Where Food Comes From, Inc. - Quarter Report: 2009 June (Form 10-Q)

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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 June 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 July 27, 2009 was 20,868,481.

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

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Integrated Management Information, Inc.

Table of Contents

June 30, 2009

	Page:

Part 1 - Financial Information

Item 1. Financial Statements:

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

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

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

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

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

Notes to Financial Statements	8

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

Item 3. Controls and Procedures	21

Part II - Other Information

Item 1. Legal Proceedings	22

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3. Defaults upon Senior Securities	22

Item 4. Submission of Matters to a Vote of Security Holders	22

Item 5. Other Information	22

Item 6. Exhibits	22

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Integrated Management Information, Inc.

Balance Sheets

(Unaudited)

	Jun 30,			Dec 31,
	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	128,548		$	154,044
Accounts receivable, net of allowance	378,014			458,715
Inventories	—			14,350
Prepaid expenses and other current assets	24,412			33,073
Total current assets	530,974			660,182
Property and equipment, net	111,266			78,275
Intangible assets, net	874			1,093
Total assets	$	643,114		$	739,550

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	125,536		$	218,843
Accrued expenses and other current liabilities	53,496			53,438
Current portion of notes payable	8,154			—
Total current liabilities	187,186			272,281
Notes payable and other long-term debt	375,209			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	3,386,308			3,359,380
Treasury stock of 60,525 and 57,200 shares, respectively	(16,889		)	(16,124		)
Accumulated deficit	(3,309,629		)	(3,196,916		)
Total stockholders’ equity	80,719			167,269
Total liabilities and stockholders’ equity	$	643,114		$	739,550

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

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Integrated Management Information, Inc.

Statements of Operations

(Unaudited)

	Second Quarter ended
	June 30,			June 30,
	2009			2008

Revenues	$	645,880		$	633,716
Costs of revenues	294,393			221,277
Gross profit	351,487			412,439
Selling, general and administrative expenses	293,168			340,724
Gain on sale of equipment	—			—
Income from operations	58,319			71,715
Other expense (income):
Interest expense	9,187			8,959
Other income, net	(133		)	(115		)
Income (loss) before income taxes	49,265			62,871
Income taxes	—			—
Income (loss) from continuing operations	49,265			62,871
Loss from discontinued operations	—			(20,137		)
Net income (loss)	$	49,265		$	42,734

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

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

Weighted average shares outstanding:
Basic	20,868,481			19,984,506
Diluted	20,956,251			20,047,389

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

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Integrated Management Information, Inc.

Statements of Operations

(Unaudited)

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

Revenues	$	1,123,205		$	1,171,046
Costs of revenues	573,489			427,603
Gross profit	549,716			743,443
Selling, general and administrative expenses	649,475			730,385
Gain on sale of equipment	(4,000		)	—
Income from operations	(95,759		)	13,058
Other expense (income):
Interest expense	17,348			17,472
Other income, net	(394		)	(1,260		)
Income (loss) before income taxes	(112,713		)	(3,154		)
Income taxes	—			—
Income (loss) from continuing operations	(112,713		)	(3,154		)
Loss from discontinued operations	—			(14,662		)
Net income (loss)	$	(112,713	)	$	(17,816	)

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	20,869,050			19,988,797
Diluted	20,869,050			19,988,797

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

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Integrated Management Information, Inc.

Statements of Cash Flows

(Unaudited)

	Year to Date Period ended June 30,
	2009			2008
Operating activities:
Net loss	$	(112,713	)	$	(17,816	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amorization	25,923			24,270
Stock based compensation expense	26,928			3,717
Provision for doubtful accounts	12,722			1,000
Gain on sale of equipment	(4,000		)	—
Changes in assets and liabilities:
Accounts receivable	67,978			(212,002		)
Inventories	14,350			3,697
Prepaid expenses and other current assets	8,661			23,534
Accounts payable	(93,307		)	60,037
Accrued expenses and other current liabilities	58			24,249
Deferred revenue	—			(5,750		)
Net cash used in operating activites	(53,400		)	(95,064		)

Investing activities:
Acquisition of property and equipment	(58,695		)	(34,731		)
Proceeds from sale of equpment	4,000			500
Net cash used in investing activities	(54,695		)	(34,231		)

Financing activities:
Proceeds from line of credit	—			24,000
Proceeds from Notes Payable	89,964			—
Repayment under Notes Payable	(6,600		)	—
Stock repurchase under Buyback Program	(765		)	(1,728		)
Net cash provided by financing activities	82,599			22,272
Net change in cash and cash equivalents	(25,496		)	(107,023		)
Cash and cash equivalents at beginning of year	154,044			170,882
Cash and cash equivalents at end of year	$	128,548		$	63,859

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

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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	—		—			26,928			—			—			26,928
Net loss	—		—			—			(112,713		)	—			(112,713		)
Balance at June 30, 2009	20,929,006		$	20,929		$	3,386,308		$	(3,309,629	)	$	(16,889	)	$	80,719

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

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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.

