U. S. SECURITIES AND EXCHANGE COMMISSION
                                 Washington, D. C. 20549

                                   FORM 10-QSB
Mark One

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

For the Quarterly Period ended September 30, 2000

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
      SECURITIES ACT OF 1934

For the transition period from period from ______ to _______

Commission File Number 0-21816

                              INFINITE GROUP, INC.
             (Exact name of Registrant as specified in its charter)

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

                        2364 Post Road, Warwick, RI 02886
                        ---------------------------------
               (Address of principal executive office) (Zip Code)

                                 (401) 738-5777
              (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes |X|   No |_|

As of November 2, 2000 the Registrant had a total of 3,353,677 shares of Common
Stock, $.001 par value, outstanding. The aggregate market value of the voting
stock of the registrant held by non-affiliates of the registrant on November 3,
2000, based on the average bid and asked price on such date was $9,432,217.

Transitional Small Business Disclosure Format

                                 Yes |X|   No |_|
<PAGE>

                                      INDEX

                              INFINITE GROUP, INC.

PART 1. FINANCIAL INFORMATION

                                                                            Page

Item 1. Consolidated Financial Statements (Unaudited)

        Consolidated Balance Sheets
        September 30, 2000 and December 31, 1999                               1

        Consolidated Statements of Operations - Three Months
        And Nine Months Ended September 30, 2000 and 1999                      2

        Consolidated Statements of Cash Flows - Nine Months
        Ended September 30, 2000 and 1999                                      3

        Notes to Unaudited Consolidated Financial Statements                 4-8

Item 2. Management's Discussion and Analysis of Financial Conditions
        and Results of Operations                                           9-15

PART II. OTHER INFORMATION

Items
1-6     none                                                                  15

SIGNATURES                                                                    15
<PAGE>

                              INFINITE GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS

                                                    Unaudited         Audited
                                                   September 30,    December 31,
ASSETS                                                 2000            1999
                                                   ------------    ------------
Current assets:
  Cash and cash equivalents                        $    109,346    $    328,094
  Restricted funds                                       68,371          79,235
  Accounts receivable, net of allowances              1,704,226       1,496,288
  Inventories                                           600,348         536,554
  Advance - stockholder                                  50,249          50,014
  Other current assets                                  135,217         147,581
  Note receivable                                            --         204,716
                                                   ------------    ------------
          Total current assets                        2,667,757       2,842,482

Property and equipment, net                           7,145,663       7,059,367

Other assets:
Cash surrender value of officer life
  insurance                                              61,546          61,546
Prepaid pension costs                                   769,101         769,101
Intangible assets, net                                  256,983         318,342
Other investment                                        295,000         250,000
Note receivable - stockholders                               --           6,652
                                                   ------------    ------------
          Total other assets                          1,382,630       1,405,641
                                                   ------------    ------------
                                                   $ 11,196,050    $ 11,307,490
                                                   ============    ============
  LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable:
    Bank                                           $    938,822    $    893,957
    Stockholder                                          18,330          40,000
  Accounts payable and accrued expenses               2,209,375       1,852,483
  Current maturities of long term obligations           800,423       1,042,159
  Current maturities of notes payable -
    stockholder                                          48,461          21,572
                                                   ------------    ------------
          Total current liabilities                   4,015,411       3,850,171

Long term obligations                                 4,418,803       5,198,680

Notes payable - stockholders                            782,784         380,483

Stockholders' equity
  Common stock, $.001 par value, 20,000,000
   shares authorized 3,521,613, and 2,918,604
   shares issued; 3,177,519 and 2,368,529 shares
   outstanding; 93,650 and -0- shares subscribed          3,615           2,918

  Additional paid-in capital:
    Common stock                                     21,711,079      20,564,179
    Warrants                                            785,199         671,418
  Accumulated deficit                               (19,473,106)    (17,985,172)
                                                   ------------    ------------
                                                      3,026,787       3,253,343
 Less:
  Treasury stock, 344,094 and 550,075
    shares, at cost                                     860,235       1,375,187
   Common stock subscription receivable                 187,500              --
                                                   ------------    ------------
           Total stockholders' equity                 1,979,052       1,878,156
                                                   ------------    ------------
                                                   $ 11,196,050    $ 11,307,490
                                                   ============    ============

                See accompanying notes to unaudited consolidated
                             financial statements.


                                      -1-
<PAGE>

                              INFINITE GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                    Three Months Ended            Nine Months Ended
                                                        Sept. 30,                     Sept. 30,
                                               --------------------------      -------------------------
                                                   2000            1999          2000            1999
                                                   ----            ----          ----            ----
<S>                                            <C>              <C>            <C>            <C>
Sales                                          $ 3,002,473      2,892,258      9,487,138      6,813,998
Cost of goods sold                               1,962,747      2,304,671      6,276,672      5,331,166
                                               -----------      ---------      ---------      ---------
Gross profit                                     1,039,726        587,587      3,210,466      1,482,832
Costs and expenses
     Research and development                      265,027        147,866        790,403      1,140,780
     General and administrative expenses           652,800        520,624      1,989,325      1,824,156
     Selling expenses                              172,235        286,525        488,667        706,051
     Depreciation and amortization                 296,260        293,636        851,264        644,382
                                               -----------      ---------      ---------      ---------
          Total costs and expenses               1,386,322      1,248,651      4,119,659      4,315,369

