UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2020

Commission File Number 0-21816

DOCUMENTS INCORPORATED BY REFERENCE

FORWARD LOOKING STATEMENT INFORMATION

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” regarding the plans and objectives of management for future operations and market trends and expectations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the expansion of our business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the factors set forth herein under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The terms “Infinite Group”, “IGI”, “we”, “our”, “us”, or any derivative thereof, as used herein refer to Infinite Group, Inc., a Delaware corporation.

PART I

Overview

Headquartered in Pittsford, New York, Infinite Group Inc. (IGI) is a developer of cybersecurity software and a provider ofrelated cybersecurity related servicesconsulting, advisory, and managed information security relatedservices. We principally sell our software and services to commercial businesses and government organizations. As part of these offerings we:

As part of these software and service offerings we:

Sales and Marketing Strategy

Approximately 89% of our business comes from our channel sales and approximately 11% from direct sales to end customers. Managed support services accounts for approximately 60% of total sales, cybersecurity software and services accounts for approximate 38% of total sales and other consulting services accounts for approximately 2% of total sales.

Virtually all managed information security support services revenue is derived from one customer, a major independent agency of the U.S. Government for which we manage one of the nation’s largest physical and virtual Microsoft Windows environments as a subcontractor through our channel partner, Peraton. We are working to expand our managed information security support services business with our channel partner Peraton, and to potentially grow the current federal enterprise customer and to expand to other Peraton customers.

We sell our cybersecurity software and services, including Nodeware, through our channel partners, which include direct channel partners, Telarus, TD SYNNEX, and Staples, and through our direct cybersecurity services teams. Our cybersecurity services include Chief Information Security Team as a Service (CISOTaaS ™), PenLogic™ penetration testing services, security assessments, incident response and others, and are provided through our channel partners and direct to end customers as a cybersecurity solution to the technical services they provide. Our channel partners utilize our expertise in cybersecurity to bring additional services to their end customers that are beyond their normal scope of offerings, and building our network of channel partners allows us the ability to efficiently gain access to a greater number of customers. We continue to drive development of our cybersecurity business through channel and direct marketing, social media programs, and fostering our extensive cybersecurity industry relationships. We are not reliant on any one customer for our cybersecurity software and services sales given that we work with a number of channel partners and direct customers. In addition to our cybersecurity software and services, we provide from time to time other information technology consulting services to existing clients.

Recent Developments

In accordance with our strategic roll-up strategy, on January 31, 2022, we entered into an agreement to acquire the issued and outstanding equity securities of Pratum, Inc. (“Pratum”), an Iowa corporation and an information securities firm. Pratum provides cybersecurity consulting and advisory services, risk assessments, and managed extended detection and response (“XDR”)  services, which we believe is a strategic fit for us. The aggregate purchase price under the Pratum agreement is $8,500,000, subject to customary purchase price adjustments for, among other things, indebtedness of Pratum as of the closing. $8,000,000 will be paid to Pratum’s shareholder at closing and $500,000 will be deposited at closing with an escrow agent to be held in escrow for a period of six months. It is anticipated that the transaction will close in the first half of 2022. Pratum will keep its name and operate as a wholly-owned subsidiary of ours. For more information, please see our Current Report on Form 8-K filed on February 2, 2022.

During the year ended December 31, 2021, we had sales of approximately $7.2 million, an operating loss of approximately $1.4 million and a net loss of approximately $1.6 million, due primarily to increased investment in sales and marketing for Nodeware and related services, together with increased costs associated with our preparations to list on and with assessing potential acquisition targets. As a result of growing demand and accelerated growth in the cybersecurity market, we continue to grow our team of cybersecurity sales and technical consultants internally and leverage contractors when needed to fill short term gaps. We added 12 new employees, primarily in the areas of sales, marketing, and technical consulting for cybersecurity services in 2021. We had full year sales of approximately $7.2 million in 2020 and $7.1 million in 2019, generating operating income of approximately $1,000 and $329,000 and net income of approximately $676,000 and $48,000, respectively.

In June 2021, we created IGI CyberLabs, LLC, a wholly owned subsidiary, to support our Nodeware solution and continued software development. CyberLabs’s overarching mission is to drive sales of our Nodeware Cloud security solution, which we believe will drive monthly and annualized recurring revenue. CyberLabs will also drive product and platform enhancements in Nodeware and new cloud and SaaS cybersecurity related products that will be brought to market through our growing channel partner relationships.

On November 3, 2021, we entered into a financing arrangement (the “Bridge Loan”) with Mast Hill Fund, L.P. (the “Lender”), a Delaware limited partnership. In exchange for a promissory note, Lender agreed to lend the Company $448,000, which bears interest at a rate of eight percent (8%) per annum, less $44,800 original issue discount. Under the terms of the Loan, amortization payments are due beginning March 3, 2022, and each month thereafter with the final payment due on November 3, 2022. On February 15, 2022, we entered into a second financing arrangement together with the Bridge Loan, the “Loans”) with Lender. In exchange for a promissory note, Lender agreed to lend the Company $370,000, which bears interest at a rate of eight percent (8%) per annum, less $37,000 original issue discount. Under the terms of the Loans, amortization payments are due beginning four months from the issue date, and each month thereafter with the final payment due on one year anniversary of the Loans. Additionally, in the event of a default under the Loans or if the Company elects to pre-pay the Loans, the Lender has the right to convert any portion or all of the outstanding and unpaid principal and interest into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $0.10 per share. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for more information regarding the Loans.

