Infinite Group (IMCI) 10-Q flags going-concern risk and heavy debt load
Infinite Group, Inc. reported a challenging quarter for the period ended September 30, 2025. Revenue for the nine months fell to
Despite cutting costs, including workforce reductions and lower trade show spending, the company’s net loss widened slightly to
The balance sheet is highly leveraged: total liabilities were
Positive
- None.
Negative
- None.
Insights
Balance sheet is highly stressed with defaults and expensive new debt.
Infinite Group shows total liabilities of
Multiple notes with Mast Hill and other lenders are in default, and related-party debt is significant. To bridge liquidity, the company entered new merchant-style loans, including a WebBank facility at an effective
Management explicitly states there is substantial doubt about the company’s ability to continue as a going concern for at least twelve months from issuance. Future filings covering periods after
Revenue mix is shifting as legacy managed services shrink and software grows.
Nine-month revenue declined to
One Peraton-related customer still contributed
Management is pivoting toward Nodeware and cybersecurity SaaS, where software sales rose about
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________
FORM
_________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number:
_________________________________________
(Exact name of registrant as specified in its charter) |
_________________________________________
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
|
|
|
| ||
(Address of principal executive offices) |
| (Zip Code) |
(
(Registrant’s telephone number, including area code)
_________________________________________
Securities registered pursuant to Section 12(b) of the Act
Title of each class | Trading Symbol |
| Name of each exchange on which registered | ||
N/A |
| N/A |
| N/A | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
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 ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | 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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
The Registrant had
Infinite Group, Inc.
Quarterly Report on Form 10-Q
For the Period Ended September 30, 2025
Table of Contents
PART I - FINANCIAL INFORMATION |
| PAGE | |
| |||
Item 1. | Financial Statements |
| 4 |
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|
| |
Balance Sheets September 30, 2025 (Unaudited) and December 31, 2024 |
| 4 | |
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| |
Statements of Operations (Unaudited) for the three and nine months ended September 30, 2025 and 2024 |
| 5 | |
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| |
Statements of Changes in Stockholders Deficiency (Unaudited) for the three and nine months ended September 30, 20254 and 2024 |
| 6 | |
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| |
Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2025 and 2024 |
| 7 | |
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| |
Notes to Financial Statements (Unaudited) |
| 8 | |
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Item 2. | Management s Discussion and Analysis of Financial Condition and Results of Operations |
| 18 |
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
| 25 |
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Item 4. | Controls and Procedures |
| 25 |
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PART II - OTHER INFORMATION |
| ||
| |||
Item 1. | Legal Proceedings |
| 26 |
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| Item 1A. | Risk Factors |
| 26 |
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Item 3 | Defaults Upon Senior Securities. |
| 26 |
| |||
Item 6. | Exhibits |
| 26 |
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| |
SIGNATURES |
| 27 | |
| 2 |
| Table of Contents |
FORWARD-LOOKING STATEMENTS
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements.” All statements other than statements of historical facts contained in this report, including among others, our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth and trends are forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions are intended to identify forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the expansion of our business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Therefore, you should not rely on any of these forward-looking statements. All forward-looking statements in this report are made only as of the date hereof or as indicated and represent our views as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise, except as required by law. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report, our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and our other filings with the Securities and Exchange Commission (the “SEC”). The terms “IGI”, the “Company”, “we”, “our”, “us”, or any derivative thereof, as used herein refer to Infinite Group, Inc., a Delaware corporation.
| 3 |
| Table of Contents |
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
INFINITE GROUP, INC.
BALANCE SHEETS
ASSETS | ||||||||
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| September 30, |
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| December 31, |
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| 2025 |
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| 2024 |
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| (Unaudited) |
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| Current assets: |
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| Cash |
| $ |
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| $ |
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| Accounts receivable, net |
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| Prepaid expenses and other current assets |
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| Other current assets - related parties |
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| Total current assets |
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| Right of Use Asset Operating Lease, net |
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| Property and equipment, net |
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| Software, net |
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| Deposits |
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| Total assets |
| $ |
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| $ |
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||||
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| Current liabilities: |
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| Accounts payable |
| $ |
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| $ |
| ||
| Accrued payroll |
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| Accrued interest payable |
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| Accrued retirement |
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| Deferred revenue |
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| Accrued expenses other and other current liabilities |
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| Operating lease liability - Short-term |
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| Current maturities of long-term obligations |
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| Current maturities of long-term obligations (convertible) |
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| Current maturities of long-term obligations - related parties |
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| Current maturities of long-term obligations - related parties (convertible) |
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| Notes payable |
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| Notes payable (Convertible) |
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| Notes payable - related parties |
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| Total current liabilities |
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| Long-term obligations: |
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| Notes payable, net of current |
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| Notes payable - related parties, net of current |
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| Operating lease liability - long-term |
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| Total liabilities |
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| Commitments and contingencies |
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| Stockholders' deficiency: |
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| Common stock, $ |
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| Additional paid-in capital |
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| Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
| Total stockholders' deficiency |
|
| ( | ) |
|
| ( | ) |
| Total liabilities and stockholders' deficiency |
| $ |
|
| $ |
| ||
See notes to unaudited financial statements.
| 4 |
| Table of Contents |
INFINITE GROUP, INC.
STATEMENTS OF OPERATIONS (Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2025 |
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| 2024 |
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| 2025 |
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| 2024 |
| ||||
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| Revenue |
| $ |
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| $ |
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| $ |
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| $ |
| ||||
| Cost of revenue |
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| Gross profit |
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| Costs and expenses: |
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| General and administrative |
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| Selling |
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| Total costs and expenses |
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| Operating loss |
|
| ( | ) |
|
| ( | ) |
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| ( | ) |
|
| ( | ) |
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| Other income (expense) |
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| Interest Income |
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| Interest expense: |
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| Related parties |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
| Other |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
| Total interest expense |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
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| Debt forgiveness |
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| Gain on partial termination of lease |
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| Total other income (expense) |
|
| ( | ) |
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| ( | ) |
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| ( | ) |
|
| ( | ) |
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| Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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| Net loss per share basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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| |
| Weighted average shares outstanding - basic and diluted |
|
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| ||||
See notes to unaudited financial statements.
| 5 |
| Table of Contents |
INFINITE GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY (Unaudited)
Nine Months Ended September 30, 2025 and 2024
Nine Months Ended September 30, 2025
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| Additional |
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| |||||||||
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| Common Stock |
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| Paid-in |
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| Accumulated |
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| |||||||||
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Total |
| |||||
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| |||||
| Balance - December 31, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Net loss |
|
| - |
|
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|
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| ( | ) |
|
| ( | ) | ||
|
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| Balance - March 31, 2025 |
|
|
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| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
|
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|
|
|
|
|
|
|
|
|
|
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| Net loss |
|
| - |
|
|
|
|
|
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| ( | ) |
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| ( | ) | ||
|
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| Balance - June 30, 2025 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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| Net loss |
|
| - |
|
|
|
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|
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| ( | ) |
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| ( | ) | ||
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| Balance - September 30, 2025 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
Nine Months Ended September 30, 2024
|
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| Additional |
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| |||||||||
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| Common Stock |
|
| Paid-in |
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| Accumulated |
|
|
| |||||||||
|
| Shares |
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| Amount |
|
| Capital |
|
| Deficit |
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| Total |
| |||||
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| |||||
| Balance - December 31, 2023 |
|
|
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| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
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| Stock based compensation |
|
| - |
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| ||||
| Net loss |
|
| - |
|
|
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|
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| ( | ) |
|
| ( | ) | ||
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| Balance - March 31, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
|
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| Net loss |
|
| - |
|
|
|
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|
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| ( | ) |
|
| ( | ) | ||
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| Balance - June 30, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
|
|
|
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|
|
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|
|
|
|
|
|
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| Net loss |
|
| - |
|
|
|
|
|
|
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| ( | ) |
|
| ( | ) | ||
|
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| Balance - September 30, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
See notes to unaudited financial statements.