Operating loss                                    (346,596)      (661,064)      (909,193)    (2,832,537)

Other income (expense)
     Gain (loss) on sale of assets                      --             --        (67,274)
     Interest and other income                      46,197            935         51,397         38,991
     Interest expense                             (201,813)      (174,506)      (562,864)      (405,819)
                                               -----------      ---------      ---------      ---------
          Total other income (expense)            (155,616)      (173,571)      (578,741)      (366,828)

Loss from continuing operations                   (502,212)      (834,635)    (1,487,934)    (3,199,365)

Gain on sale of business segment
  (less applicable income taxes of $825,000)            --             --             --      4,170,315

Income (loss) before extraordinary item           (502,212)      (834,635)    (1,487,934)       970,950

Extraordinary item                                      --             --             --       (222,864)
                                               -----------      ---------      ---------      ---------

Net income (loss)                              $  (502,212)      (834,635)    (1,487,934)       748,086
                                               ===========      =========      =========      =========
Income (loss) per share - basic:
     Continuing operations                     $     (0.16)         (0.38)         (0.54)         (1.42)
     Disposed business segment:                         --             --             --
       Gain on sale                                     --             --             --           1.86
     Extraordinary item                                 --             --             --          (0.09)
                                               -----------      ---------      ---------      ---------
     Net income (loss) per common share        $     (0.16)         (0.38)         (0.54)          0.34
                                               ===========      =========      =========      =========

Income from disposed business segment
     per share - diluted                       $        --             --                          1.75

Weighted average number of common
  shares outstanding:
     Basic                                       3,070,296      2,198,529      2,736,351      2,246,524
     Diluted                                     3,070,296      2,331,862      2,736,351      2,379,587
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.


                                      -2-
<PAGE>

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

                                                      Nine Months    Nine Months
                                                        Ended           Ended
                                                       Sept. 30,      Sept. 30,
                                                         2000           1999
                                                     ------------    ----------
Cash flows from operating activities:
  Net loss from continuing operations                $(1,487,934)    (3,199,365)
  Adjustment to reconcile net loss from
    continuing operations to net cash used in
    continuing operations:
  Depreciation and amortization                          851,264        644,382
  Loss on disposition of assets                           67,274             --
  Amortization of discount on note payable                27,355         33,033
  Expenses satisfied via issuance of equity                   --         39,527
  Expenses satisfied via issuance of debt                 42,500             --
  Asset write down and allowances                          6,652         30,338
  Changes in assets and liabilities:
    (Increase) decrease in assets:
       Accounts receivable                              (207,938)      (132,885)
       Other current assets                               12,364         64,574
       Inventories                                       (63,794)       494,115
    Increase (decrease) in liabilities:
       Accounts payable and
         accrued expenses                                423,972       (673,242)
                                                     -----------    -----------
  Net cash used in continuing operations             $  (328,285)    (2,699,523)

Cash flows from investing activities:
  Advance under note receivable                               --       (100,000)
  Repayment of note receivable                           204,716             --
  Net collections on advance to
    stockholder                                             (235)           192
  Purchase of property and equipment                    (447,457)    (1,617,409)
  Proceeds from the sale of property
    and equipment                                        122,900             --
  Purchase of investments                                (45,000)      (298,701)
  Increase in intangible assets                               --        (18,705)
  Proceeds from the sale of investment in
    Spectra Science Corp.                                     --      3,620,128
                                                     -----------    -----------
  Net cash (used in) provided by                        (165,076)     1,585,505
    investing activities

Cash flows from financing activities:
   Net borrowings (repayments) of
     short-term debt                                     729,865        (70,643)
   Borrowings of long-term obligations                        --      1,373,165
   Repayments of long-term obligations                  (775,114)      (882,562)
   Net (repayments to) borrowings from
     stockholder                                          (8,964)        77,696
   Decrease in restricted funds, net                      10,864         14,330
   Proceeds from the issuance of common
     stock                                               317,962             --
                                                     -----------    -----------
  Net cash provided by financing
    activities                                           274,613        511,986
                                                     -----------    -----------

Net decrease in cash and cash equivalents               (218,748)      (602,032)

Cash and cash equivalents - beginning of
  period                                                 328,094      1,036,910
                                                     -----------    -----------
Cash and cash equivalents - end of period            $   109,346    $   434,878
                                                     ===========    ===========

      See accompanying notes to unaudited consolidated financial statements


                                      -3-
<PAGE>

                              INFINITE GROUP, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

NOTE 1. - BASIS OF PRESENTATION

      The accompanying financial statements of Infinite Group, Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine-month period ended September 30, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. For further information, refer to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999, which includes
audited financial statements and footnotes thereto as of and for the years ended
December 31, 1999 and 1998.

