**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**





Washington,
      D.C. 20549





**FORM
      10-QSB**





**QUARTERLY
      REPORT UNDER SECTION 13 OR 15(D)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**


**FOR
      THE QUARTERLY PERIOD ENDED MARCH 31, 2007**





Commission
      File Number 0-21816





**INFINITE
      GROUP, INC.**


(Exact
      name of small business issuer as specified in its charter)


Delaware
              52-1490422(State
                  or other jurisdiction
              (I.R.S.
                  Employerof
                  incorporation or organization)
              Identification
                  No.)





60
      Office
      Park Way


Pittsford,
      New York 14534


(Address
      of principal executive office)





(585)
      385-0610


(Issuer’s
      telephone number, including area code)





Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the issuer was required to file such reports), and (2) has been subject
      to
      such filing requirements for the past 90 days. Yes
x
      No o




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





Number
      of
      shares outstanding of each of the issuer's classes of common equity, as of
      the
      latest practicable date: As of May 11, 2007, there were 23,524,965 shares of
      common stock outstanding.





Transitional
      Small Business Disclosure Format. Yes o No x







INFINITE
      GROUP, INC.


**FORM
      10-QSB REPORT**


TABLE
        OF
        CONTENTS


PAGEPART
                  I - FINANCIAL INFORMATIONItem
                  1.
              
              Financial
                  StatementsBalance
                  Sheet - March 31, 2007 (Unaudited) and December 31, 2006
                  (Audited)
              3Statements
                  of Operations - (Unaudited) for the threemonths
                  ended March 31, 2007 and 2006
              4Statements
                  of Cash Flows - (Unaudited) for the three monthsended
                  March 31, 2007 and 2006
              5Notes
                  to Consolidated Financial Statements - (Unaudited)
              6Item
                  2.
              
              Management’s
                  Discussion and Analysis or Plan of Operations
              8Item
                  3.
              
              Controls
                  and Procedures
              15PART
                  II - OTHER INFORMATIONItem
                  1.
              
              Legal
                  Proceedings
              16Item
                  2.
              
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              16Item
                  3.
              
              Defaults
                  Upon Senior Securities
              16Item
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders
              17Item
                  5.
              
              Other
                  Information
              17Item
                  6.
              
              Exhibits
              17SIGNATURES
              
              
              17


**FORWARD-LOOKING
      STATEMENTS**




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





2


**PART
      I**


**FINANCIAL
      INFORMATION**




**Item
      1. Financial Statements**





**INFINITE
                GROUP, INC.****Consolidated
                Balance Sheets****March
                31,**
            
            **December
                31,****2007**
            
            **2006****ASSETS**
            
            **(Unaudited)**
            
            (Audited)**Current
                assets:**Cash
            
            **$**
            **71,726**
            
            $
            73,786Accounts
                receivable, net of allowance of $53,000 ($53,000 - 2006)
            
            
            **680,486**
            
            
            487,240Notes
                receivable, current portion
            
            
            **3,678**
            
            
            4,968Prepaid
                expenses and other current assets
            
            
            **43,085**
            
            
            38,600Total
                current assets
            
            
            **798,975**
            
            
            604,594**Property
                and equipment, net**
            
            
            **75,217**
            
            
            80,612**Other
                assets**-
                deposits
            
            
            **19,523**
            
            
            19,523Total
                assets
            
            **$**
            **893,715**
            
            $
            704,729**LIABILITIES
                AND STOCKHOLDERS’ DEFICIENCY****Current
                liabilities:**Accounts
                payable
            
            
            **224,335**
            
            
            224,051Accrued
                payroll
            
            
            **314,625**
            
            
            216,397Accrued
                interest payable
            
            
            **187,761**
            
            
            176,734Accrued
                retirement and pension
            
            
            **1,839,527**
            
            
            1,807,524Accrued
                expenses-other
            
            
            **95,947**
            
            
            62,042Current
                maturities of long-term obligations-bank
            
            
            **46,873**
            
            
            50,354Note
                payable
            
            
            **30,000**
            
            
            30,000Notes
                payable-related parties
            
            
            **144,740**
            
            
            148,663**Total
                current liabilities**
            
            
            **2,883,808**
            
            
            2,715,765**Long-term
                obligations:**Notes
                payable-related parties
            
            
            **1,146,124**
            
            
            1,146,124Accrued
                pension expense
            
            
            **735,896**
            
            
            706,196Total
                liabilities
            
            
            **4,765,828**
            
            
            4,568,085Commitments
                and contingencies**Stockholders’
                deficiency:**Common
                stock, $.001 par value, 60,000,000 shares authorized;22,414,965
                (22,414,965 - 2006) shares issued and outstanding
            
            
            **22,415**
            
            
            22,415Additional
                paid-in capital
            
            
            **29,036,484**
            
            
            28,981,059Accumulated
                deficit
            
            
            **(30,352,373**
            **)**
            
            (30,288,191
            )Accumulated
                other comprehensive loss
            
            
            **(2,578,639**
            **)**
            
            (2,578,639
            )Total
                stockholders’ deficiency
            
            
            **(3,872,113**
            **)**
            
            (3,863,356
            )Total
                liabilities and stockholders’ deficiency
            
            **$**
            **893,715**
            
            $
            704,729




See
        notes
        to consolidated financial statements.
  3





**INFINITE
                GROUP, INC.****Consolidated
                Statements of Operations (Unaudited)****Three
                Months Ended****March
                31,****2007**
            
            **2006****Sales**
            
            **$**
            **2,132,407**
            
            $
            1,623,436Cost
                of services
            
            
            **1,408,607**
            
            
            1,305,859**Gross
                profit**
            
            
            **723,800**
            
            
            317,577Costs
                and expenses:General
                and administrative
            
            
            **216,212**
            
            
            326,796Defined
                benefit pension plan
            
            
            **115,525**
            
            
            46,442Selling
            
            
            **336,598**
            
            
            412,534Research
                and development
            
            
            **45,263**
            
            
            68,122Depreciation
                and amortization
            
            
            **9,307**
            
            
            13,039Total
                costs and expenses
            
            
            **722,905**
            
            
            866,933**Operating
                income (loss)**
            
            
            **895**
            
            
            (549,356
            )Other
                income (expense):Interest
                income
            