| 6 |
| Table of Contents |
INFINITE GROUP, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
|
| Nine Months Ended September 30, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
| Cash flows from operating activities: |
|
|
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|
| ||
| Net loss |
| $ | ( | ) |
| $ | ( | ) |
| Adjustments to reconcile net loss to net cash provided (used) by operating activities: |
|
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| Depreciation and amortization |
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| Amortization of debt discount |
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| Stock based compensation |
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| Bad debt expense (recovery) |
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| Forgiveness of debt |
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| ( | ) | |
| Gain on partial termination of lease |
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| ( | ) | |
| (Increase) decrease in assets: |
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| Accounts receivable |
|
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|
| ( | ) | |
| Prepaid expenses and other assets |
|
| ( | ) |
|
| ( | ) |
| Increase (decrease) in liabilities: |
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| Accounts payable |
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| ||
| Deferred revenue |
|
| ( | ) |
|
| ( | ) |
| Accrued expenses |
|
|
|
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|
| ||
| Accrued retirement |
|
| ( | ) |
|
|
| |
| Net cash provided (used) by operating activities |
|
| ( | ) |
|
| ( | ) |
|
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| Cash flows from investing activities: |
|
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|
| Purchase of property and equipment |
|
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|
|
| ( | ) | |
| Capitalization of software development costs |
|
| ( | ) |
|
| ( | ) |
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| Net cash provided (used) by investing activities |
|
| ( | ) |
|
| ( | ) |
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| Cash flows from financing activities: |
|
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| Proceeds from issuance of notes payable |
|
|
|
|
|
| ||
| Proceeds from issuance of notes payable - related parties |
|
|
|
|
|
| ||
| Repayments of note payable-related parties |
|
| ( | ) |
|
| ( | ) |
| Repayments of note payable |
|
| ( | ) |
|
| ( | ) |
|
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| Net cash provided (used) by financing activities |
|
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| ||
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| Net decrease in cash |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| Cash - beginning of period |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Cash - end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
| Supplemental Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
| Cash payments for interest |
| $ |
|
| $ |
| ||
See notes to unaudited financial statements.
| 7 |
| Table of Contents |
INFINITE GROUP, INC.
Notes to Financial Statements - (Unaudited)
Note 1. Basis of Presentation
The December 31, 2024 balance sheet has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. 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, 2024 filed with the U.S. Securities and Exchange Commission (SEC). Results of operations for the three and nine months ended September 30, 2025, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2025.
Note 2. Going Concern
The Company reported net losses of $
The Company’s mission is to drive shareholder value by developing and bringing to market automated, cost effective, and innovative cybersecurity technologies. The Company’s strategy is to build its business by designing, developing, and marketing IT security-based products and solutions that fill technology gaps in cybersecurity.
The Company's goal is to increase sales and generate cash flow from operations on a consistent basis. The Company’s business plans require improving the results of its operations in future periods. The Company has renegotiated the terms of certain obligations, using operational cash flow to pay down balances and extending terms, and has obtained and may continue to seek additional financing through debt or equity issuances.
The Company plans to issue stock, restructure certain debt obligations and anticipates significant growth of business, although there can be no assurance that such plans will be successfully implemented or that such growth will be achieved.
The Company believes the capital resources generated by the operations, together with cash available under its factoring line of credit and from additional related party and third-party loans, if available, may provide sources to fund its ongoing operations and to support the internal growth of the Company although there can be no assurance that such resources will be sufficient or that additional financing will be available on acceptable terms or at all. The Company may need to extend existing debt agreements in order to provide resources for other purposes. If the Company experiences significant growth in its sales, the Company believes that this may require it to increase its financing line, finance additional accounts receivable, or obtain additional working capital from other sources to support its sales growth.
The Company plans to continue to evaluate alternatives which may include continuing to renegotiate the terms of other notes, seeking conversion of the notes to shares of common stock and seeking additional funds to repay the notes, although there can be no assurance that noteholders will agree to such conversions or that additional funds will be available. The Company continues to evaluate repayment of our remaining notes payable based on its cash flow.
As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the date these financial statements are issued. The accompanying financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.
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, 2024 presents a summary of significant accounting policies as included in the Company’s Annual Report on Form 10-K as filed with the SEC.
Reclassifications – It is the Company’s policy to reclassify prior period amounts to conform with the current period presentation.
Fair Value of Financial Instruments - The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, and accrued expenses approximate fair value because of the immediate short-term maturity of these financial instruments. The carrying value of notes payable and convertible notes payable approximates the fair value based on rates currently available from financial institutions and various lenders.
Cash and Cash Equivalents - The Company’s cash balance consists solely of deposits held at major financial institutions. The Company does not hold any cash equivalents as of September 30, 2025 or December 31, 2024.
| 8 |
| Table of Contents |
As of September 30, 2025, cash was held in the following amounts:
Category |
| September 30, 2025 |
|
| December 31, 2024 |
| ||
|
|
|
|
|
|
| ||
Cash in bank accounts |
| $ |
|
| $ |
| ||
Total cash and cash equivalents |
| $ |
|
| $ |
| ||
The Company maintains its cash balances with a high‑quality financial institution.
The Company does not have any restricted cash as of September 30, 2025.
Prepaid and Other Current Assets - Prepaid and other current assets were $
Management evaluated the composition of prepaid and other current assets and determined that the individual components are appropriately classified as current based on their expected realization within twelve months. No indicators of impairment or non-recoverability were identified as of September 30, 2025.
Revenue from contracts with customers
The Company’s total revenue recognized from contracts from customers was comprised of three major services: Managed support services, Cybersecurity projects, and Software. The categories depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. There were no material unsatisfied performance obligations at September 30, 2024 or 2023 for contracts with an expected original duration of more than one year. The Company has elected to apply the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations for contracts that have original expected durations of one year or less. The following table summarizes the revenue recognized by the major services:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2025 |
|
| 2024 |
|
| 2025 |
|
| 2024 |
| ||||
| Managed support services |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| Cybersecurity projects |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Software |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Total Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Managed support services
Managed support services consist of revenue primarily from the Company’s subcontracts with Peraton for services to its end clients, principally a major establishment of the U.S. Government for which the Company manages 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. Revenue is recognized over time as services are performed in accordance with ASC 606.
Cybersecurity projects
Cybersecurity projects include performing cybersecurity assessments, testing and consulting as a CISO (Chief Information Security Officer).
Cybersecurity assessments and testing services are considered distinct performance obligations when sold standalone 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 allocated to each performance obligation and recognized as each performance obligation is satisfied. Depending on the nature of the service, the amounts recognized are based on an allocation of the transaction price to each performance obligation using the relative standalone selling price method in accordance with ASC 606.
| 9 |
| Table of Contents |
Software
Software revenue includes the selling of licenses of Nodeware® and third-party software, principally Webroot™.
Nodeware and Webroot software offerings consist of fees generated from the use of the respective software by our customers. Revenue is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer. For Webroot, substantially all customers are billed in the month of service and the service is cancellable upon notice per the respective agreements. The majority of Webroot billing is electronic, and approximately half of those billed amounts are paid to the Company instantaneously via an online payment platform. For Nodeware, billings generally occur annually or monthly in advance of services for clients with recurring subscriptions. In some instances, billing occurs monthly in arrears based on actual consumption in the prior month. For payments made in advance, revenue related to the term associated with our software licenses is recognized ratably over the contractual period.
We generate revenue via fixed-price service agreements. These are based on periodic billings of a fixed dollar amount for recurring services of a similar nature performed according to the contractual arrangements with clients. Revenue is recognized as services are performed in accordance with ASC 606.
Based on historical experience, the Company believes that collection of the customer billings is reasonably assured.
Capitalization of Software for Resale - The Company capitalizes the software development costs for software to be sold, leased, or otherwise marketed in accordance with ASC 985-20. Capitalization begins upon the establishment of technological feasibility of a new product or enhancements to an existing product, which is generally the completion of a working prototype that has been certified as having no critical bugs and is a release candidate. Costs incurred after the enhancement has reached technological feasibility and before it is released in the market are capitalized and are primarily labor costs related to coding and testing. Amortization begins once the software is ready for its intended use, generally based on the pattern in which the economic benefits will be consumed. Costs associated with major upgrade releases begin amortization in the month after release. The amortization period is three years. See Note 5 for further disclosure regarding capitalization of software for resale.
Leases - At contract inception, the Company determines whether the arrangement is or contains a lease and determines the lease classification in accordance with ASC 842. The lease term is determined based on the non-cancellable term of the lease adjusted to the extent optional renewal terms and termination rights are reasonably certain. Lease expense is recognized evenly over the lease term. Variable lease payments are recognized as period costs. The present value of remaining lease payments is recognized as a liability on the balance sheet with a corresponding right-of-use asset adjusted for prepaid or accrued lease payments. The Company uses its incremental borrowing rate for the discount rate, unless the interest rate implicit in the lease contract is readily determinable. The Company has adopted the practical expedients to not separate non-lease components from lease components and to not present short-term leases on the balance sheet. See Note 11 for further disclosure regarding lease accounting.
Income Taxes – The Company recorded no income tax expense for the three and six months ended September 30, 2025. The effective tax rate for the periods presented was 0%, which differs from the U.S. federal statutory rate primarily due to the Company’s loss before income taxes and the corresponding full valuation allowance maintained against its net deferred tax assets.