On December 15, 2021, our board of directors (the “Board”) approved a reverse stock split of our outstanding shares of common stock by a ratio within the range of 3-to-1 and 75-to-1 of our outstanding shares of common stock and recommended that the stockholders of the Company authorize the Board, in its discretion, for one year, to determine the final ratio, effective date, and date of filing of the certificate of amendment to our Certificate of Incorporation, as amended, in connection with the reverse stock split. On January 26, 2022, the company’s stockholder voted to authorize the reverse stock split. As of the date of this report, the Board has not set a record date or a ratio for the reverse stock split. The reverse stock split will not impact the number of authorized shares of common stock which will remain at 60,000,000 shares. All option, share and per share information in this prospectus does not give effect to the reverse stock split.

Business Strategy

We have a threefold business strategy composed of:

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.

Cybersecurity is a constantly evolving field, so we selldevote 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 product,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, through bothpresent an opportunity for significant growth. We believe that Nodeware’s ability to be deployed in an underserved market segment, across a wide variety of networks and the ability to integrate it into existing and new cybersecurity software and services, will allow us to significantly grow this segment of our direct partnersbusiness. Similarly, we believe Nodeware’s SaaS recurring revenue business model and through other 3rd party partner distribution and agents so they can either sell itits flexibility as a standalone or integrated solution ormakes it an attractive part of otherour channel partners’ portfolio of products. Accordingly, in 2021 we made significant investments in Nodeware sales and marketing to grow our team of cybersecurity sales and technical consultants. As a result, we believe we are seeing the pipeline growth expected from focused efforts, which we anticipate will convert to revenue growth in 2022 and beyond.

We believe the market for cybersecurity services they providefor 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 their customers. This enables the channel partnerconsolidate, which is why we are seeking to develop a base of recurring revenue. We have also enabled Nodeware to be vertically integrated intostrategically acquire other cybersecurity platforms to create native offerings. We also provide our cybersecuritytechnology and services through our channel partners as a cybersecurity overlay to the technical services they provide, which also provides recurring revenue.

The following sections define specific components of our business strategy.

Nodeware is an automateda patented SaaS solution that automates network asset identification, and cybersecurity vulnerability management and monitoring solution thatmonitoring. Nodeware simply and affordably enhances security by proactively identifying, monitoring, and addressing potential cybersecurity vulnerabilities on both internal and external facing networks, creating awhich creates enhanced security to safeguard against malicious intenthackers and ransomware. Nodeware’s flexibility allows it to exploit known problems inspan from a customer’ssingle network to several subnetworks, as well as accommodating larger, more complex organizations with simplicity and affordability.more advanced network needs. Nodeware assesses vulnerabilities in a computer network using proprietary scanning technology to capture a comprehensive view of the security exposure of a network infrastructure. Users receive alerts and view network information through a proprietary, web enabled dashboard. Continuous and automated internal scanning and external on demand scanning are components of this offering.

Nodeware provides an economical solution for small and medium-sized enterprises as compared to costly solutions focused on enterprise sized customers, and is designed to accommodate the varying network needs of our end customers’ organizations and networks. 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. Nodeware creates an opportunity for our channel partners to sell and use a product that provides greater visibility into the network security of an end customer. Since 2018, we have continued to expand our portfolio of channel partners, which now includes Telarus, TD SYNNEX, Staples, and a growing list of MSPs, MSSPs,  agents and distributors and government contractors.

In June 2021, we created IGI CyberLabs, LLC, a wholly owned subsidiary, to support our Nodeware solution and continued software development. CyberLabs’s overarching mission is to drive sales of Nodeware, which we believe will drive monthly and annualized recurring revenue. CyberLabs will also drive product and platform enhancements across other current future subsidiaries as IGI’s strategic roll up of cybersecurity companies comes to fruition. This also enhances our ability to bring new cloud and SaaS cybersecurity related solutions to market through our growing channel partner relationships.

Cybersecurity Services

In addition to Nodeware, we provide cybersecurity consulting services that include incident response, security awareness training, cybersecurity risk management, IT governance and compliance, security assessment services, (CISOTaaS ™) and PenLogic™ penetration testing services offerings to channel partners and direct customers across different markets, including banking, manufacturing, supply chain, and technology, in North America. Our cybersecurity consulting projects leverage different technology platforms and processes, such as Nodeware, to create documentation and processes that a customer can use to continually improve overall IT governance and corporate security. We validate overall network and infrastructure security with the goal of maintaining the integrity of confidential client information, preserving the continuity of services, and minimizing potential data damage from cybersecurity threats and incidents. We continue to enhance our cybersecurity services based on feedback from customers and changes in the market.

Managed Support Services

We also provide managed support services related to information security, principally as a subcontractor for Peraton, a large information technology provider and U.S. government contractor, where we assume the responsibility for providing a defined set of cybersecurity services. These services typically include 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.

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 SaaS based platform has an agilepatent will remain in effect for four years from the date of issue and continuous development process thatmay be extended for up to twenty years from the filing date. Therefore, the expiration date of the subject patent, assuming all milestones to extend are met, is flexible to react to customer and market needs. July 19, 2037.

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.Nodeware. 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 a Windows, AgentMac, 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 continued evolution.

The efforts we have taken to protect our intellectual property may not be sufficient or effective.

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 (USPTO) and can mature into a patent once the USPTOthat office determines that the claimed invention meets the standards for patentability.

Our current patent applicationand trademark portfolio consists of a patent for the Nodeware is readysolution and process for examination byscanning for vulnerabilities and a pending patent covering the U.S. patent application examiner. In 2018, 2019methodologies associated with identifying and 2020,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 Nodeware patent was reviewed by an auditorcompany and weproducts. We intend to continue to defendwork to enhance our intellectual property position on the Nodeware solution and address referencesin other appropriate cybersecurity technology we generate.

Research and Development

Our research and development efforts are focused on ensuring our software and services continually adapt to the patentever-evolving cybersecurity threats, developing new and improved functionality to continue its cycle through the process. We are awaiting on an auditor assignment for the second provisional patent filed.