            
            **128**
            
            
            268Interest
                expense:Related
                parties
            
            
            **(35,625**
            **)**
            
            (29,296
            )Other
            
            
            **(28,975**
            **)**
            
            (13,634
            )Total
                interest expense
            
            
            **(64,600**
            **)**
            
            (42,930
            )Other
                income-settlement of litigation
            
            
            **—**
            
            
            498,088Total
                other income (expense)
            
            
            **(64,472**
            **)**
            
            455,426Loss
                before income tax expense
            
            
            **(63,577**
            **)**
            
            (93,930
            )Income
                tax expense
            
            
            **(605**
            **)**
            
            (7,300
            )Net
                loss
            
            **$**
            **(64,182**
            **)**
            $
            (101,230
            )Net
                loss per share - basic and diluted
            
            **$**
            **(.00**
            **)**
            $
            (.01
            )Weighted
                average number of shares outstanding - basic and diluted
            
            
            **22,414,965**
            
            
            19,856,881





See
      notes
      to consolidated financial statements.




4


**INFINITE
                GROUP, INC.****Consolidated
                Statements of Cash Flows (Unaudited)****Three
                Months Ended****March
                31,****2007**
            
            **2006****Operating
                activities:**Net
                loss
            
            **$**
            **(64,182**
            **)**
            
            (101,230
            )Adjustments
                to reconcile net loss to net cash provided byoperating
                activities:Stock
                based compensation
            
            
            **55,425**
            
            
            29,282Depreciation
                and amortization
            
            
            **9,307**
            
            
            13,039(Increase)
                decrease in assets:Accounts
                receivable
            
            
            **(193,246**
            **)**
            
            74,334Inventories
            
            
            **-**
            
            
            (2,013
            )Other
                current assets
            
            
            **(4,485**
            **)**
            
            (18,373
            )Increase
                (decrease) in liabilities:Accounts
                payable
            
            
            **284**
            
            
            (70,308
            )Accrued
                expenses
            
            
            **143,160**
            
            
            78,889Accrued
                pension obligations
            
            
            **61,703**
            
            
            58,297**Net
                cash provided by operating activities**
            
            
            **7,966**
            
            
            61,917**Investing
                activities:**Purchase
                of property and equipment
            
            
            **(3,912**
            **)**
            
            (7,177
            )Proceeds
                from notes receivable
            
            
            **1,290**
            
            
            1,116**Net
                cash used in investing activities**
            
            
            **(2,622**
            **)**
            
            (6,061
            )**Financing
                activities:**Repayments
                of bank notes payable
            
            
            **(3,481**
            **)**
            
            (3,206
            )Repayments
                of note payable-related party
            
            
            **(3,923**
            **)**
            
            -Proceeds
                from exercise of stock options
            
            
            **-**
            
            
            420**Net
                cash used in financing activities**
            
            
            **(7,404**
            **)**
            
            (2,786
            )Net
                increase (decrease) in cash
            
            
            **(2,060**
            **)**
            
            53,070Cash
                - beginning of period
            
            
            **73,786**
            
            
            109,090Cash
                - end of period
            
            **$**
            **71,726**
            
            $
            162,160Supplemental
                disclosure:Cash
                paid for:Interest
            
            **$**
            **64,734**
            
            $
            43,770Income
                taxes
            
            **$**
            **605**
            
            $
            7,300




See
        notes
        to consolidated financial statements.
  5





**INFINITE
      GROUP, INC.**





**Notes
      to Consolidated Financial Statements - (Unaudited)**





**Note
      1. Basis of Presentation**





The
      accompanying unaudited consolidated 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.) for interim financial information and with
      instructions to Form 10-QSB. Accordingly, they do not include all of 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 accompanying unaudited
      consolidated financial statements should be read in conjunction with the
      Company’s audited consolidated financial statements and the notes thereto
      included in the Company’s Annual report on Form 10-KSB for the year ended
      December 31, 2006 filed with the U.S. Securities and Exchange Commission.
      Results of consolidated operations for the three months ended March 31, 2007
      are
      not necessarily indicative of the operating results that may be expected for
      the
      year ending December 31, 2007. The consolidated financial statements herein
      include the accounts of the Company and its wholly owned subsidiaries. The
      subsidiaries are inactive. All material inter-company accounts and transactions
      have been eliminated.





**Note
      2. Summary of Significant Accounting Policies**




There
      are
      several accounting policies that we believe are significant to the presentation
      of our consolidated financial statements. These policies require management
      to
      make complex or subjective judgments about matters that are inherently
      uncertain. Note 3 to our audited consolidated financial statements for the
      year
      ended December 31, 2006 presents a summary of significant accounting
      policies.




The
      Company reclassified certain prior year amounts to conform with the current
      year’s presentation.





**Note
      3. Stock Option Plans**





As
      of
      March 31, 2007 the Company’s Stock Option Plans (the “Plan”) provided for the
      grant of incentive or non-qualified stock options for the purchase of common
      stock for up to 5,223,000 shares to employees, directors and consultants. The
      Plan is administered by the compensation committee established by the Company’s
      board of directors, which determines the terms of the options including the
      exercise price, expiration date, number of shares, and vesting provisions.





In
      December 2004, the Financial Accounting Standards Board issued SFAS 123R,
      Share-Based Payment (“SFAS 123R”). SFAS 123R supersedes SFAS 123, Accounting for
      Stock Based Compensation, and Accounting Principles Board Opinion 25, Accounting
      for Stock Issued to Employees (“APB 25) and its related implementation guidance.
      On January 1, 2006, the Company adopted the provisions of SFAS 123R using the
      modified prospective transition method. Under this method, the Company is
      required to record compensation expense for all stock based awards granted
      after
      the date of adoption and for the unvested portion of previously granted awards
      that remain outstanding as of the beginning of the adoption. Prior period
      financial statements have not been restated. Under SFAS 123R, compensation
      expense related to stock based payments is recorded over the requisite service
      period based on the grant date fair value of the awards.