The Company has incurred significant operating losses since inception and continues to maintain a full valuation allowance against its deferred tax assets because management has concluded that it is more likely than not that these assets will not be realized based on the weight of available evidence.
As of September 30, 2025, the Company had approximately $
No material uncertain tax positions have been recorded as of September 30, 2025, and the Company does not anticipate significant changes to its unrecognized tax benefits within the next twelve months.
Use of Estimates - The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates and assumptions used in the preparation of these financial statements include, but are not limited to:
| · | Revenue recognition, including the determination of standalone selling prices, allocation of transaction consideration to performance obligations, and estimates of variable consideration for usage based or incentive-based fees. |
| · | Allowance for credit losses on accounts receivable and contract assets. |
| · | Capitalized software development costs, including the determination of technological feasibility and expected economic life. |
| 10 |
| Table of Contents |
| · | Stock based compensation, including the fair value of equity awards and expected forfeiture rates. |
| · | Fair value measurements for financial instruments, including embedded derivatives or contingent consideration, when applicable. |
| · | Income taxes, including the valuation of deferred tax assets and liabilities and the assessment of uncertain tax positions. |
Management bases its estimates on historical experience, current business and economic conditions, and other relevant factors. Estimates and assumptions are reviewed periodically, and the effects of revisions are recorded in the period in which they are determined.
Recently Issued Accounting Pronouncements - In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (CODM), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in the update and existing segment disclosures in Topic 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption was permitted. The Company adopted this standard with our fiscal 2024 annual filing. The Company has a single segment. See Note 14.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). The amendments in this ASU are intended to enhance the transparency of income tax information by updating income tax disclosure requirements. The guidance is effective for public entities for annual periods beginning after December 15, 2024, and early adoption is permitted. The amendments in this ASU should be applied on a prospective basis; however, retrospective application is permitted. The Company will adopt this standard with our fiscal 2025 annual filing. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires disclosure in the notes to financial statements, at each interim and annual reporting period, of specified information about certain costs and expenses including purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption. Also required is a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated. This ASU is effective for all public entities for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, and early adoption is permitted. This ASU should be applied either prospectively to financial statements issued after the effective date of this update or retrospectively to all prior periods presented in the financial statements. The Company will adopt this standard with our fiscal 2027 annual filing. The Company is currently evaluating these new disclosure requirements and the impact of adoption.
Note 4. Concentrations of Risk and Significant Customers
Concentrations of Credit Risk - The Company is a developer and provider of cloud based cybersecurity software and related cybersecurity consulting, advisory and managed information security solutions. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains its cash deposits with a high quality financial institution.
The Company’s accounts receivable is derived from customers located primarily in the United States. Credit risk is mitigated through monitoring of customer financial condition, and the use of contractual billing and collection terms customary in the SaaS industry. For most services agreements, the Company requires down payments of at least 50%.
Significant Customer Concentration - During the three and nine months ended September 30, 2025, one customer accounted for approximately
The loss of this customer or delays in payment could have a material adverse effect on the Company’s business, financial condition, and results of operations. Management continues to monitor the financial condition and creditworthiness of this customer and believes that the receivable balance is collectible based on current information.
Supplier and Operational Risk - The Company relies on third party cloud infrastructure providers to deliver its SaaS platform. Any disruption, capacity constraint, or service degradation at these providers could adversely impact the Company’s ability to serve customers. The Company believes alternative providers are available; however, transitioning services could result in temporary service interruptions and increased costs.
Industry and Geographic Risk - The Company operates in the cybersecurity industry, which is characterized by rapid technological change, evolving threat landscapes, and increasing regulatory requirements. These factors may impact customer purchasing patterns and the Company’s ability to maintain or grow revenue. No geographic region outside the United States accounted for more than 10% of revenue during the three and Nine months ended September 30, 2025.
Note 5. 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. 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.
| 11 |
| Table of Contents |
The retained amount is
The financing line provides the Company with the ability to finance up to $
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 $
Note 6. Capitalization of Software for Resale
As of September 30, 2025, there was $
Note 7. Deferred Revenue and Performance Obligations
Deferred Revenue
Deferred revenue, which is a contract liability, consists primarily of payments received and accounts receivable recorded in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met.
Revenue recognized during the three months ended September 30, 2025 and 2024, that was included in the deferred revenue balances at the beginning of the respective periods, was approximately $
Revenue recognized during the nine months ended September 30, 2025 and 2024, that was included in the deferred revenue balances at the beginning of the respective periods was approximately $
Transaction Price Allocated to the Remaining Performance Obligations
Transaction price allocated to the remaining performance obligations represents all future, non-cancelable contracted revenue that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.
As of September 30, 2025, total remaining non-cancelable performance obligations under the Company’s contracts with customers was approximately $
Note 8. Debt Obligations
Revised Financing Arrangement - On March 12, 2025, the Company received funding from a loan agreement with Stripe and Celtic Bank. The loan amount was $
Business Loan and Security Agreement - On August 15, 2025, the Company received funding from Business Loan and Security Agreement with WebBank. The funding provided was $
| 12 |
| Table of Contents |
Business Installment Loan - On September 23, 2025, the Company received funding from a business installment loan with OnDeck Capital, LLC. The funding provided was $
Obligations in Default – As of September 30, 2025, the Company is in default under the Mast Hill financing arrangements dated November 3, 2021, February 11, 2022, May 31, 2022, and November 23, 2022 and February 3, 2023. Pursuant to the terms of the arrangements, the Company has accrued approximately $
The Company is in default with four third parties’ notes from 2003 and 2004. The Company has accrued approximately $
The Company is in default with a note with a related party from 2024. The Company has accrued approximately $
The Company is working to resolve these defaults. Continued default may result in acceleration of amounts due, additional penalties, legal action, or other adverse consequences that could materially harm the Company's financial condition and operations.
Note 9. Earnings/(loss) 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 profit (loss) per share for the three and nine months ended September 30, 2025:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2025 |
|
| 2024 |
|
| 2025 |
|
| 2024 |
| ||||
| Numerator for basic and diluted net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted net loss per share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
| Weighted average common shares outstanding Basic and diluted shares |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
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|
| Anti-dilutive shares excluded from per share calculation |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Certain common shares issuable under stock options and convertible notes payable have been omitted from the diluted net loss per share calculation because their inclusion is considered anti-dilutive because the exercise prices were greater than the average market price of the common shares or their inclusion would have been anti-dilutive.
Note 10. Stock Option Plans, Warrants and Agreements
At the annual meeting of stockholders of the Company held on January 26, 2022; the Company’s stockholders voted to approve the Company’s 2021 Equity Incentive Plan (the “2021 Plan”). The maximum number of shares of Common Stock available for grant and issuance under the 2021 Plan will be (a) 60,000, plus (b) any shares of Common Stock that are subject to options granted under the Prior Plans that expire, are forfeited or canceled or terminate for any other reason without the issuance of shares under the Prior Plans on or after January 26, 2022, plus (c) any shares of Common Stock that are subject to options granted under the Prior Plans that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any option under the Prior Plans on or after January 26, 2022.
| 13 |
| Table of Contents |
The Company has approved stock options plans and agreements covering up to an aggregate of
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. No options were granted during the nine months ended September 30, 2025 or the nine months ended September 30, 2024.
No options were vested during the nine months ended September 30, 2025.
A summary of all stock option activity for the nine months ended September 30, 2025 and September 30, 2024 follows:
|
| Number of |
|
| Weighted |
|
| Remaining |
| Aggregate |
| |||
|
| Options |
|
| Average |
|
| Contractual |
| Intrinsic |
| |||
|
| Outstanding |
|
| Exercise Price |
|
| Term |
| Value |
| |||
| Outstanding at December 31, 2024 |
|
|
|
| $ |
|
|
|
|
|
| |||
| Expired |
|
| ( | ) |
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Outstanding at September 30, 2025 |
|
|
|
| $ |
|
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At September 30, 2025- vested or expected to vest |
|
|
|
| $ |
|
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
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|
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|
| Exercisable |
|
|
|
| $ |
|
|
| $ |
| ||||
|
| Number of |
|
| Weighted |
|
| Remaining |
| Aggregate |
| |||
|
| Options |
|
| Average |
|
| Contractual |
| Intrinsic |
| |||
|
| Outstanding |
|
| Exercise Price |
|
| Term |
| Value |
| |||
| Outstanding at December 31, 2023 |
|
|
|
| $ |
|
|
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| |||
| Expired |
|
| ( | ) |
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| ||
|
|
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|
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| |
| Outstanding at September 30, 2024 |
|
|
|
| $ |
|
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At September 30, 2024- vested or expected to vest |
|
|
|
| $ |
|
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable |
|
|
|
| $ |
|
|
| $ |
| ||||
There were no warrant issuances, exercises, expirations, or other changes during the three and nine months ended September 30, 2025. The warrants outstanding as of September 30, 2025 are unchanged from those disclosed in the Company’s Annual Report on Form 10 K for the year ended December 31, 2024.