NOTE 2. - NOTES PAYABLE - STOCKHOLDERS

      During the quarters ended March 31, 2000 and June 30, 2000, the Company
incurred $255,000 and $104,000 of additional debt, payable to its President and
principal stockholder. The obligations accrued interest at the rate of 10-1/2%.
The principal balance of $399,000, including a loan of $40,000 incurred in
December 1999, matured during the quarter ended June 30, 2000. Of these notes
payable, $248,285 was applied to the exercise of warrants and options exercised
by the Company's President during the quarter ended June 30, 2000 and the
balance, including accrued interest, was satisfied by the issuance of common
shares (see Note 6).

      During the quarter ended June 30, 2000, the Company's President loaned
$325,000 to the Company evidenced by a note bearing interest at the rate of 11%
that matured in September 2000. A portion of this loan, in the amount of
$260,000, was satisfied during the quarter ended June 30, 2000, by issuance of
common shares (see Note 6). The remaining balance amounting to $65,000, as well
as accrued interest of $11,000, was applied to the exercise of warrants and
options exercised by the Company's President during the quarter ended September
30, 2000 (see Note 6).

      During the quarter ended September 30, 2000, the Company issued short-term
notes payable to three employee/stockholders, amounting to $42,500. As of
September 30, 2000, $24,170 of this amount was applied to the exercise of
options exercised by the employees during the quarter ended September 30, 2000.

NOTE 3. - CONVERTIBLE NOTES PAYABLE

      During the quarter ended March 31, 2000, convertible notes payable to
former Osley and Whitney, Inc. shareholders, along with accrued interest
aggregating $146,540, were converted into 97,700 shares of the Company's common
stock. The excess of the fair market value of the common shares issued over the
principal and interest reduction, which amounted to $200,000, has been reflected
as additional purchase price consideration.


                                      -4-
<PAGE>

                              INFINITE GROUP, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

NOTE 4. - CAPITAL LEASE OBLIGATION - STOCKHOLDER

      During the period ended September 30, 2000, the Company entered into a
capital lease agreement with its President and principal stockholder for the
lease of equipment. The lease provides for monthly payments of approximately
$5,650 through April, 2010, including interest at the prime rate plus 1% (10.5%
at September 30, 2000). The asset and capital lease obligation recorded as a
result of the transaction amounted to approximately $419,000. As of September
30, 2000 the Company was in arrears on the required payments. The outstanding
balance as of September 30, 2000 amounted to $436,862, including accrued
interest, which is included in notes payable stockholder in the accompanying
balance sheet.

NOTE 5. - EARNINGS PER SHARE

      In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," the Company has reported basic and diluted earnings per
share. The difference between the weighted average number of common shares
outstanding for the basic and diluted calculation represents the effect of
convertible debentures. As discussed in Note 5, these debentures were converted
into common shares during the quarter ended September 30, 2000. The conversion
of outstanding options and warrants were not considered in the calculation of
diluted income from disposed segment per share since the average market price is
less than the exercise price for all exercisable securities during the periods
ended September 30, 1999. The impact of convertible debentures and the exercise
of stock options is excluded from the computation of loss per share from
continuing operations because their assumed conversion would be antidilutive.

NOTE 6. - STOCKHOLDERS' EQUITY

      During the quarters ended September 30, 2000 and June 30, 2000, the
Company's President exercised 15,565 and 62,019 incentive stock options,
respectively, as well as 25,000 and 128,000 common stock purchase warrants.
These securities had strike prices ranging from $1.031 to $2.50. The aggregate
exercise price of $76,000 and $248,285 for the quarters ended September 30, 2000
and June 30, 2000 was paid by reducing Notes Payable- Stockholder which became
due during the quarters (see Note 2).

      During the quarter ended June 30, 2000, the Company's President agreed to
accept 75,981 common shares (valued at $2.00 per share) in satisfaction of the
balance of the Notes Payable - Stockholder, which became due during that quarter
(see Note 2).

      During the quarter ended June 30, 2000, the Company's President agreed to
accept 130,000 common shares (valued at $2.00 per share) in satisfaction of a
portion of the Note Payable - Stockholder due September (see Note 2). As
additional consideration, the Company granted the President a five-year warrant
to purchase


                                      -5-
<PAGE>

                              INFINITE GROUP, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

25,000 common shares at $1.63. During the quarter ended September 30, 2000 these
warrants were exercised and are included in the aggregate exercise price
previously discussed.

      During the quarter ended September 30, 2000, various employees of the
Company exercised options resulting in the issuance of 44,200 shares of common
stock. These options had exercise prices ranging from $1.00 to $2.50 resulting
in an aggregate exercise price of $58,832, of which, $53,370 was paid by
reducing liabilities outstanding to the employees.

      During the quarter ended September 30, 2000 a convertible debenture in the
amount $100,000, as well as accrued interest of $35,000 was converted into
74,176 shares of common stock. The note was convertible into common shares at
the rate of 80% of the average closing price on the ten days prior to
conversion.