The
      compensation cost that has been charged against income for options granted
      under
      the Plan was $38,244 and $23,585 for the three months ended March 31, 2007
      and
      2006, respectively. The impact of this expense was to increase basic and diluted
      net loss per share from $(.00) to $(.01) for the three months ended March 31,
      2006. There was no impact on net loss per share for the three months ended
      March
      31, 2007. The adoption of SFAS 123R did not have an impact on cash flows from
      operating or financing activities. A deduction is not allowed for income tax
      purposes until the options are exercised. The amount of this deduction will
      be
      the difference between the fair value of the Company’s common stock and the
      exercise price at the date of exercise. Accordingly, there is a deferred tax
      asset for the tax effect of the financial statement expense. The tax effect
      of
      the income tax deduction in excess of the financial statement expense will
      be
      recorded as an increase to additional paid-in capital. Due to the uncertainty
      of
      the Company’s ability to generate sufficient taxable income in the future to
      utilize the tax benefits of the options granted, the Company has recorded a
      valuation allowance to reduce its gross deferred tax asset to zero. As a result,
      for the three months ended March 31, 2007 and 2006, there is no income tax
      expense impact from recording the fair value of options granted.




6





The
      Company used volatility of 50% and 100% when computing the value of stock
      options and warrants for the three months ended March 31, 2007 and 2006,
      respectively. This is based on historical volatility, with consideration given
      to activity subsequent to July 2005, when the Company brought current its public
      information in filings with the SEC, the volume of trading in the Company’s
      common stock has trended upward. The Company believes the increase in the volume
      of trading has provided more liquidity and less volatility than was previously
      experienced. The expected dividend yield is zero percent and the expected life
      of the options is ten years. The risk-free rate for periods within the
      contractual life of the option is based on the U.S. Treasury yield curve in
      effect at the time of grant.  The
      Company recorded expense of $38,244 and $23,585 for employee stock options
      and
      $17,181 and $5,697 for options and warrants issued to independent service
      providers for the three months ended March 31, 2007 and 2006, respectively.





A
      summary
      of all stock option activity for the three months ended March 31, 2007
      follows:





**Number
                of Options**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted-Average
                Remaining Contractual Term**
            
            **Aggregate
                Intrinsic Value**Outstanding
                at December 31, 2006
            
            
            4,380,000
            
            $
            .24Options
                issued
            
            
            35,000
            
            $
            .50Options
                expired
            
            
            (14,500
            )
            $
            .41Outstanding
                at March 31, 2007
            
            
            4,400,500
            
            $
            .24
            
            
            7.9
                years
            
            $
            1,198,130Exercisable
                at March 31, 2007
            
            
            3,685,833
            
            $
            .21
            
            
            7.6
                years
            
            $
            1,122,117





The
      weighted average fair value of options granted during the three months ended
      March 31, 2007 was approximately $.33 ($.23 during the three months ended March
      31, 2006). No options were exercised during the three months ended March 31,
      2007. The total intrinsic value of options exercised during the three months
      ended March 31, 2006 was $480.





A
      summary
      of the status of nonvested stock option activity for the three months ended
      March 31, 2007 follows:




**Nonvested
                Shares**
            
            **Shares**
            
            **Weighted
                Average**
              **Fair
                Value**
              **at
                Grant Date**Nonvested
                at December 31, 2006
            
            
            784,000
            
            $
            .30Granted
            
            
            35,000
            
            $
            .33Vested
            
            
            (96,333
            )
            $
            .24Forfeited
            
            
            (8,000
            )
            $
            .37Nonvested
                at March 31, 2007
            
            
            714,667
            
            $
            .31




7




At
      March
      31, 2007, there was approximately $162,000 of total unrecognized compensation
      cost related to non-vested options granted under the plan. That cost is expected
      to be recognized over a weighted average period of two years. The total fair
      value of shares vested during the three months ended March 31, 2007 was
      approximately $23,000.




**Note
      4. Net Income (Loss) Per Share**





Basic
      net
      income (loss) per share is based on the weighted average number of common shares
      outstanding during the periods presented. Diluted income (loss) 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 stock options, stock warrants and convertible notes payable.
      Stock options and warrants with exercise prices that exceeded the average fair
      market value of common stock had an antidilutive effect and therefore, were
      excluded from the computation of net income (loss) per share. 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 assumed to be exercise. In a loss period, the calculation for basic
      and
      diluted net income (loss) per share is considered to be the same, as the impact
      of potential common shares is anti-dilutive.





For
      the
      three months ended March 31, 2007 and 2006, the Company had 22,414,965 and
      19,856,881 weighted average shares of its common stock outstanding,
      respectively. If the Company had generated earnings during the three months
      ended March 31, 2007 and 2006, 19,597,891 and 1,705,113 common stock
      equivalents, respectively, would have been added to the weighted average shares
      outstanding. These additional shares represent the assumed exercise of common
      stock options and warrants whose exercise price is less than the average of
      common stock during the period and convertible notes payable. The proceeds
      of
      the exercise are assumed to be used to purchase common stock for treasury and
      the incremental shares are added to the weighted average shares
      outstanding.





**Note
      5. - New Accounting Pronouncements**





Effective
      January 1, 2007, the Company adopted the provisions of FASB Interpretation
      No.
      48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — An Interpretation
      of FASB Statement No. 109.” FIN 48 provides detailed guidance for the financial
      statement recognition, measurement and disclosure of uncertain tax positions
      recognized in the financial statements in accordance with SFAS No. 109. Tax
      positions must meet a “more-likely-than-not” recognition threshold at the
      effective date to be recognized upon the adoption of FIN 48 and in subsequent
      periods. Upon the adoption of FIN 48, the Company had no unrecognized tax
      benefits. During the three month ended March 31, 2007, the Company recognized
      no
      adjustments for uncertain tax benefits.





Income
      taxes are computed using the asset and liability method of accounting. Under
      the
      asset and liability method, a deferred tax asset or liability is recognized
      for
      estimated future tax effects attributable to temporary differences and
      carryforwards. The measurement of deferred income tax assets is adjusted by
      a
      valuation allowance, if necessary, to recognize future tax benefits only to
      the
      extent, based on available evidence, it is more likely than not such benefits
      will be realized. The Company’s deferred tax assets were fully reserved at March
      31, 2007 and December 31, 2006 .





