FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2000
OR
|_| 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 0-21816
INFINITE GROUP, INC.
--------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1490422
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2364 Post Road, Warwick, RI 02886
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (401) 738-5777
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 |X| No |_|
As of May 1, 2000 there were 2,368,529 shares of common stock, par value $0.001
per share outstanding. The aggregate market value of the voting stock of the
registrant held by non-affiliates of the registrant on May 1, 2000, based on the
average bid and asked price on such date was $5,992,378.
Transitional Small Business Disclosure Format: Yes |_| No |X|
<PAGE>
INFINITE GROUP, INC.
Form 10-QSB
INDEX
Page
PART I. Consolidated Financial Statements
Item 1. Consolidated Balance Sheets (Unaudited)
March 31, 2000 and December 31, 1999............................... 3
Consolidated Statements of Operations - Three Months
Ended March 31, 2000 and 1999...................................... 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2000 and 1999...................................... 5
Notes to Unaudited Consolidated Financial Statements............... 6
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of Operations..................... 9
PART II. OTHER INFORMATION
Items
1-6 Not Applicable..................................................... 14
SIGNATURES.................................................................. 15
2
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INFINITE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 172,974 $ 328,094
Restricted funds 130,794 79,235
Accounts receivable, net of allowances 1,650,916 1,496,288
Inventories 492,338 536,554
Note receivable 204,716 204,716
Advance - stockholder 50,014 50,014
Other current assets 114,767 147,581
------------ ------------
Total current assets 2,816,519 2,842,482
Property and equipment, net 6,898,496 7,059,367
Other assets:
Note receivable - stockholders -- 6,652
Other investment 295,000 250,000
Cash surrender value of officer life insurance 61,546 61,546
Prepaid pension costs 769,101 769,101
Intangible assets, net 307,348 318,342
------------ ------------
Total other assets 1,432,995 1,405,641
------------ ------------
$ 11,148,010 $ 11,307,490
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable:
Bank $ 928,328 $ 893,957
Stockholder 295,000 40,000
Accounts payable and accrued expenses 1,860,468 1,852,483
Current maturities of long-term obligations 795,950 1,042,159
Current maturities of notes payable - stockholders 23,964 21,572
------------ ------------
Total current liabilities 3,903,710 3,850,171
Long term obligations 5,092,362 5,198,680
Notes payable - stockholders 383,812 380,483
Stockholders' equity
Common stock, $.001 par value, 20,000,000
shares authorized 3,016,304 and 2,918,604
shares issued; 2,466,229 and 2,368,529
shares outstanding 3,016 2,918
Additional paid-in capital:
Common stock 20,910,580 20,564,179
Warrants/Options 671,418 671,418
Accumulated deficit (18,441,701) (17,985,172)
3,143,313 3,253,343
------------ ------------
Less treasury stock, 550,075 shares, at cost 1,375,187 1,375,187
Total stockholders' equity 1,768,126 1,878,156
------------ ------------
$ 11,148,010 $ 11,307,490
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
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INFINITE GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2000 1999
---- ----
Sales $ 3,290,826 1,236,002
Cost of goods sold 2,199,810 947,403
--------- ---------
Gross profit 1,091,016 288,599
Costs and expenses
Research and development 239,411 408,843
General and administrative expenses 626,906 493,988
Selling expenses 180,875 143,538
Depreciation and amortization 272,097 147,075
--------- ---------
Total costs and expenses 1,319,289 1,193,444
Operating loss (228,273) (904,845)
Other income (expense)
Interest expense (160,182) (111,417)
Loss on sale of assets (68,074) --
Interest and other income -- 17,352
--------- ---------
Total other income (expense) (228,256) (94,065)
========= =========
Loss from continuing operations (456,529) (998,910)
Gain on sale of disposed business segment
(less applicable income taxes of $825,000) -- 4,170,315
Net income (loss) $ (456,529) 3,171,405
========= =========
Income (loss) per share - basic:
Contining operations (0.19) (0.39)
Disposed business segment -- 1.61
--------- ---------
Net income(loss) per share (0.19) 1.22
========= =========
Income from disposed business segment
per share - diluted -- 1.57
========= =========
Weighted average number of common
shares outstanding:
Basic 2,368,529 2,591,311
========= =========
Diluted 2,409,494 2,657,978
========= =========
See accompanying notes to unaudited consolidated financial statements.
