Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM 10-Q

_________________________________________

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

For the quarterly period ended June 30, 2023

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

For the transition period from ________ to ________

Commission file number: 000-21816

_________________________________________

INFINITE GROUP, INC.

(Exact name of registrant as specified in its charter)

_________________________________________

Delaware		52-1490422
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

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

(585) 385-0610

(Registrant’s telephone number, including area code)

_________________________________________

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

Title of each class		Trading Symbol		Name of each exchange on which registered
N/A		N/A		N/A

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

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

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

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

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

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

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

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

Infinite Group, Inc.

Quarterly Report on Form 10-Q

For the Period Ended June 30, 2023

Table of Contents

PART I - FINANCIAL INFORMATION		PAGE

Item 1. Financial Statements		4

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

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

Statements of Stockholders’ Deficiency (Unaudited) for the three and six months ended June 30, 2023 and 2022		6

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

Notes to Financial Statements – (Unaudited)		8

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk		23

Item 4. Controls and Procedures		23

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		24

Item 1A. Risk Factors		24

Item 3 Defaults Upon Senior Securities.		24

Item 6. Exhibits		24

SIGNATURES		25

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FORWARD-LOOKING STATEMENTS

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

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

INFINITE GROUP, INC.
BALANCE SHEETS

ASSETS

	June 30,			December 31,
	2023			2022
	(Unaudited)
Current assets:
Cash	$	17,339		$	23,187
Accounts receivable, net of allowances for expected credit losses of 32,692
as of June 30, 2023 and $36,710 as of December 31, 2022, respectively		212,890			406,005
Prepaid expenses and other current assets		462,260			144,218
Total current assets		692,489			573,410
Right of Use Asset Operating Lease, net		604,366			645,095
Property and equipment, net		11,640			19,996
Software, net		420,897			417,325
Deposits		10,144			10,144
Total assets	$	1,739,536		$	1,665,970

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
Accounts payable	$	1,605,944		$	1,687,579
Accrued payroll		420,602			386,289
Accrued interest payable		1,301,144			783,581
Accrued retirement		292,366			286,605
Deferred revenue		451,738			550,523
Accrued expenses other and other current liabilities		230,336			138,639
Current maturities of long-term obligations		549,000			515,000
Operating lease liability - Short-term		80,762			76,826
Current maturities of long-term obligations - related parties		659,300			385,000
Notes payable, net		1,491,004			1,572,857
Notes payable - related parties		199,000			229,000
Total current liabilities		7,281,196			6,611,899

Long-term obligations:
Notes payable:
Other		416,473			458,849
Related parties		499,000			886,876
Operating lease liability - long-term		531,374			572,560
Total liabilities		8,728,043			8,530,184

Commitments and contingencies

Stockholders' deficiency:
Common stock, $.001 par value, 60,000,000 shares authorized; 506,608 and 470,093 shares issued and outstanding, June 30, 2023 and December 31, 2022, respectively.		507			470
Additional paid-in capital		32,324,991			32,164,334
Accumulated deficit		(39,314,005	)		(39,029,018	)
Total stockholders' deficiency		(6,988,507	)		(6,864,214	)
Total liabilities and stockholders' deficiency	$	1,739,536		$	1,665,970

See notes to unaudited financial statements.

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INFINITE GROUP, INC.
STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022

Revenue	$	1,783,476		$	1,696,492		$	3,547,469		$	3,363,562
Cost of revenue		998,215			1,059,639			1,964,421			2,180,879
Gross profit		785,261			636,853			1,583,048			1,182,683

Costs and expenses:
General and administrative		465,177			613,317			996,822			1,217,300
Selling		761,365			612,957			1,454,475			1,260,582
Total costs and expenses		1,226,542			1,226,274			2,451,297			2,477,882

Operating loss		(441,281	)		(589,421	)		(868,249	)		(1,295,199	)

Other income (expense)
Interest Income		71,324			10			71,624			18

Interest expense:
Related parties		(30,755	)		(22,728	)		(57,700	)		(46,142	)
Other		(688,133	)		(221,061	)		(1,188,491	)		(360,111	)
Total interest expense		(718,888	)		(243,789	)		(1,246,191	)		(406,253	)

Debt forgiveness		95,131			0			95,131			0
ERC tax refund		1,662,698			0			1,662,698			0
Total other income (expense)		1,110,265			(243,779	)		583,262			(406,235	)

Net profit (loss)	$	668,984		$	(833,200	)	$	(284,987	)	$	(1,701,434	)

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

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

Weighted average shares outstanding
– basic		494,960			443,953			483,243			440,004

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

See notes to unaudited financial statements.

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

Six Months Ended June 30, 2023

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

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

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

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

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

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

Six Months Ended June 30, 2022

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

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

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

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

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

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

See notes to unaudited financial statements.

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

	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(284,987	)	$	(1,701,434	)
Adjustments to reconcile net loss to net cash used
by operating activities:
Stock based compensation		26,159			52,631
Depreciation and amortization		124,154			117,686
Amortization of debt discount		635,960			255,042
Amortization of common stock expensed for services		8,517			0
Bad debt recovery		(4,018	)		0
Foregiveness of debt		(95,131	)		0
(Increase) decrease in assets:
Accounts receivable		197,132			76,894
Prepaid expenses and other assets		(299,859	)		17,394
Increase (decrease) in liabilities:
Accounts payable		(81,635	)		549,665
Deferred revenue		(98,785	)		(22,334	)
Accrued expenses		663,654			12,014
Accrued retirement		5,761			5,536
Net cash provided (used) by operating activities		796,922			(636,906	)

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

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

Cash flows from financing activities:
Proceeds from notes payable		257,645			918,900
Debt issuance costs		(295,336	)		(53,445	)
Repayment of ERC Claim Agreement		(1,662,698	)		0
Repayments of note payable-related parties		(30,000	)		0
Repayments of note payable-short-term		(369,786	)		(215,040	)

Net cash provided (used) by financing activities		(2,100,175	)		650,415

Net decrease in cash		(5,848	)		(97,838	)

Cash - beginning of period		23,187			99,432

Cash - end of period	$	17,339		$	1,594

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

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

See notes to unaudited financial statements.

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INFINITE GROUP, INC.

Notes to Financial Statements - (Unaudited)

Note 1. Basis of Presentation

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

Note 2. Management Plans - Capital Resources

The Company reported net losses of $284,987 and $1,701,434 for the six months ended June 30, 2023 and 2022, respectively, and stockholders’ deficiencies of $6,988,507 and $6,864,214 at June 30, 2023 and December 31, 2022, respectively. The Company has a working capital deficit of approximately $6.6 million at June 30, 2023.