The
      Company recognizes interest and penalties, if any, related to uncertain tax
      positions in selling, general and administrative expenses or to defined benefit
      pension plan expense if they are associated with the Osley & Whitney, Inc.
      Retirement Plan (O&W Plan). The Company has accrued interest and excise
      taxes associated with the contributions that the Company was not able to
      contribute to the O&W Plan. No interest and penalties related to uncertain
      tax positions were accrued at March 31, 2007.





The
      tax
      years 2002 through 2006 remain open to examination by the taxing jurisdictions
      in which the Company operates. The Company expects no material changes to
      unrecognized tax positions within the next twelve months.




**Item
      2.**  **Management’s Discussion and Analysis or Plan of Operations**





**Overview**





We
      operate in the field of information technology (IT) consulting services and
      biometric technology, and we have an office in the Washington DC metropolitan
      area. In March 2006, we opened a regional office in Jackson, Mississippi with
      the objective of developing new business in that area of the U.S. We
      now
      provide business and technology integration and systems support primarily to
      U.S. government clients. We focus on aligning business processes with technology
      for delivery of solutions to meet our clients’ exact needs and providing expert
      management services to the lifecycle of technology-based projects.




8




**Osley
      & Whitney, Inc. Retirement Plan**





Since
      our
      sale of all of the common stock of Osley & Whitney, Inc. (O&W) on
      December 30, 2002, we have continued to act as the sponsor of the Osley &
Whitney, Inc. Retirement, Plan (O&W Plan), a defined benefit pension plan.





Although
      we have acted as the sponsor of the O&W Plan since we acquired O&W,
      recently it was determined that we may not have had, or currently have, a legal
      obligation to do so since December 30, 2002 when we sold all of the common
      stock
      of O&W to a third party. During the three months ended March 31, 2007, we
      submitted information advocating this position to the Department of the Treasury
      to ascertain whether they concur or disagree with this determination. The
      Department of the Treasury is presently reviewing this information. If they
      do
      not concur with our position, we intend to pursue all appropriate further
      avenues to prevail in our position. Depending upon the ultimate outcome
      regarding our obligations as sponsor of the O&W Plan, adjustments to our
      financial statements may be necessary.





At
      March
      31, 2007, the O&W Plan had an accrued pension obligation liability of
      $2,524,285 and an accumulated other comprehensive loss of $2,578,639 which
      we
      have recorded as a reduction of stockholders’ equity. The market value of plan
      assets decreased from $3,497,115 at December 31, 2006 to $3,430,661 at March
      31,
      2007. The decrease was comprised of investment returns of $40,135 which were
      offset by benefit payments of $105,549 and expenses paid of $1,040.




We
      were
      required to make contributions in 2004, 2005 and 2006 and are required to make
      contributions in future years to fund the O&W Plan deficiencies. We did not
      make any contributions in 2004 or 2006. During 2005, we made contributions
      of
      $6,439 and 500,000 shares of our common stock, which were valued on the
      contribution date at $175,000 using that day’s closing market price. We
      currently do not have the funds available to make the required contributions
      which currently approximate $1.4 million, which includes the minimum required
      plan contributions of $513,551 and $979,328 for the 2005 and 2004 plan years,
      respectively. We recorded defined benefit pension expense of $115,525 and
      $46,442 for the three months ended March 31, 2007 and 2006, respectively. In
      2006 and 2005, we recorded aggregate excise taxes of $268,200. We may be
      required to pay interest on these excise taxes and potentially could incur
      additional excise taxes up to 100% of required plan contributions that were
      not
      made.




During
      2006, the Pension Benefit Guarantee Corporation placed a lien on all of our
      assets to secure the contributions due to the O&W Plan. The lien is
      subordinate to liens that secure accounts receivable financing and notes
      payable.




**IT
      Consulting**




Our
      IT
      Services Group provides IT services which include strategic staffing, program
      management, project management, network services, technical engineering,
      software development, and enterprise resource planning. Since December 2003,
      when we were awarded a Federal Supply Schedule Contract by the U.S. General
      Services Administration (GSA) for IT consulting services, we have been a GSA
      contractor and as a result, have entered into and completed several subcontract
      agreements with a number of prime contractors to several U.S. Governmental
      agencies. As a GSA contractor we can compete for and secure prime contracts
      with
      all executive agencies of the U.S. Government as well as other national and
      international organizations. As of March 31, 2007, we have one prime contract
      under our GSA schedule.




**Future
      Trends**




We
      believe that our operations, as currently structured, together with our current
      financial resources, will result in improved financial performance in future
      years.




9




Although
      our future prospects appear promising, the lengthy government financing and
      procurement processes may result in operating losses until sales increase to
      support our infrastructure and provide consistent cash flow to support
      profitability.





In
      the
      future, we may issue additional debt or equity securities to satisfy our cash
      needs. Any debt incurred or issued may be secured or unsecured, at fixed or
      variable interest rates and may contain other terms and conditions that our
      board of directors deems prudent. Any sales of equity securities may be at
      or
      below current market prices. We cannot assure you that we will be successful
      in
      generating sufficient capital to adequately fund our working capital
      needs.




**Results
      of Operations**




**Comparison
      of the Three Months ended March 31, 2007 and 2006**




The
      following table compares our statement of operations data for the three months
      ended March 31, 2007 and 2006. The trends suggested by this table are not
      indicative of future operating results.