Note 11. Lease
Beginning on June 1, 2022, the Company leases its headquarters facility under an operating lease agreement that expires on
On January 9, 2024, the Company partially terminated the lease agreement.
Rent due is $
Upon entering the lease amendment, the Company adjusted the right-of-use asset from $
| 14 |
| Table of Contents |
Supplemental balance sheet information related to the lease on September 30, 2025 and December 31, 2024 is as follows:
|
|
|
| September 30, |
|
| December 31, |
| ||
| Description |
| Classification |
| 2025 |
|
| 2024 |
| ||
| Right of Use Asset Lease, net |
| Other assets (non-current) |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
| Operating Lease liability Short-term |
| Accrued liabilities |
|
|
|
|
|
| ||
| Operating Lease liability Long-term |
| Other long-term liabilities |
|
|
|
|
|
| ||
| Total operating lease liability |
|
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
| Discount rate operating lease |
|
|
|
| % |
|
| % | ||
Note 12. Related Party Assets and Debt
As of September 30 2025, the Company had the following other assets - related‑parties:
|
| Other current assets |
| |||||
Related Party |
| 9/30/2025 |
|
| 12/31/2024 |
| ||
CEO |
|
|
|
|
|
| ||
President |
|
|
|
|
| ( | ) | |
Total |
|
|
|
|
|
| ||
As of September 30, 2025, the Company had the following related‑party debt outstanding:
|
|
| Principal Outstanding |
|
|
|
| ||||||||||
Related Party |
| Instrument |
| September 30, 2025 |
|
| December 31, 2024 |
|
| Interest Rate |
|
| Maturity Date | ||||
Chief Executive Officer |
| Convertible Note |
| $ |
|
| $ |
|
|
| % |
| |||||
President |
| Convertible Note |
|
|
|
|
|
|
|
| % |
| |||||
President |
| Line of Credit |
|
|
|
|
|
|
|
| % |
| |||||
President |
| Demand Note |
|
|
|
|
|
|
|
| % |
| Demand | ||||
President |
| Demand Note |
|
|
|
|
|
|
|
| % |
| Demand | ||||
Chief Executive Officer |
| Demand Note |
|
|
|
|
|
|
|
| % |
| Demand | ||||
Board Member |
| Note Payable |
|
|
|
|
|
|
|
| % |
| |||||
Board Member |
| Note Payable |
|
|
|
|
|
|
|
| % |
| |||||
Relative of Executive |
| Note Payable |
|
|
|
|
|
|
|
| % |
| |||||
Relative of Executive |
| Line of Credit |
|
|
|
|
|
|
|
| % |
| |||||
Relative of Executive |
| Line of Credit |
|
|
|
|
|
|
|
| % |
| |||||
Vice President |
| Demand Note |
|
|
|
|
|
|
|
| % |
| Demand | ||||
Included in accrued interest payable at September 30, 2025 are amounts due to related parties of approximately $
Note 13. Commitments and Contingencies
Non-cancelable Purchase Obligations - In the normal course of business, the Company enters into non-cancelable purchase commitments with various third parties to purchase products and services such as cloud infrastructure capacity, subscription-based cloud service arrangements, technology equipment, corporate and marketing events and consulting services.
Legal Matters - From time to time, the Company is involved in legal proceedings, claims, and regulatory matters arising in the ordinary course of business. The Company accrues a liability for loss contingencies when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is reasonably possible but not probable, or where the amount of loss cannot be reasonably estimated, the Company discloses the nature of the contingency but does not record a liability.
| 15 |
| Table of Contents |
As of September 30, 2025, the Company is not a party to any legal proceedings that, individually or in the aggregate, are expected to have a material adverse effect on its financial position, results of operations, or cash flows. No accrual for loss contingencies has been recorded.
Note 14. Segment Information
We operate as a single business segment focused on the development and sales of cybersecurity software and the related cybersecurity consulting, advisory, and managed information security services. The determination of a single business segment is consistent with the financial information regularly reviewed by our Chief Executive Officer, the chief operating decision maker (“CODM”), in assessing segment performance and deciding how to allocate resources on a company basis. The accounting policies of the segment are the same as those described in the summary of significant accounting policies.
The CODM measures segment profit and loss by net loss as reported in the statement of operations. The CODM uses net loss to monitor budget and forecast versus actual results to assess segment performance and to allocate resources across the organization. The measure of segment assets is reported on the balance sheet as total assets.
The following table summarizes segment revenue, segment loss, and significant segment expenses regularly reported to the CODM during the 3 and 9 months ended September 30, 2025 and 2024:
|
| For the 3 months ended September 30, |
|
| For the 9 months ended September 30, |
| ||||||||||
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| 2025 |
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| 2024 |
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| 2025 |
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| 2024 |
| ||||
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| ||||
Sales |
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| ||||
Less (a): |
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|
Employee expenses (b) |
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| ||||
Software and equipment |
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| ||||
Sales and marketing expenses (c) |
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| ||||
Other professional services (d) |
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| ||||
Other operating expenses (e) |
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| ||||
Loss from operations |
|
| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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Reconciliation to net income |
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Other income (f) |
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| ||||
Interest income (expense), net |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Reconciliation to net income |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
(a) | The significant expense categories align with the information provided to the CODM. |
(b) | Employee expenses include salaries, benefits and commissions |
(c) | Sales and marketing expenses include sales, marketing and partner commission expenses. |
(d) | Other professional services include legal and accounting expenses. |
(e) | Other operating expenses include depreciation and amortization expenses, fees and other taxes, rent and other expenses. |
Other income from the nine months ended September 30, 2024 represents other income due to a partial termination of the lease adjustment of $
Note 15. Asset Purchase Agreement
On March 12, 2025, Infinite Group, Inc. (the “Company”) entered into an Asset Purchase Agreement (this “Agreement”) with Opti9 Technologies LLC, a Delaware limited liability company (“Buyer”) for the sale of assets related to the division of business known as the Ace Server Management division. Under this division the Company provides IT managed infrastructure services, to a US government agency as a subcontractor to Peraton Enterprise Solutions LLC (f/k/a Perspecta Enterprise Solutions LLC (“Peraton”))
| 16 |
| Table of Contents |
The purchase price was $
The closing was expected to take place in June 2025. The closing of the transaction was subject to customary conditions, including, among other things, (i) approval by the Company’s stockholders; (ii) consent of Peraton; (iii) consent of certain of the Company’s debtholders; (iv) that no temporary or permanent judgment issued by any governmental entity of competent jurisdiction or law or other legal restraint or prohibition preventing or prohibiting the consummation of the transaction shall be in effect; (v) that no event or circumstance with a material adverse effect on the Ace server management business division shall have occurred; and, (vi) other customary conditions for a transaction of this nature.
The Agreement contained representations, warranties and covenants of the parties customary for a transaction of this type, including a 4 year non-competition covenant from competing with the Buyer in providing services to the U.S. government agency that was subject of the Peraton subcontract, and providing 24x7x365 Windows and/or Linux operating system and hardware support and monitoring services to other parties.
Concurrently with the execution of the Agreement, certain stockholders were to enter into voting agreements (the “Voting Agreements”) with Buyer. Pursuant to the terms of the Voting Agreements, these stockholders were to agree to vote their shares in favor of the transaction at the Company’s upcoming stockholders meeting, to not solicit any other acquisition proposals and to vote their shares against any competing acquisition proposals. The shares subject to the Voting Agreements comprised approximately 28% of all outstanding shares. The Voting Agreements would terminate in certain circumstances, including upon termination of the Agreement.
The Company planned to present the transaction for the sale of these assets for approval at its upcoming annual meeting of stockholders tentatively scheduled for June 4, 2025.
On April 22, 2025, the Company received verbal communication from Peraton that the ASM contract was to be cancelled for convenience on May 17, 2025.
On May 8, 2025, the Company received a request in writing to answer an RFP that would retain certain employees of the Company that previously provided service under the ASM contract and would move the Company to a time and materials subcontract with Peraton serving the US government agency.
