lease liability – Long-term	$	0	$	196,977	$	196,977	$	178,928

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5. Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Schedule of earnings per share, basic and diluted

	Three Months Ended March 31,
	2019		2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss)	$	35,036	$	(87,000	)
Denominator for basic and diluted net income (loss) per share:
Weighted average common shares outstanding		29,061,883		29,061,883
Basic and diluted net income (loss) per share	$	.00	$	.00
Anti-dilutive shares excluded from net income (loss) per share calculation		28,123,143		28,402,990

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6. Stock Option Plans and Agreements (Tables)

3 Months Ended

Mar. 31, 2019

Share-based Payment Arrangement [Abstract]

Schedule of share-based payment award, stock options, valuation assumptions

Risk-free interest rate	1.50	%
Expected dividend yield	0	%
Expected stock price volatility	100	%
Expected life of options	2.50 years

Schedule of share-based compensation, stock options, activity

	Number of Options Outstanding			Weighted Average Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2018		7,920,000		$	.09
Granted		50,000			.05
Forfeited		(938,000	)		.23
Expired		(65,000	)		.18
Outstanding at March 31, 2019		6,967,000		$	.07	3.5 years	$	2,000
At March 31, 2019 - vested or
expected to vest and exercisable		6,942,000		$	.06	3.5 years	$	2,000

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2. Management Plans - Capital Resources (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018	Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Net loss	$ 35,036	$ (87,000)
Stockholders' deficiency	$ (3,964,798)	$ (4,125,564)	$ (4,000,094)	$ (4,038,564)

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3. Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Total sales	$ 1,687,794	$ 1,594,518
Managed Support Services
Total sales	1,228,747	1,270,182
Cybersecurity Projects and Software
Total sales	310,608	283,056
Other IT Consulting Services
Total sales	$ 148,439	$ 41,280

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3. Summary of Significant Accounting Policies (Details 1) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Right of Use Asset – Lease, net	$ 248,612	$ 0
Operating Lease liability – Short-term	70,196	0
Operating Lease liability – Long-term	$ 178,928	0
Restatement Adjustment [Member]
Right of Use Asset – Lease, net		265,825
Operating Lease liability – Short-term		68,848
Operating Lease liability – Long-term		196,977
As Restated [Member]
Right of Use Asset – Lease, net		265,825
Operating Lease liability – Short-term		68,848
Operating Lease liability – Long-term		$ 196,977

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5. Earnings Per Share (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Net income (loss)	$ 35,036	$ (87,000)
Weighted average common shares outstanding	29,061,883	29,061,883
Basic and diluted net income (loss) per share	$ 0	$ 0
Anti-dilutive shares excluded from net loss per share calculation	28,123,143	28,402,990

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6. Stock Option Plans and Agreements (Details)	3 Months Ended
	Mar. 31, 2019
Share-based Payment Arrangement [Abstract]
Risk-free interest rate	1.50%
Expected dividend yield	0.00%
Expected stock price volatility	100.00%
Expected life of options	2 years 6 months

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6. Stock Option Plans and Agreements (Details 1)	3 Months Ended
	Mar. 31, 2019 USD ($) $ / shares shares
Share-based Payment Arrangement [Abstract]
Number of options outstanding, beginning | shares	7,920,000
Number of options granted | shares	50,000
Number of options forfeited | shares	(938,000)
Number of options expired | shares	(65,000)
Number of options outstanding, ending | shares	6,967,000
Number of options vested or expected to vest | shares	6,942,000
Weighted average exercise price outstanding, beginning | $ / shares	$ 0.09
Weighted average exercise price granted | $ / shares	0.05
Weighted average exercise price forfeited | $ / shares	0.23
Weighted average exercise price expired | $ / shares	0.18
Weighted average exercise price outstanding, ending | $ / shares	0.07
Weighted average exercise price vested or expected to vest | $ / shares	$ 0.06
Weighted-average remaining contractual term outstanding	3 years 6 months
Weighted-average remaining contractual term vested or expected to vest	3 years 6 months
Aggregate intrinsic value outstanding | $	$ 2,000
Aggregate intrinsic value vested or expected to vest | $	$ 2,000

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7. Related Party Accounts Receivable and Accrued Interest Payable (Details Narrative) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Related Party Transactions [Abstract]
Accrued interest payable, related parties, current	$ 157,626	$ 148,703