Three
                  Months Ended March 31,2006
                  vs. 2007As
                  a % of
              
              
              
              As
                  a % of
              
              Amount
                  of
              
              %
                  Increase2007
              
              Sales
              
              2006
              
              Sales
              
              Change
              
              (Decrease)Sales
              
              $
              2,132,407
              
              
              100.0
              %
              $
              1,623,436
              
              
              100.0
              %
              $
              508,971
              
              
              31.4
              %Cost
                  of services
              
              
              1,408,607
              
              
              66.1
              
              
              1,305,859
              
              
              80.4
              
              
              102,748
              
              
              7.9Gross
                  profit
              
              
              723,800
              
              
              33.9
              
              
              317,577
              
              
              19.6
              
              
              406,223
              
              
              127.9General
                  and administrative
              
              
              216,212
              
              
              10.1
              
              
              326,796
              
              
              20.1
              
              
              (110,584
              )
              
              (33.8
              )Defined
                  benefit pension plan
              
              
              115,525
              
              
              5.4
              
              
              46,442
              
              
              2.9
              
              
              69,083
              
              
              148.8Selling
              
              
              336,598
              
              
              15.8
              
              
              412,534
              
              
              25.4
              
              
              (75,936
              )
              
              (18.4
              )Research
                  and development
              
              
              45,263
              
              
              2.1
              
              
              68,122
              
              
              4.2
              
              
              (22,859
              )
              
              (33.6
              )Depreciation
                  and amortization
              
              
              9,307
              
              
              0.4
              
              
              13,039
              
              
              0.8
              
              
              (3,732
              )
              
              (28.6
              )Total
                  operating expenses
              
              
              722,905
              
              
              33.9
              
              
              866,933
              
              
              53.4
              
              
              (144,028
              )
              
              (16.6
              )Operating
                  income (loss)
              
              
              895
              
              
              0.0
              
              
              (549,356
              )
              
              (33.8
              )
              
              550,251
              
              
              (100.2
              )Interest
                  expense, net
              
              
              (64,472
              )
              
              (3.0
              )
              
              (42,662
              )
              
              (2.6
              )
              
              (21,810
              )
              
              51.1Other
                  income
              
              
              -
              
              
              
              
              
              498,088
              
              
              30.7
              
              
              (498,088
              )
              
              (100.0
              )Income
                  tax expense
              
              
              (605
              )
              
              (0.0
              )
              
              (7,300
              )
              
              (0.4
              )
              
              6,695
              
              
              (91.7
              )Net
                  loss
              
              $
              (64,182
              )
              
              (3.0
              )%
              $
              (101,230
              )
              
              (6.2
              )%
              $
              37,048
              
              
              (36.6
              )%Net
                  loss per share - basic and diluted
              
              $
              (.00
              )
              
              
              
              $
              (.01
              )


**Sales**





Sales
      for
      the three months ended March 31, 2007 were $2,132,407 as compared to sales
      for
      the three months ended March 31, 2006 of $1,623,436, an increase of $508,971.
      A
      significant portion of the increase was a result of sales from new projects,
      including the
      first
      phase of a nationwide Physical to Virtual server consolidation project for
      a
      major establishment of the U.S. government which
      began during late 2006 and was completed during 2007. Virtualization
      is the process of presenting a logical grouping of computing resources so they
      can be accessed in ways that give benefits over the original configuration.
      A
      good example of virtualization is multiprocessing computer architectures. This
      is the practice of partitioning or splitting up one server to appear as multiple
      servers. Using virtualization software provided by third party vendors such
      as
      VMWare, a client can run multiple operating systems on one physical machine
      and
      therefore a broader, richer set of business applications.





In
      March
      2006, one of our contracts to provide services to the U.S. government ended
      when
      the project ended and another contract had staffing reductions. Approximately
      26% or $2.2 million of our sales for the year ended December 31, 2005 was
      generated from the contract for services to the U.S. government. Due to the
      nature of certain of our contracts, contract expirations occur when projects
      are
      completed or when appropriations of funds have been fully depleted and new
      appropriations have not been approved. We have continued to submit proposals
      and
      have identified opportunities for other new contracts to replace sales that
      do
      not continue in the ordinary course of business, as well as to increase our
      sales.




10





We
      are
      actively pursuing opportunities to develop additional sales from new and
      existing target markets. In March 2006, we opened a regional office in Jackson,
      Mississippi, and hired a new business development employee and retained a
      lobbying firm to pursue state and local government business opportunities within
      the Gulf Coast region. Moreover, we are also channeling energies towards forming
      alliances with large systems integrators, who are mandated by federal policy
      to
      direct defined percentages of their work to small business subcontractors.
      In
      addition, we are currently working on proposals for contract awards that we
      believe will enhance our position as a government contractor.





Early
      successes in our recent initiatives are evident in the preferred relationships
      we have earned with several large systems integrators and one major product
      house. In addition, we are a member of a team that won the U.S. State
      Department’s recent Hybrid Information Technology Support Services (HITSS)
      contract. Under our agreement with the prime contractor, we are identified
      as a
      primary Earned Value Management resource. However, although we believe our
      future prospects are robust, the lengthy government financing and procurement
      processes may result in continuing operating losses until sales increase to
      support our infrastructure and provide consistent profitability.





**Cost
      of Services and Gross Profit**





Cost
      of
      services represents the cost of employee services related to the IT Services
      Group. Cost of services for the three months ended March 31, 2007 was $1,408,607
      or 66.1% of sales as compared to $1,305,859 or 80.4% for the three months ended
      March 31, 2006. Gross profit was $723,800 or 33.9% of sales for the three months
      ended March 31, 2007 compared to $317,577 or 19.6% of sales for the three months
      ended March 31, 2006. The increase in gross profit is due to a change in the
      mix
      of our business resulting from new projects at improved gross margins which
      began in late 2006 and a reduction in the costs related to employees who did
      not
      generate billable revenue after contract reductions. Although our objective
      is
      to maintain an overall gross margin of approximately 30%, in the future we
      may
      submit bids on new work with lower gross profit margins to generate
      opportunities for long-term, larger volume contracts and more stable sales.





**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 for the three months ended March 31, 2007 decreased
      by $110,584 or 33.8% to $216,212. As a percentage of sales, general and
      administrative expense was 10.1% for the three months ended March 31, 2007
      and
      20.1% for the same period in 2006. This change was due in part to an increase
      in
      sales for the three months ended March 31, 2007 compared to 2006. In addition,
      we incurred certain non-recurring expenses in 2006 including legal fees of
      $25,000 due to administering our contracts and proxy solicitation expenses
      of
      approximately $18,400. We also reduced compensation and benefits expense by
      approximately $69,000 for the three months ended March 31, 2007 as compared
      to
      2006.





We
      anticipate that the amount of general and administrative expenses will increase
      as we continue to implement our business strategy and incur travel and other
      expenses associated with managing a larger business.