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

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

The Company plans to issue stock, restructure certain debt and anticipates significant growth of business.

The Company believes the capital resources generated by the improving results of its operations as well as cash available under its factoring line of credit and from additional related parties and third-party loans, if needed, provide sources to fund its ongoing operations and to support the internal growth of the Company. The Company may need to extend existing debt agreements in order to provide resources for other purposes. If the Company experiences significant growth in its sales, the Company believes that this may require it to increase its financing line, finance additional accounts receivable, or obtain additional working capital from other sources to support its sales growth.

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

As a result, for the foreseeable future, there is substantial doubt about the Company’s ability to continue as a going concern.

Note 3. Summary of Significant Accounting Policies

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

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

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

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Revenue

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

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

Managed support services

1,122,084

1,115,607

2,248,882

2,204,614

Cybersecurity projects

353,937

300,456

676,000

626,917

Software

307,455

280,429

622,587

532,031

Total Revenue

1,783,476

1,696,492

3,547,469

3,363,562

Managed support services

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

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

Cybersecurity projects

Cybersecurity projects includes performing cybersecurity assessments, testing and consulting as a CISO (Chief Information Security Officer).

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

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

Software

Software revenue includes the selling of licenses of Nodeware® and third-party software, principally Webroot™.

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

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

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

During the three and six months ended June 30, 2023, sales to one client, including sales under subcontracts for services to several entities, accounted for 63% of total sales in both periods, (65% for both periods in 2022) and 27% of accounts receivable at June 30, 2023 (27% at December 31, 2022).

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

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

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

Note 4. Sale of Certain Accounts Receivable

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

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

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

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

Note 5. Capitalization of Software for Resale

As of June 30, 2023, there was $1,007,817 of costs capitalized ($894,027 as of December 31, 2022) and $586,920 of accumulated amortization ($472,702 as of December 31, 2022). During the three and six months ended June 30, 2023, there was $49,389 and $110,218, respectively, of amortization expense recorded ($53,402 and $106,803, respectively, for the three and six months ended June 30, 2022). Costs incurred prior to reaching technological feasibility are expensed as incurred. During the three and six months ended June 30, 2023, there was approximately $15,000 and $21,700, respectively, of labor amounts expensed related to these development costs ($7,800 and $16,100, respectively in 2022).

Note 6. Deferred Revenue and Performance Obligations

Deferred Revenue

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

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

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

Transaction Price Allocated to the Remaining Performance Obligations

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

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

Note 7. Debt Obligations

Mast Hill Loan #5 - On February 3, 2023, Infinite Group, Inc. (the “Company”), as borrower, entered into a financing arrangement (the “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 $118,000.00, which bears interest at a rate of eight percent (8%) per annum, less $11,800.00 original issue discount. Under the terms of the Loan, amortization payments are due beginning June 3, 2023, and each month thereafter with the final payment due on February 3, 2024. Additionally, in the event of a default under the Loan or if the Company elects to pre-pay the Loan, 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 $2.00 per share. The conversion price is subject to adjustment under certain circumstances, including issuances of Company common stock below the conversion price. The Company is not required to issue additional shares to Lender in the event an adjustment to the conversion price occurs. Except for the option to convert the note in the event of a pre-payment, there is no pre-payment penalty associated with the promissory note. The Loan is subject to customary events of default, including cross-defaults on the Loan agreements and on other indebtedness of the Company, violations of securities laws (including Regulation FD), and failure to issue shares upon a conversion of the note. Amounts due under the Loan are subject to a 15% penalty in the event of a default. As additional consideration for the financing, the Company issued Lender a 5-year warrant to purchase 59,000 shares of Company common stock at a fixed price of $2.00 per share, subject to price adjustments for certain actions, including dilutive issuances, representing 100% warrant coverage on the principal amount of the Loan. The Company has granted the Lender customary “piggy-back” registration rights with respect to the shares issuable upon conversion of the promissory note and exercise of the warrant. No material relationship exists between the Company or its affiliates and Lender, other than in respect of the Loan and similar loans between the Company and Lender entered into on November 3, 2021, February 11, 2022, May 31, 2022, and November 23, 2022, respectively. This loan was in default at June 30, 2023 and the amount of interest expense recorded as penalties during the three months ended June 30, 2023 was approximately $18,900.

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

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

Under the terms of the New Note, the Company agreed to make a one-time payment of $16,667 for interest accrued on the Original Note for the four-month period covering June 2022 through September 2022 during the first quarter of 2023. The Company has also agreed to make quarterly interest payments of $6,250, commencing on December 31, 2022, and continuing through and including September 30, 2024.

Revised Financing Arrangement - During March 2023, the Company entered into a revised financing arrangement with Celtic Bank which originally loaned the Company $139,400 with a one-time fixed loan fee of $11,152 for a total obligation of $150,552 in 2022. Under the terms of the revised financing arrangement, the lender loaned the Company $155,800 with a one-time fixed loan fee of $12,464 for a total obligation of $168,264. The balance of the original loan of $27,559 was paid to the lender as part of the revised financing agreement. The lender payments became due on March 24, 2023, and consisted of 30% of the Company’s receivables processed through Stripe, Inc.’s payment processing platform and then due and owing to the Company or $18,696 over a sixty-day period, whichever is higher, with the final payment due on September 14, 2024. At June 30, 2023, the balance of this revised financing arrangement was $105,696.

Extinguishment of Convertible Promissory Note - On April 12, 2023, the Company entered into an agreement with Talos Victory Fund to accept final payment in the amount of $200,000 on the convertible promissory note dated April 12, 2022. The debt was forgiven at that time and approximately $95,000 was recorded as forgiveness of debt in the Statements of Operations.

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Payment to Board Member – On April 11, 2023, the Company paid off a demand note to one board member. The payment was for $30,000 plus $2,891 of accrued interest.

Obligations in Default – As of June 30, 2023, the Company is in default with the Mast Hill financing arrangements dated November 3, 2021, February 11, 2022, May 31, 2022, and November 23, 2022 and February 3, 2023. Per the arrangements, the Company has accrued approximately $130,000 and $347,000 in default and penalty interest expense during the three months and six months ended June 30, 2023, respectively.