4
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INFINITE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss from continuing operations $ (456,529) $ (998,910)
Adjustments to reconcile net loss from continuing
operations to net cash used in continuing operations:
Depreciation and amortization 272,097 147,075
Loss on disposition of assets 68,074
Amortization of discount on note payable 9,584 13,967
Expenses satisfied via issuance of equity 39,527
Asset write down and allowances 6,652 10,112
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (154,628) 320,033
Other current assets 32,814 67,641
Inventory and inventoried parts 44,216 35,414
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 7,985 (285,058)
----------- -----------
Net cash used in continuing operations (169,735) (650,199)
Cash flows from investing activities:
Purchase of property and equipment (91,206) (508,925)
Proceeds from the sale of property and equipment 122,900
Purchase of investments (45,000) --
Increase in intangible assets -- (18,705)
Proceeds from the sale of investment in Spectra Science Corp. -- 3,620,128
Advance to stockholder -- (646)
Advance under note receivable -- (200,000)
----------- -----------
Net cash (used in) provied by investing activities (13,306) 2,891,852
Cash flows from financing activities:
Net borrowings (repayments) of short-term debt 289,371 (89,000)
Repayments of long-term obligations (206,028) (40,533)
Repayments of notes payable - stockholders (3,863) --
Net borrowings from stockholder -- (7,792)
Increase in restricted funds, net (51,559) (47,460)
----------- -----------
Net cash provided by (used in) financing activities 27,921 (184,785)
----------- -----------
Net increase (decrease) in cash and cash equivalents (155,120) 2,056,868
Cash and cash equivalents - beginning of period 328,094 1,010,736
----------- -----------
Cash and cash equivalents - end of period $ 172,974 $ 3,067,604
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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INFINITE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Infinite Group, Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. For further information, refer to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999, which includes
audited financial statements and footnotes as of and for the years ended
December 31, 1999 and 1998. In accordance with SAS 71, Interim Financial
Information, the Company's interim financial statements and related notes have
been reviewed by the Company's independent auditors.
NOTE 2. - NOTES PAYABLE - STOCKHOLDERS
During the quarter ended March 31, 2000, the Company incurred $255,000 of
additional debt, payable to the President and principal stockholder, which is
included in note payable - stockholder as of March 31, 2000 in the accompanying
balance sheet. The obligation accrues interest at the rate of 10-1/2%, and may
be prepaid at any time. The entire principal balance matures at various times
from May 1, 2000 through June 30, 2000.
NOTE 3. - EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," the Company has reported basic and diluted earnings per
share. The difference between the weighted average number of common shares
outstanding for the basic and diluted calculation represents the effect of
convertible debentures. The conversion of outstanding options and warrants were
not considered in the calculation of diluted income from disposed segment per
share since the average market price is less than the exercise price for all
excercisable securities during the quarter ended March 31, 1999. The impact of
convertible debentures and the exercise of stock options is excluded from the
computation of loss per share from continuing operations because their assumed
conversion would be antidilutive.
NOTE 4. - CONVERTIBLE NOTES PAYABLE
During the quarter ended March 31, 2000, convertible notes payable to
former Osley and Whitney, Inc. ("O&W") shareholders, along with accrued
interest, aggregating $146,540 were converted into 97,700 common shares of the
Company's common stock. The excess of the fair market value of the common shares
issued over the principle and interest reduction which amounted to $200,000 has
been reflected as additional purchase price consideration.