We havebelieve the timely development of new features and the enhancement of our existing solution(s) that address continuously evolving cybersecurity risks is essential to maintaining our competitive position. Our research and development team works closely with our channel partners, customers, and internal teams to collect user feedback to enhance our development process to continually incorporate suggestions and feedback. We also believe our research and development teams’ focus on developing new products will help us expand our business and improve our market position. We invest substantial resources in research and development to ensure that the functionalities of Nodeware can be robustly and efficiently integrated with other industry solutions because we believe this is key to our ability to expand the presence of Nodeware and our other software and services in the cybersecurity market. We utilize an agile development process to deliver numerous releases, fixes and feature updates on a technologyregular basis and capitalize qualifying costs of developing larger scale projects. Our research and development team is primarily based in Pittsford, New York, and we maintain additional research and development capabilities in certain other locations who supplement our core team.

In June 2021, we created IGI CyberLabs, LLC, a wholly owned subsidiary, to support our Nodeware solution and continued software development. CyberLabs's overarching mission is to drive sales of our Nodeware solution, which we believe will drive monthly and annualized recurring revenue. CyberLabs will also drive product and platform enhancements in Nodeware and new cloud and SaaS cybersecurity related products that will be brought to market through our growing direct customer and channel partner relationships. We believe a continued focus on intellectual property development strategy alignedcreates differentiation in the market for cybersecurity.

Costs incurred prior to reaching technological feasibility are expensed as incurred, and subsequently they are capitalized until product launch.

Certifications

We possess certifications 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.

Certain of our employees in our cyber securitycybersecurity group have this certification.

We face competition from several different vendorsmany companies in thisthe evolving cybersecurity market. We compete with other MSPs and IT professional services firms Managed Security Services Providers (MSSPs),who have cybersecurity offerings, MSSPs, and cybersecurity product and software developers operating in the Federal Government, stateNorth American market. We have competitors who are both publicly listed and local governmentprivate companies, and commercial marketplace.that are regional and national in coverage. Many of our larger competitors have substantially greater capital resources, research and development staff, sales, and marketing resources, facilities, and experience than we do. We obtain a portion of our business based on proposals submitted in response to requests from potential and current clients, who will typically also receive proposals from other firms. We faceour competitors. Specifically, Nodeware faces direct competition from companies such as Rapid 7, Qualys, and Tenable in the commercial markets from other IT service providers, MSSPs, and software development companies, large and small. Many of our larger competitors, in general, have substantially greater capital resources, research and development staffs, sales, and marketing resources, facilities, and experience.

Our ability to develop and market our services, and to establish and maintain a competitive position in our businesses will depend, in large part, upon our ability to attract and retain qualified technical, marketing and managerial personnel, of which there can be no assurance.

We were incorporated under the laws of the state of Delaware on October 14, 1986. Our principal corporate headquarters are located at 175 Sully’s Trail, Suite 202, Pittsford, NY 14534.New York 14534 and our phone number is (585) 385-0610. Our business is in the field of delivering cybersecurity services, licensing and selling our cybersecurity solutions, including Nodeware, and distributing third party software licenses.

In addition to the other information provided in our reports, you should consider the following factors carefully in evaluating our business and us. Additional risks and uncertainties not presently known to us, which we currently deem immaterial or that are similar to those faced by other companies in our industry or business in general, such as competitive conditions, may also impair our business operations. If any of the following risks occur, our business, financial condition, or results of operations could be materially adversely affected.

We sell cybersecurity software and services, including third-party software as well as our internally developed software, Nodeware. As a result, we have been and will be a target of cyber-attacks designed to impede the performance of our products, penetrate our network security or the security of our cloud platform or our internal systems, or that of our customers, misappropriate proprietary information and/or cause interruptions to our services. Because of the significant military action against Ukraine launched by Russia, the risk of such cyber-attacks is increased.

For example, because Nodeware is a network vulnerability management tool,solution, a successful cyber-attack on us may be perceived as a victory for the cyber attacker, thereby increasing the likelihood that we may be a target of more cyber-attacks, even absent financial motives. Further, if our systems are breached as a result of third-party action, employee error or misconduct, attackers could learn critical information about how our primary product operates to help protect our customers’ IT infrastructures from cyber risk, thereby making our customers more vulnerable to cyber-attacks. In addition, if actual or perceived breaches of our network security occur, they could adversely affect the market perception of our Nodeware product,solution, negatively affecting our reputation, and may expose us to the loss of our proprietary information or information belonging to our customers, investigations or litigation and possible liability, including injunctive relief and monetary damages. Such security breaches could also divert the efforts of our technical and management personnel. In addition, such security breaches could impair our ability to operate our business and provide products to our customers. If this happens, our reputation could be harmed, our revenue could decline, and our business could suffer.

Our information technology systems may be subject to intentional disruption or other security incidents that could result in liability and adversely impact our reputation and future sales.

We monitorand our service providers face threats from a variety of sources, including attacks on our networks and systems from numerous sources, including traditional “hackers,” sophisticated nation-state and nation-state supported actors, other sources of malicious code (such as viruses and worms), and phishing attempts. We and our service providers could be a target of cyber-attacks or other malfeasance designed to impede the performance of our software and services, penetrate our network continuously withsecurity or the security of our Nodeware productcloud platform or our internal systems, misappropriate proprietary information and/or cause interruptions to our services. Our software, platforms, and system, and those of our service providers, may also suffer security incidents as a result of non-technical issues, including intentional or inadvertent acts or omissions by our employees or service providers. With the increase in personnel working remotely during the current COVID-19 pandemic, we and our service providers are at increased risk for security breaches. . Because of the significant military action against Ukraine launched by Russia, the risk of such cyber-attacks, malfeasance, security incidents, and security breaches is increased. The conditions caused by the Russian invasion of Ukraine could also result in disruption or other security incidents for our service providers.