Note 8. Short-term Obligation

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

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

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

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

Note 9. Earnings per Share

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

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

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

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

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

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

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

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

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

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

Note 10. Stock Option Plans and Agreements

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

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

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

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

The Company recorded expense for options issued to employees and independent service providers of $26,159 for both the three and six months ended June 30, 2023, and $51,708 and $52,631, for the three and six months June 30, 2022, respectively.

32,600 options vested during the six months ended June 30, 2023.

The Company issued 15,000 performance-based stock options during the six months ended June 30, 2023 at $1.17 per share to an executive of the Company. Certain bookings targets must be made for the options to vest. The unrecognized compensation expense for these options is approximately $12,000 at June 30, 2023.

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

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

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

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

Exercisable		158,054		$	5.14	2.7 years	$	0.00

Note 11. Lease

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

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

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

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

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

Discount rate – operating lease			7.00	%		7.00	%

Note 12. Related Party Accrued Interest Payable

Included in accrued interest payable are amounts due to related parties of approximately $345,000, at June 30, 2023 ($299,000 at December 31, 2022).

Note 13. Subsequent Events

On July 13, 2023, Donald Reeve, Chairman of the Board, and the Company, entered into a short term note wherein the Company borrowed $40,000 from Mr. Reeve. Interest will accrue monthly at a rate of 10% per annum. The note was due in full with interest on August 14, 2023 and has been extended to a new term date of September 13, 2023. This note remains outstanding as of the filing date.

In July 2023, warrants were exercised via a cashless exercise, resulting in 14,567 shares of common stock being issued.

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

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

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

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

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

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

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

Overview

Impact of COVID-19

The COVID-19 pandemic has resulted, and is likely to continue to result, in economic disruption on a global basis. It has already changed traditional global travel and supply chains and adversely impacted global commercial activity. Considerable uncertainty still surrounds COVID-19 and its potential long-term economic effects, as well as the effectiveness of any responses taken by government authorities and businesses. While the travel restrictions, limits on hours of operations and/or closures of non-essential businesses, and other efforts to curb the spread of COVID-19, have been generally lifted, there continues to be a disruption in business activity globally. New strains and variants of the coronavirus continue to spread around the world. The rollout of vaccines around the globe is encouraging, but their long-term impact on the political environment, business environment, and the Company is still uncertain.

During 2023, our managed support services, cybersecurity projects and software revenues were minimally impacted by the impact of the COVID-19 pandemic on our customers’ operational priorities. We are continuing to adapt our operations to meet the challenges of these changing priorities. While employees at our headquarters are physically present in the office, other locations have had to go fully remote due to the changing nature of IT work during the pandemic. Our sales and marketing expenses increased significantly during the first two quarters of 2023, and we expect these expenses to continue to grow. We will continue to actively monitor the nature and extent of the impact to our business, operating results, and financial condition.

Our Business

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

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

As part of these software and service offerings we:

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

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

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

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Business Strategy

We have a threefold business strategy composed of:

-	providing differentiated cybersecurity software and services to small to mid-sized enterprises who lack the internal resources to focus on cybersecurity related matters by combining customized software and professional services;

-	designing, developing, and marketing cybersecurity SaaS solutions, including Nodeware; and

-	identifying other cybersecurity companies to acquire as part of a strategic roll-up strategy.

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

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

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

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

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

The following sections define specific components of our business strategy.

Nodeware®

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

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

Nodeware is an automated asset identification and vulnerability management and monitoring solution that enhances security by proactively identifying, monitoring, and addressing potential vulnerabilities on both internal and external facing networks, creating a safeguard against malicious intent to exploit known problems in a customer’s network with simplicity and affordability. Nodeware assesses vulnerabilities in a computer network using scanning technology to capture a comprehensive view of the security exposure of a network infrastructure. Users receive alerts and view network information through a proprietary, web enabled dashboard. Continuous and automated internal scanning and external on demand scanning are components of this offering.

The Cloud based SaaS platform has an agile and continuous development process that is flexible to react to customer and market needs. In December 2019, we filed a second provisional patent application and in December 2020 we filed the subsequent action on the institutional patent on the Nodeware platform. In 2020 and 2021, we created many new feature updates and improvements to the platform in response to COVID-19 needs and impact such as a downloadable Windows executable version along with Windows, Mac, and Linux Agents that could be downloaded to a remote PC or server. A number of enhancements related to data management, threat intelligence, and user functionality were part of the 2020/21 continued evolution of Nodeware.

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

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In June 2021, we created IGI CyberLabs, LLC, a wholly owned subsidiary to support our Nodeware solution and continued software development. Cyberlabs’ overarching mission is to drive sales of our Nodeware Cloud security platform, which will drive monthly and annualized recurring revenue. CyberLabs will also drive product and platform enhancements in Nodeware and continue to enhance our rapid scale Go-to-Market capabilities. Additionally, CyberLabs is chartered with development of cloud and SaaS cybersecurity related products that will be brought to market through our growing channel relationships.

Intellectual Property

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

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

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

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

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

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

Technology and Product Development

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

Cybersecurity Services

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

Results of Operations

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

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

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	Three Months Ended June 30,

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

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

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

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

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

	Six Months Ended June 30,

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

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

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

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

Sales

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

Our cybersecurity projects revenue increased by 18%, from $300,456 for the three months ended June 30, 2022, to $353,937 for the same period ended June 30, 2023. For the six months ended June 30, 2023, cybersecurity projects increased 8% to $676,000 from $626,917 in the same prior year period. These increases were due to increased sales efforts and the timing of the completion of the engagements.

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Software sales, which includes the selling of licenses of Nodeware and third-party software Webroot, increased by 10% from the three months ended June 30, 2022 to the same period in 2023. Sales for the period in 2022 were $280,429 and increased by $27,026 to $307,455 for the same period in 2023. For the six months ended June 30, 2022 and 2023, sale were $532,031 and $622,587, respectively, for an increase of 17%. The increase was primarily attributable to improving sales of Nodeware, and slightly offset by decreasing sales of Webroot. We expect this trend to continue throughout 2023 as we focus our resources on Nodeware.

Cost of Sales and Gross Profit

Cost of sales principally represents compensation expense for our employees. Cost of sales decreased by 6% to $998,215 during the three months ended June 30, 2023 from $1,059,639 during the corresponding period of 2022. For the six month periods ended June 30 2022 and 2023, cost of sales decreased from $2,180,879 in 2022 to $1,964,421 in 2023; a decrease of 10%. The decrease in cost of sales during the three and six months ended June 30, 2023 from 2022 was primarily due to a decrease in payroll and benefits of salaried employees who support our managed services and cybersecurity projects. This reduction of payroll was due to normal attrition without replacement. There was no impact on performance, as we were able to absorb the staff reduction with efficiency improvements to our processes and tools.