6
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INFINITE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 5. - BUSINESS SEGMENTS
The Company's businesses are organized, managed and internally reported as
two segments. The segments are determined based on differences in products,
production processes and internal reporting. All of the segments of the Company
operate entirely within the United States. Revenues from customers in foreign
countries are minimal.
Prior to April 1, 1999, the Laser segment was the primary segment. Revenue
from this segment accounted for 94% and 95% of total revenue in 1998 and the
first quarter of 1999, respectively. As a result, corporate expenses were
reported as part of the Laser Service segment. With the acquisition of O&W in
April 1999, the Plastics segment became a significant component of the Company's
consolidated financial statements. Based on the increased activity of the second
segment, general corporate activity is reported as a separate segment. Prior
periods were restated to conform with this presentation.
Transactions between reportable segments are recorded at cost. The Company
relies on intersegment cooperation and management does not represent that these
segments, if operated independently, would report the results shown.
A summary of selected consolidated information for the Company's industry
segments during the three months ended March 31, 2000 and 1999 is set forth as
follows:
7
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INFINITE GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
Photonic
Material
Laser Spectra Plastics Unallocated
Group Science Group Corporate Eliminations
----- ------- ----- --------- ------------
Three Months Ended March 31, 2000
---------------------------------
<S> <C> <C> <C> <C> <C>
Sales from external customers $ 1,697,581 $ -- $ 1,593,245 $ -- $ --
=========== =========== =========== ============ ============
Operating income (loss) $ (64,803) $ -- $ 23,422 $ (186,892) $ --
=========== =========== =========== ============ ============
Identifiable assets $ 5,473,632 $ -- $ 3,727,370 $ 1,947,008 $ --
=========== =========== =========== ============ ============
Three Months Ended March 31, 1999
---------------------------------
Sales from external customers $ 1,173,954 $ -- $ 62,048 $ -- $ --
=========== =========== =========== ============ ============
Operating loss $ (257,432) $ -- $ (342,063) $ (305,350) $ --
=========== =========== =========== ============ ============
Net income from disposed business segment $ -- $ 4,170,315 $ -- $ -- $ --
=========== =========== =========== ============ ============
Identifiable assets, as of December 31, 1999 $ 8,871,591 $ -- $ 5,072,008 $ 10,922,806 $(13,558,915)
=========== =========== =========== ============ ============
Consolidated
------------
Three Months Ended March 31, 2000
---------------------------------
<S> <C>
Sales from external customers $ 3,290,826
============
Operating income (loss) $ (228,273)
============
Identifiable assets $ 11,148,010
============
Three Months Ended March 31, 1999
---------------------------------
Sales from external customers $ 1,236,002
============
Operating loss $ (904,845)
============
Net income from disposed business segment $ 4,170,315
============
Identifiable assets, as of December 31, 1999 $ 11,307,490
============
</TABLE>
8
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MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains or incorporates forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 regarding the plans and objectives of management for future operations. You
can identify these forward-looking statements by our use of the words
"believes," "anticipates," "plans," "expects," "may," "will," "intends,"
"estimates" and similar expressions, whether in the negative or affirmative.
Such statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. The forward-looking statements
included herein are based on current expectations that involve numerous risks
and uncertainties. Our plans and objectives are based, in part, on assumptions
involving judgements 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. Factors that could
cause actual results to differ materially from those expressed or implied by
forward-looking statements include, but are not limited to, the factors set
forth in "Certain Factors That May Affect Future Growth," under Part I, Item 1,
of the Company's Annual Report on Form 10-KSB for the year ended December 31,
1999 as filed with the Securities and Exchange Commission. In light of the
significant uncertainties inherent in the forward-looking statements included
herein particularly in view of our early stage operations, the inclusion of such
information should not be regarded by us or any other person that the objectives
and plans will be achieved.
GENERAL
Our business has two segments, the Laser and Photonics Group and the
Plastics Group. We sell products and services in the fields of material
processing, advanced manufacturing methods, high productivity production mold
building and laser-application technology. We have approximately 145 employees.