During April and May 2025, the Company executed layoffs constituting a material reduction in the workforce because of this change. During 2025, the Company received task orders and executed time and materials subcontracts with Peraton to retain certain employees serving the US Government agency.
On July 31, 2025, the Company received a notice of termination of the Asset Purchase Agreement.
Note 16. Subsequent Events
On October 27, 2025, the Company borrowed $
On October 31, 2025, the Company borrowed $
On November 12, 2025, the Company received funding from a loan agreement with Stripe and Celtic Bank. The loan amount was $
On December 19, 2025, the Company borrowed $
On December 31, 2025, the Company borrowed $
On January 28, 2026, the Company received funding from a Standard Merchant Cash Advance Agreement with Fiji SPV LLC. The funding provided was $
************
| 17 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion contains forward-looking statements, the accuracy of which involves risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons including, but not limited to, those discussed under the heading “Forward Looking Statements” above and elsewhere in this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our financial statements and the notes thereto appearing elsewhere in this report.
Overview
Our Business
Headquartered in Pittsford, New York, Infinite Group is a developer of cybersecurity software and related cybersecurity consulting, advisory, and managed information security services. We principally sell our software and services through indirect channels such as Managed Service Providers (“MSPs”), Managed Security Services Providers (“MSSPs”), agents and distributors and government contractors, whom we refer to collectively as our channel partners. We also sell directly to end customers.
We believe our ability to succeed depends on how successful we are in differentiating ourselves in the cybersecurity market at a time when competition and consolidation in these markets are on the rise. Our strategy to differentiate our cybersecurity software and services from our competitors is to combine customized software and professional services, and grow our business by designing, developing, and marketing cybersecurity software-as-a-service (“SaaS”) solutions that can be deployed in myriad environments. Software and services are initially developed in our wholly-owned subsidiary, Nodeware, Inc., to fill technology gaps we identify, and then we bring these software and services to market through our existing channel partner and customer relationships. Our software and services are designed to simplify and manage the security needs of our customers and channel partners in a variety of environments. We focus on the small and medium-sized enterprises market. We support our channel partners by providing recurring-revenue business models for both services and through our cybersecurity SaaS solutions. Products may be sold as standalone solutions or integrated into existing environments to further automate the management of cybersecurity and related IT functions.
As part of these software and service offerings we:
Internally developed and brought to market, Nodeware®, a patented SaaS solution that automates network asset identification, and cybersecurity vulnerability management and monitoring. Nodeware simply and affordably enhances security by proactively identifying, monitoring, and addressing potential cybersecurity vulnerabilities on networks, which creates enhanced security to safeguard against hackers and ransomware. Nodeware provides an economical solution for small and medium-sized enterprises as compared to more costly solutions focused on enterprise-sized customers and is designed to accommodate the varying network needs of our end customers’ organizations and networks. Nodeware’s flexibility allows it to span from a single network to several subnetworks, as well as accommodating larger, more complex organizations with more advanced network needs. Nodeware is sold as a SaaS solution and continuously releases enhancements, updates, and upgrades to stay current with security needs and changes in the market. Nodeware is also designed to be integrated into other technology platforms. We primarily sell Nodeware through our channel partners, with a small percentage being sold directly to end customers. We intend to continue to develop our intellectual property to serve as the core to our proprietary software and services. In addition to our proprietary software and services we also act as a master distributor for other cybersecurity software, principally Webroot a cloud-based endpoint security platform solution, where we market to and provide support for over 135 channel partners across North America;
Provide cybersecurity consulting and advisory services to channel partners and direct customers across different markets, including banking, manufacturing, supply chain, and technology. As part of our consulting and advisory services, we are contracted to support existing information technology and executive teams at both the customer and channel partner level and provide security leadership and guidance. We validate overall corporate and infrastructure cybersecurity with the goal of maintaining and securing the integrity of confidential client information, preserving the continuity of services, and minimizing potential data damage from threats and incidents; and
Provide managed support services related to information security, principally as a subcontractor for Peraton, a large information technology provider and U.S. government contractor, by providing in-depth troubleshooting, backend analysis, and technical and security support, commonly referred to as Level 2 support, for mission critical technical infrastructure from the server level to the end user interface application in a critical government environment.
Business Strategy
We have a threefold business strategy composed of:
- providing differentiated cybersecurity software and services to small to mid-sized enterprises who lack the internal resources to focus on cybersecurity related matters by combining customized software and professional services;
- designing, developing, and marketing cybersecurity SaaS solutions, including Nodeware; and
- identifying other cybersecurity companies to acquire as part of a strategic roll-up strategy.
We believe our ability to succeed depends on how successful we are in differentiating ourselves in the market at a time when competition and consolidation in these markets is on the rise.
Our software and services are designed to simplify the security needs of our customers and channel partners, with a focus on the small to mid-sized enterprises, and we believe our ability to integrate our product and service offerings differentiates them from our competitors. In addition, we support our channel partners by providing recurring -revenue business models for both services and our cybersecurity SaaS solutions.
| 18 |
| Table of Contents |
Cybersecurity is a constantly evolving field, so we devote significant efforts in developing proprietary software and services to meet our customer and channel partners’ evolving needs. These efforts have resulted in the development of our patented and patent-pending Nodeware solution. We expect to continue to make significant investments in developing other intellectual property to serve as the core to other proprietary software and services.
Historically, a significant portion of our revenues has been derived through our managed support services, however, we believe our cybersecurity SaaS solutions, including Nodeware, present an opportunity for significant growth. We believe that Nodeware’s ability to be deployed across a wide variety of networks and the ability to integrate it into existing and new cybersecurity solutions, will allow us to significantly grow this segment of our business. Similarly, we believe Nodeware’s SaaS recurring revenue business model and its flexibility as a standalone or integrated solution makes it an attractive part of our channel partners’ portfolio of products. Accordingly, in 2024 and 2025, we made significant investments in IGI and Nodeware, Inc. sales and marketing to grow our team of cybersecurity sales and technical consultants. As a result, we believe we are seeing the pipeline growth expected from focused efforts, which we anticipate will convert to revenue growth in 2026.
We believe the market for cybersecurity services for small and medium-sized enterprises is fragmented and does not currently meet the needs of this customer base. The market is fragmented and is beginning to consolidate, which is why we are seeking to strategically acquire other cybersecurity technology and services companies.
The following sections define specific components of our business strategy.
Nodeware®
In May 2016, we filed a provisional patent application for our proprietary product, Nodeware and launched it commercially in November 2016. In May 2017, we filed a utility patent application for Nodeware.
U.S. Patent No. 10,999,307, was issued on May 4, 2021, for NETWORK ASSESSMENT SYSTEMS AND METHODS THEREOF U. S. Patent Application Serial No. 15/600,297, filed May 19, 2017, claiming priority of U.S. Provisional Patent Application Serial No. 62/338,904, filed May 19, 2016.
Nodeware is an automated asset identification and vulnerability management and monitoring solution that enhances security by proactively identifying, monitoring, and addressing potential vulnerabilities on both internal and external facing networks, creating a safeguard against malicious intent to exploit known problems in a customer’s network with simplicity and affordability. Nodeware assesses vulnerabilities in a computer network using scanning technology to capture a comprehensive view of the security exposure of a network infrastructure. Users receive alerts and view network information through a proprietary, web enabled dashboard. Continuous and automated internal scanning and external on demand scanning are components of this offering.
The Cloud based SaaS platform has an agile and continuous development process that is flexible to react to customer and market needs. In December 2019, we filed a second provisional patent application and in December 2020 we filed the subsequent action on the institutional patent on the Nodeware platform. In 2020 and 2021, we created many new feature updates and improvements to the platform in response to COVID-19 needs and impact such as a downloadable Windows executable version along with Windows, Mac, and Linux Agents that could be downloaded to a remote PC or server. A number of enhancements related to data management, threat intelligence, and user functionality were part of the 2020/21 continued evolution of Nodeware.
Nodeware creates an opportunity for resellers, including managed service providers, managed security service providers, distributors, and value-added resellers to use a product that provides greater visibility into the network security of an organization. We sell Nodeware in the commercial sector through channel partners and agents. Since 2018, we have continued to expand our channel of direct resellers, which now includes Telarus, SYNNEX, and Staples.
In June 2021, we created IGI CyberLabs, LLC, a wholly owned subsidiary to support our Nodeware solution and continued software development. Cyberlabs’ overarching mission is to drive sales of our Nodeware Cloud security platform, which will drive monthly and annualized recurring revenue. CyberLabs will also drive product and platform enhancements in Nodeware and continue to enhance our rapid scale Go-to-Market capabilities. Additionally, CyberLabs is chartered with development of cloud and SaaS cybersecurity related products that will be brought to market through our growing channel relationships.