Basis of Presentation

Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, costs and expenses during the reporting period. Actual results could differ from the estimates.

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Integrated Management Information, Inc.

Notes to the Financial Statements

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:

	Second Quarter ended		Year to Date Period ended
	June 30,	June 30,	June 30,	June 30,
	2009	2008	2009	2008
Basic:
Weighted average shares outstanding	20,868,481	19,984,506	20,869,050	19,988,797

Diluted:
Weighted average shares outstanding	20,868,481	19,984,506	20,869,050	19,988,797
Weighted average effects of dilutive securities	87,770	62,883	—	—
Total	20,956,251	20,047,389	20,869,050	19,988,797

Antidilutive securities:	7,062,810	10,410,310	8,831,310	10,665,310

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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, June 30, 2009	8,831,310		$	1.62	$	0.01	1.60	$	31,285
Exercisable, June 30, 2009	7,135,188		$	1.44	$	0.01	1.60	$	23,807

The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on June 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 June 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 Year to Date Period ended
	June 30,	June 30,
	2009	2008

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

No stock options were granted during the year to date period ended June 30, 2009 or the second quarter ended June 30, 2008.

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 second quarters ended June 30, 2009 and 2008 was $15,779 and $884, respectively, and has been included in general and administrative expenses. Stock-based compensation cost for the year to date periods ended June 30, 2009 and 2008 was $26,978 and $3,717,

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Integrated Management Information, Inc.

Notes to the Financial Statements

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.

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 June 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.

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Integrated Management Information, Inc.

Notes to the Financial Statements

Note 7 - Notes Payable

Notes payable consist of the following:

	June 30,		December 31,
	2009		2008

Equipment Note Payable	$	33,363	$	—
Lapaesotes Note Payable	350,000		300,000
	$	383,363	$	300,000
Less current portion of notes payable and other long-term debt	8,154		—
Notes payable and other long-term debt	$	375,209	$	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 $350,000 payable of unsecured debt payable to a major shareholder who is related to Pete Lapaseotes, a director.

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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 June 30, 2009, the annual primary lease payments are as follows:

Years Ending December 31,	Amount
2009	23,370
2010	47,326
2011	48,509
2012	24,554
Thereafter	—
Total lease commitments	$	143,759

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. There was no adjustment to Mrs. Saunders annual salary.

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.

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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

We adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, (SFAS 157) on January 1, 2008, which became effective for fiscal periods beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosure about fair value measurements. SFAS 157 applies whenever other statements require or permit assets or liabilities to be measured at fair value. The adoption of SFAS 157 did not have an impact on our financial statements.

We adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115 (SFAS No. 159) on January 1, 2008, which became effective for fiscal periods beginning after November 15, 2007. This standard permits entities to choose to measure many financial instruments and certain other items at fair value. While SFAS No. 159

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Integrated Management Information, Inc.

Notes to the Financial Statements

became effective for our 2008 fiscal year, we did not elect the fair value measurement option for any of our financial assets or liabilities.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161). This statement changes the disclosure requirements for derivative instruments and hedging activities. SFAS 161 requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective as of the beginning of our 2009 fiscal year. We are currently evaluating the potential impact, if any, of the adoption of SFAS 161 on our financial statements.

In April 2008, the FASB issued FASB Staff Position No. FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions that are used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets and requires enhanced related disclosures. FSP 142-3 must be applied prospectively to all intangible assets acquired as of and subsequent to fiscal years beginning after December 15, 2008. We are currently evaluating the impact that FSP 142-3 will have on our financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). SFAS 162 identifies the sources of accounting principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement will be effective November 15, 2008. We currently adhere to the hierarchy of GAAP as presented in SFAS 162 and do not expect its adoption will have a material impact on its results of operations and financial condition.

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.

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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.

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 calving season is at its 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.

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Liquidity and Capital Resources

At June 30, 2009, we had cash and cash equivalents of $128,548 compared to $154,044 of cash and cash equivalents at December 31, 2008. Our working capital at June 30, 2009 was $343,788 compared to $387,901 at December 31, 2008.

Net cash used in operating activities during the second quarter 2009 was $53,400 compared to $95,064 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 $54,695 is primarily attributable to capital expenditures. Our capital expenditures were $58,695 and $34,731 for the year to date periods ended June 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 financing activities of $82,599 during the year to date period ended June 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.

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.

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.

Off Balance Sheet Arrangements

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

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RESULTS OF OPERATIONS

Second Quarter and Year to Date Periods ended June 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 second quarter and year to date period ended June 30, 2009 were $645,880 and $1,123,205 compared to $633,716 and $1,171,046, respectively. While the improvement during second quarter represents modest growth, we believe it is significant in light of the current economic conditions severely impacting the food industry. On a comparable year to date basis, the first quarter in the prior year included significant growth in new customers due to a delisting of a competitor by the USDA. Currently, verification services provided to those customers that we acquired in the first quarter of the prior year are now spread more evenly throughout our fiscal year.

During the second quarter ended June 30, 2009, our third party verification revenue, which includes sales of our USVerified solutions and related consulting, program development and web-based development services, slightly decreased 5% to $542,391 compared to $570,830 in the same quarter 2008. On a comparable quarter to quarter basis, 2008 included approximately $97,000 in revenue related to a special grant funded project for premise registrations throughout the USDA. Excluding this non-recurring revenue stream, verification revenue for second quarter 2009 improved 14.5% over the comparable revenue stream in second quarter 2008.

For the year to date period ended June 30, 2009, third party verification revenue slightly decreased 6.4% to $955,030 compared to $1,020,672 in the same 2008 period. On a comparable year to date basis, 2008 included approximately $214,000 in revenue related to a special grant funded project for premise registrations throughout the USDA. Excluding this non-recurring revenue stream, verification revenue for the year to date period ended June 30, 2009 improved 18.4% over the comparable revenue stream in 2008. 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 June 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 54.2% to $96,990 in the second quarter 2009 compared to $62,886 in the second quarter 2008. For the year to date period ended June 30, 2009, hardware sales increased 48.5% to $156,085 compared to $105,125 in the same 2008 period.

We believe that occurrence of the following events will drive our business forward effectively increasing customer demand for third party verification services and presenting additional opportunities:

· The reopening of key export markets;

· An ever increasing consumer demand for verification of NHTC and humane handling marketing claims;

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· The many recent product recalls in fresh produce and the advent of legislation concerning country of origin labeling (COOL);

· Increased congressional scrutiny of food safety which creates an ever growing movement towards a mandatory identification program (NAIS);

· An increase in forward-thinking producers and retailers who are both environmentally conscious and looking for a marketing edge;

· An increase in producers and consumers who are committed to reducing their carbon footprint;

· A shift in attitude within the new administration that is uniquely positioning the agricultural industry.

Cost of Sales and Gross Margin

Cost of sales for the second quarter 2009 was $294,393 compared to $221,277 during the second quarter 2008. Gross margin for the second quarter 2009 declined by approximately 11 basis points to 54.4% of revenues compared to 65.1% for the second quarter 2008. For the year to date period ended June 30, 2009, cost of sales was 573,489 compared to $427,603 for the same 2008 period. Gross margins declined 14.5 basis points to 48.9% in 2009 compared to 63.5% 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 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 second quarter 2009 were $293,168, a decrease of $47,556, or 14% over the second quarter 2008 amount of $340,724. For the year to date period ended June 30, 2009, expenses decreased $80,910 or 11.1% to $649,475 compared to $730,385 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.

Income (Loss) from Continuing Operations and per Share information

As a result of the foregoing, income from continuing operations for the second quarter ended June 30, 2009 was $49,265 or less than a penny per basic and diluted common share, compared to $62,871 or less than a penny per basic and diluted common share for the second quarter ended June 30, 2008.

Loss from continuing operations for the year to date period ended June 30, 2009 was $112,713 or $0.01 per basic and diluted common share, compared to $3,154 or less than a penny per basic and diluted common share for the same period in 2008.

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Net Income (Loss)

Net income for the second quarter ended June 30, 2009 was $49,265 compared to $42,734 for the second quarter ended June 30, 2008. For the year to date period ended June 30, 2009, net loss was $112,713 compared to $17,816 for the same period ended June 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 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.

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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.

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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

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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: August 4, 2009	Integrated Management Information, Inc.

		By:	/s/ John K. Saunders

			Chief Executive Officer

		By:	/s/ Dannette D. Boyd

			Chief Financial Officer