Our gross profit increased by $148,408 for the three months ended June 30, 2022 to 2023, from $636,853 to $785,261. For the six months ended June 30, 2023, gross profit of $1,583,048 represents a 34% increase over gross profits for the same period in 2022 of $1,182,683. The increase was due to the combination of increased sales and the decrease in salary and benefits previously referenced above.

General and Administrative Expenses

General and administrative expenses include corporate overhead such as compensation and benefits for executive, administrative and finance personnel, rent, insurance, professional fees, travel, and office expenses. General and administrative expenses of $465,177 for the three months ended June 30, 2023 decreased approximately 24% from $613,317 for the same quarter of 2022. For the six months ended June 30, 2023, general and administrative expenses were $996,822, down from $1,217,300 for the same period in 2022. The decrease was primarily due to the reduction in legal, accounting, and other related fees associated with the S-1 filing in 2022, down approximately $135,000 for the comparative three month periods, and down approximately $265,000 for the comparative six month periods. During the three month period comparison, the decrease was partially offset by an increase in bad debt expense of approximately $10,000, and $26,000 for the six month period comparison.

Selling Expenses

Selling expenses of $761,365 for the three months ended June 30, 2023 increased approximately 24% from $612,957 for the same quarter of 2022. For the six months ended June 30, 2023, selling expenses were $1,454,475; an increase of 15% over $1,260,582 for the same period in 2022. For the three month period, approximately $220,000 of the increase was due to marketing spending, partially offset by reductions in staffing and related benefits. For the six month period, approximately $260,000 of the increase was due to an increase in marketing spending, partially offset by reductions in staffing and related benefits.

Operating Income (Loss)

For the three months ended June 30, 2023 and June 30, 2022, operating loss was $441,281 and $589,421, respectively, for an improvement in the loss by $148,140. For the six months ended June 30, 2023 and June 30, 2022, the operating loss was $868,249 and $1,295,199, respectively. The improvement in our operating loss from the previous year is principally attributable to the growth of sales as referenced above, the reduction in cost of sales as referenced above, the reduction of general and administrative expenses as referenced above, partially offset by the increase in selling expenses as referenced above.

Interest Expense

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

Other Income

For the three and six months ended June 30, 2023, other income included a one-time refund of taxes of $1,662,698 related to the approval of the Employee Retention Credit by the IRS as well as the gain of $95,131 related to debt forgiveness.

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Net Profit (Loss)

For the three months ended June 30, 2023, net profit was $668,984. For the same period in 2022, we showed a net loss of $833,200. For the six months ended June 30, 2023 and June 30, 2022, the net loss was $284,987 and $1,701,434, respectively. The primary reasons for this improvement in both periods was the one-time other income recognized during the three months ended June 30, 2023 associated with the Employee Retention Credit mentioned above.

Liquidity and Capital Resources

At June 30, 2023, we had cash of $17,339 available for working capital needs and planned capital asset expenditures. At June 30, 2023, we had a working capital deficit of approximately $6.6 million and a current ratio of 0.10.

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

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

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

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

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

In the first six months of 2023, a total of approximately $404,000 was recorded as deferred note costs. At June 30, 2023, the unamortized balance of the deferred note costs for all notes payable to third parties was approximately $227,000. See Notes 5 and 6 of the 2022 Audited Financial Statements for more information.

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

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

We have $549,000 of current maturities of long-term obligations to third parties. This is comprised of various notes including long-term notes to third parties of $265,000 due on January 1, 2018 (plus accrued interest of approximately $260,000), and approximately $284,000 due on January 1, 2024.

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

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

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

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

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

Cash Flows Provided by (Used in) Operating Activities

Our operating cash flow is primarily affected by the overall profitability of our contracts, our ability to invoice and collect from our clients in a timely manner, and our ability to manage our vendor payments. We bill our clients weekly or monthly after services are performed as well as collect down payments depending on the contract terms. Our net loss of $284,987 for the six months ended June 30, 2023 was offset by non-cash expenses and credits of $695,641. In addition, our net loss was offset by an increase in accounts receivable and other assets of $102,727, an increase in accrued payroll, deferred revenue and other expenses payable of $570,630 and a decrease in accounts payable of $81,635 resulting in cash provided by operating activities of $796,922.

We are increasing our marketing of Nodeware to our IT channel partners who resell to their customers. We are making investments in our cyber security team for penetration testing, CISOTaaS and other services. Due to the lengthy lead times typically needed to generate these new sales, we expect a delay before realizing a return from our sales and marketing efforts, of one or more quarters. As a result, we may continue to experience operating income or operating losses from these resource expenditures until sufficient sales are generated. We expect to fund the cost for the new expenditures from our operating cash flows, the equity raise and incremental borrowings, as needed.

Cash Flows Provided by (Used in) Investing Activities

During the six months ended June 30, 2023, we received approximately $1,413,000 for the aforementioned Risk Participation of ERC (Employee Retention Credit) Claim Agreement. We also incurred capital expenditures for computer hardware as well as software development labor for the enhancements to Nodeware. We expect to continue to invest in computer hardware and software to update our technology to support the growth of our business. We do not anticipate our continued investment to be significant in these two categories.

Cash Flows Provided by (Used in) Financing Activities

During the six months ended June 30, 2023, we received $257,645 from various debt products, including a fifth Mast Hill Fund L.P. loan for $118,000, and a restructured loan with Celtic Bank for 139,645. We paid the ERC Claim with the amounts received from the IRS of $1,662,698, principal of $369,786 on short term debt and $30,000 of related party short term debt. There were debt issuance costs of $295,336 during the period.

Credit Resources

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

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

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

We believe the capital resources available under our factoring line of credit, cash from additional related party loans and cash generated by improving the results of our operations will be sufficient to fund our ongoing operations for at least the next 12 months. The funds from the equity raise will allow us to support and accelerate the internal growth of our operations and offer additional opportunities if they arise.

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

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

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

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for a comprehensive listing of the Company’s other risk factors. There are no material changes for the three and six months ended June 30, 2023.

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

During the six months ended June 30, 2023, warrants were exercised, resulting in 6,515 shares of common stock being issued.

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

Item 3. Defaults Upon Senior Securities.

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

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

The Company is in default on a note payable to third parties of $355,000 due on December 31, 2022. The accrued interest on the note is approximately $111,000 at June 30, 2023.