Our Laser and Photonics Group, comprised of Laser Fare (Smithfield, RI),
Mound Laser & Photonics Center (Miamisburg, OH) and the Advanced Technology
Group (Narragansett, RI), provides comprehensive laser-based materials
processing services to leading manufacturers.
Our Plastics Group, comprised of Osley & Whitney/ExpressTool (Westfield,
MA), Materials & Manufacturing Technologies (West Kingston, RI) and Express
Pattern (Buffalo Grove, IL), provides rapid prototyping services and proprietary
mold building services.
9
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We were organized as a Delaware corporation on October 14, 1986. On
January 7, 1998, we changed our name from Infinite Machines Corp. to Infinite
Group, Inc. Our executive offices are located at 2364 Post Road, Warwick, Rhode
Island 02886. We own various trademark rights and hold federal trademark
registration for our name and the Infinite Group logo. "Infinite Group," "Laser
Fare," "Osley & Whitney," "ExpressTool" and "Zyrkon" are registered trademarks
of Infinite Group, Inc. We maintain sites on the World Wide Web at
www.infinite-group.com, www.laserfare.com, www.mlpc.com, www.expresspattern.com
and www.expresstool.com. However, the information found on our Web sites is not
part of this report.
The laser and photonics group
Our Laser Fare (LF) subsidiary is primarily engaged in contract laser
material processing; however it also develops new applications for industrial
lasers. Laser Fare has 22 high powered computer controlled lasers that are
capable of performing a wide variety of manufacturing processes with multi-axis
laser manipulation. Laser Fare also manufactures complete assemblies for
selective medical product companies. Approximately 75% of Laser Fare's sales
come from customers in the medical device, aerospace and power generation
industries. Customers include General Electric, United Technologies, Allied
Signal, Polaroid, Stryker Medical and Dey Laboratories. Through Laser Fare we
also provide a variety of value-added services that include assembly, heat
treating, coating, testing and inspection. We quote orders through traditional
sales methods as well as through our Web site at www.laserfare.com. Laser Fare
is certified for overhaul and repair by the Federal Aviation Administration (FAA
No. LQFR37K), and as a Contract Manufacturer (Type E) by the Food and Drug
Administration (FDA No. 1287338).
Our Mound Laser and Photonics Center (MLPC) subsidiary specializes in
laser applications, photonics applications and material processing and provides
services within industry, government and education sectors. The midwest
location, a region long known for its expertise in materials and material
science, gives us a platform for growth into the automotive, aerospace, tool and
die and other local industries. Specialized services include growth of thin
films by pulsed laser deposition, applications of lasers to chemistry and
photochemistry, spectroscopy and applied optics. MLPC has applied for a
provisional patent on pulsed laser deposition. The combination of Laser Fare's
expertise in materials processing and MLPC's expertise in laser and photonics
applications creates a synergistic atmosphere for the advancement of laser
materials processing and the development and commercialization of new
laser-based technology.
Our Advanced Technology Group (ATG) manages research and development
programs for industrial and government sponsors. ATG has recently been awarded
several contracts and subcontracts sponsored by the Defense Advanced Research
Project Agency (DARPA). DARPA is the central research and development
organization for the Department of Defense. It manages and directs selected
basic and applied research and development projects for the Department of
Defense, and pursues research and technology where risk and payoff are both very
high and where success may provide dramatic advances for traditional military
roles and missions and dual-use applications. As it effects ATG, these programs
have been focused on laser driven
10
<PAGE>
direct write technologies. Laser direct technologies enable cost-effective
manufacturing of engineered components without the use of expensive tooling by
directly depositing materials on the substrate with laser energy. Active and
passive devices for electronic and photonic applications can be manufactured
this way as well as a wide variety of sensors and activators. These technologies
have applications across a broad range of industries that utilize electronic and
photonic materials (including telecommunications, automotive and consumer
electronics).