In April 2024, the Company formed Nodeware Inc. in the state of Delaware. It is a wholly owned subsidiary to support Nodeware’s go to market strategy.
In May 2024, the Company formed Nodeware Inc. in the state of Nevada. It is a wholly owned subsidiary to support the Company’s Nodeware solution.
| 19 |
| Table of Contents |
Intellectual Property
We believe that our intellectual property is an asset that will contribute to the growth and profitability of our business. We rely on a combination of patented, patent-pending and confidentiality procedures, trademarks and contractual provisions to establish and protect our intellectual property rights in the United States and abroad. We intend to rely on both registration and common law protection for our trademarks.
In May 2016, we filed a provisional patent application for our proprietary product, Nodeware, and launched it commercially in November 2016. In May 2017, we filed a utility patent application for Nodeware: U.S. Patent No. 10,999,307, was issued on May 4, 2021, for NETWORK ASSESSMENT SYSTEMS AND METHODS THEREOF U.S. Patent Application Serial No. 15/600,297, filed May 19, 2017, claiming priority of U.S. Provisional Patent Application Serial No. 62/338,904, filed May 19, 2016. The patent will remain in effect for twenty years from the filing date of May 19, 2017, subject to payment of maintenance fees. Therefore, the expiration date of the subject patent is May 19, 2037.
In December 2019, we filed a second provisional patent application and in December 2020 we filed the subsequent action on the patent on Nodeware. In 2020 and 2021, we created updates and improvements to the platform in response to COVID-19 needs and impact such as a downloadable Windows executable version along with Windows, Mac, and Linux Agents that could be downloaded to a remote PC or server. A number of enhancements related to data management, threat intelligence, and user functionality were part of these updates.
The efforts we have taken to protect our intellectual property may not be sufficient or effective. As a result of this uncertainty and overall significance to the financial statements, these costs have been expensed.
The U.S. patent system permits the filing of provisional and non-provisional patent applications. A non-provisional patent application is examined by the United States Patent and Trademark Office and can mature into a patent once that office determines that the claimed invention meets the standards for patentability.
Our current patent and trademark portfolio consists of a patent for the Nodeware solution and process for scanning for vulnerabilities and a pending patent covering the methodologies associated with identifying and cataloging the assets on or across any physical or cloud network, together with a registered trademark for the “Nodeware” name and other trademarks and tradenames associated with our company and products. We intend to continue to work to enhance our intellectual property position on the Nodeware solution and in other appropriate cybersecurity technology we generate.
Technology and Product Development
Our goal is to position our products and solutions to enable vertical and other Application Programming Interface (API) based integration, with other industry solutions. We have a technology and product development strategy aligned with our business strategy. We continue to identify other technical partners in the cybersecurity market to integrate Nodeware into, through either API or full stack integration.
Cybersecurity Services
We provide cybersecurity consulting services that include incident response, security awareness training, risk management, IT governance and compliance, security assessment services, penetration testing, and Chief Information Security Officer Team as a Service (CISOTaaS™) offerings to channel partners and direct customers across different vertical markets (banking, supply chain, manufacturing, healthcare, legal, etc.) in North America. Our cybersecurity projects leverage different technology platforms and processes such as Nodeware to create a living document that a customer can use to go forward on a path of continuous improvement for its overall Information security. We support both internal and external organizations with our cybersecurity overlay that allows us to stay agnostic in the process, especially for compliance while enabling the IT organization to address the issues discovered. We validate overall network security with the goal of maintaining the integrity of confidential client information, preserving the continuity of services, and minimizing potential data damage from attempted threats and incidents. We continue to enhance our cybersecurity services when opportunities materialize and as the market evolves.
| 20 |
| Table of Contents |
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2025 and 2024
The following tables compare our statements of operations data for the three and nine months ended September 30, 2025 and 2024. The trends suggested by this table are not indicative of future operating results.
|
| Three Months Ended September 30, |
| |||||||||||||||||||||
|
|
|
|
|
|
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|
| 2024 vs 2023 |
|
|
| |||||||||||
|
|
|
| As a % of |
|
|
|
| As a % of |
|
| Amount of |
|
| % Increase |
| ||||||||
|
| 2025 |
|
| Sales |
|
| 2024 |
|
| Sales |
|
| Change |
|
| (Decrease) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| Sales |
| $ | 834,671 |
|
|
| 100.0 | % |
| $ | 1,635,958 |
|
|
| 100.0 | % |
| $ | (801,287 | ) |
|
| (49.0 | )% |
| Cost of sales |
|
| 534,170 |
|
|
| 64.0 |
|
|
| 944,914 |
|
|
| 57.8 |
|
|
| (410,744 | ) |
|
| (43.5 | ) |
| Gross profit |
|
| 300,501 |
|
|
| 36.0 |
|
|
| 691,044 |
|
|
| 42.2 | % |
|
| (390,543 | ) |
|
| (56.5 | ) |
| General and administrative |
|
| 372,171 |
|
|
| 44.6 |
|
|
| 453,407 |
|
|
| 27.7 |
|
|
| (81,236 | ) |
|
| (17.9 | ) |
| Selling |
|
| 428,625 |
|
|
| 51.4 |
|
|
| 499,869 |
|
|
| 30.6 |
|
|
| (71,244 | ) |
|
| (14.3 | ) |
| Total cost and expenses |
|
| 800,796 |
|
|
| 95.9 |
|
|
| 953,276 |
|
|
| 58.3 |
|
|
| (152,480 | ) |
|
| (16.0 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating loss |
|
| (500,295 | ) |
|
| (59.9 | ) |
|
| (262,232 | ) |
|
| (16.0 | ) |
|
| (238,063 | ) |
|
| (90.8 | ) |
| Interest expense (net) |
|
| (169,238 | ) |
|
| (20.3 | ) |
|
| (196,802 | ) |
|
| (12.0 | ) |
|
| 27,564 |
|
|
| 14.0 |
|
| Other income |
|
| - |
|
|
| - |
|
|
| 71,736 |
|
|
| 4.4 |
|
|
| (71,736 | ) |
|
| - |
|
| Net loss |
| $ | (669,533 | ) |
|
| (80.2 | )% |
| $ | (387,298 | ) |
|
| (23.7 | )% |
| $ | (282,235 | ) |
|
| (72.9 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share - basic and diluted |
| $ | (1.28 | ) |
|
|
|
|
| $ | (0.74 | ) |
|
|
|
|
| $ | (0.54 | ) |
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| 2024 vs 2023 |
|
|
| |||||||||||
|
|
|
| As a % of |
|
|
|
| As a % of |
|
| Amount of |
|
| % Increase |
| ||||||||
|
| 2025 |
|
| Sales |
|
| 2024 |
|
| Sales |
|
| Change |
|
| (Decrease) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| Sales |
| $ | 3,835,938 |
|
|
| 100.0 | % |
| $ | 4,842,422 |
|
|
| 100.0 | % |
| $ | (1,006,484 | ) |
|
| (20.8 | )% |
| Cost of sales |
|
| 2,175,742 |
|
|
| 56.7 |
|
|
| 2,842,848 |
|
|
| 58.7 |
|
|
| (667,106 | ) |
|
| (23.5 | ) |
| Gross profit |
|
| 1,660,196 |
|
|
| 43.3 |
|
|
| 1,999,574 |
|
|
| 41.3 | % |
|
| (339,378 | ) |
|
| (17.0 | ) |
| General and administrative |
|
| 1,236,464 |
|
|
| 32.2 |
|
|
| 1,349,433 |
|
|
| 27.9 |
|
|
| (112,969 | ) |
|
| (8.4 | ) |
| Selling |
|
| 1,256,679 |
|
|
| 32.8 |
|
|
| 1,294,277 |
|
|
| 26.7 |
|
|
| (37,598 | ) |
|
| (2.9 | ) |
| Total cost and expenses |
|
| 2,493,143 |
|
|
| 65.0 |
|
|
| 2,643,710 |
|
|
| 54.6 |
|
|
| (150,567 | ) |
|
| (5.7 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating loss |
|
| (832,947 | ) |
|
| (21.7 | ) |
|
| (644,136 | ) |
|
| (13.3 | ) |
|
| (188,811 | ) |
|
| (29.3 | ) |
| Interest expense (net) |
|
| (484,957 | ) |
|
| (12.6 | ) |
|
| (671,028 | ) |
|
| (13.9 | ) |
|
| 186,071 |
|
|
| 27.7 |
|
| Other Income |
|
| - |
|
|
| - |
|
|
| 87,086 |
|
|
| 1.8 |
|
|
| (87,086 | ) |
|
| - |
|
| Net loss |
| $ | (1,317,904 | ) |
|
| (34.4 | )% |
| $ | (1,228,078 | ) |
|
| (25.4 | )% |
| $ | (89,826 | ) |
|
| (7.3 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share - basic and diluted |
| $ | (2.53 | ) |
|
|
|
|
| $ | (2.36 | ) |
|
|
|
|
| $ | (0.17 | ) |
|
|
|
|
Sales
Our managed support service sales decreased by 73% from $1,113,968 during the three months ended September 30, 2024 to $302,323 during the corresponding period of 2025. For the nine month period ended September 30, managed support service sales decreased 35% from $3,268,608 in 2024, to $2,132,550 for the same period in 2025. Managed support service sales comprised approximately 36% of our sales during the three months ended September 30, 2025, and approximately 68% for the same period in 2024. For the nine months ended September 30, managed support service sales comprised approximately 56% of sales in 2025, and 67% for the same period in 2024. The change in our managed support service sales during the three and nine months ended September 30, 2025 was due to the managed support service/ASM contract was cancelled by Peraton for convenience during the second quarter of 2025. On May 8, 2025, we received a request in writing to answer an RFP that would retain certain employees of the Company that previously provided service under the ASM contract and would move the Company to a time and materials subcontract with Peraton serving the US government agency.