The Company is in default on a note payable to third parties of $566,000 due on March 22, 2023. The accrued interest on the note is approximately $121,000 at June 30, 2023.

The Company is in default on a note payable to third parties of $118,000 due on June 3, 2023. The accrued interest on the note is approximately $22,000 at June 30, 2023.

The Company is in default on a note payable to third parties of $170,000 due on June 30, 2023. The accrued interest on the note is approximately $121,000 at June 30, 2023.

The Company is in default on a note payable to third parties of $240,902 due on June 30, 2023. The accrued interest on the note is approximately $105,000 at June 30, 2023.

Item 6. Exhibits

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

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

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SIGNATURES

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

		Infinite Group, Inc.
		(Registrant)

Date: October 16, 2023		/s/ James Villa
		James Villa
		Chief Executive Officer
		(Principal Executive Officer)

Date: October 16, 2023		/s/ Richard Glickman
		Richard Glickman Finance and Chief Accounting Officer VP Finance and Chief Accounting Officer

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INDEX TO EXHIBITS

Exhibit
No.		Description

10.1		Business Loan Agreement, dated August, 23, 2023, between Infinite Group, Inc. and WebBank
10.2		Financing and Security Agreement, dated September 14, 2023, between Infinite Group, Inc. and Celtic Bank Corporation
10.3		Loan Agreement between the Infinite Group, Inc.and Celtic Bank dated October 12, 2023
31.1		Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. *
31.2		VP Finance Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. *
32.1		Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. *
32.2		VP Finance Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS		XBRL Instance Document.*
101.SCH		XBRL Taxonomy Extension Schema Document.*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.*
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.*

* Filed as an exhibit hereto.

nullnullnullnullnullnullnull

Cover - shares	6 Months Ended
Cover - shares	Jun. 30, 2023	Oct. 10, 2023
Cover [Abstract]
Entity Registrant Name	INFINITE GROUP, INC.
Entity Central Index Key	0000884650
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	No
Document Period End Date	Jun. 30, 2023
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2023
Entity Common Stock Shares Outstanding		521,175
Entity File Number	000-21816
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	52-1490422
Entity Address Address Line 1	175 Sully’s Trail
Entity Address Address Line 2	Suite 202
Entity Address City Or Town	Pittsford
Entity Address State Or Province	NY
Entity Address Postal Zip Code	14534
City Area Code	585
Local Phone Number	385-0610
Entity Interactive Data Current	Yes

BALANCE SHEETS - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash	$ 17,339	$ 23,187
Accounts receivable, net of allowances for expected credit losses of $32,692 as of June 30, 2023 and $36,710 as of December 31, 2022, respectively	212,890	406,005
Prepaid expenses and other current assets	462,260	144,218
Total current assets	692,489	573,410
Right of Use Asset Operating Lease, net	604,366	645,095
Property and equipment, net	11,640	19,996
Software, net	420,897	417,325
Deposits	10,144	10,144
Total assets	1,739,536	1,665,970
Current liabilities:
Accounts payable	1,605,944	1,687,579
Accrued payroll	420,602	386,289
Accrued interest payable	1,301,144	783,581
Accrued retirement	292,366	286,605
Deferred revenue	451,738	550,523
Accrued expenses other and other current liabilities	230,336	138,639
Current maturities of long-term obligations	549,000	515,000
Operating lease liability - Short-term	80,762	76,826
Current maturities of long-term obligations - related parties	659,300	385,000
Notes payable, net	1,491,004	1,572,857
Notes payable - related parties	199,000	229,000
Total current liabilities	7,281,196	6,611,899
Notes payable:
Other	416,473	458,849
Related parties	499,000	886,876
Operating lease liability - long-term	531,374	572,560
Total liabilities	8,728,043	8,530,184
Stockholders' deficiency:
Common stock, $.001 par value, 60,000,000 shares authorized; 506,608 and 470,093 shares issued and outstanding, June 30, 2023 and December 31, 2022, respectively.	507	470
Additional paid-in capital	32,324,991	32,164,334
Accumulated deficit	(39,314,005)	(39,029,018)
Total stockholders' deficiency	(6,988,507)	(6,864,214)
Total liabilities and stockholders' deficiency	$ 1,739,536	$ 1,665,970

BALANCE SHEETS (Parenthetical) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
BALANCE SHEETS
Allowances for accounts receivable	$ 32,692	$ 36,710
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	506,608	470,093
Common stock, shares outstanding	506,608	470,093

STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
STATEMENTS OF OPERATIONS (Unaudited)
Revenue	$ 1,783,476	$ 1,696,492	$ 3,547,469	$ 3,363,562
Cost of revenue	998,215	1,059,639	1,964,421	2,180,879
Gross profit	785,261	636,853	1,583,048	1,182,683
Costs and expenses:
General and administrative	465,177	613,317	996,822	1,217,300
Selling	761,365	612,957	1,454,475	1,260,582
Total costs and expenses	1,226,542	1,226,274	2,451,297	2,477,882
Operating loss	(441,281)	(589,421)	(868,249)	(1,295,199)
Other income (expense)
Interest Income	71,324	10	71,624	18
Interest expense:
Related parties	(30,755)	(22,728)	(57,700)	(46,142)
Other	(688,133)	(221,061)	(1,188,491)	(360,111)
Total interest expense	(718,888)	(243,789)	(1,246,191)	(406,253)
Debt forgiveness	95,131	0	95,131	0
ERC tax refund	1,662,698	0	1,662,698	0
Total other income (expense)	1,110,265	583,262	243,779	(406,235)
Net profit (loss)	$ 668,984	$ (833,200)	$ (284,987)	$ (1,701,434)
Net profit (loss) per share - basic	$ 1.35	$ (1.88)	$ (0.59)	$ (3.87)
Net profit (loss) per share - diluted	$ 1.07	$ (1.88)	$ (0.59)	$ (3.87)
- basic	494,960	443,953	483,243	440,004
- dilluted	638,776	443,953	483,243	440,004