We are taking steps to monitor and enhance the security of our software and services, cloud platform, and other relevant systems, IT infrastructure, networks, and data; however, the unprecedented scale of remote work may require additional personnel and resources, which nevertheless cannot be guaranteed to fully safeguard our software and services, our cloud platform, or any systems, IT infrastructure networks, or data upon which we rely. Further, because our operations involve providing cybersecurity software and services to our customers, we may be targeted for cyber-attacks and other security incidents. A breach in our data security or an attack against our service availability, or that of our third-party service providers, could impact our networks or networks secured by our software and services, creating system disruptions or slowdowns and exploiting security vulnerabilities of our software and services, and the information stored on our networks or those of our third-party service providers could be accessed, publicly disclosed, altered, lost, or stolen, which could subject us to liability and cause us financial harm. If an actual or perceived disruption in the availability of our software and services or the breach of our security measures or those of our service providers occurs, it could adversely affect the market perception of our software and services, result in a loss of competitive advantage, have a negative impact on our reputation, or result in the loss of customers, channel partners and sales, and it may expose us to the loss or alteration of information, litigation, regulatory actions and investigations and possible liability. Any such actual or perceived security breach or disruption could also divert the efforts of our technical and management personnel. We also may incur significant costs and operational consequences of investigating, remediating, eliminating and putting in place additional tools and devices designed to prevent actual or perceived security incidents, as well as the costs to comply with any notification obligations resulting from any security incidents. In addition, any such actual or perceived security breach could impair our ability to operate our business and provide software and services to our customers. If this happens, our reputation could be harmed, our revenues could decline and our business could suffer.

Although we maintain insurance coverage that may be applicable to certain liabilities in the event of a security breach or other security incident, we cannot be certain that our insurance coverage will be adequate for liabilities that actually are incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material and adverse effect on our business, including our financial condition, operating results and reputation.

If our software and services fail to detect vulnerabilities or incorrectly detect vulnerabilities, our brand and reputation could be harmed, which could have an adverse effect on our business and results of operations.

If our software and services fail to detect vulnerabilities in our customers’ IT infrastructures, or if our software and services fail to identify and respond to new and increasingly complex methods of attacks, our business and reputation may suffer. There is no guarantee that our software and services will detect all vulnerabilities. Additionally, our cybersecurity software. 

Further, our software and services sometimes are tested against other security products, and may fail to perform as effectively, or to be perceived as performing as effectively, as competitive products for any number of reasons, including misconfiguration. To the extent current or potential customers, channel partners, or others believe there has been an occurrence of an actual or perceived failure of our software and services to detect a vulnerability or otherwise to function as effectively as competitive products in any particular test or indicates our software and services do not provide significant value, our business, competitive position, and reputation could be harmed.

In addition, our software and services do not currently extend to cover mobile devices or personal devices that employees may bring into an organization. As such, our software and services would not identify or address vulnerabilities in mobile devices, such as mobile phones or tablets, or personal devices, and our customers’ IT infrastructures may be compromised by attacks that infiltrate their networks through such devices.

An actual or perceived security breach or theft of the sensitive data of one of our customers, regardless of whether the breach is attributable to the failure of our software and services, could adversely affect the market’s perception of our cybersecurity software and services.

If our solutions fail to help our customers achieve and maintain compliance with regulations and industry standards, our revenues and operating results could be harmed.

We generate a portion of our revenues from software and services that help organizations achieve and maintain compliance with regulations and industry standards. For example, some of our customers subscribe to our software and services to help them comply with the security standards developed and maintained by the Payment Card Industry Security Standards Council, or the PCI Council, which apply to companies that store cardholder data. Industry organizations like the PCI Council may significantly change their security standards with little or no notice, including changes that could make their standards more or less onerous for businesses. Governments may also adopt new laws or regulations, or make changes to existing laws or regulations, that could impact the demand for or value of our solutions.

If we are unable to adapt our software and services to changing regulatory standards in a timely manner, or if our solutions fail to assist with or expedite our customers’ compliance initiatives, our customers may lose confidence in our solutions and could switch to products offered by our competitors. In addition, if regulations and standards related to data security, vulnerability management and other IT, security and compliance requirements are relaxed or the penalties for non-compliance are changed in a manner that makes them less onerous, our customers may view government and industry regulatory compliance as less critical to their businesses, and our customers may be less willing to purchase our solutions. In any of these cases, our revenues and operating results could be harmed.

Our cybersecurity software and services are delivered from a third-party vendor, and any disruption of service at their facilities would interrupt or delay our ability to deliver our software and services to our customers which could reduce our revenues and harm our operating results.

Our existing data center facilities providers have no obligations to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew our agreements with the facilities providers on commercially reasonable terms or if in the future we add additional data center facility providers, we may experience costs or downtime in connection with the loss of an existing facility or the transfer to, or addition of, new data center facilities.

Any disruptions or other performance problems with our software and services could harm our reputation and business and may damage our customers’ businesses. Interruptions in our service delivery might reduce our revenues, cause us to issue credits to customers, subject us to potential liability and cause customers to terminate their subscriptions or not renew their subscriptions.

If the market for cloud solutions for IT, security and compliance does not evolve as we anticipate, our revenues may not grow and our operating results would be harmed.

Our success depends to a significant extent on the willingness of organizations to increase their use of cloud solutions for their IT, security, and compliance. To date, some organizations have been reluctant to use cloud solutions because they have concerns regarding the risks associated with the reliability or security of the technology delivery model associated with these solutions. If other cloud service providers experience security incidents, loss of customer data, disruptions in service delivery or other problems, the market for cloud solutions as a whole, including our solutions, may be negatively impacted. Moreover, many organizations have invested substantial personnel and financial resources to integrate on-premise software into their businesses, and as a result may be reluctant or unwilling to migrate to a cloud solution, such as Nodeware. Organizations that use on-premise security products, such as network firewalls, security information and event management products or data loss prevention solutions, may also believe that these products sufficiently protect their IT infrastructure and deliver adequate security. Therefore, they may continue spending their IT security budgets on these products and may not adopt our software and services in addition to or as a replacement for such products.