**Defined
      Benefit Pension Plan Expenses**





Defined
      benefit pension plan expenses include expenses (including pension expense,
      excise taxes, professional services, and interest costs) associated with the
      O&W Plan of $115,525 for the three months ended March 31, 2007 and $46,442
      for the three months ended March 31, 2006, an increase of $69,083. During 2006,
      the Pension Benefit Guarantee Corporation placed a lien on all of our assets
      to
      secure pension payments due under the O&W Plan. This lien is subordinate to
      liens that secure accounts receivable financing and notes payable.




11




Although
      we have acted as the sponsor of the O&W Plan since we acquired O&W,
      recently it was determined that we may not have had, or currently have, a legal
      obligation to do so since December 30, 2002 when we sold all of the common
      stock
      of O&W to a third party. During the three months ended March 31, 2007 we
      incurred additional legal and professional fees in connection with advocating
      this position with the appropriate regulatory authorities to ascertain whether
      they concur or disagree with this determination. We are seeking the concurrence
      of the Department of the Treasury and have recently provided to them the
      information related to our determination. They are presently reviewing the
      information.




If
      our
      current efforts do not result in a concurrence with our position, we intend
      to
      pursue all appropriate further avenues to prevail in our position. Depending
      upon the ultimate outcome regarding our obligations as sponsor of the O&W
      Plan, adjustments to our financial statements may be necessary.




**Selling
      Expenses**





For
      the
      three months ended March 31, 2007 we incurred selling expenses of $336,598
      associated with growing the business in our IT Services Group compared to
      $412,534 for the three months ended March 31, 2006, a decrease of $75,936.
      As a
      result of the expiration of one subcontract during the first quarter of 2006,
      we
      reduced certain salaried selling positions resulting in compensation and
      benefits expense reductions of approximately $49,000 and consultant expense
      reductions of approximately $56,000 for the three months ended March 31, 2007
      as
      compared to 2006. We expect to add additional sales personnel in the future
      as
      sales increase or as specific new sales opportunities are recognized. We
      recorded $17,181 of expense during the three months ended March 31, 2007 for
      the
      value of a warrant issued to a consultant who has met certain performance
      criteria by assisting us with increasing our sales. We recorded selling expense
      associated with employee stock options of $29,229 for the three months ended
      March 31, 2007, an increase of $21,021 compared to $8,208 for the three months
      ended March 31, 2006.





**Research
      and Development Expenses**





For
      the
      three months ended March 31, 2007 we recorded $45,263 of research and
      development expenses, a decrease of $22,859 compared to $68,122 for the three
      months ended March 31, 2006. In 2007, these expenses were principally related
      to
      examining new business opportunities and to a lesser extent for the development
      of an access control terminal and related software called TouchThruTM. TouchThruTM
is a self-contained terminal enabling physical access control using biometric
      identification. It incorporates fingerprint matching technology licensed from
      Ultra-Scan Corporation, a private technology company headquartered in Buffalo,
      New York. We eliminated one TouchThruTM engineering position subsequent to the
      three months ended March 31, 2006 since the TouchThruTM product development was
      substantially complete.




Although
      we are in a position to market and sell that product, we have revised our
      strategy based on Ultra-Scan’s development of a next generation fingerprint
      scanner that is expected to replace the current scanner. At the appropriate
      time, we plan to market and sell a re-designed TouchThruTM unit using this next
      generation technology. We will expend very limited resources on our current
      product version to introduce the capabilities of this product to the market.
      The
      TouchThruTM unit will be marketed in a variety of industries and markets,
      including the federal, state and local government, health care, travel and
      general security, and access control. During the year ended December 31, 2006,
      we delivered demonstration and pre-production units for trial to certain
      prospective customers in two industries.




We
      believe that significant resources will be required to market and sell a newly
      designed TouchThruTM product that is based on Ultra-Scan’s next generation
      scanner. Given our limited financial resources at this time and other business
      priorities, this will be deferred until the market is better established and
      we
      have the necessary working capital to support this product. We will continue
      to
      monitor the market and determine the appropriate time to enter this market.




12




**Depreciation
      and Amortization**





Depreciation
      and amortization expense decreased by $3,732 to $9,307 for the three months
      ended March 31, 2007 compared to $13,039 for the three months ended March 31,
      2006. The decrease is due to less depreciation and amortization of assets
      related to the TouchThruTM product, which were considered impaired and written
      off during 2006.





**Income
      (Loss) From Operations**





For
      the
      three months ended March 31, 2007 we had operating income of $895, an
      improvement of $550,251 compared to operating loss of $(549,356) for the three
      months ended March 31, 2006. This is principally attributable to three
      factors **,** first,
      our sales increased from $1,623,436 in 2006 to $2,132,407 in 2007, an increase
      of $508,971; second, our gross profit increased by $406,223; and third, our
      operating expenses decreased by $144,028 including decreases in general and
      administrative expenses of $110,584, selling expenses of $75,936, and research
      and development expenses of $22,859, which were offset in part by increases
      in
      defined benefit pension plan expenses of $69,083.





**Interest
      Expense**





Net
      interest expense was $64,472 for the three months ended March 31, 2007 compared
      to $42,662 for the three months ended March 31, 2006. The increase of $21,810
      is
      principally due to an increase in factoring fees of approximately $17,000 due
      to
      an increase in the volume of financings, and additional interest expense
      associated with short-term borrowings from related parties in 2007.





**Other
      Income**





For
      the
      three months ended March 31, 2007 other income was $0 compared to $498,088
      for
      the same period in 2006. During the three months ended March 31, 2006 we
      received and recorded other income of $498,088, net of legal fees of $166,412,
      from the resolution of the lawsuit we filed in the Superior Court, State of
      Rhode Island on August 13, 1999 against Spectra Science Corporation and Nabil
      Lawandy.





**Income
      Taxes**





Income
      tax expense was $605 and $7,300 for the three months ended March 31, 2007 and
      2006, respectively, consisting of state taxes.





**Net
      Loss**





For
      the
      three months ended March 31, 2007, ** we
      recorded a net loss of $(64,182) or $(.00) per share compared to a net loss
      of
      $(101,230) or $(.01) per share for the three months ended March 31,
      2006.