STATEMENTS OF CHANGES IN STOCKHOLDERS' Deficit (Unaudited) - USD ($)	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit
Balance, shares at Dec. 31, 2021		436,012
Balance, amount at Dec. 31, 2021	$ (4,097,889)	$ 436	$ 31,369,036	$ (35,467,361)
Stock based compensation, shares		0
Stock based compensation, amount	923	$ 0	923	0
Warrants issued, shares		0
Warrants issued, amount	148,334	$ 0	148,334	0
Net loss	(868,234)	$ 0	0	(868,234)
Balance, shares at Mar. 31, 2022		436,012
Balance, amount at Mar. 31, 2022	(4,816,866)	$ 436	31,518,293	(36,335,595)
Balance, shares at Dec. 31, 2021		436,012
Balance, amount at Dec. 31, 2021	(4,097,889)	$ 436	31,369,036	(35,467,361)
Net loss	(1,701,434)
Balance, shares at Jun. 30, 2022		447,482
Balance, amount at Jun. 30, 2022	(5,387,542)	$ 447	31,780,806	(37,168,795)
Balance, shares at Mar. 31, 2022		436,012
Balance, amount at Mar. 31, 2022	(4,816,866)	$ 436	31,518,293	(36,335,595)
Stock based compensation, shares		0
Stock based compensation, amount	51,708	$ 0	51,708	0
Warrants issued, shares		0
Warrants issued, amount	210,816	$ 0	210,816	0
Net loss	(833,200)	$ 0	0	(833,200)
Cashless exercise of warrants, shares		11,470
Cashless exercise of warrants, amount	0	$ 11	(11)	0
Balance, shares at Jun. 30, 2022		447,482
Balance, amount at Jun. 30, 2022	(5,387,542)	$ 447	31,780,806	(37,168,795)
Balance, shares at Dec. 31, 2022		470,093
Balance, amount at Dec. 31, 2022	(6,864,214)	$ 470	32,164,334	(39,029,018)
Stock based compensation, shares		0
Stock based compensation, amount	26,159	$ 0	26,159	0
Warrants issued, shares		0
Warrants issued, amount	107,834	$ 0	107,834	0
Net loss	(953,971)	$ 0	0	(953,971)
Cashless exercise of warrants, shares		6,515
Cashless exercise of warrants, amount	0	$ 7	(7)	0
Balance, shares at Mar. 31, 2023		476,608
Balance, amount at Mar. 31, 2023	(7,684,192)	$ 477	32,298,320	(39,982,989)
Balance, shares at Dec. 31, 2022		470,093
Balance, amount at Dec. 31, 2022	(6,864,214)	$ 470	32,164,334	(39,029,018)
Net loss	(284,987)
Balance, shares at Jun. 30, 2023		506,608
Balance, amount at Jun. 30, 2023	(6,988,507)	$ 507	32,324,991	(39,314,005)
Balance, shares at Mar. 31, 2023		476,608
Balance, amount at Mar. 31, 2023	(7,684,192)	$ 477	32,298,320	(39,982,989)
Net loss	668,984	$ 0	0	668,984
Stock Issued, shares		30,000
Stock Issued, amount	26,701	$ 30	26,671	0
Balance, shares at Jun. 30, 2023		506,608
Balance, amount at Jun. 30, 2023	$ (6,988,507)	$ 507	$ 32,324,991	$ (39,314,005)

STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net loss	$ (284,987)	$ (1,701,434)
Adjustments to reconcile net loss to net cash used
Stock based compensation	26,159	52,631
Depreciation and amortization	124,154	117,686
Amortization of debt discount	635,960	255,042
Amortization of common stock expensed for services	8,517	0
Bad debt recovery	(4,018)	0
Foregiveness of debt	95,131	0
(Increase) decrease in assets:
Accounts receivable	197,132	76,894
Prepaid expenses and other assets	(299,859)	17,394
Increase (decrease) in liabilities:
Accounts payable	(81,635)	549,665
Deferred revenue	(98,785)	(22,334)
Accrued expenses	663,654	12,014
Accrued retirement	5,761	5,536
Net cash provided (used) by operating activities	796,922	(636,906)
Cash flows from investing activities:
Purchase of property and equipment	(2,099)	(969)
Sale of ERC claim	1,413,294	0
Capitalization of software development costs	113,790	110,378
Net cash provided (used) by investing activities	1,297,405	(111,347)
Cash flows from financing activities:
Proceeds from notes payable	257,645	918,900
Debt issuance costs	(295,336)	(53,445)
Repayment of ERC Claim Agreement	(1,662,698)	0
Repayments of note payable-related parties	(30,000)	0
Repayments of note payable-short-term	(369,786)	(215,040)
Net cash provided (used) by financing activities	(2,100,175)	650,415
Net decrease in cash	(5,848)	(97,838)
Cash - beginning of period	23,187	99,432
Cash - end of period	17,339	1,594
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest	248,549	54,826
Non-cash investing and financing activities:
Warrant issued in conjunction with debts	107,834	359,150
Common stock issued via exercise of warrant	7	11
Common stock issued in conjunction with services	$ 30	$ 0

Basis of Presentation

6 Months Ended

Jun. 30, 2023

Basis of Presentation

Basis of Presentation

Note 1. Basis of Presentation

Management Plans Capital Resources

6 Months Ended

Jun. 30, 2023

Management Plans Capital Resources

Management Plans - Capital Resources

Note 2. Management Plans - Capital Resources

The Company plans to issue stock, restructure certain debt and anticipates significant growth of business.

As a result, for the foreseeable future, there is substantial doubt about the Company’s ability to continue as a going concern.

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2023

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 3. Summary of Significant Accounting Policies

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

Revenue

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

Managed support services

1,122,084

1,115,607

2,248,882

2,204,614

Cybersecurity projects

353,937

300,456

676,000

626,917

Software

307,455

280,429

622,587

532,031

Total Revenue

1,783,476

1,696,492

3,547,469

3,363,562

Managed support services

Cybersecurity projects

Cybersecurity projects includes performing cybersecurity assessments, testing and consulting as a CISO (Chief Information Security Officer).

Software

Software revenue includes the selling of licenses of Nodeware® and third-party software, principally Webroot™.

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

Sale of Certain Accounts Receivable

6 Months Ended

Jun. 30, 2023

Sale of Certain Accounts Receivable

Sale of Certain Accounts Receivable

Note 4. Sale of Certain Accounts Receivable

Capitalization of Software for Resale

6 Months Ended

Jun. 30, 2023

Capitalization of Software for Resale

Capitalization of Software for Resale

Note 5. Capitalization of Software for Resale

Deferred Revenue and Performance Obligations

6 Months Ended

Jun. 30, 2023

Deferred Revenue and Performance Obligations

Deferred Revenue and Performance Obligations

Note 6. Deferred Revenue and Performance Obligations

Deferred Revenue

Transaction Price Allocated to the Remaining Performance Obligations

Debt Obligations

6 Months Ended

Jun. 30, 2023

Debt Obligations

Debt Obligations

Note 7. Debt Obligations

Payment to Board Member – On April 11, 2023, the Company paid off a demand note to one board member. The payment was for $30,000 plus $2,891 of accrued interest.