If customers do not recognize the benefits of our cloud software and our services over traditional on-premise enterprise software products, and as a result we are unable to increase sales of subscriptions to our software and services, then our revenues may not grow or may decline, and our operating results would be harmed.

We use third-party software and data that may be difficult to replace or cause errors or failures of our software and services that could lead to lost customers or harm to our reputation and our operating results.

We license third-party software as well as security and compliance data from various third parties to deliver our software and services. In the future, this software or data may not be available to us on commercially reasonable terms, or at all. Any loss of the right to use any of this software or data could result in delays in the provisioning of our software and services until equivalent technology or data is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business. In addition, any errors or defects in or failures of this third-party software or data could result in errors or defects in our software and services or cause our software and services to fail, which could harm our business and be costly to correct. Many of these providers attempt to impose limitations on their liability for such errors, defects or failures, and if enforceable, we may have additional liability to our customers or third-party providers that could harm our reputation and increase our operating costs.

We will need to maintain our relationships with third-party software and data providers, and to obtain software and data from such providers that do not contain any errors or defects. Any failure to do so could adversely impact our ability to deliver effective solutions to our customers and could harm our operating results.

Our software contains third-party open source software components, and our failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our software and services.

Our software contains software licensed to us by third-parties under so-called “open source” licenses, including the GNU General Public License, the GNU Lesser General Public License, the BSD License, the Apache License and others. From time to time, there have been claims against companies that distribute or use open source software in their products and services, asserting that such open source software infringes the claimants’ intellectual property rights. We could be subject to suits by parties claiming that what we believe to be licensed open source software infringes their intellectual property rights. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. In addition, certain open source licenses require that source code for software programs that are subject to the license be made available to the public and that any modifications or derivative works to such open source software continue to be licensed under the same terms. If we combine our proprietary software with open source software in certain ways, we could, in some circumstances, be required to release the source code of our proprietary software to the public. Disclosing the source code of our proprietary software could make it easier for cyber attackers and other third parties to discover vulnerabilities in or to defeat the protections of our solutions, which could result in our solutions failing to provide our customers with the security they expect from our services. This could harm our business and reputation. Disclosing our proprietary source code also could allow our competitors to create similar products with lower development effort and time and ultimately could result in a loss of sales for us. Any of these events could have a material adverse effect on our business, operating results and financial condition.

Our software and services could be used to collect and store personal information of our customers’ employees or customers, and therefore privacy and other data handling concerns could result in additional cost and liability to us or inhibit sales of our software and services.

We may collect, store, process and use our customers’ employees or customers personally identifiable information and other data in our transactions with them, and we may rely on third parties that are not awaredirectly under our control to do so as well. While we take reasonable measures intended to protect the security, integrity and confidentiality of the personal information and other sensitive information we collect, store or identified an incident leadingtransmit, we cannot guarantee that inadvertent or unauthorized use or disclosure will not occur, or that third parties will not gain unauthorized access to this information. If we or our third-party service providers were to experience a breach, disruption or failure of systems compromising our customers’ data, or if one of our third-party service providers or partners were to access our customers’ personal data without our authorization, our brand and reputation could be adversely affected, use of our software and services could decrease and we could be exposed to a breachrisk of loss, litigation and regulatory proceedings.

Despite our compliance efforts, we may fail to achieve compliance with applicable privacy or data protection laws and regulations as they evolve, or adhere to contractual obligations regarding the collection, processing, storage and transfer of data (including data from our customers, prospective customers, partners and employees), either due to internal or external facing systems.  We have implemented several proactive policies and procedures to mitigate any internal incidents from outside forces. This includes deploying additional monitoring software, phishing training, creating an internal incident response team, and additional awareness through internal communications around typical attempts that outside forces use. While we have seen phishing attempts sent to certain email addresses, we have mitigated those through the aforementioned steps. Our internal security team has blocked the associated addresses and/or domains of the senders and has enhanced email security features to identify external emails. Overall, our internal security posture continues to evolve as the market evolves.  We have a cyber insurance policy which will cover certain expenses related to an attack,factors such as resource limitations or a lack of vendor cooperation. Any actual or perceived failure to comply with these laws or obligations could result in enforcement action against us, including fines, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to any existing customers and prospective customers), any of which could harm our business, results of operations, and financial condition. Further, privacy concerns may inhibit market adoption of our software and services, particularly in certain business interruption costs associated with an incident.

We derived approximately 70%59% of our sales in 2021 and 61% of our sales in 2020 from contracts as either a prime contractor or a subcontractor from government contracts. We expect that we will continue to derive a substantial portion of our sales for the foreseeable future from work performed under government contracts, as we have in the past, and from marketing efforts focused on commercial enterprises. If we or our prime contractors were suspended or prohibited from contracting with federal, state or local governments, or if our reputation or relationship with the federal, state or local governments and commercial enterprises were impaired, or if any of the foregoing otherwise ceased doing business with us or our prime contractors or significantly decreased the amount of business it does with us or our prime contractors, our business, prospects, financial condition and operating results would be materially adversely affected.