      During the quarter ended June 30, 2000, the Company sold, in a private
placement transaction, 250,000 shares of its common stock at a price of $2.00
per share, resulting in proceeds of $500,000. As of September 30, 2000, $312,500
of this amount has been received. The unpaid portion has been recorded as a
stock subscription receivable, plus interest at 10% per annum, which will be
paid in three equal payments, on November 29, 2000, February 26, 2000 and May
26, 2000. The receivable is shown as a reduction of stockholders' equity in the
accompanying balance sheet. In connection with this transaction, the Company
granted 50,000 warrants to purchase common stock at a price of $1.63 per share.
A portion of the proceeds, amounting to $63,000, was allocated to these warrants
and recorded as additional paid-in capital warrants. This amount was based on
the fair value of the warrants at the date of grant, determined utilizing the
Black-Schoeles pricing models. The Company also granted the purchaser's designee
a warrant to purchase 100,000 common shares at a price of $2.00 per share,
exercisable for a four year period commencing May 31, 2001, for services
rendered in connection with the financing. This warrant had a value of $124,000
at the date of grant, which is recorded as a stock offering cost and additional
paid-in capital warrants.

NOTE 7. - SUBSEQUENT EVENTS

      During October 2000, various employees of the Company exercised incentive
stock options resulting in the issuance of 45,290 shares of the Company's common
stock. These options had exercise prices ranging from $1.00 to $2.50 per share
resulting in aggregate exercise proceeds of $75,553 of which $72,935 was paid by
reducing Company liabilities outstanding to the employees.

      Additionally, in October 2000, the Company's President agreed to accept
88,668 common shares (valued at $2.73 per share) in satisfaction of a note
payable issued to him in October 2000, amounting to $242,064. As additional
consideration, the Company granted its President a three-year warrant to
purchase 8,900 shares of common stock at $3.42 per share.


                                      -6-
<PAGE>

                              INFINITE GROUP, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

      Further, in October 2000, the Company sold 42,200 shares of common stock
in a private placement transaction at a price of $2.84 per share, resulting in
proceeds of $120,000. As additional consideration, three-year warrants to
purchase 4,300 shares of common stock at $3.95 per share were granted.

NOTE 8. - BUSINESS SEGMENTS

      The Company's businesses are organized, managed and internally reported as
two segments. The segments are determined based on differences in products,
production processes and internal reporting. All of the segments of the Company
operate entirely within the United States. Revenues from customers in foreign
countries are minimal.

      Prior to April 1, 1999, the Laser segment was the primary segment. Revenue
from this segment accounted for 94% and 95% of total revenue in 1998 and the
first quarter of 1999, respectively. As a result, corporate expenses were
reported as part of the Laser Service segment. With the acquisition of O&W in
April 1999, the Plastics segment became a significant component of the Company's
consolidated financial statements. Based on the increased activity of the second
segment, general corporate activity is reported as a separate segment. Prior
periods were restated to conform with this presentation.

      Transactions between reportable segments are recorded at cost. The Company
relies on intersegment cooperation and management does not represent that these
segments, if operated independently, would report the results shown.

      A summary of selected consolidated information for the Company's industry
segments during the three and nine month periods ended September 30, 2000 and
1999 is set forth as follows:


                                      -7-
<PAGE>

<TABLE>
<CAPTION>
                                                            Photonic
                                                            Material
                                                 Laser       Spectra     Plastics     Unallocated
                                                 Group       Science       Group       Corporate     Eliminations   Consolidated
                                                 -----       -------       -----       ---------     ------------   ------------
<S>                                           <C>           <C>         <C>           <C>            <C>            <C>
 Three Months Ended September 30, 2000

Sales from external customers                 $ 1,407,810   $       --  $ 1,594,663   $         --   $         --   $  3,002,473
                                              ===========   ==========  ===========   ============   ============   ============
Operating loss                                $   (93,519)  $       --  $  (105,017)  $   (148,060)  $         --   $   (346,596)
                                              ===========   ==========  ===========   ============   ============   ============
Identifiable assets                           $ 8,272,435   $       --  $ 3,842,658   $ 12,714,433   $(13,633,476)  $ 11,196,050
                                              ===========   ==========  ===========   ============   ============   ============

 Three Months Ended September 30, 1999

Sales from external customers                 $ 1,465,331   $       --  $ 1,426,927   $         --   $         --   $  2,892,258
                                              ===========   ==========  ===========   ============   ============   ============
Operating loss                                $   (57,053)  $       --  $  (327,471)  $   (276,540)  $         --   $   (661,064)
                                              ===========   ==========  ===========   ============   ============   ============
Identifiable assets, as of December 31, 1999  $ 8,871,591   $       --  $ 5,072,008   $ 10,922,806   $(13,558,915)  $ 11,307,490
                                              ===========   ==========  ===========   ============   ============   ============

 Nine Months Ended September 30, 2000

Sales from external customers                 $ 4,732,199   $       --  $ 4,754,939   $         --   $         --   $  9,487,138
                                              ===========   ==========  ===========   ============   ============   ============
Operating loss                                $  (284,949)  $       --  $   (57,457)  $   (566,787)  $         --   $   (909,193)
                                              ===========   ==========  ===========   ============   ============   ============
Identifiable assets                           $ 8,272,435   $       --  $ 3,842,658   $ 12,714,433   $(13,633,476)  $ 11,196,050
                                              ===========   ==========  ===========   ============   ============   ============