Shortterm Obligation

6 Months Ended

Jun. 30, 2023

Shortterm Obligation

Short-term Obligation

Note 8. Short-term Obligation

Earnings per Share

6 Months Ended

Jun. 30, 2023

Earnings per Share

Earnings per Share

Note 9. Earnings per Share

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

Table of Contents

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

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

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

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

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

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

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

Stock Option Plans and Agreements

6 Months Ended

Jun. 30, 2023

Stock Option Plans and Agreements

Stock Option Plans and Agreements

Note 10. Stock Option Plans and Agreements

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

32,600 options vested during the six months ended June 30, 2023.

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

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

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

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

Exercisable		158,054		$	5.14	2.7 years	$	0.00

Lease

6 Months Ended

Jun. 30, 2023

Lease

Lease

Note 11. Lease

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

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

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

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

Discount rate – operating lease			7.00	%		7.00	%

Related Party Accrued Interest Payable

6 Months Ended

Jun. 30, 2023

Related Party Accrued Interest Payable

Note 12. Related Party Accrued Interest Payable

Included in accrued interest payable are amounts due to related parties of approximately $345,000, at June 30, 2023 ($299,000 at December 31, 2022).

Subsequent Events

6 Months Ended

Jun. 30, 2023

Subsequent Events

Subsequent Events

Note 13. Subsequent Events

In July 2023, warrants were exercised via a cashless exercise, resulting in 14,567 shares of common stock being issued.

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2023

Summary of Significant Accounting Policies

Reclassifications

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

Fair Value of Financial Instruments

Revenue

Revenue

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

Managed support services

1,122,084

1,115,607

2,248,882

2,204,614

Cybersecurity projects

353,937

300,456

676,000

626,917

Software

307,455

280,429

622,587

532,031

Total Revenue

1,783,476

1,696,492

3,547,469

3,363,562

Managed support services

Cybersecurity projects

Cybersecurity projects includes performing cybersecurity assessments, testing and consulting as a CISO (Chief Information Security Officer).

Software

Software revenue includes the selling of licenses of Nodeware® and third-party software, principally Webroot™.

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

Capitalization of Software for Resale

Leases

Recently Adopted Accounting Guidance

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2023

Summary of Significant Accounting Policies

Schedule of Disaggregation of revenue

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

Managed support services

1,122,084

1,115,607

2,248,882

2,204,614

Cybersecurity projects

353,937

300,456

676,000

626,917

Software

307,455

280,429

622,587

532,031

Total Revenue

1,783,476

1,696,492

3,547,469

3,363,562

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2023

Earnings per Share

Schedule of earning Loss per share, basic and diluted

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

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

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

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

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

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

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

Stock Option Plans and Agreements (Tables)

6 Months Ended

Jun. 30, 2023

Stock Option Plans and Agreements

Stock option valuation assumptions

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

Stock option activity

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

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

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

Exercisable		158,054		$	5.14	2.7 years	$	0.00

Lease (Tables)

6 Months Ended

Jun. 30, 2023

Lease

Supplemental operating lease information

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

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

Discount rate – operating lease			7.00	%		7.00	%

Management Plans - Capital Resources (Details Narrative) - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Management Plans - Capital Resources (Details Narrative)
Net income (loss)	$ 668,984	$ (953,971)	$ (833,200)	$ (868,234)	$ (284,987)	$ (1,701,434)
Total stockholders' deficiency	6,988,507				6,988,507		$ 6,864,214
Working capital deficit	$ 6,600,000				$ 6,600,000

Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Total Revenue	$ 1,783,476	$ 1,696,492	$ 3,547,469	$ 3,363,562
Software Member
Total Revenue	307,455	280,429	622,587	532,031
Cybersecurity projects Member
Total Revenue	353,937	300,456	676,000	626,917
Managed Support Services [Member]
Total Revenue	$ 1,122,084	$ 1,115,607	$ 2,248,882	$ 2,204,614

Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Increases in reserves			$ 21,600
Sales Revenue Net [Member] \| Customer A [Member]
Concentration risk	63.00%	65.00%	63.00%	65.00%
Accounts Receivable [Member] \| Customer A [Member]
Concentration risk			27.00%		27.00%
Cybersecurity projects and software Member
Description of agreements			In substantially all agreements, a 50% to 75% down payment is required before work is initiated. Down payments received are deferred until revenue is earned. Upon completion of performance obligation of service, payment terms are 30 days

Sale of Certain Accounts Receivable (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Retained amount rate			10.00%
Prime plus rate			3.60%
Effective rate			11.85%
Sublimit for accounts receivable	$ 1,500,000		$ 1,500,000
Accounts receivable	2,000,000		2,000,000
Purchaser [Member]
Accounts receivable net	34,000		34,000		$ 23,000
Accounts receivable	1,916,000	$ 1,062,000	1,916,000	$ 1,062,000
Remained outstanding receivables financiing agreeent	20,000		20,000		144,000
Cost associated with the financing line	9,838	$ 12,195	24,510	$ 22,306
Remained outstanding receivables	$ 343,000		$ 343,000		$ 228,000

Capitalization of Software for Resale (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Capitalization of Software for Resale
Cost of capitalised software	$ 1,007,817		$ 1,007,817		$ 894,027
Accumulated capitalized SW amortization	586,920		586,920		$ 472,702
Development costs	15,000	$ 7,800	21,700	$ 16,100
Amortization expense	$ 49,389	$ 53,402	$ 110,218	$ 106,803

Deferred Revenue and Performance Obligations (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Deferred Revenue and Performance Obligations
Remaining non-cancelable performance obligations	$ 882,000	$ 90,000	$ 882,000	$ 90,000
Revenue recognized	$ 123,000	$ 136,000	$ 307,000	$ 278,000