Because we derive a significant portion of our sales from contracts with federal, state and local governments, we believe that the success and development of our business will continue to depend on our successful participation in their contract programs. Changes in federal, state and local government budgetary priorities could directly affect our financial performance. A significant decline in government expenditures, a shift of expenditures away from programs which call for the types of services that we provide or a change in government contracting policies, could cause U.S. Governmental agencies as well as state and local governments to reduce their expenditures under contracts, to exercise their right to terminate contracts at any time without penalty, not to exercise options to renew contracts or to delay or not originate new contracts. Any of those actions could seriously harm our business, prospects, financial condition or operating results. Moreover, although our contracts with governmental entities may contemplate that our services will be performed over a period of several years, government entities usually must approve funds for a given program each government fiscal year and may significantly reduce or eliminate funding for a program. Significant reductions in these appropriations could have a material adverse effect on our business. Additional factors that could have a serious adverse effect on our government contracting business include, but may not be limited to:

We may grow our business by acquiring or investing in companies and businesses and assets that we feel have synergy and will complement our business plan. As such, we periodically evaluate potential business combinations and investments in other companies and assets. We may be unablerely on third-party software-as-a-service vendors to profitably manage businesses and assets that we may acquire or invest in. We may fail to integrate these businesses and assets successfully without incurring substantial expenses, delays or other problems that could negatively impact our results of operations.

Risks Related to our Common Stock

The trading price of our common stock has been volatile and will continue to be subject to volatility in the trading markets and other factors.

The closing market price for our common stock varied between a low of $.03$.07 and a high of $.15$.30 in 2020.2021. This volatility may affect the price at which a stockholder could sell its shares of common stock, and the sale of substantial amounts of our common stock could adversely affect the price of our common stock. Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors, including variations in our quarterly operating results and announcement by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, or capital commitments.

There is limited trading in our common stock, and we cannot assure you that an active public market for our common stock will ever develop. The lack of an active public trading market means that a stockholder may not be able to sell shares of common stock when wanted, thereby increasing market risk. Until our common stock is listed on an exchange, we expect that the shares will continue to be quoted on the OTC Bulletin Board. However, an investor may find it difficult to obtain accurate quotations regarding the common stock’s market value. In addition, if we failed to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the shares liquidity. Moreover, our ability to obtain future financing may be adversely affected by the consequences of our common stock trading on the OTC Bulletin Board.

The Securities and Exchange Commission (SEC)SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market or exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is currently below $5.00 per share and therefore may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to accept our share certificates into a customer account and may affect the ability of our stockholders to sell their shares.

Our principal offices are located at 175 Sully’s Trail, Suite 202, Pittsford, New York 14534, where we lease approximately 7,112 square feet owned or leased. Beginning on August 1, 2016, weof office space under a lease that expires in July 2022. We are negotiating with our headquarters facility under an operating lease agreement. Our rent expense is $80,000 annually duringlandlord to remain in the first yearsame location with a smaller footprint. We believe a smaller footprint will be suitable and adequate for our current and future needs given the ability of our employees to work remotely. Approximately 85% of the workforce is remote and while we will be renewing our lease, term and increases by 1.5% annually thereafter. We havewe feel it is prudent to reduce the right to terminate the lease upon six months prior notice after three yearssize of occupancy.

PART II

Our common stock is quoted on the OTC Bulletin Board under the symbol IMCI. The following table sets forth, for the periods indicated, the high and low closing bid quotations per share for our common stock for each quarter within the last two fiscal years, as reported by the OTC Bulletin Board. Quotations represent interdealer prices without an adjustment for retail markups, markdowns or commissions and may not represent actual transactions:

At March 24, 2021,February 26, 2022, we had 198205 record stockholders and estimate that we had approximately 1,200 beneficial stockholders.

We have never declared or paid a cash dividend on our common stock. It has beenstock and we currently anticipate that we will retain future earnings for the policydevelopment, operations and expansion of our board of directors (the Board) to retain all available funds to financebusiness and do not anticipate declaring or paying any cash dividends for the development and growth of our business.foreseeable future. The payment of cash dividends in the future will be dependent upon our earnings and financial requirements and other factors deemed relevant by our Board.

Headquartered in Pittsford, New York, Infinite Group Inc. (IGI) is a developer of cybersecurity software and a provider ofrelated cybersecurity consulting, advisory and managed information security services. We principally sell our software and services to commercial businessesthrough indirect channels such as MSPs, MSSPs, agents and distributors and government organizations. As part of these offerings we:

Business Strategy

We have a threefold business strategy composed of:

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 cybersecurity business is comprisedsoftware and services are designed to simplify the security needs of three components: managed security services,our customers and channel partners, with a focus on the small to mid-sized enterprises, and be believe our ability to integrate our product development and deployment, and integration of third-party security solutions intoservice offerings differentiates them from our security offerings to our channel and customers. We provide cybersecurity services and technical consulting resources tocompetitors. In addition, we support both our channel partners by providing recurring -revenue business models for both services and end customers. For example,our cybersecurity SaaS solutions.

Cybersecurity is a constantly evolving field, so we selldevote 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 product,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, through bothpresent 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 direct partnersbusiness. Similarly, we believe Nodeware’s SaaS recurring revenue business model and through other 3rd party partner distribution and agents so they can either sell itits flexibility as a standalone or integrated solution ormakes it an attractive part of otherour channel partners’ portfolio of products. Accordingly, in 2021 we made significant investments in IGI and CyberLabs sales and marketing to grow our team of cybersecurity sales and technical services they provideconsultants. As a result, we believe we are seeing the pipeline growth expected from focused efforts, which we anticipate will convert to their customers. This enablesrevenue growth in 2022.

We believe the channel partner to develop a base of recurring revenue. We also provide ourmarket for cybersecurity services throughfor 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.

Recent Developments

On December 15, 2021, our channel partnersBoard approved a reverse stock split of our outstanding shares of common stock by a ratio within the range of 3-to-1 and 75-to-1 of our outstanding shares of common stock and recommended that the stockholders of the Company authorize the Board, in its discretion, for one year, to determine the final ratio, effective date, and date of filing of the certificate of amendment to our Certificate of Incorporation, as amended, in connection with the reverse stock split. On January 26, 2022, the company’s stockholder voted to authorize the reverse stock split. As of the date of this report, the Board has not set a record date or a ratio for the reverse stock split. The reverse stock split will not impact the number of authorized shares of common stock which will remain at 60,000,000 shares. All option, share and per share information in this prospectus does not give effect to the reverse stock split.