 Nine Months Ended September 30, 1999

Sales from external customers                 $ 3,788,160   $       --  $ 3,025,838   $         --   $         --   $  6,813,998
                                              ===========   ==========  ===========   ============   ============   ============
Operating loss                                $  (962,676)  $       --  $(1,030,623)  $   (839,238)  $         --   $ (2,832,537)
                                              ===========   ==========  ===========   ============   ============   ============
Net income from disposed business segment     $        --   $4,170,315  $        --   $         --   $         --   $  4,170,315
                                              ===========   ==========  ===========   ============   ============   ============
Extraordinary item                            $        --   $       --  $        --   $   (222,864)  $         --   $   (222,864)
                                              ===========   ==========  ===========   ============   ============   ============
Identifiable assets, as of December 31, 1999  $ 8,871,591   $       --  $ 5,072,008   $ 10,922,806   $(13,558,915)  $ 11,307,490
                                              ===========   ==========  ===========   ============   ============   ============
</TABLE>


                                      -8-
<PAGE>

         MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
                             RESULTS OF OPERATIONS

                           FORWARD-LOOKING STATEMENTS

Certain statements made in this Quarterly Report on Form 10-QSB are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 regarding the plans and objectives of management
for future operations. You can identify these forward-looking statements by our
use of the words "believes," "anticipates," "plans," "expects," "may," "will,"
"intends," "estimates" and similar expressions, whether in the negative or
affirmative. Such statements involve known and unknown risks, uncertainties and
other factors that may cause actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Our plans and objectives are
based, in part, on assumptions involving judgements with respect to, among other
things, future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond our control. Although we believe that its assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this report will prove to be accurate.
Factors that could cause actual results to differ materially from those
expressed or implied by forward -looking statements include, but are not limited
to, the factors set forth in "Certain Factors That May Affect Future Growth,"
under Part I, Item 1, of the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1999 as filed with the Securities and Exchange Commission. In
light of the significant uncertainties inherent in the forward-looking
statements included herein particularly in view of our early stage operations,
the inclusion of such information should not be regarded by us or any other
person that the objectives and plans of the Company will be achieved.

GENERAL

      Our business has two business segments, the Laser and Photonics Group and
the Plastics Group. We sell products and services in the fields of material
processing, advanced manufacturing methods, high productivity production mold
building and laser-application technology. We have approximately 145 employees.

      Our Laser and Photonics Group, comprised of Laser Fare (Smithfield, RI),
Mound Laser & Photonics Center (Miamisburg. OH) and the Advance Technology Group
(Narragansett, RI), provides comprehensive laser-based materials processing and
photonics services to leading manufacturers and contract research and
development.

      Our Plastics Group, comprised of Osley & Whitney/ExpressTool (Westfield,
MA), Materials & Manufacturing Technologies (West Kingston, RI) and Express
Pattern (Buffalo Grove, IL), provides rapid prototyping services and proprietary
mold building services.

      We were organized as a Delaware corporation on October 14, 1986. On
January 7, 1998, we changed our name from Infinite Machines Corp. to Infinite
Group, Inc. Our executive offices are located at 2364 Post Road, Warwick, RI
02886. We own various trademark rights for our name and the Infinite Group logo.
"Infinite Group," "Laser Fare," "Osley & Whitney," "ExpressTool," and "Zyrkon"
are trademarks of Infinite Group, Inc. We maintain sites on the World Wide Web
at www.infinite-group.com, www.laserfare.com, www.mlpc.com,
www.expresspattern.com and www.expresstool.com. However, the information found
on the web sites is not part of this report.


                                      -9-
<PAGE>

THE LASER AND PHOTONICS GROUP

      Our Laser Fare (LF) subsidiary is primarily engaged in contract laser
material processing; however it also develops new applications for industrial
lasers. Laser Fare has 23 high powered computer controlled lasers that are
capable of performing a wide variety of manufacturing with multi-axis
manipulation. Laser Fare also manufactures stents and complete assemblies for
selective medical product companies. Approximately 75% of Laser Fare's sales
come from customers in the medical device, aerospace and power generation
industries. Customers include General Electric, United Technologies, Honeywell,
Polaroid, Stryker Medical and Dey Laboratories. Through Laser Fare we also
provide a variety of value-added services, that include assembly, heat treating,
coating, testing and inspection. We quote orders through traditional sales
methods as well as through our Web site at www.laserfare.com. Laser Fare is
certified for overhaul and repair by the Federal Aviation Administration (FAA
No. LQFR37K), and as a Contract Manufacturer (Type E) by the Food and Drug
Administration (FDA No. 1287338).

      Our Mound Laser and Photonics Center (MLPC) subsidiary specializes in
laser applications, photonics applications and materials processing, and
provides services within industry, government and education sectors. The midwest
location, a region long known for its expertise in materials and material
science, gives us a platform for growth into the automotive, aerospace, tool and
die and other local industries. Specialized services include growth of thin
films by pulsed laser deposition, application of lasers to chemistry and
photochemistry, spectroscopy, and applied optics. MLPC has applied for a
provisional patent on pulsed laser deposition. The combination of Laser Fare's
expertise in materials processing and MLPC's expertise in laser and photonics
applications creates a synergistic atmosphere for the advancement of laser
materials processing and the development and commercialization of new
laser-based technology.