During April and May 2025, we executed layoffs constituting a material reduction in the workforce because of this change. We received task orders and executed time and materials subcontracts with Peraton to retain certain employees serving the US Government agency.
Our cybersecurity projects revenue decreased by 13%, from $189,391 for the three months ended September 30, 2024, to $165,525 for the same period ended September 30, 2025. For the nine months ended September 30, 2025, cybersecurity projects increased 2% to $609,809 from $598,332 in the same prior year period. These changes were due to timing of engagements in 2025.
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Software sales, which includes the selling of licenses of Nodeware and third-party software Webroot, increased by 10% from the three months ended September 30, 2024 to the same period in 2025. Sales for the period in 2024 were $332,599 and increased by $34,224 to $366,823 for the same period in 2025. For the nine months ended September 30, 2024 and 2025, sales were $975,482and $1,093,579, respectively, for an increase of 12%. The increase was primarily attributable to improving sales of Nodeware and slightly offset by decreasing sales of Webroot. We have expended significant sales and marketing resources on Nodeware in 2024 and 2025, while concurrently diverting resources from Webroot. We expect this trend to continue throughout 2025 and 2026 as we focus our resources on Nodeware.
Cost of Sales and Gross Profit
Cost of sales principally represents compensation expense for our employees of our managed support services and cybersecurity projects teams. Cost of sales decreased by 57% to $534,170 during the three months ended September 30, 2025 from $944,914 during the corresponding period of 2024. For the nine month periods ended September 30, 2024 and 2025, cost of sales decreased from $2,842,848 in 2024 to $2,175,742 in 2025; a decrease of 23%. The decrease in cost of sales during the three and nine months ended September 30, 2025 from 2024 was primarily due to a decrease in payroll and benefits of salaried employees who support our managed services as noted above.
Our gross profit decreased by $390,543 for the three months ended September 30, 2024 to 2025, from $691,044 to $300,501. For the nine months ended September 30, 2025, gross profit of $1,660,196 represents a 17% decrease in gross profits for the same period in 2024 of $1,999,574. The decrease was due to the combination of decreased sales offset by the decrease in salary and benefits previously referenced above.
General and Administrative Expenses
General and administrative expenses include corporate overhead such as compensation and benefits for executive, administrative and finance personnel, rent, insurance, professional fees, travel, and office expenses. General and administrative expenses of $453,407 for the three months ended September 30, 2025 decreased approximately 27% from $620,180 for the same quarter of 2024. For the nine months ended September 30, 2025, general and administrative expenses were $1,349,433, down from $1,617,002 for the same period in 2024. The decrease was primarily due to the reduction in salaries and benefits in addition to lower rent due to downsizing the office space and marketing spending, with total year to date expenses in those categories down approximately $166,000 for the comparative nine month periods.
Selling Expenses
Selling expenses of $428,625 for the three months ended September 30, 2025 decreased approximately 18% from $499,869 for the same quarter of 2024. For the nine months ended September 30, 2025, selling expenses were $1,256,679; a decrease of 3% from $1,294,277 for the same period in 2024. For the three month period, approximately $114,000 of the decrease was due to reductions in number of trade shows attended offset by increases in salaries and benefits of approximately $20,000. For the nine month period, approximately $110,000 of the decrease was due to a decrease in marketing and trade show spending offset by increases in staffing and related benefits of approximately $34,000.
Operating Loss
For the three months ended September 30, 2025 and September 30, 2024, operating loss was $500,295 and $262,232, respectively, for an increase in the loss by $238,063. For the nine months ended September 30, 2025 and September 30, 2024, the operating loss was $832,947 and $644,136, respectively. The increase in our operating loss from the previous year is principally attributable to the reduction in managed services revenue, offset by reduction of trade shows, as referenced above.
Interest Expense
Net interest expense of $169,238 for the three months ended September 30, 2025 decreased significantly from expense of $196,802 for the same quarter of 2024. For the nine months ended September 30, 2025, net interest expense of $484,957 represents a decrease of $671,028 from the same period in 2024. The decrease in interest expense is primarily attributable to the MCA loans entered into during late 2023 and the first quarter of 2024 that were paid off in late 2024.
Other Income
For the three months ended September 30, 2024, other income included gain on the extinguishment of debts in the amount of $71,736. For the nine months ended September 30, 2024, other income included $15,350 was for the partial termination of the lease agreement for the corporate office in addition to the gain on the extinguishment of debts.
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Net Loss
For the three months ended September 30, 2025, net loss was $669,533. For the same period in 2024, we showed a net loss of $387,298. For the nine months ended September 30, 2025 and September 30, 2024, the net loss was $1,317,904 and $1,228,078, respectively. The primary reasons for this approximate $282,000 increase in loss in the three month period was due to the reduction in managed services revenue. For the nine month period, the primary reason for the increase in loss was due to the reduction in managed services revenue offset by controlling spending.
Liquidity and Capital Resources
At September 30, 2025, we had cash of $38,776 available for working capital needs and planned capital asset expenditures. At September 30, 2025, we had a working capital deficit of approximately $10.5 million and a current ratio of 0.05.
During 2025, 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 September 30, 2025, based on eligible accounts receivable, we had $23,000 available under this arrangement. We pay fees based on the length of time that the invoice remains unpaid.
We entered into four loan agreements and a revised financing arrangement during the nine month period ended September 30, 2025.
On March 10, 2025, we received funding from a loan agreement with Stripe and Celtic Bank. The loan amount was $241,500 plus a fixed fee of $23,667. The repayment amount of $265,167 will be repaid at a repayment rate of 30% of our receivables automatically withheld by Stripe. There is no financing percentage. The repayment start date was March 17, 2025, with a minimum payment amount of $29,463 over every 60-day period. The final repayment date is September 8, 2026, if the total repayment amount is not paid as of that date. This loan agreement also eliminates the remaining balance of $30,090 from the previous Stripe loan dated June 4, 2024, as the remaining balance was rolled into this new loan. The amount outstanding at September 30, 2025 is $110,013. This amount is included in the current notes payable to third parties
On August 15, 2025, the Company received funding from Business Loan and Security Agreement with WebBank. The funding provided was $150,000 with a fixed fee of $3,000. A payment plan of $2,558 per week for 78 weeks effective August 21, 2025. The effective interest rate of the agreement is 42.6%.
On September 23, 2025, the Company received funding from a business installment loan with OnDeck Capital, LLC. The funding provided was $200,000 with a fixed fee of $5,000. A payment plan of $3,844 per week for 78 weeks effective September 30, 2025. The effective interest rate of the agreement is 61.6%.
At September 30, 2025, we had current notes payable of $139,000 to related parties. $40,000 of this debt was due on January 1, 2023, and is currently in default. The remaining $99,000 are in the form of demand notes with an interest rate of 6%.
At September 30, 2025, we have current notes payable of approximately $1,777,000 to third parties, which includes convertible notes payable of approximately $150,000. Also included is $12,500 in principal amount of a note payable due on June 30, 2016 which has not been paid and is in default. 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. The Company has accrued interest on these notes of approximately $257,000 as of September 30, 2025.