In accordance with our strategic roll-up strategy, on January 31, 2022, we entered into an agreement to acquire the issued and outstanding equity securities of Pratum, an Iowa corporation and an information securities firm. Pratum provides cybersecurity consulting and advisory services, risk assessments, and managed XDR services. The aggregate purchase price under the Pratum agreements is $8,500,000, subject to customary purchase price adjustments for, among other things, indebtedness of Pratum as of the closing. $8,000,000 will be paid to Pratum’s shareholder at closing and $500,000 will be deposited at closing with an escrow agent to be held in escrow for a period of six months. It is anticipated that the transaction will close in the first half of 2022. Pratum will keep its name and operate as a cybersecurity overlay to the technical services they provide.

The following discussion analyzes our results of operations for the years ended December 31, 2021 and 2020. The following information should be considered together with our financial statements for such periods and the accompanying notes thereto.

The following table compares our statements of operations data for the years ended December 31, 20202021 and 2019.

Cost of sales principally represents the compensation expense for our employees (primarily the cost of employee services related to our IT Services Group.services group). In smaller amounts, we also incurred cost of sales for third party software licenses for our commercial SME partners.

Gross profit decreased by 10.1% to approximately $2,734,936 for 2021 The primary driver of the reduction in gross profit marginwas the increase in cost of sales in 2021 from 2020 due to the cost of the three new salaried employees to support our cybersecurity software and services group versus the other areas of business.

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 increased by $462,963 in 2020 consisting of offsetting fluctuations in various expense items and2021 due primarily to increases in salaries and benefits of approximately $222,000$165,000, consulting expenses of approximately $137,000, and corporatelegal fees of approximately $161,000. Corporate marketing expenses of $90,000.

The increase of $638,655 in selling expenses to $1,983,127 in 20202021 is principally due to the increase of employee salaries, commissions and benefits totaling approximately $186,000$403,000 due primarily to the growth to the cyber security and NodewareCyberLabs leadership and sales team.teams. The remaining increase is attributable to several smaller items including amortization of development labor, marketing and consulting fees.

In 2021, we settled the long-term debt agreement with the Pension Benefit Guaranty Corporation (“PBGC”)  for $200,000 on the outstanding principal of $246,000 and accrued interest of approximately $74,500. We recorded a gain of approximately $120,500 at that time of forgiveness. In 2020, we received a Paycheck Protection Plan (“PPP”) loan which was subsequently forgiven.forgiven in the 4th quarter of 2020. We recorded $963,516 of other income at that time of forgiveness.

Interest expense decreased by approximately $10,553 and includes interest on indebtedness, amortization of loan fees, cost of stock options as part of debt agreements and fees for financing accounts receivable invoices. The increasedecrease in interest expense is principally attributable to stock option costs from 2020 which did not occur in 2021. The decrease in interest expense is primarily attributable to the non-cash options expense issued for loan financing consideration of approximately $69,300 during 2020 offset by lower rates and less usethe associated interest of financing accounts receivable invoices due toapproximately $54,000 from the availability of PPP.

The increasedecrease in net income (loss) is attributable primarily to the selling, general and administrative items discussed above for 20202021 as compared to 2019.

At December 31, 2020,2021, we had cash of $32,313$99,432 available for working capital needs and planned capital asset expenditures. expenditures and a working capital deficit of approximately $3,062,000 with a current ratio of 0.25.

During 2020, we financed2021, our business activities through cash flows provided by financing activities and sales with recourse of our accounts receivable. Our primary source of liquidity is cash provided by collections of accounts receivable PPP loan 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 December 31, 2020,2021, based on eligible accounts receivable, we had approximately $362,000$66,000 available to borrow under this line. arrangement. We expect sales during 2022 to generate additional accounts receivable eligible for factoring, that will support our operations. We pay fees based on the length of time that the invoice remains unpaid.

At December 31, 2020,2021, we had a working capital deficitcurrent notes payable of approximately $2,051,627 and a current ratio$229,000 to related parties. $100,000 of 0.35. Our objectivethis debt is to improve our working capital position through profitable operations, and we may continue to borrow to provide cash for working capital.

At December 31, 2020,2021, we have current notes payable of approximately $162,500$384,000 to third parties, which includes convertible notes payable of approximately $150,000. Also included is $12,500 in principal amount of a note payable due on June 30, 2016 but not paid by then. This note was issued in payment of software we purchased in February 2016 and secured by a security interest in the software. To date, the holder has not taken any action to collect the amount past due on this note or to enforce the security interest in the software.

Also included in the current notes payable is the Bridge Loan with Mast Hill Fund, L.P, which bears interest at a rate of 8%.  We plan to use the proceeds from the Bridge Loan to substantially enhance our marketing of CyberLab’s Nodeware solution, in order to significantly increase its growth. A total of approximately $272,000 was recorded as deferred note costs associated with this transaction. At December 31, 2020,2021, the unamortized balance of the deferred note costs was approximately, $227,000. See Note 6 of the 2021 Audited Financial Statements for more information.

At December 31, 2021, we also have an accrued liability for the voluntary match portion of a former simple IRA plan, including interest, of approximately $265,000.$275,000. We do not anticipate distributing this liability in the next year or two. Interest will continue to accrue.

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, depending on the contract terms. Our net incomeloss of $675,996$1,568,813 for 20202021 was increased by non-cash expenses for depreciation, amortization, bad debt expense, amortization of debt discount and stock-based compensation of $230,418$364,857 and decreased for non-cash adjustments for forgiveness of debt of $963,516.$120,505. In addition, an increase in accounts payable and accrued expenses of $203,082$626,328 was offset by increases in accounts receivable and other assets of $559,735$153,316 resulted in net cash used in operating activities of $413,755.