This
      improvement is principally attributable to three factors, first, our sales
      increased from $1,623,436 in 2006 to $2,132,407 in 2007, an increase of
      $508,971; second, our gross profit increased by $406,223; and third, our
      operating expenses decreased by $144,028 including decreases in general and
      administrative expenses of $110,584, selling expenses of $75,936, and research
      and development expenses of $22,859, which were offset in part by an increase
      in
      defined benefit pension plan expenses of $69,083. During the three months ended
      March 31, 2006 the operating loss of $(549,356) was substantially offset by
      other income of $498,088.




**Stock-Based
      Compensation**




In
      December 2004, the Financial Accounting Standards Board issued SFAS 123R,
      Share-Based Payment (“SFAS 123R”). SFAS 123R supersedes SFAS 123, Accounting for
      Stock Based Compensation, and Accounting Principles Board Opinion 25, Accounting
      for Stock Issued to Employees (“APB 25) and its related implementation guidance.
      On January 1, 2006, we adopted the provisions of SFAS 123R using the modified
      prospective transition method. Under this method, we are required to record
      compensation expense for all stock based awards granted after the date of
      adoption and for the unvested portion of previously granted awards that remain
      outstanding as of the beginning of the adoption and prior period financial
      statements have not been restated. Under SFAS 123R, compensation expense related
      to stock based payments is recorded over the requisite service period based
      on
      the grant date fair value of the awards.




13




Our
      board
      of directors and stockholders have approved stock options plans, which have
      authority to grant options to purchase up to an aggregate of 5,223,000 shares
      at
      March 31, 2007. Such options may be designated at the time of grant as either
      incentive stock options or nonqualified stock options.




As
      a
      result of adopting SFAS 123R in 2006, the compensation cost that has been
      charged against income for options granted to employees under the plan was
      $38,244 and $23,585 for the three months ended March 31, 2007 and 2006,
      respectively. The impact of this expense was to increase basic and diluted
      net
      loss per share from $(.00) to $(.01) for the three months ended March 31, 2006.
      There was no impact on net loss per share for the three months ended March
      31,
      2007. The adoption of SFAS 123R did not have an impact on cash flows from
      operating or financing activities. A deduction is not allowed for income tax
      purposes until the options are exercised. The amount of this deduction will
      be
      the difference between the fair value of our common stock and the exercise
      price
      at the date of exercise. Accordingly, we have a deferred tax asset for the
      tax
      effect of the financial statement expense. The tax effect of the income tax
      deduction in excess of the financial statement expense will be recorded as
      an
      increase in additional paid-in capital. Due to the uncertainty of our ability
      to
      generate sufficient taxable income in the future to utilize the tax benefits
      of
      the options granted, we have recorded a valuation allowance to reduce our gross
      deferred tax asset to zero. As a result, for the three months ended March 31,
      2007 and 2006, there is no income tax expense impact from recording the fair
      value of options granted.





We
      also
      recorded expense of $17,181 and $5,697 for warrants and stock options issued
      to
      consultants for the three months ended March 31, 2007 and 2006, respectively.





In
      the
      following table, we present adjustments and pro forma amounts to reflect the
      impact that the adoption of SFAS 123R had on our financial statements including
      net loss. We believe that these non-generally accepted accounting principles
      (GAAP) financial measures provide investors useful information to facilitate
      the
      comparison of current performance to prior performance. These non-GAAP measures
      should not be considered in isolation or as a substitute for performance
      measures in accordance with GAAP.




Three
                  Months Ended March 31,2007
              
              
              
              
              
              20062007
              
              Adjustments
              
              Pro
                  Forma
              
              2006
              
              Adjustments
              
              Pro
                  FormaSales
              
              $
              2,132,407
              
              $
              -
              
              $
              2,132,407
              
              $
              1,623,436
              
              $
              -
              
              $
              1,623,436Cost
                  of services
              
              
              1,408,607
              
              
              (6,388
              )
              
              1,402,219
              
              
              1,305,859
              
              
              (14,093
              )
              
              1,291,766Gross
                  profit
              
              
              723,800
              
              
              6,388
              
              
              730,188
              
              
              317,577
              
              
              14,093
              
              
              331,670General
                  and administrative
              
              
              216,212
              
              
              (2,627
              )
              
              213,585
              
              
              326,796
              
              
              (1,284
              )
              
              325,512Defined
                  benefit pension plan
              
              
              115,525
              
              
              -
              
              
              115,525
              
              
              46,442
              
              
              -
              
              
              46,442Selling
              
              
              336,598
              
              
              (29,229
              )
              
              307,369
              
              
              412,534
              
              
              (8,208
              )
              
              404,326Research
                  and development
              
              
              45,263
              
              
              -
              
              
              45,263
              
              
              68,122
              
              
              -
              
              
              68,122Depreciation
                  and amortization
              
              
              9,307
              
              
              -
              
              
              9,307
              
              
              13,039
              
              
              -
              
              
              13,039Total
                  operating expenses
              
              
              722,905
              
              
              (31,856
              )
              
              691,049
              
              
              866,933
              
              
              (9,492
              )
              
              857,441Operating
                  income (loss)
              
              
              895
              
              
              38,244
              
              
              39,139
              
              
              (549,356
              )
              
              23,585
              
              
              (525,771
              )Interest
                  expense, net
              
              
              (64,472
              )
              
              -
              
              
              (64,472
              )
              
              (42,662
              )
              
              -
              
              
              (42,662
              )Other
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              498,088
              
              
              -
              
              
              498,088Income
                  tax expense
              
              
              (605
              )
              
              -
              
              
              (605
              )
              
              (7,300
              )
              
              -
              
              
              (7,300
              )Net
                  loss
              
              $
              (64,182
              )
              $
              38,244
              
              $
              (25,938
              )
              $
              (101,230
              )
              $
              23,585
              
              $
              (77,645
              )





**Liquidity
      and Capital Resources**




At
      March
      31, 2007, we had cash of $71,726 available for our working capital needs and
      planned capital asset expenditures.