ATG has a consulting arrangement with Molecular Geodesics Inc. (MGI) of
Cambridge, MA. MGI is creating technologies using synthetic biomimetic materials
with the mechanical responsiveness of living cells and tissues and applying
these technologies to medical, industrial and military applications. Our
Advanced Technology Group will utilize Laser Fare's and ExpressTool's
proprietary techniques to fabricate structures for MGI.
Through ATG, Triton Systems of Chelmsford, MA contracts with our Laser
Fare subsidiary to laser fabricate aerospace components from metal composite
materials. These are strong lightweight materials that are used in jet engines.
The plastics group
In April 1999, we acquired 100% of the outstanding capital stock of Osley
& Whitney, Inc. (O& W), a privately held Massachusetts corporation, from its
stockholders for approximately $1.5 million in cash and notes. O&W is a
fifty-year-old plastic injection moldbuilding company located in Westfield, MA
with approximately 50 employees. It serves a blue-ribbon clientele of
automotive, automotive aftermarket, consumer sporting goods and office machine
companies, including Polaroid, Pitney-Bowes, Hardigg Industries and Titleist,
from its 21,500 sq. ft. manufacturing facility. Our proprietary mold fabrication
and conformal cooling technologies lower the cost of molded parts, increase
molding capacity and provide shorter delivery times over conventionally
constructed molds. This compliments our established expertise in the
moldbuilding industry.
During 1999, ExpressTool (ET) was integrated into our Westfield, MA
facility and separate facilities in Warwick, RI were closed to reduce cost and
improve productivity. The ExpressTool process incorporates its conformal cooling
and proprietary thermal management for high production injection mold tooling to
allow molds used in the plastic fabrication industries to cool and eject parts
up to 75% faster than traditional molds. Additionally, they accept computer
files directly from their customers who use such software as AutoCad, ProE and
Cadkey to submit their 3D designs directly over the internet at
www.expresstool.com. ExpressTool began shipping mold inserts to Cheseborough
Pond, 3M, and GE Plastics and has achieved preferred vendor status with Pitney
Bowes, FordVisteon and others.
In April 1999, we formed Express Pattern (EP) located in Buffalo Grove,
IL, to expand our midwest presence and provide plastic rapid prototyping
services to the metal casting industries. Express Pattern ships plastic
prototype parts to Allen-Bradley, Paradigm, Rolls-Royce Allison, Motorola,
Hewlett-Packard and others. EP provides direct interface (including uploads over
the interenet) from customer CAD software (such as AutoCad, ProE and others) to
11
<PAGE>
our stereolithography systems and equipment. Express Pattern also provides
similar services to our other subsidiaries.
Also in April 1999, we acquired 100% of the outstanding stock of Materials
& Manufacturing Technologies, Inc. (MMT) of West Kingston, Rhode Island in
exchange for 20,000 shares of our common stock. MMT has received a patent,
number 5,427,987, from the United States patent office on its work in zirconium
diboride materials. MMT has an exclusive licensing arrangement with Texas A&M
University (with rights to sub-license) for use of patents and intellectual
property owned by Texas A&M in the area of electrodes and parts made from
zirconium diboride/copper (Zyrkon(TM)) composites. Zyrkon(TM) composite
electrodes have been shown to be superior to copper, tungsten/copper and
graphite electrodes in electrical discharge machining applications. In addition,
parts made from Zyrkon(TM) exhibit excellent abrasion resistance and resistance
to wear by electric arcs as well as high thermal conductivity and a relatively
low coefficient of thermal expansion. These properties indicate that Zyrkon(TM)
can be used to replace current material systems in applications as varied as
injection mold tooling, spot-welding, waste remediation electrodes, high-current
switches and heat sinks. The acquisition provides us with the ability to take
advantage of these material systems in our areas of expertise as well as
providing us with the ability to address new markets.
Liquidity and Capital Resources
We have financed our product development activities through a series of
private placements of debt and equity securities. As of March 31, 2000, we had
cash, cash equivalents and marketable debt securities of approximately $172,974
available for our working capital needs and planned capital asset expenditures.