Also included in the current notes payable to third parties at September 30, 2025, are five bridge loans with Mast Hill Fund, L.P., for an aggregate principal amount of $1,511,801. The bridge loans were entered into on November 3, 2021, February 15, 2022, May 27, 2022, November 23, 2022, and February 2, 2023, with maturity dates of November 3, 2022, February 15, 2023, May 27, 2023, November 23, 2023, and February 2, 2024, respectively. All five loans bear interest at an original rate of 8%. Since these loans are in default, the interest rate is 12%. We used the proceeds from the bridge loans to substantially enhance our marketing of Nodeware, Inc.’s Nodeware solution, in order to significantly increase its growth.
During the first nine months of 2025, approximately $24,000 was recorded as deferred note costs. At September 30, 2025, the unamortized balance of the deferred note costs for all notes payable to third parties was approximately $7,000. See Notes 5 and 6 of the 2024 Audited Financial Statements for more information.
We entered into unsecured lines of credit financing agreements (the “LOC Agreements”) with two related parties in previous years. The LOC Agreements provide for working capital of up to $100,000 through July 31, 2022 and $75,000 through January 2, 2023, both of which have expired. At September 30, 2024, we had approximately $15,000 of availability under the LOC Agreements.
During 2021, we issued demand notes to three board members for $79,000 in total. The demand notes bear a 6% interest rate. The amount outstanding as of September 30, 2025 is $49,000.
We have approximately $1,124,000 of current maturities of long-term obligations to third parties. This is comprised of various notes including long-term notes to third parties of $265,000 due on January 1, 2018 (plus accrued interest of approximately $320,000) which is in default, approximately $284,000 due on January 1, 2024 which is in default, approximately $116,000 due August 24, 2024 which is in default, $250,000 that was due September 30, 2025 and is in default, approximately $94,000 due in the next 12 months on an 18 month loan agreement ending on February 2027, and approximately $115,000 due in the next 12 months on an 18 month loan agreement ending on March 23, 2027.
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At September 30, 2025, we have $1,693,000 of current maturities of long-term obligations to related parties. $70,000 was due on January 1, 2023 which is in default, $25,000 was due June 30, 2023 which is in default, $90,000 was due on July 31, 2023 which is in default, $474,300 is due January 1, 2024 which is in default, 499,000 is due August 31, 2026 and $535,117 due before September 30, 2026.
We plan to renegotiate the terms of the various notes payable, seek funds to repay the notes or use a combination of both alternatives. We cannot provide assurance that we will be able to repay current notes payable or obtain extensions of maturity dates for long-term notes payable when they mature or that we will be able to repay or otherwise refinance the notes at their scheduled maturities.
We have a note payable agreement for up to $500,000 with a related party. The note has an interest rate of 7.5% and is due on August 31, 2026. The balance is $499,000 at June 30, 2025.
The following table sets forth our cash flow information for the periods presented:
|
| Nine Months Ended September 30, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
| Net cash used in operating activities |
| $ | (273,570 | ) |
| $ | (702,685 | ) |
| Net cash used in investing activities |
|
| (172,181 | ) |
|
| (149,708 | ) |
| Net cash provided by financing activities |
|
| 315,590 |
|
|
| 849,401 |
|
| Net decrease in cash |
| $ | (130,161 | ) |
| $ | (2,992 | ) |
Cash Flows Used in Operating Activities
Our operating cash flow is primarily affected by the overall profitability of our contracts, our ability to invoice and collect from our clients in a timely manner, and our ability to manage our vendor payments. We bill our clients weekly or monthly after services are performed as well as collect down payments depending on the contract terms. Our net loss of $1,317,904 for the nine months ended September 30, 2025 was offset by non-cash expenses and credits of $183,775. In addition, our net loss was increased by an decrease in accounts receivable and other assets of $167,652 and offset by increases in accounts payable and other expenses payable of $882,907 and a decrease in deferred revenue and accrued payroll of $190,000 resulting in cash used in operating activities of $273,570.
We are continuing to increase our marketing of Nodeware to our IT channel partners who resell to their customers. We are making investments in our cyber security team for penetration testing, CISOTaaS and other services. Due to the lengthy lead times typically needed to generate these new sales, we expect a delay before realizing a return from our sales and marketing efforts, of one or more quarters. As a result, we may continue to experience operating income or operating losses from these resource expenditures until sufficient sales are generated. We expect to fund the cost for the new expenditures from our operating cash flows, the equity raise and incremental borrowings, as needed.
Cash Flows Provided by (Used in) Investing Activities
During the nine months ended September 30, 2025, we incurred capital expenditures of $172,181 for software development labor for the enhancements to Nodeware. We expect to continue to invest in computer hardware and software to update our technology to support the growth of our business. We do not anticipate our continued investment to be significant in these two categories.
Cash Flows Provided by (Used in) Financing Activities
During the nine months ended September 30, 2025, we received $591,500 from various debt products, including a business loan and security agreement with WebBank for $150,000 which is paid in 78 weekly installments, a business loan and security agreement with ODK Capital, LLC for $200,000 payable over 78 weeks, and a restructured loan with Celtic Bank for $241,500. We paid the principal of $244,521 on notes payable, and $29,763 of related party short term debt.
Credit Resources
We maintain an accounts receivable financing line of credit from an independent financial institution that allows us to sell selected accounts receivable invoices to the financial institution with full recourse against us in the amount of $2,000,000, including a sublimit for one major client of $1,500,000. This provides us with the cash needed to finance certain costs and expenses. At September 30, 2025, we had financing availability, based on eligible accounts receivable, of approximately $37,000 under this line. We pay fees based on the length of time that the invoice remains unpaid. We also have approximately $16,000 of available credit under various lines of credit as of September 30, 2025.
During May 2019, we originated a line of credit note payable for a $500,000 with a related party and borrowed $499,000 and have $1,000 available to borrow for working capital. This agreement matures in August 2026.
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During 2017, we originated two lines of credit with related parties totaling $175,000. At September 30, 2025, we had $15,000 available under these financing agreements which matured in January 2023 and July 2023, respectively.
We believe the capital resources available under our factoring line of credit, cash from additional related party loans and cash generated by improving the results of our operations will be sufficient to fund our ongoing operations for at least the next 12 months.
We anticipate financing growth from acquisitions of other businesses, if any, and our longer-term internal growth through one or more of the following sources: issuance of equity: cash from collections of accounts receivable; additional borrowing from related and third parties; use of our existing accounts receivable credit facility; or a refinancing of our accounts receivable credit facility.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, the chief executive officer and chief financial officer concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us or our business.
Item 1A. Risk Factors
Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a comprehensive listing of the Company’s other risk factors. There are no material changes for the three and nine months ended September 30, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the nine months ended September 30, 2025, no warrants were exercised.
Item 3. Defaults Upon Senior Securities.
The Company is in default on convertible notes to third parties of $150,000 due on December 31, 2016. The accrued interest on these notes is approximately $143,000 at September 30, 2025.
The Company is in default on long-term notes to third parties of $265,000 due on January 1, 2018. The accrued interest on these notes is approximately $320,000 at September 30, 2025.
The Company is in default on a note payable to third parties of $355,000 due on December 31, 2022. The accrued interest on the note is approximately $228,000 at September 30, 2025.
The Company is in default on a note payable to third parties of $566,000 due on March 22, 2023. The accrued interest on the note is approximately $321,000 at September 30, 2025.
The Company is in default on a note payable to third parties of $118,000 due on June 3, 2023. The accrued interest on the note is approximately $63,000 at September 30, 2025.
The Company is in default on a note payable to third parties of $213,772 due on July 15, 2023. The accrued interest on the note is approximately $147,000 at September 30, 2025.
The Company is in default on a note payable to third parties of $259,029 due on November 3, 2022. The accrued interest on the note is approximately $164,000 at September 30, 2025.
Item 6. Exhibits
Exhibits required to be filed by Item 601 of Regulation S-K.
For the exhibits that are filed herewith or incorporated herein by reference, see the Index to Exhibits located below in this report. The Index to Exhibits is incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| Infinite Group, Inc. |
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|
| (Registrant) |
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|
|
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Date: February 23, 2026 |
| /s/ James Villa |
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|
| James Villa |
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| Chief Executive Officer |
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|
| (Principal Executive Officer) |
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|
|
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Date: February 23, 2026 |
| /s/ Richard Glickman |
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| Richard Glickman Finance and Chief Accounting Officer VP Finance and Chief Accounting Officer |
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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 |
| VP Finance Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. * |
| 32.1 |
| Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. * |
| 32.2 |
| VP Finance Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. * |
101.INS |
| XBRL Instance Document.* |
101.SCH |
| XBRL Taxonomy Extension Schema Document.* |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document.* |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document.* |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document.* |
| 101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document.* |
* Filed as an exhibit hereto.
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