14




At
      March
      31, 2007, we had working capital deficit of approximately $2.1 million and
      a
      current ratio of .28. The O&W Plan current liabilities have a significant
      impact on our working capital. Without the current liabilities of the O&W
      Plan, working capital was a deficit of approximately $296,000. Our objective
      is
      to improve our working capital position from profitable operations. If we
      continue to incur operating losses or net losses, we may continue to experience
      working capital shortages that impair our business operations and growth
      strategy. Presently, we have sufficient cash flow and short-term financing
      sources, through sales with recourse of accounts receivable, to pay our payrolls
      and recurring invoices on a timely basis.





We
      have
      financed the activity of our IT Services Group through the issuance of notes
      payable to third parties, including related parties, private placements of
      common stock and financing through sales with recourse of our accounts
      receivable.





We
      have
      available a financing line of up to $800,000 with a financial institution that
      allows us to sell selected accounts receivable invoices to the financial
      institution with full recourse against us. We pay fees based on the length
      of
      time that the invoice remains unpaid. At March 31, 2007, we had approximately
      $400,000 of availability under this line and could finance up to another
      approximately $400,000 based on eligible accounts receivable.





We
      have
      used our common stock to provide compensation to certain employees and
      consultants and to fund liabilities. For the three months ended March 31, 2007
      we recorded expense of $17,181 related to warrants issued to a consultant who
      has met a portion of his performance criteria by assisting us with increasing
      our sales in 2007.





During
      the three months ended March 31, 2006 we issued non-qualified stock options
      and
      warrants to other service providers and recorded $5,697 of expense related
      to
      these issuances.





Successes
      in our 2006 and 2007 initiatives are evident in the preferred relationships
      we
      have earned with several large systems integrators and one major product house.
      In addition, we are a member of a team that won the U.S State Department’s
      recent Hybrid Information Technology Support Services (HITSS) contract. Under
      our agreement with the prime contractor, we are identified as a primary Earned
      Value Management resource. In June 2006, we were awarded a prime contract under
      the Department of the Navy’s SeaPort-Enhanced (SeaPort-e) program. This contract
      allows us to compete for and perform service requirements solicited by various
      Navy commands, the Marine Corps, other organizations within the Department
      of
      Defense (DoD), non-DoD agencies, and certain joint agency organizations for
      work
      that is integrally related to the scope and mission of the contract. This work
      involves professional services in all
      phases of naval ship and weapon systems acquisition and life-cycle support, including
      research and development support, prototyping, technology analysis, acquisition
      logistics, project management support, modeling, test and evaluation trials,
      crisis and consequence management, and engineering support.





Although
      our future prospects appear promising, the lengthy government financing and
      procurement processes may result in continuing operating losses until sales
      increase to support our infrastructure and provide consistent cash flow to
      support profitability.





In
      the
      future, we may issue additional debt or equity securities to satisfy our cash
      needs. Any debt incurred or issued may be secured or unsecured, at a fixed
      or
      variable interest rates and may contain other terms and conditions that our
      board of directors deems prudent. Any sales of equity securities may be at
      or
      below current market prices. We cannot assure you that we will be successful
      in
      generating sufficient capital to adequately fund our working capital
      needs.





**Risk
      Factors**




You
      should consider the risk factors included in our Annual Report on Form 10-KSB
      for the year ended December 31, 2006 in evaluating our business and us.
      Additional risks and uncertainties not presently known to us, which we currently
      deem immaterial or that are similar to those faced by other companies in our
      industry or business in general, such as competitive conditions, may also impair
      our business operations. If any of the results of the risks occur, our business,
      financial condition, or results of operations could be materially adversely
      affected.





**Item
      3. Controls and Procedures**





Evaluation
      of Disclosure Controls and Procedures. Our
      management, with the participation of the 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, as amended (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 controls over financial reporting that occurred
        during our fiscal first quarter that has materially affected, or is reasonably
        likely to materially affect, our internal control over financial
        reporting.


15




**PART
      II**




**OTHER
      INFORMATION**




**Item
      1. Legal Proceedings**





We
      are
      not presently involved in any material legal proceedings.




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





On
      April
      5, 2007, we engaged the services of a consultant, an accredited investor, to
      assist us with business development for a term of one year through April 4,
      2008
      and issued it (i) 100,000 restricted shares of our common stock and (ii) a
      warrant to acquire 100,000 shares of our common stock, exercisable at $.50
      per
      share, which expires on April 4, 2012. The issuance of the common shares and
      the
      warrant were made in reliance upon the exemptions from registration set forth
      in
      Sections 4(2) and 4(6) of the Securities Act of 1933, as amended
      ("Act").





On
      April
      24, 2007, upon the exercise of an outstanding stock option under our stock
      option plan, we issued 10,000 restricted shares of our common stock and
      received aggregate proceeds of $500. The issuance of the shares was made in
      reliance upon the exemption from registration set forth in Section 4(2) of
      the
      Act.





On
      May 1,
      2007, outstanding convertible notes in the aggregate principal amount of $50,000
      with a conversion price of $.05 per shares, were converted by three separate
      note holders, all accredited investors, in accordance with the terms of the
      notes. Upon conversion, we issued a total of 1,000,000 restricted shares of
      our
      common stock. The issuance of the common shares was made in reliance upon the
      exemptions from registration set forth in Sections 4(2) and 4(6) of the
      Act.





We
      reasonably believe that each purchaser had such knowledge and experience in
      financial and business matters to be capable of evaluating the merits and risks
      of the investment, each purchaser represented an intention to acquire the
      securities for investment only and not with a view to distribution there of
      and
      appropriate legends were affixed to the stock certificates or
      warrant.





No
      underwriter was involved in these transactions.





**Item
      3. Defaults Upon Senior Securities**





None.




16





**Item
      4. Submission of Matters to a Vote of Security Holders**





None.





**Item
      5.**  **Other
      Information.**





The
      disclosure in response to Part II-Item 2, above in incorporate herein by
      reference.





**Item
      6.**  **Exhibits**




Exhibit
              No.
            Description




31.1
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.




31.2
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.




32.1
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act of
                2002.




**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


Infinite
                Group Inc.
              (Registrant)Date
                May 11, 2007
            
            /s/
                Michael S. SmithChief
                Executive Officer
                (Principal
                  Executive Officer)




Date
                  May 11, 2007
            
            /s/
                  Michael S. SmithChief
                  Financial Officer
                (Principal
                    Financial Officer)


17