While the majority of the revenues realized as of March 31, 2000 were
attributed to our LF, O&W & EP operations, we anticipate improved revenue from
our other divisions and positive results from additional expense containment
measures that have been implemented. We are also pursuing other strategies for
raising additional working capital through debt and/or equity transactions.
On June 30, 1998, our president and chief executive officer loaned the
company an aggregate of $1.15 million. The note evidencing the loan is for a
term of ten years and bears interest at a rate of 9.0% for the first twelve
months and adjusts annually thereafter to a rate equal to the one-year T-Bill
rate plus 3.5% (8.64 % at December 31, 1999). Our president also loaned the
company $250,000 in the first quarter of 1998 pursuant to a one year note which
bore interest at a rate of 9.0%. This note was repaid during 1999. In
consideration for the loans, we granted detachable warrants to purchase 536,000
shares of our common stock exercisable at $5.60 per share. Half of the warrants
vested immediately and the remaining 50% vested in four equal tranches, six,
nine, twelve, and fifteen months from the anniversary date of the loan. In April
1999, approximately $650,000 of the outstanding balance of the loans was repaid.
As of December 31, 1999, all warrants had vested. During the quarter ended
September 30, 1999, our president also loaned us an additional $150,000 pursuant
to a note that was convertible to common stock at $0.9375 per share and bore
interest at the prime interest rate. Subsequently, in
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December 1999, our president converted the note into 160,000 shares of common
stock. In consideration for the loan, we granted detachable warrants to purchase
128,000 shares of our common stock exercisable at $1.0375 per share. In December
1999, our president loaned the company an additional $40,000 pursuant to a
ninety day promissory note which bears interest at a rate of 10% per annum.
During the quarter ended March 31, 2000, our president loaned us an additional
$255,000 pursuant to ninety day promissory notes which bear interest at a rate
of 10 1/2 % per annum.
As of March 31, 2000 we had a working capital deficit of approximately
$1,087,191. In conjunction with our on-going business expansion program, we are
pursuing additional equity, alternative sources of funding from conventional
banking institutions and the availability of government funds in the form of
revenue bonds for the purchase of equipment and facilities, among others. There
is no assurance, however, that our current resources will be adequate to fund
our current operations and business expansion or that we will be successful in
raising additional working capital. Our failure to raise necessary working
capital could force us to curtail operations which would have a material adverse
effect on our financial condition and results of operations.
Risk of Nasdaq Delisting. Our Common Stock is listed on the Nasdaq SmallCap
Market System and in connection therewith the we required to maintain certain
continued listing requirements including $2 million of net tangible asset. At
December 31, 1999, our net tangible assets were $1,732,953. As a result, in
April 2000, we received notification from Nasdaq requesting submission by the
Company of a plan to achieve and sustain compliance with the Nasdaq SmallCap
continued listing requirements (the "Listing Requirements"). In May 2000, we
submitted a plan which demonstrated both current compliance with the Listing
Requirements and continued compliance in foreseeable future periods. A response
from Nasdaq to our plan is outstanding. Management believes that the Company
will continue to meet the Listing Requirements for the continued listing of our
Common Stock on the Nasdaq SmallCap Market. However, no assurance can be given
that we will continue to meet such requirements, or that Nasdaq will concur with
our plan.. In the event that we do not meet the continued listing requirements,
our Common Stock will be subject to delisting from the Nasdaq SmallCap Market,
whereupon it would trade on the Nasdaq Electronic Bulletin Board. Such an event
would make it more difficult for shareholders to effect transactions in the our
Common Stock.