      In June 2000, our MLPC subsidiary was awarded a $100,000 Phase 1 Small
Business Innovative Research (SBIR) contract from the Air Force Research
Laboratory (AFRL). The SBIR is for work on the laser deposition of High
Temperature Superconductors (HTS). The work is based on recent developments at
our MLPC subsidiary in laser micromachining and fabrication technology. AFRL's
Materials and Manufacturing Directorate (AFRL/ML) possesses novel HTS process
technology and has developed complementary substrate preparation technology.

      Our Advanced Technology Group (ATG) conducts research and development
programs for industrial and government sponsors. ATG has recently been awarded
several contracts and subcontracts sponsored by the Defense Advanced Research
Project Agency (DARPA). DARPA is the central research and development
organization for the Department of Defense. It manages and directs selected
basic and applied research and development projects for the Department of
Defense, and pursues research and technology where risk and payoff are both very
high and where success may provide dramatic advances for traditional military
roles and missions and dual-use commercial applications. As it effects ATG,
these programs have been focused on laser driven direct write technologies.
Laser direct technologies enable cost-effective manufacturing of engineered
components without the use of expensive tooling by directly depositing materials
on substrates with laser energy. Active and passive devices for electronic and
photonic applications can be manufactured this way as well as a wide variety of
sensors, Micro Electro Mechanical Systems ("MEMS") and actuators. These
technologies have applications across a broad range of industries that utilize
electronic and photonic materials (including telecommunications, automotive and
consumer electronics).


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<PAGE>

      ATG has a consulting arrangement with Tensegra Inc. of Cambridge, MA.
Tensagra is creating technologies using synthetic biomimetic materials with the
mechanical responsiveness of living cells and tissues and applying these
technologies to medical, industrial and military applications. Our Advanced
Technology Group will utilize Laser Fare's and ExpressTool's proprietary
techniques to fabricate structures for Tensegra.

      Triton Systems of Chelmsford, MA contracts with our Advanced Technology
Group to laser fabricate aerospace components from metal matrix composite
materials. These are strong lightweight materials that are used in aerospace
engines.

      In May 2000, our Advanced Technology Group was awarded a contract from
MIOX Corporation in support of their award from DARPA for small portable water
purification system that can be carried by a soldier in the field. The system
will provide filtered, desalinated, and disinfected water in sufficient quantity
to supply a single soldier, from natural water sources, including saltwater. We
will apply our knowledge of classical manufacturing and additive direct write
techniques to enable the cost effective manufacturing of these devices.

      In June 2000, ATG was awarded a contract from the State University of New
York (SUNY) at Stony Brook in support of their award from DARPA for thermally
sprayed direct write sensors. The Center for Thermal Spray Technology at
SUNY-Stony Brook is a National Science Foundation Materials Research Science and
Engineering Center. The Center conducts both basic and applied research in
thermal spray materials and processes and has a broad base of industrial
support. It is recognized as a world leader in thermal spray technology. This
high energy direct write approach will create a new family of sensors and sensor
enabled MEMS that will be able to function in harsher environments than today's
devices. Our successful completion of this work will open new markets for these
devices ranging from aerospace and automotive to telecommunications.

THE PLASTICS GROUP

      In April 1999, we acquired 100% of the outstanding capital stock of Osley
& Whitney, Inc. (O&W), a privately held Massachusetts corporation, from its
stockholders for approximately $1.5 million payable in cash and notes. O&W is a
fifty-year-old plastic injection moldbuilding company located in Westfield, MA
with approximately 54 employees. It serves a blue-ribbon clientele of
automotive, automotive aftermarket, consumer sporting goods, and office machine
companies including Polaroid, Pitney-Bowes, Hardigg Industries, and others, from
its 21,500-sq. ft. manufacturing facility. Our proprietary mold fabrication and
conformal cooling technologies lower the cost of molded parts, increase molding
capacity and provide shorter delivery times over conventional constructed molds.
This compliments our established expertise in the moldbuilding industry. O&W has
achieved preferred vendor status with Pitney Bowes, Hardigg Industries and
others.

      ExpressTool (ET) was integrated into our Westfield facility and separate
facilities in Warwick, RI were closed to reduce cost and improve productivity.
The ExpressTool process incorporates its conformal cooling and proprietary
thermal management for high production injection mold tooling to allow molds
used in the plastic fabrication industries to cool and eject parts up to 75%
faster than traditional molds. ET accepts 3-D design computer files directly
over the Internet from our customers who use such software as AutoCad, Pro-E,
Solidworks and Cadkey. ExpressTool is shipping mold inserts to such customers as
Cheeseborough Pond, 3M and GE Plastics among others. In April 1999, we formed
Express Pattern (EP) located in


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<PAGE>

Buffalo Grove, IL to expand our midwest presence and provide plastic rapid
prototyping services to the metal casting industries. Express Pattern ships
plastic prototype parts to Allen-Bradley, Paradigm, Rolls-Royce Allison,
Motorola, Hewlett-Packard and others. In addition to quotations and prototype
part production from traditional blueprints, EP provides direct interface
(including uploads over the internet) from customer CAD software (such as
AutoCad, Pro-E and others) to our stereolithography systems and equipment.
Express Pattern also provides similar services to our other subsidiaries.