We are increasing our marketing Webroot andof Nodeware to our IT channel partners who resell to their customers. We are making investments in our cyber security team for penetration testing, vCISOCISOTaaS and other services. Due to the lengthy lead times typically needed to generate these new sales, we do not expect to realize a return from our sales and marketing personnel for one or more quarters. As a result, we may continue to experience small operating income or operating losses from these investments in personnel until sufficient sales are generated. We expect to fund the cost for the new sales personnel from our operating cash flows, the equity raise and incremental borrowings, as needed.

During 2020,2021, we received $957,372$378,040 from a bridge loan from the U. S. Small Business Administration (“SBA”) as part of the Paycheck Protection Plan enacted by Congress under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). We received SBA forgiveness of this amount plus accrued interest of $6,143 later in the year.Mast Hill Fund L.P. We borrowed $50,000$249,000 from a related party under the terms of a note payable. The note allows for up to $500,000 credit and is due in August 2026. During 2019 and 2020, we borrowed $200,000$250,000 from the $500,000 credit note. We also borrowed $329,000 from other related parties during 2021, of which $100,000 was extinguished with common stock. During 2020,2021, we made principal paymentspaid $200,000 to the PBGC to settle all outstanding indebtedness and terminate all commitments and obligations under its original promissory note dated October 17, 2011, and the First Amended Agreement dated March 15, 2015. The Company recorded a gain of $96,635 to related party note holders and $167,527 to a third party.

We plan to evaluate alternatives which may include renegotiating the terms of the notes, seeking conversion of the notes to shares of common stock and seeking funds to repay the notes. We continue to evaluate repayment of our notes payable based on our cash flow.

During May 2019, we originated a line of credit note payable for a $500,000 with a related party and borrowed $250,000$499,000 and have $250,000$1,000 available to borrow for working capital. This agreement matures in August 2026. We may borrow from the outstanding line of credit to pay a portion the PBGC settlement amount.

During 2017, we originated two lines of credit with related parties totaling $175,000. At December 31, 2020,2021, we had $15,000 available under these financing agreements which mature in July 2022 and January 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 as well as the extension of approximately $574,000 of short term debt to long term will be sufficient to fund our ongoing operations and to support the internal growth we expect to achieve 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; issuance of equity; use of our existing accounts receivable credit facility; or a refinancing of our accounts receivable credit facility.

See Note 3 to the Financial Statements for a discussion of the Company’s accounting policies and estimates including Capitalization of Software for Resale and management’s assessment of going concern.

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)) under the Exchange Act) as of the end of the period covered by this report (the Evaluation Date). Based upon that evaluation, our 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.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Infinite Group have been detected.

(b)Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019.2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Our management has concluded that, as of December 31, 2020,2021, our internal control over financial reporting was effective based on these criteria.

This Annual Report does not include an attestation report of our Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 20202021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

None.

PART III

The principal occupation of each of our directors and executive officers for at least the past five years is as follows:

Our Board has anintends to have three standing committees upon the effectiveness of the registration statement we filed with the SEC on January 14, 2022: audit committeecommittee; compensation committee; and a compensationnominating and corporate governance committee. The audit committee reviews the scope and resultsEach of the audit and other services provided by ourthese committees will consist solely of independent registered public accounting firmdirectors including Mr. Reeve and our internal controls. The compensation committee is responsibletwo director nominees who will join the Board and these committees upon the effectiveness of this registration statement. We will adopt written charters for the approvaleach of compensation arrangements forthese committees that will be available on our officers and the review of our compensation plans and policies. Each committee is comprised of Mr. Villa and Mr. Reeve.

Upon the effectiveness of the registration statement filed with the SEC on January 14, 2022, one of our director nominees who will serve on the audit committee is comprisedwill be “independent” under Rule 10A-3 of Mr. Villa,the Exchange Act and qualify as chairman, and Mr. Reeve. The Board has determined that Mr. Villa qualifies as our auditan “audit committee financial expert,” as thatsuch term is defined in Item 407(d)(5) of Regulation S-K. Neither Mr. Villa nor Mr. Reeve is independent for audit committee purposes under the definition contained in Section 10A(m)(3) of the Exchange Act.

Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten-percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to us, or written representations that no Forms 5 were required, we believe that all required Section 16(a) filings were timely made for the year ended December 31, 2020.2021, except for Mr. Glickman, who filed one late Form 4 which reported two transactions. With respect to any of our former directors, officers, and greater than ten-percent stockholders, we have no knowledge of any known failure to comply with the filing requirements of Section 16(a).

2021 Summary Compensation Table

The Summary Compensation Table below includes, for each of the years ended December 31, 20202021 and 2019,2020, individual compensation for services to Infinite Group, Inc. paid to: (i) our Chief Executive Officer, our Chief Financial Officer and (ii) the next most highly paid executive officers whose total compensation exceeded $100,000 for the year ended December 31, 20202021 (together, the Named Executives)“Named Executive Officers”).

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1. The amounts in this column do not reflect option awards actually received by our Named Executive Officers, but instead reflect the aggregate grant date fair value for stock option awards  granted during the year and do not reflect whether the recipient has realized a financial gain from such awards such as by exercising stock options.computed in accordance with FASB ASC 718. The fair value of the stock option awards was determined using the Black-Scholes option pricing model. See Note 3 to the financial statements in this report regarding assumptions underlying valuation of equity awards.

We do not have any employment agreements with any of the Named Executives.

Effective August 13, 2019, we established that in connection with rendering services as a Board of Directors, each non-management Director may receive compensation, as applicable to each Director, if approved by the Board. Directors are reimbursed for the costs relating to attending Board and committee meetings.

Effective August 20, 2019, the Board resolved to compensate Donald W. Reeve $12,000 annually as Chairman of the Board.

At December 31, 2020,2021, Donald W. Reeve held exercisable options for: