Where Food Comes From 10Q 2009 Q3 Quarterly report

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended September 30, 2009

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 333-133634

INTEGRATED MANAGEMENT INFORMATION, INC.

(Name of Small Business Issuer in its charter)

Colorado		43-1802805
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

221 Wilcox, Suite A

Castle Rock, CO 80104

(Address of principal executive offices, including zip code)

Issuer’s telephone number, including area code:

(303) 895-3002

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 registrant 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 registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

Large accelerated filer: o		Accelerated filer: o

Non-accelerated filer: o		Smaller reporting company: x

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

The number of shares of the registrant’s common stock, $.001 par value per share, outstanding as of November 5, 2009 was 20,868,481.

Transitional small business disclosure format (check one): Yes o No x

Table of Contents

Integrated Management Information, Inc.

Table of Contents

September 30, 2009

Part 1 - Financial Information

		Page:

Item 1.	Financial Statements:

	Balance Sheets (unaudited), September 30, 2009 and December 31, 2008	3

	Statements of Operations (unaudited), for the third quarter ended September 30, 2009 and 2008	4

	Statements of Operations (unaudited), for the year to date periods ended September 30, 2009 and 2008	5

	Statements of Cash Flows (unaudited), for the year to date periods ended September 30, 2009 and 2008	6

	Statements of Stockholders’ Equity(unaudited), for the year ended December 31, 2008 and the year to date period ended September 30, 2009	7

	Notes to Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Controls and Procedures	20

Part II - Other Information

Item 1.	Legal Proceedings	21

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 3.	Defaults upon Senior Securities	21

Item 4.	Submission of Matters to a Vote of Security Holders	21

Item 5.	Other Information	21

Item 6.	Exhibits	21

Table of Contents

Integrated Management Information, Inc.

Balance Sheets

(Unaudited)

	Sept 30,			Dec 31,
	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	245,352		$	154,044
Accounts receivable, net of allowance	374,907			458,715
Inventories	—			14,350
Prepaid expenses and other current assets	8,864			33,073
Total current assets	629,123			660,182
Property and equipment, net	134,550			78,275
Intangible assets, net	764			1,093
Total assets	$	764,437		$	739,550

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	203,283		$	218,843
Accrued expenses and other current liabilities	38,030			53,438
Current portion of notes payable	8,309			—
Total current liabilities	249,622			272,281
Notes payable and other long-term debt	363,060			300,000
Commitments and contingencies
Stockholders equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued or outstanding	—			—
Common stock, $0.001 par value; 95,000,000 shares authorized; 20,929,006 and 20,929,006 shares issued, respectively; and 20,868,481 and 20,871,806 shares outstanding, respectively	20,929			20,929
Additional paid-in-capital	3,386,948			3,359,380
Treasury stock of 60,525 and 57,200 shares, respectively	(16,889		)	(16,124		)
Accumulated deficit	(3,239,233		)	(3,196,916		)
Total stockholders’ equity	151,755			167,269
Total liabilities and stockholders’ equity	$	764,437		$	739,550

The accompanying notes are an integral part of these financial statements.

Table of Contents

Integrated Management Information, Inc.

Statements of Operations

(Unaudited)

	Third Quarter ended
	Sept 30,			Sept 30,
	2009			2008

Revenues	$	778,736		$	597,262
Costs of revenues	391,446			352,152
Gross profit	387,290			245,110
Selling, general and administrative expenses	308,030			391,312
Gain on sale of equipment	—			(366,991		)
Income from operations	79,260			220,789
Other expense (income):
Interest expense	9,114			7,603
Other income, net	(250		)	(875		)
Income before income taxes	70,396			214,061
Income taxes	—			—
Income from continuing operations	70,396			214,061
Loss from discontinued operations	—			(53,071		)
Net income	$	70,396		$	160,990

Income per share from continuing operations:
Basic	$	—		$	0.01
Diluted	$	—		$	0.01

Loss per share from discontinued operations:
Basic	$	—		$	—
Diluted	$	—		$	—

Weighted average shares outstanding:
Basic	20,868,481			20,856,009
Diluted	20,996,910			21,372,672

The accompanying notes are an integral part of these financial statements.

Table of Contents

Integrated Management Information, Inc.

Statements of Operations

(Unaudited)

	Year to Date Period ended
	Sept 30,			Sept 30,
	2009			2008

Revenues	$	1,901,941		$	1,768,308
Costs of revenues	964,935			779,754
Gross profit	937,006			988,554
Selling, general and administrative expenses	957,505			1,121,697
Gain on sale of equipment	(4,000		)	(366,991		)
Income from operations	(16,499		)	233,848
Other expense (income):
Interest expense	26,462			25,075
Other income, net	(644		)	(2,135		)
Income (loss) before income taxes	(42,317		)	210,908
Income taxes	—			—
Income (loss) from continuing operations	(42,317		)	210,908
Loss from discontinued operations	—			(67,733		)
Net income (loss)	$	(42,317	)	$	143,175

Income (loss) per share from continuing operations:
Basic	$	—		$	0.01
Diluted	$	—		$	0.01

Loss per share from discontinued operations:
Basic	$	—		$	—
Diluted	$	—		$	—

Weighted average shares outstanding:
Basic	20,868,859			20,583,331
Diluted	20,868,859			20,646,214

The accompanying notes are an integral part of these financial statements.

Table of Contents

Integrated Management Information, Inc.

Statements of Cash Flows

(Unaudited)

	Year to Date Period ended Sept 30,
	2009			2008
Operating activities:
Net income (loss)	$	(42,317	)	$	143,175
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amorization	39,525			38,080
Stock based compensation expense	27,568			5,716
Provision for doubtful accounts	12,722			4,146
Amortization under advertising rights	—			5,000
Loss (gain) on sale/disposal of equipment	(4,000		)	4,709
Gain on sale of online businesses	—			(366,991		)
Changes in assets and liabilities:
Accounts receivable	71,086			(349,831		)
Inventories	14,350			6,166
Prepaid expenses and other current assets	24,209			(13,787		)
Accounts payable	(15,560		)	11,604
Accrued expenses and other current liabilities	(15,408		)	2,520
Deferred revenue	—			(5,750		)
Net cash provided by (used in) operating activites	112,175			(515,243		)

Investing activities:
Acquisition of property and equipment	(95,471		)	(45,521		)
Proceeds from sale of online businesses	—			800,000
Proceeds from sale of equipment	4,000			800
Net cash provided by (used in) investing activities	(91,471		)	755,279

Financing activities:
Proceeds from line of credit	—			38,000
Repayments on line of credit	—			(108,000		)
Proceeds from Notes Payable	89,964			—
Repayment under Notes Payable	(18,595		)	(350,000		)
Proceeds from issuance of common stock	—			125,000
Stock repurchase under Buyback Program	(765		)	(13,690		)
Net cash provided by (used in) financing activities	70,604			(308,690		)
Net change in cash and cash equivalents	91,308			(68,654		)
Cash and cash equivalents at beginning of year	154,044			170,882
Cash and cash equivalents at end of year	$	245,352		$	102,228

The accompanying notes are an integral part of these financial statements.

Table of Contents

Integrated Management Information, Inc.

Statements of Stockholders’ Equity

(Unaudited)

						Additional
	Common Stock					Paid-in			Retained			Treasury
	Shares		Amount			Capital			Deficit			Stock			Total
Balance at December 31, 2007	28,245,506		$	28,246		$	4,705,679		$	(3,346,574	)	$	(1,485,000	)	$	(97,649	)

Stock repurchase of 57,200 shares on the open market	—		—			—			—			(16,124		)	(16,124		)
Stock-based compensation expense	—		—			3,410			—			—			3,410
Issuance of common stock in connection with a private placement in July 2008	916,000		916			124,084			—			—			125,000
Exercise of stock options	17,500		17			2,957			—			—			2,974
Retirement of treasury stock	(8,250,000	)	(8,250		)	(1,476,750		)	—			1,485,000			—
Net income	—		—			—			149,658			—			149,658
Balance at December 31, 2008	20,929,006		$	20,929		$	3,359,380		$	(3,196,916	)	$	(16,124	)	$	167,269
Stock repurchase of 3,325 shares on the open market	—		—			—			—			(765		)	(765		)
Stock-based compensation expense	—		—			27,568			—			—			27,568
Net loss	—		—			—			(42,317		)	—			(42,317		)
Balance at September 30, 2009	20,929,006		$	20,929		$	3,386,948		$	(3,239,233	)	$	(16,889	)	$	151,755

The accompanying notes are an integral part of these financial statements.

Table of Contents

Integrated Management Information, Inc.

Notes to the Financial Statements

Note 1 - The Company and Basis of Presentation

Business Overview

Integrated Management Information, Inc. (“IMI Global,” “IMI,” the “Company,” “our,” “we,” or “us,”) is a leading provider of verification and communication solutions for the agriculture, livestock and food industry.

We provide our owned and operated online properties and services which specialize in identification and traceability, process, production practice and supply verification, document control for USDA verification programs and third party auditing services. We apply information technology to the agriculture, livestock and food industry by addressing the growing importance of marketing claims such as: source of origin information, genetic background, animal treatment, animal health history, animal age, animal movements, nutrition, carbon credits and other credence attributes. Our solutions provide assurance regarding those claims made that can not be confirmed by visual inspection once the product reaches the meat case and is marketed to the consumer. We have developed a range of proprietary web based applications, consulting methodologies, auditing processes, and other services to allow the livestock and food industry to record, manage, report, and audit this information. Our solutions help our customers establish their own systems, meet government regulations, create their own premium brand identity, gain cost efficiencies and command a higher price for their product.

We stand at the forefront of a rapidly evolving movement to track livestock and verify sources of beef and other livestock products. In the aftermath of the discovery of the first case of mad cow disease in the United States in December, 2003, many of the largest U.S. beef and other livestock export markets were closed resulting in significant losses to the industry. In response to the crisis, several initiatives were enacted to facilitate the reopening of key export markets. Most notably, U.S. suppliers seeking to sell beef and other livestock products to other countries must participate in a pre-approved Quality System Assessment Program so as to have an approved means of verifying specific product requirements. In response, we were the first to develop a USDA Quality System Assessment document management system for auditing the tracking systems used by beef and other livestock producers to verify source and age. We introduced our USVerified Source and Age Verification system in 2005, and over the years we have continued to enhance and further develop programs to address other verification needs including, but not limited to, non-hormone treated cattle (NHTC) and humane handling marketing claims. More recently, we worked with compliance programs, and marketing approaches in advance of completion of the country of origin labeling (COOL) legislation’s final rule, requiring meat retailers to display the country of origin on their meat and produce labels. In March 2009, we introduced our VerifiedGreen™ Verification program. This program caters to producers and consumers who are committed to reducing their carbon footprint. Such a program is expected to appeal to forward-thinking producers and retailers who are both environmentally conscious and looking for a marketing edge as well as to consumers who want to support producers practicing good environmental stewardship.

Interim Financial Statements

The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and should be read in conjunction with our audited financial statements and footnotes thereto for the year ended December 31, 2008 included in our Form 10-K filed on March 31, 2009. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading.

Table of Contents

Integrated Management Information, Inc.

Notes to the Financial Statements

The financial statements reflect all adjustments (consisting primarily of normal recurring adjustments) that are, in the opinion of management necessary for a fair presentation of our financial position and results of operations. The operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results to be expected for any other interim period of any future year.

Certain reclassifications have been made to conform previously reported data to the current presentation. These reclassifications have no effect on net income or financial position as previously reported.

Note 2 - - Asset Sale and Discontinued Operations

On July 15, 2008, we completed the sale (the “asset sale”) of three wholly-owned online businesses — CattleNetwork, CattleStore and AgNetwork — to Vance Publishing Corp. (“Vance”), a privately held provider of print and electronic media with a strong presence in the agricultural industry. The transaction included $800,000 in cash and long term advertising rights for placements in Vance’s industry leading publications, including Drover’s, Pork, Bovine Veterinarian and Dairy Herd Management, over a three year period. The assets sold in the transaction primarily represented all of the goodwill and intangible assets recorded on the balance sheet. We sold the assets at a substantial premium to the original purchase in 2005 and recorded a gain on sale of approximately $358,000 in 2008.

Note 3 - Basic and Diluted Income (Loss) per Share

Basic income (loss) per share was computed by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Weighted average number of shares used to compute basic and diluted loss per share is the same in these financial statements since the effect of dilutive securities is anti-dilutive.

The following schedule is a reconciliation of the share data used in the basic and diluted income (loss) per share computations:

	Third Quarter ended		Year to Date Period ended
	Sept 30,	Sept 30,	Sept 30,	Sept 30,
	2009	2008	2009	2008
Basic:
Weighted average shares outstanding	20,868,481	20,856,009	20,868,859	20,583,331

Diluted:
Weighted average shares outstanding	20,868,481	20,856,009	20,868,859	20,583,331
Weighted average effects of dilutive securities	128,429	516,663	—	62,883
Total	20,996,910	21,372,672	20,868,859	20,646,214

Antidilutive securities:	7,062,810	10,460,310	8,831,310	10,460,310

Table of Contents

Integrated Management Information, Inc.

Notes to the Financial Statements

Note 4 - Stock-Based Compensation

Our stock based award plans (collectively referred to as the “Plans”) provide for the issuance of stock-based awards to employees, officers, directors and consultants. The Plans permit the granting of stock awards and stock options. The vesting of stock-based awards is generally subject to meeting certain performance based objectives, the passage of time or a combination of both, and continued employment through the vesting period. Stock option activity under our Plans is summarized as follows:

							Weighted Avg.
			Weighted Avg.		Weighted Avg.		Remaining
	Number of		Exercise Price		Fair Value		Contractual Life	Aggregate
	Options/Warrants		per Share		per Share		(in years)	Intrinsic Value

Outstanding, December 31, 2008	10,548,810		$	1.51	$	0.03	1.78
Granted	—		$	—	$	—	—
Exercised	—		$	—	$	—	—
Canceled	(1,717,500	)	$	0.97	$	0.14	0.01
Outstanding, September 30, 2009	8,831,310		$	1.62	$	0.01	1.35	$	31,285
Exercisable, September 30, 2009	7,303,810		$	1.41	$	0.01	1.36	$	27,160

The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on September 30, 2009 and the exercise price for the in-the-money options) that would have been received by the option holders if all the in-the-money options had been exercised on September 30, 2009.

The fair value of stock options is estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:

	For the Quarter ended		For the Year to Date Period ended
	Sept 30,	Sept 30,	Sept 30,	Sept 30,
	2009	2008	2009	2008

Expected life of options from date of grant	N/A	3.0 years	N/A	3.0 years
Risk free interest rate	N/A	2.8 - 2.9%	N/A	2.5 - 2.9%
Expected volatility	N/A	35.9%	N/A	35.9%
Assumed dividend yield	N/A	0.0%	N/A	0.0%

No stock options have been granted during the year to date period ended September 30, 2009.

Dividend yield is based on our historical and anticipated policy of not paying cash dividends. Expected volatility is based on the “calculated value” method set forth in FAS 123R (based on historical volatilities of appropriate industry sector indices) because our stock did not have sufficient historic share price data available, as it was not publicly traded prior to November 15, 2006. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the options. The expected term of options represents the period of time that options granted are expected to be outstanding giving consideration to vesting schedules.

Our stock-based compensation cost for the third quarters ended September 30, 2009 and 2008 was $640 and $2,000, respectively, and has been included in general and administrative expenses. Stock-based compensation cost for the year to date periods ended September 30, 2009 and 2008 was $27,568 and $5,716, respectively. No tax benefits were recognized for these costs due to our cumulative losses as well as a full valuation reserve on our deferred tax assets.

Table of Contents

Integrated Management Information, Inc.

Notes to the Financial Statements

Note 5 - - Stock Buyback Plan

On January 7, 2008, we announced our intention to buy back up to one million shares of our common stock from the open market over the first six months of 2008. Our Board of Directors extended the period of time in which we can buy back shares until June 30, 2009.

As of June 30, 2009, we have repurchased 60,525 shares at an average price of $0.26 per share. Total cash consideration for the repurchased shares was $16,889. The repurchased shares are recorded as part of treasury stock and are accounted for under the cost method.

Note 6 — Income Taxes

Deferred tax assets and liabilities have been determined based upon the differences between the financial statement amounts and the tax bases of assets and liabilities as measured by enacted tax rates expected to be in effect when these differences are expected to reverse. In assessing the reliability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Our net operating loss carry forwards are the most significant component of our deferred income tax assets; however, the ultimate realization of our deferred income tax assets is dependent upon generation of future taxable income. We consider past history, the scheduled reversal of taxable temporary differences, projected future taxable income, and tax planning strategies in making this assessment. As of September 30, 2009 and December 31, 2008, we believe it is more likely than not that our net deferred tax asset will not be realized and accordingly we have recorded a valuation allowance against the deferred tax assets.

We will continue to assess the need for a valuation allowance that results from uncertainty regarding our ability to realize the benefits of our deferred tax assets. As we move closer towards achieving net income for a full year, we will review qualitative and quantitative data, including events within our industry, the nature of our business, our future forecasts and historical trending. If we conclude that our prospects for the realization of our deferred tax assets are more likely than not, we will then reduce our valuation allowance as appropriate and credit income tax expense after considering the following factors:

· The levels of historical taxable income and projections for future taxable income over periods in which the deferred tax assets would be deductible, and

· Accumulation of net income before tax utilizing a look-back period of three years.

The amount of the deferred tax asset considered realizable, however, could be reduced if estimates of future taxable income during the carry-forward periods are reduced.

Table of Contents

Integrated Management Information, Inc.

Notes to the Financial Statements

Note 7 - Notes Payable

Notes payable consist of the following:

	September 30,		December 31,
	2009		2008

Equipment Note Payable	$	31,369	$	—
Lapaesotes Note Payable	340,000		300,000
	$	371,369	$	300,000
Less current portion of notes payable and other long-term debt	8,309		—
Notes payable and other long-term debt	$	363,060	$	300,000

Equipment Note Payable

On January 31, 2009, we issued a note payable in the amount of $35,963 for the purchase of a vehicle used primarily for business purposes. Under the Note, interest and principal payments are due in equal monthly installments of $870.55 over 4 years beginning March 17, 2009. The Note is fully secured by the vehicle.

Lapaseotes Note Payable

In September 2007, we obtained $300,000 in unsecured debt financing. In April 2009, an additional $50,000 was obtained under the same financing terms. The notes are held by a major shareholder; bear an interest rate of 9% per annum, payable quarterly. The principal balance is due on September 12, 2011.

Note 8 - Related Party Transactions

As previously discussed in Note 7, we have unsecured debt payable to a major shareholder who is related to Pete Lapaseotes, a director.

Table of Contents

Integrated Management Information, Inc.

Notes to the Financial Statements

Note 9 - Commitments and Contingencies

Operating Leases

In June 2006, we entered into a building lease for our headquarters in Castle Rock, Colorado. The lease is for a period of five years and can be extended for an additional five years. In addition to the primary rent, the lease requires additional payments for operating costs and other common area maintenance costs.

As of September 30, 2009, the annual primary lease payments are as follows:

Years Ending December 31,	Amount
2009	11,970
2010	47,326
2011	48,509
2012	24,554
Thereafter	—
Total lease commitments	$	132,359

We lease a copier machine which requires a base rent of $375.00 per month or $4,500 annually. The lease expires in April 2014.

Employment Agreements

In January 2006, we entered into an employment contract with John Saunders as our President and Chief Executive Officer for an annual salary of $90,000 subject to annual performance review adjustments. The agreement automatically renews annually unless a 60-day notice of non-renewal is provided by either the Company or the employee.

In January 2006, we entered into an employment contract with Leann Saunders as our Vice President of Quality Control for an annual salary of $90,000 subject to annual performance review adjustments. The agreement automatically renews annually unless a 60-day notice of non-renewal is provided by either the Company or the employee. In September 2008, Mrs. Saunders was promoted to the position of President.

Legal proceedings

The Company is and may be involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business. Although it is not possible to predict with certainty the outcome of these unresolved actions, we do not believe, based on current knowledge, that any legal proceeding or claim is likely to have a material effect on its financial position, results of operation or cash flows.

Concentration of Risks

Livestock identification tags sold in connection with our verification offerings are purchased primarily from Allflex. However, there are numerous other companies which manufacture and market such ear tags.

Table of Contents

Integrated Management Information, Inc.

Notes to the Financial Statements

Other

On June 3, 2008, Tyson Foods, Inc. filed a petition to cancel the trademark “Beef Born & Raised in the USA®”. On July 14, 2008, Born & Raised in the USA® filed a motion to dismiss the cancellation action. Both motions are pending before the United States Patent and Trademark Office.

Integrated Management Information, Inc. (IMI Global) is the exclusive worldwide marketing partner for the Born & Raised in the USA® labeling program, which includes unique and distinctive labeling for beef, pork, poultry, lamb, fish and game. As such, IMI Global is marketing the label and providing USDA compliance to retailers who must display a label identifying the country of origin (COOL) for meat products that began in the fall of 2008.

IMI Global supports Born & Raised in the USA® in its decision to defend its trademarked labeling, believing that the trademarks were legally issued and are fully enforceable. IMI Global continues to market the label and verification program and has expressed its desire to work closely with Tyson Foods on this program.

Note 10 - Liquidity

Historically, our growth has been funded through a combination of convertible debt from private investors and private placement offerings. We continually evaluate all funding options including additional offerings of our securities to private, public and institutional investors and other credit facilities as they become available.

The primary driver of our operating cash flow is our third-party verification solutions, specifically the gross margin generated from services provided. Therefore we focus on the elements of those operations including revenue growth and long term projects that ensure a steady stream of operating profits to enable us to meet our cash obligations. On a weekly basis we review the performance of each of our revenue streams focusing on third party verification solutions compared with prior periods and our operating plan. Based on the continued sales growth, overall improvement in our performance and our ability to secure additional financing, we believe that we have sufficient cash on hand to execute our current Business Plan although we can give no assurance. The culmination of all our efforts has brought opportunities to us including: increased investor confidence and renewed interest in our company, third-party interest in our expertise to develop and enhance websites, as well as the potential to develop business relationships with long term strategic partners. In keeping with our core business, we will continue to review our business model with a focus on profitability, long term capital solutions and the potential impact of acquisitions or divestitures, if such an opportunity arises.

Note 11 - - Recent Accounting Pronouncements

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165) codified as FASB Accounting Standards Codification Topic 855 (ASC 855). SFAS 165 establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before financial statements are available to be issued (subsequent events). More specifically, SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition in the financial statements, identifies the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that should be made about events or transactions that occur after the balance sheet date. SFAS 165 provides largely the same guidance on subsequent events which previously existed only in auditing literature. We have adopted SFAS 165 and it did not have an impact on our financial statements.

In June 2009, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”), a replacement of FASB Statement No. 162” codified as FASB ASC Topic 105. All existing accounting standard documents are superseded by the Codification, which does not change or alter existing GAAP. Since we have adopted SFAS No. 168, any references to GAAP included in our historical public filings with the SEC are no longer included in the Company’s filings. The adoption of SFAS No. 168 had no impact on our financial statements.

We have considered all other recently issued accounting pronouncements and do not believe the adoption of such pronouncements will have a material impact on our consolidated financial statements.

Note 12 – Subsequent Events

We have evaluated all subsequent events through November 12, 2009, the date this Quarterly Report on Form 10-Q was filed with the SEC. No material subsequent events have occurred since September 30, 2009 that required recognition or disclosure in these financial statements.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

Business Overview

We are a leading provider of verification and communication solutions for the agriculture, livestock and food industry.

We stand at the forefront of a rapidly evolving movement to track livestock and verify sources of beef and other livestock products. In the aftermath of the discovery of the first case of mad cow disease in the United States in December, 2003, many of the largest U.S. beef and other livestock export markets were closed resulting in significant losses to the industry. In response to the crisis, several initiatives were enacted to facilitate the reopening of key export markets. Most notably, U.S. suppliers seeking to sell beef and other livestock products to other countries were required to participate in a pre-approved Quality System Assessment Program so as to have an approved means of verifying specific product requirements. In response, we were the first to develop a USDA Quality System Assessment document management system for auditing the tracking systems used by beef and other livestock producers to verify source and age. We introduced our USVerified Source and Age Verification system in 2005, and over the years we have continued to enhance and further develop programs to address other verification needs including, but not limited to, non-hormone treated cattle (NHTC) and humane handling marketing claims. More recently, we worked with compliance programs, and marketing approaches in advance of completion of the country of origin labeling (COOL) legislation’s final rule, requiring meat retailers to display the country of origin on their meat and produce labels. In March 2009, we introduced our VerifiedGreen™ Verification program. This program caters to producers and consumers who are committed to reducing their carbon footprint. Such a program is expected to appeal to forward-thinking producers and retailers who are both environmentally conscious and looking for a marketing edge as well as to consumers who want to support producers practicing good environmental stewardship.

Current Marketplace Conditions

We believe the following recent events will drive our business forward effectively increasing consumer demand for third party verification services and presenting additional opportunities:

· In September 2009, the Democratic Party of Japan (DPJ) scored an overwhelming victory in Japan’s elections. Of particular concern for the U.S. meat industry is the fact that the DPJ has taken a relatively harder line against expanded access for beef imports from the United States (US). Thus, it looks that in the near term, with Japan focused on a transitional government, and being more protectionists in nature, the current agreement for supplying Japan—cattle must be age verified as 20 months of age or

Table of Contents

less—will stay intact. This sets the stage for continued growth in IMI’s third party source and age verification services. This was evidenced by a 30% growth in third quarter for cow/calf verification services.

· U.S. beef has been largely absent from the European Union (EU) for the past 19 years. With limited domestic and Brazilian supply into the EU and a newly negotiated and implemented, as of August 2009, duty-free beef quota, there is great optimism in US beef demand in the EU. Currently the new quota is limited to non-hormone-treated beef (NHTC), which requires third party verification, but with duty-free access significantly lowering the cost of doing business in Europe, we believe that it offers significantly more potential for third party NHTC verification services and our new product line, High Quality Beef verification services.

· With increased consumer consciousness generated by movies such as “Food, Inc.” and Time Magazine’s August 2009 cover article “The Real Cost of Cheap Food”, consumers are looking for answers to questions including food production practices and overall food safety and regulation. Additionally, there has been a shift in attitude within the new administration that is uniquely positioning the agricultural industry. “Know Your Farmer Know Your Food” is a new USDA initiative to help more Americans understand where their food comes from and how they can support development of local and regional food systems.

Seasonality

Our business is subject to seasonal fluctuations. Significant portions of our revenues are typically realized during the second and fourth quarters of the fiscal year when the calf marketings are at their peak. Because of the seasonality of the business and our industry, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Liquidity and Capital Resources

At September 30, 2009, we had cash and cash equivalents of $245,352 compared to $154,044 of cash and cash equivalents at December 31, 2008. Our working capital at September 30, 2009 was $379,501 compared to $387,901 at December 31, 2008.

Net cash provided by operating activities for the year to date period ended September 30, 2009 was $112,175 compared to $515,243 net cash used by operating activities during the same period in 2008. Cash used by operating activities (continuing and discontinued operations) is driven by our net loss and adjusted by non-cash items. Non-cash adjustments primarily include depreciation, amortization of intangible assets and stock based compensation expense. The improvement was primarily driven by the timing of cash receipts and cash disbursements.

Net cash used in investing activities of $91,471 for the year to date period ended September 30, 2009 is primarily attributable to capital expenditures. Our capital expenditures were $95,471 and $45,521 for the year to date periods ended September 30, 2009 and 2008, respectively. Our capital expenditures are primarily related to purchases and internal development of information technology assets to support our product and service offerings. As we anticipate continued growth, we expect to continue investing additional capital in our information technology assets. Net cash provided by investing activities of $755,279 for the year to date period ended September 30, 2008 was primarily due to the sale of the online businesses during third quarter 2008.

Table of Contents

Net cash provided by financing activities of $70,604 during the year to date period ended September 30, 2009 was primarily related to $50,000 additional financing acquired under an existing note payable and approximately $40,000 in new debt acquired in connection with the acquisition of equipment. Net cash used in financing activities of $308,690 during the year to date period ended September 30, 2008 was primarily related to the repayment of the CattleNetwork Note Payable.

The primary driver of our operating cash flow is our third-party verification solutions, specifically the gross margin generated from services provided. Therefore we focus on the elements of those operations including revenue growth and long term projects that ensure a steady stream of operating profits to enable us to meet our cash obligations. On a weekly basis we review the performance of each of our revenue streams focusing on third party verification solutions compared with prior periods and our operating plan. Based on the continued sales growth, overall improvement in our performance and our ability to secure additional financing, we believe that we have sufficient cash on hand to execute our current Business Plan although we can give no assurance. The culmination of all our efforts has brought opportunities to us including: increased investor confidence and renewed interest in our company, third-party interest in our expertise to develop and enhance websites, as well as the potential to develop business relationships with long term strategic partners. In keeping with our core business, we will continue to review our business model with a focus on profitability, long term capital solutions and the potential impact of acquisitions or divestitures, if such an opportunity arises.

Our plan for continued growth is primarily based upon intensifying our focus on international markets. We believe that there are significant growth opportunities available to us because often the only way to access various restrictions as imposed on international market imports/exports is via a quality verification program, like our USVerified™.com product line.

Off Balance Sheet Arrangements

As of September 30, 2009, we had no off-balance sheet arrangements of any type.

RESULTS OF OPERATIONS

Third Quarter and Year to Date Periods ended September 30, 2009 compared to the Same Periods in Fiscal Year 2008

Our Statements of Operations present income (loss) from continuing operations and loss from discontinued operations. All discussions are based on income from continuing operations and therefore exclude all income statement items of the current and prior year’s discontinued operations.

Revenues

Revenues are derived from sales of our USVerified identification and verification solutions, consulting services, web-based development and hardware sales. Revenues for the third quarter and year to date period ended September 30, 2009 were $778,736 and $1,901,941 compared to $597,262 and $1,768,308,

Table of Contents

respectively. While the improvement year to date represents modest growth, we believe it is significant in light of the current economic conditions severely impacting the food industry.

During the third quarter ended September 30, 2009, our third party verification revenue, which includes sales of our USVerified solutions and related consulting, program development and web-based development services, increased 31.6% to $581,032 compared to $441,564 in the same quarter 2008. For the year to date period ended September 30, 2009, third party verification revenue increased 23.1% to $1,536,062 compared to $1,248,150 in the same 2008 period.

For purposes of analysis of our verification revenue stream as discussed above, we have not included approximately $214,000 in 2008 year to date revenue related to a special grant funded project for premise registrations throughout the USDA. This project was specific to the years ended 2007 and 2008. Midway through the USDA grant funded project, the USDA re-evaluated the project and decided to discontinue the project. As of September 30, 2009 we have approximately $150,000 in receivables outstanding related to this project that is greater than 90 days past due. We believe we will collect the full amount due and accordingly have not reserved any portion of the amount outstanding.

Revenues derived from sales of hardware, primarily sales of cattle identification ear tags, increased 29.1% to $191,254 in the third quarter 2009 compared to $148,198 in the third quarter 2008. For the year to date period ended September 30, 2009, hardware sales increased 37.1% to $347,339 compared to $253,324 in the same 2008 period.

Cost of Sales and Gross Margin

Cost of sales for the third quarter 2009 was $391,446 compared to $352,152 during the third quarter 2008. Gross margin for the third quarter 2009 improved by approximately 9 basis points to 49.7% of revenues compared to 41% for the third quarter 2008. For the year to date period ended September 30, 2009, cost of sales was $964,935 compared to $779,754 for the same 2008 period. Gross margins declined approximately 7 basis points to 49.3% in 2009 compared to 55.9% in the same 2008 period.

Certain elements of costs of sales are fixed in nature such as salaries and rent. Accordingly, when sales volumes remain relatively constant or decrease during a difficult economic period, cost of sales does not decrease in the same proportion. Therefore, cost of sales as a percentage of sales may be adversely affected by reduced volumes or the impact of inflation.

The decrease in our gross margins during the year to date period in 2009 compared to 2008 was partially due to shifts in the sales mix of lower margin hardware product sales coupled with the absorption of certain costs which are generally fixed in nature. More specifically in early 2008, we increased our headcount of dedicated personnel providing program development and web based development services in connection with our third party verification programs. Due to our focus on margins and customer service, we are committed to long term growth and the scalability of the programs we develop.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the third quarter 2009 were $308,030, a decrease of $83,282, or 21.3% over the third quarter 2008 amount of $391,312. For the year to date period ended September 30, 2009, expenses decreased $164,192 or 14.6% to $957,505 compared to $1,121,697 for the same year to date period in 2008. The decrease was primarily due to a net reduction in salaries due to a lesser number of office support personnel offset by adjustments to salaries for costs of living and annual performance reviews.

Table of Contents

Gain on Sale of Online Businesses

Income (Loss) from Continuing Operations and per Share information

As a result of the foregoing, income from continuing operations for the third quarter ended September 30, 2009 was $70,396 or less than a penny per basic and diluted common share, compared to $214,061 or $0.01 per basic and diluted common share for the third quarter ended September 30, 2008.

Loss from continuing operations for the year to date period ended September 30, 2009 was $42,317 or less than a penny per basic and diluted common share, compared to income from continuing operations of $210,908 or $0.01 per basic and diluted common share for the same period in 2008.

Net Income (Loss)

Net income for the third quarter ended September 30, 2009 was $70,396 compared to $160,990 for the third quarter ended September 30, 2008. For the year to date period ended September 30, 2009, net loss was $42,317 compared to net income of $143,175 for the same period ended September 30, 2008.

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following critical accounting policy reflects the more significant estimates and assumptions used in the preparation of the consolidated financial statements.

Stock-Based Compensation Expense

Calculating stock-based compensation expense requires the input of highly subjective assumptions, including the expected term of the stock-based awards, stock price volatility, and the pre-vesting option

Table of Contents

forfeiture rate. We estimate the expected life of options granted based on historical exercise patterns, which we believe are representative of future behavior. We estimate the volatility of our common stock on the date of grant based on the implied volatility of publicly traded options on our common stock, with a term of one year or greater. We believe that implied volatility calculated based on actively traded options on our common stock is a better indicator of expected volatility and future stock price trends than historical volatility. Therefore, expected volatility was based on a market-based implied volatility. The assumptions used in calculating the fair value of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. We estimate the forfeiture rate based on historical experience of our stock-based awards that are granted, exercised and cancelled. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period.

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this report, has concluded that our disclosure controls and procedures are effective at a reasonable assurance level based on his evaluation of these controls and procedures as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Lack of Segregation of Duties

Management is aware that there is a lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation.

Table of Contents

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are and may be involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business. Although it is not possible to predict with certainty the outcome of these unresolved actions, we do not believe, based on current knowledge, that any legal proceeding or claim is likely to have a material adverse effect on our financial position, results of operations or cash flows.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

(a) Exhibits

Number		Description
31.1		Section 302 Certification of CEO
31.2		Section 302 Certification of CFO
32.1		Section 906 Certification of CEO
32.2		Section 906 Certification of CFO

Table of Contents

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 10, 2009	Integrated Management Information, Inc.
		By:	/s/ John K. Saunders
			Chief Executive Officer

		By:	/s/ Dannette D. Boyd
			Chief Financial Officer

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Where Food Comes From (WFCF) 10-Q2009 Q3 Quarterly report

Content analysis