Debt Obligations (Details Narrative) - USD ($)				1 Months Ended	3 Months Ended	6 Months Ended
Debt Obligations (Details Narrative) - USD ($)	Apr. 12, 2023	Apr. 11, 2023	Feb. 03, 2023	Mar. 17, 2023	Jun. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Mar. 24, 2023	Dec. 31, 2022
Common stock par value					$ 0.001	$ 0.001			$ 0.001
J.H. Darbie & Co., Inc. [Member]
Finders cash fee paid			$ 3,100
Warrant coverage on principal amount			120.00%
Gross proceeds of the Loan			2.92%
Warrant to purchase commo stock shares			3,098
Warrants exercise price			$ 2.40
Talos Victory Fund [Member]
Convertible promissory note issued	$ 200,000
Forgiveness of debt	$ 95,000
Mast Hill Fund L P [Member]
Bears interest rate			8.00%
Accrued expense					$ 130,000	$ 347,000
Conversion price			$ 2.00
Borrowed amount			$ 118,000
Warrant coverage on principal amount			100.00%
Due maturity date			June 3, 2023
Warrants to purchase			59,000
Common stock par value			$ 2.00
Warrants term						5 years
Original issue discount			$ 11,800			$ 18,900
Amended and Restated Line of Credit Note and Agreement [Member]
Accrued interest		$ 2,891		$ 16,667
Interest payments quarterly		$ 30,000		$ 6,250
Bears interest rate				10.00%
Borrowed amount				$ 250,000
Revised Financing Arrangement [Member]
Borrowed amount					$ 105,696	105,696	$ 139,400
Loan fee						11,152
Total obligation amount									$ 150,552
Outstanding loan amount paid						27,559
Payments due						18,696
Repayment interest rate								30.00%
Revised Financing Arrangement One [Member]
Borrowed amount							$ 155,800
Loan fee						$ 12,464
Total obligation amount									$ 168,264

Shortterm Obligation (Details Narrative) - USD ($)	6 Months Ended
Shortterm Obligation (Details Narrative) - USD ($)	Jun. 30, 2023	Apr. 21, 2023	Mar. 29, 2023
Balance Amount		$ 82,830
Purchase price			$ 1,330,464
Aggregate Purchase Price	$ 1,662,698
ERC Claim and Risk Participation Agreement
Employee Retention Credit	1,662,698
Interest income (expense)	$ 70,699

Earnings Per Share (Details) - USD ($)	3 Months Ended				6 Months Ended
Earnings Per Share (Details) - USD ($)	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022
Earnings per Share
Net profit (loss) per share - basic	$ 1.35		$ (1.88)		$ (0.59)	$ (3.87)
Net profit (loss)	$ 681,001		$ (833,200)		$ (284,987)	$ (1,701,434)
Net profit (loss) per share - diluted	$ 1.07		$ (1.88)		$ (0.59)	$ (3.87)
Net income (loss)	$ 668,984	$ (953,971)	$ (833,200)	$ (868,234)	$ (284,987)	$ (1,701,434)
Weighted average common shares outstanding Basic	494,960		443,953		483,243	440,004
Weighted average common shares outstanding Diluted	638,776		443,953		483,243	440,004
Anti-dilutive shares excluded from net loss per share calculation	325,634		319,350		505,770	319,350

Stock Option Plans and Agreements (Details)	6 Months Ended
Stock Option Plans and Agreements (Details)	Jun. 30, 2023
Expected dividend yield	0.00%
Expected life of options	2 years 9 months
Expected stock price volatility	110.00%
Minimum [Member]
Risk-free interest rate	3.57%
Maximum [Member]
Risk-free interest rate	3.98%

Stock Option Plans and Agreements (Details 1)	6 Months Ended
Stock Option Plans and Agreements (Details 1)	Jun. 30, 2023 USD ($) $ / shares shares
Stock Option Plans and Agreements
Number of options outstanding, beginning \| shares	131,789
Number of options granted \| shares	47,600
Number of options expired \| shares	(6,335)
Number of options outstanding, ending \| shares	173,054
Number of options vested or expected to vest \| shares	158,054
Number of options exercisable \| shares	158,054
Weighted average exercise price outstanding, beginning \| $ / shares	$ 6.03
Weighted average exercise price granted \| $ / shares	1.20
Weighted average exercise price expired \| $ / shares	3.85
Weighted average exercise price outstanding, ending \| $ / shares	5.14
Weighted average exercise price vested or expected to vest \| $ / shares	5.14
Weighted average exercise price exercisable \| $ / shares	$ 5.14
Weighted-average remaining contractual term outstanding	2 years 10 months 24 days
Weighted-average remaining contractual term vested or expected to vest	2 years 8 months 12 days
Weighted-average remaining contractual term exercisable	2 years 8 months 12 days
Aggregate intrinsic value outstanding \| $	$ 0
Aggregate intrinsic value vested or expected to vest \| $	0
Aggregate intrinsic value exercisable \| $	$ 0

Stock Option Plans and Agreements (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Stock Option Plans and Agreements
Option expense	$ 26,159	$ 51,708	$ 26,159	$ 52,631
Unrecognized compensation cost	$ 12,000		$ 12,000
Options and granted			47,600	1,267
Options vested			32,600
Performance-based stock options			15,000
Option price	$ 1.17		$ 1.17
Aggregate shares of common stock authorized under stock option plans and agreements	249,113		249,113

LEASE (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Lease
Right of use asset - lease, net	$ 604,366	$ 645,095
Operating lease liability - short-term	80,762	76,826
Operating lease liability - long-term	531,374	572,560
Total operating lease liability	$ 612,136	$ 649,386
Discount Rate Operating Lease	7.00%	7.00%

LEASE (Details Narrative)	6 Months Ended
LEASE (Details Narrative)	Jun. 30, 2023 USD ($)
Lease
Leases expires	May 31, 2029
Rent expense	$ 118,487
Leases rate	2.00%
Right-of-use asset	$ 691,009
Lease liability	$ 691,009

RELATED PARTY ACCRUED INTEREST PAYABLE (Details Narrative) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Related Party Accrued Interest Payable
Additional accrued interest to related parties	$ 345,000	$ 299,000

Subsequent Events (Details Narrative) - USD ($)			1 Months Ended
Subsequent Events (Details Narrative) - USD ($)	Oct. 13, 2023	Sep. 14, 2023	Aug. 25, 2023	Oct. 19, 2023	Jul. 13, 2023	Jun. 30, 2023	Dec. 31, 2022
Common stock shares						506,608	470,093
Subsequent Event [Member]
Accrued interest					$ 40,000
Interest rate					10.00%
Common stock shares					14,567
Amended and Restated Line of Credit Note - [Member] \| Subsequent Event [Member]
Interest rate		48.40%	46.80%
Repayment interest rate	20.00%
Depersible live		12 months	546 days
Loan fee	$ 140,200	$ 200,000	$ 150,000	$ 17,400
Fixed Fee	16,403
Principal Due Amount	$ 156,603	$ 20,892	2,671
Original loan			$ 58,350	$ 35,754

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