      Also in April 1999, we acquired 100% of the outstanding stock of Materials
& Manufacturing Technologies, Inc. (MMT) of West Kingston, Rhode Island in
exchange for 20,000 shares of Infinite Group common stock. MMT has received a
patent, number 5,427,987, from the United States patent office on its work in
zirconium diboride materials. MMT has an exclusive licensing arrangement with
Texas A&M University (with rights to sub-license) for use of patents and
intellectual property owned by Texas A&M in the area of electrodes and parts
made from zirconium diboride/cooper (Zyrkon(TM)) composites. Zyrkon(TM)
composite electrodes have been shown to be superior to copper, tungsten/copper
and graphite electrodes in electrical discharge machining applications. In
addition, parts made from Zyrkon(TM) exhibit excellent abrasion resistance and
resistance to wear by electric arcs as well as high thermal conductivity and a
relatively low coefficient of thermal expansion. These properties indicate that
Zyrkon(TM) can be used to replace current material systems in applications as
varied as injection mold tooling, spot-welding, waste remediation electrodes,
high-current switches and heat sinks. The acquisition provides us with the
ability to take advantage of these material systems in our areas of expertise as
well as providing us with the ability to address new markets.

LIQUIDITY AND CAPITAL RESOURCES

      The Company has financed its product development activities through a
series of private placements of debt and equity securities. As of September 30,
2000, we had cash, cash equivalents and marketable debt securities of
approximately $ 109,346 available for our working capital needs and planned
capital asset expenditures.

      While the majority of the revenues realized in the nine months ending
September 30, 2000 were attributed to Laser Fare and Osley & Whitney operations,
we anticipate improved revenue from other divisions and positive results from
additional expense containment measures that have been implemented. We are also
pursuing other strategies for raising working capital through debt and/or equity
transactions.

      In October 2000, the Company's raised $437,617 in equity from the exercise
of employee incentive stock options ($75,553), conversion of debt to equity by
the Company's president ($242,064) and a private placement ($120,000).

      On May 31, 2000, we completed a $500,000 private placement of Common
Stock, at a price of $2.00 per share, of which $250,000 was paid in cash and the
remainder is due in four equal installments (August 31, 2000, November 29, 2000,
February 26, 2001and May 26, 2001) with accrued interest at 10% per annum. In
conjunction with the financing, we issued warrants to purchase 50,000 and
100,000 shares of Common Stock, at exercise prices of $1.625 and $2.00 per
share, respectively, exercisable commencing on the first anniversary date of the
warrant and expiring five years from the date of issuance.

      During the period from January 1, 1998 through September 30, 2000, the
Company's


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<PAGE>

president and chief executive officer loaned the Company an aggregate of
$2,274,000, which bore interest at various interest rates. In consideration for
these loans, the president was issued warrants to purchase 689,000 shares of
common stock. As of September 30, 2000, the Company has repaid approximately
$1,045,000 of the loans and approximately $809,000 has been converted into
556,000 shares of common stock, through the exercise of options and warrants, as
well as the issuance of shares from treasury.

      As of September 30, 2000 we had a working capital deficit of approximately
$1,347,654. In conjunction with our on-going business expansion program, we are
pursuing additional equity, alternative sources of funding from conventional
banking institutions and the availability of government funds in the form of
revenue bonds for the purchase of equipment and facilities, among others. There
is no assurance, however, that our current resources will be adequate to fund
our current operations and business expansion or that we will be successful in
raising additional working capital. Our failure to raise necessary working
capital could force us to curtail operations, which would have a material
adverse effect on our financial condition and results of operations.

      Risk of Nasdaq Delisting. Our Common Stock is listed on the Nasdaq
SmallCap Market System and in connection therewith we are required to maintain
certain continued listing requirements including $2 million of net tangible
asset. At December 31, 1999 and at March 31, 2000, our net tangible assets were
$1,732,953 and $1,629,288, respectively. As a result, in April 2000, we received
notification from Nasdaq requesting submission by the Company of a plan to
achieve and sustain compliance with the Nasdaq SmallCap continued listing
requirements (the "Listing Requirements"). In May 2000, we submitted a plan,
which demonstrated both current compliance with the Listing Requirements and
continued compliance in foreseeable future periods. A response from Nasdaq to
our plan is outstanding. Our net tangible assets at June 30, 2000 and at
September 30, 2000 were $2,017,252 and $1,854,916, respectively. An additional
$187,500 will be added to net tangible assets as a stock subscription receivable
is paid through three equal payments of $62,500 each (plus interest) on November
29, 2000, February 26, 2001 and May 26, 2001. Further in October 2000, the
Company raised $437,617 in equity from the exercise of employee incentive stock
options ($75,553), conversion of debt to equity by the Company's president
($242,064) and through a private placement ($120,000). Had these transactions
been completed by September 30, 2000, our net tangible assets at such date would
have been $2,642,369. Based upon our compliance plan, we believe that the
Company will continue to meet the Listing Requirements for the continued listing
of our Common Stock on the Nasdaq SmallCap Market. However, no assurance can be
given that we will continue to meet such requirements, or that Nasdaq will
concur with our plan. In the event that we do not meet the continued listing
requirements, our Common Stock will be subject to delisting from the Nasdaq
SmallCap Market, whereupon it would trade on the Nasdaq Electronic Bulletin
Board. Such an event would make it more difficult for shareholders to effect
transactions in our Common Stock.