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Consolidated revenues for the three months ended March 31, 2000 were
$3,290,826, on cost of sales of $2,199,810, resulting in a gross profit of
$1,091,016 for the quarter. Consolidated revenues for the three months ended
March 31, 1999 were $1,236,002 on cost of sales of $947,403, resulting in a
gross profit of $288,599 for the three months ended March 31, 1999. The increase
of $2,054,824 or 166.2% in consolidated revenues for the quarter ended March
31,2000, compared to the quarter ended March 31, 1999, was primarily due to
revenues
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associated with the Osley & Whitney acquisition and the formation of Express
Pattern, as well as increased Laser Group revenues (approximately $525,000).
Research and development expenses were $239,411 for the three months ended
March 31, 2000 as compared to $408,843 for the three months ended March 31,
1999. The decrease of $169,432 or 41.4%, was primarily attributed to cost
containment for research and development efforts in our plastics group, as
separate Express Tool facilities were integrated into our O&W Westfield
operations.
General and administrative expenses were $626,906 for the three months
ended March 31, 2000 as compared to $493,988 for the three months ended March
31, 1999. The increase of $132,918 or 26.9% was primarily due to expenses for
additional resources at our Laser Group for engineers, training and for
professional fees in the legal and investor relations areas.
Selling expenses were $180,875 for the three months ended March 31, 2000
as compared to $143,538 for the three months ended March 31, 1999. The increase
of $37,337 or 26% was primarily attributed to increased sales employees at our
plastics group.
Depreciation and amortization expense totaled $272,097 for the three
months ended March 31, 2000 as compared to $147,075 for the three months ended
March 31, 1999. The increase of $125,022 or 85% was primarily due to fixed asset
additions in both our laser and plastics groups along with depreciation related
to the O&W acquisition.
Interest expense was $160,182 for the three months ended March 31, 2000 as
compared to $111,417 for the three months ended March 31, 1999. The increase of
$48,765 or 43.8% was due to interest paid on the note payable to our president,
and debt obligations related to the O&W acquisition.
The loss from continuing operations was $456,529 for the three months
ended March 31, 2000 as compared to a loss of $998,910 for the three months
ended March 31, 1999. We had a consolidated net loss of $456,529 for the three
months ended March 31, 2000 as compared to net income of $3,171,405 for the
three months ended March 31, 1999. The net income for the three months ended
March 31, 1999 was primarily attributed to the gain realized on the sale of the
Company's Spectra Science Series A Convertible Preferred Stock of approximately
$4,170,315, net of $825,000 in taxes.
Part II - Other information
Not Applicable
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d), the Securities
Exchange Act of 1934, the company has duly caused this Report to be signed on
May 10, 2000 on its behalf by the undersigned, thereunto duly authorized.
INFINITE GROUP, INC.
By:/s/ Clifford G. Brockmyre
------------------------------------
Clifford G. Brockmyre, President
and Chief Executive Officer
/s/ Bruce J. Garreau
--------------------------------------
Bruce J. Garreau,
Chief Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
March 31,2000 10-QSB in it's entirety by referance to such financial
statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 172,974
<SECURITIES> 0
<RECEIVABLES> 1,695,615
<ALLOWANCES> 44,699
<INVENTORY> 492,338
<CURRENT-ASSETS> 2,816,519
<PP&E> 9,843,379
<DEPRECIATION> 2,944,883
<TOTAL-ASSETS> 11,148,010
<CURRENT-LIABILITIES> 3,903,710
<BONDS> 5,476,174
0
0
<COMMON> 3,016
<OTHER-SE> 1,765,110
<TOTAL-LIABILITY-AND-EQUITY> 11,148,010
<SALES> 3,290,826
<TOTAL-REVENUES> 3,290,826
<CGS> 2,199,810
<TOTAL-COSTS> 3,279,688
<OTHER-EXPENSES> 239,411
<LOSS-PROVISION> 9,652
<INTEREST-EXPENSE> 160,182
<INCOME-PRETAX> (456,529)
<INCOME-TAX> 0
<INCOME-CONTINUING> (456,529)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (456,529)
<EPS-BASIC> (.19)
<EPS-DILUTED> (.19)
</TABLE>