                              Results of Operatons

Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

      Consolidated revenues for the three months ended September 30, 2000 were
$3,002,473 on cost of sales of $1,962,747, resulting in a gross profit of
$1,039,726 for the quarter. Consolidated revenues for the three months ended
September 30, 1999 were $2,892,258 on cost of


                                      -13-
<PAGE>

sales of $2,304,671, resulting in a gross profit of $587,587 for the three
months ended September 30, 1999. The increase of $110,215 or 3.8% in
consolidated revenues for the quarter ended September 30, 2000 was due to
increased revenues within both business segments.

      Research and development expenses were $265,027 for the three months ended
September 30, 2000 as compared to $147,866 for the three months ended September
30,1999. The increase of $117,161, or 79.2%, was primarily attributed to the
Advanced Technology Groups research and development programs with its industrial
and government customers.

      General and administrative expenses were $652,800 for the three months
ended September 30, 2000 as compared to $520,624 for the three months ended
September 30, 1999. The increase of $132,176, or 25.4%, was primarily
attributable to professional fees in the legal and investor relations areas.

      Selling expenses were $172,235 for the quarter ended September 30, 2000,
as compared to $286,525 for the three months ended September 30, 1999. The
decrease was primarily attributable to productivity improvements such as quoting
certain jobs through our Internet websites.

      Depreciation and amortization expenses were $296,260 for the three months
ended September 30, 2000, as compared to $293,636 for the three months ended
September 30,1999.

      Interest expense during the third quarter ending September 30, 2000 was
$201,813 as compared to $174,506 for the three months ended September 30, 1999.
The increase of $27,307, or 15.6%, was due to interest paid on the note payable
to our president, debt obligations related to the O&W acquisition and the
increase in the prime interest rates.

      We had a consolidated net loss of $502,212 for the three months ended
September 30, 2000, as compared to the consolidated net loss of $834,635 for the
three months ended September 30, 1999.

Nine Months Ended September 30, 2000 Compared to the Nine Months Ended September
30, 1999

      Consolidated revenue for the nine months ended September 30, 2000 were
$9,487,138, with $4,732,199 of sales coming from the Laser Group and $4,754,939
of sales coming from the Plastics Group. Cost of sales totaled $6,276,672 and a
gross profit of $3,210,466 was realized for the period. For the nine months
ended September 30, 1999, sales totaled $6,813,998 and consisted primarily of
Laser Group sales of $3,788,160 and Plastics Group sales of $3,025,838.
Consolidated cost of sales was $5,331,166 for the first nine months ended
September 30, 1999 and the Company realized a gross profit of $1,482,832 for the
period. The increase in consolidated revenues for the nine months ended
September 30, 2000 was due to increased revenues within both business segments.

      Research and development expenses were $790,403 during the nine months
ended September 30, 2000 as compared to $1,140,780 during the nine months ended
September 30, 1999. The decrease of $350,377, or 30.7%, was primarily
attributable to cost containment for research and development efforts in our
plastics group, as separate ExpressTool facilities were integrated into our O&W
operations.


                                      -14-
<PAGE>

      General and administration expenses for the nine months ended September
30, 2000 were $1,989,325 as compared to $1,824,156 for the nine months ended
September30, 1999. The increase was primarily due to expenses for additional
resources at our Laser Group for engineers, training and for professional fees
in the legal and investor relations areas.

      Selling expenses were $488,667 for the nine months ended September 30,
2000 as compared to $706,051 for the nine months ended September 30, 1999. The
decrease was primarily attributable to reduced staffing and higher productivity
of Internet based quoting.

      Depreciation and amortization expenses totaled $851,262 for the nine
months ended September 30, 2000 as compared to $644,382 for the nine months
ended September 30, 1999. The increase was primarily due to fixed asset
additions in both our laser and plastics groups along with depreciation related
to the O&W acquisition.

      Interest expense was $562,864 and $405,819 during the nine month periods
ended September 30, 2000 and 1999 respectively. The increase in interest expense
was due to interest paid on the note payable to our president and chief
executive officer, Osley & Whitney bank acquisition debt and the increase in
prime interest rates.

      The loss from continuing operations was $1,487,934 for the nine months
ended September 30, 2000 as compared to a loss of $3,199,365 for the nine months
ended September 30, 1999. We had a consolidated net loss of $1,452,445 for the
nine months ended September 30, 2000 as compared to consolidated net income of
$748,086 during the nine months ended September 30, 1999. The net income for
nine months ended September 30, 1999 was primarily attributed to the gain
realized on the sale of the Company's Spectra Science Series A Convertible
Preferred Stock of approximately $4,170,315, net of $825,000 in income taxes.

Part II - Other Information

none

                                   SIGNATURES

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

November 3, 2000

                                        INFINITE GROUP, INC.

                                        By: /s/ Clifford G. Brockmyre
                                           -------------------------------------
                                        Clifford G. Brockmyre, President
                                        And Chief Executive Officer

                                        By: /s/ Bruce J. Garreau
                                           -------------------------------------
                                        Bruce J Garreau
                                        Chief Financial and Accounting
                                        Officer


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