Where Food Comes From, Inc. - Quarter Report: 2011 March (Form 10-Q)

imi-10q_0512.htm

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 March 31, 2011

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes 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 May 12, 2011 was 20,725,850.

Integrated Management Information, Inc.
Table of Contents
March 31, 2011

Part 1 - Financial Information

Item 1.	Financial Statements:	Page:

	Balance Sheets (unaudited), March 31, 2011 and December 31, 2010	3

	Statements of Operations (unaudited), for the first quarter ended March 31, 2011 and 2010	4

	Statements of Cash Flows (unaudited), for the year to date period ended March 31, 2011 and 2010	5

	Statements of Stockholders’ Equity (unaudited), for the year ended December 31, 2010 and the year to date period ended March 31, 2011	6

	Notes to Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 4.	Controls and Procedures	20

Part II - Other Information

Item 1.	Legal Proceedings	21

Item 1A.	Risk Factors	21

Item 2.	Issuer Purchases of Equity Securities	21

Item 6.	Exhibits	21

Integrated Management Information, Inc.

Balance Sheets

(Unaudited)

	March 31,			Dec 31,
	2011			2010
Assets
Current assets:
Cash and cash equivalents	$	476,375		$	513,076
Accounts receivable, net of allowance		301,946			222,480
Prepaid expenses and other current assets		26,491			34,580
Total current assets		804,812			770,136
Property and equipment, net		99,695			114,544
Intangible assets, net		13,288			14,724
Total assets	$	917,795		$	899,404

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	157,763		$	172,324
Accrued expenses and other current liabilities		25,740			33,608
Current portion of notes payable		9,304			9,130
Total current liabilities		192,807			215,062
Notes payable and other long-term debt		309,282			331,687
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;
21,039,006 and 21,039,006 shares issued, respectively; and 20,725,850 and 20,788,450 shares outstanding, respectively		21,039			21,039
Additional paid-in-capital		3,401,383			3,401,383
Treasury stock of 313,156 and 250,556 shares, respectively		(61,789	)		(47,417	)
Accumulated deficit		(2,944,927	)		(3,022,350	)
Total stockholders’ equity		415,706			352,655
Total liabilities and stockholders’ equity	$	917,795		$	899,404

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

Integrated Management Information, Inc.

Statements of Operations

(Unaudited)

	First Quarter ended
	Mar 31,			Mar 31,
	2011			2010

Revenues	$	821,819		$	680,183
Costs of revenues		369,746			278,741
Gross profit		452,073			401,442
Selling, general and administrative expenses		367,007			352,682
Income from operations		85,066			48,760
Other expense (income):
Interest expense		8,205			8,469
Other income, net		(562	)		(290	)
Income before income taxes		77,423			40,581
Income taxes		—			—
Net income	$	77,423		$	40,581

Net income per share:
Basic	$	—		$	—
Diluted	$	—		$	—

Weighted average shares outstanding:
Basic		20,764,368			20,846,814
Diluted		20,810,526			20,862,808

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

Integrated Management Information, Inc.

Statements of Cash Flows

(Unaudited)

	Year to Date Period ended Mar 31,
	2011			2010
Operating activities:
Net income	$	77,423		$	40,581
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		20,737			18,237
Stock based compensation expense		—			63
Changes in operating assets and liabilities:
Accounts receivable		(79,466	)		46,401
Prepaid expenses and other current assets		8,089			4,094
Accounts payable		(14,561	)		(16,830	)
Accrued expenses and other current liabilities		(7,868	)		(8,041	)
Net cash provided by operating activites		4,354			84,505

Investing activities:
Acquisition of property and equipment		(4,452	)		(26,228	)
Acquisition of intangible assets		—			(8,500	)
Net cash used in investing activities		(4,452	)		(34,728	)

Financing activities:
Repayments under notes payable		(22,231	)		(12,071	)
Stock repurchase under Buyback Program		(14,372	)		(1,277	)
Net cash used in financing activities		(36,603	)		(13,348	)
Net change in cash and cash equivalents		(36,701	)		36,429
Cash and cash equivalents at beginning of year		513,076			214,329
Cash and cash equivalents at end of period	$	476,375		$	250,758

Cash paid during the year to date period ended:
Income taxes	$	—		$	—
Interest paid	$	7,788		$	7,562

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

Integrated Management Information, Inc.

Statements of Stockholders’ Equity

(Unaudited)

					Additional
	Common Stock				Paid-in		Accumulated			Treasury
	Shares		Amount		Capital		Deficit			Stock			Total
Balance at December 31, 2009		20,929,006	$	20,929	$	3,387,130	$	(3,350,107	)	$	(20,144	)	$	37,808

Stock repurchase of 171,031 shares on the open market		—		—		—		—			(27,273	)		(27,273	)
Issuance of 110,000 common shares		110,000		110		14,190		—			—			14,300
Stock-based compensation expense		—		—		63		—			—			63
Net income		—		—		—		327,757			—			327,757
Balance at December 31, 2010		21,039,006	$	21,039	$	3,401,383	$	(3,022,350	)	$	(47,417	)	$	352,655

Stock repurchase of 62,600 shares on the open market		—		—		—		—			(14,372	)		(14,372	)
Net income		—		—		—		77,423			—			77,423
Balance at March 31, 2011		21,039,006	$	21,039	$	3,401,383	$	(2,944,927	)	$	(61,789	)	$	415,706

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

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.

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, 2010 included in our Form 10-K filed on March 10, 2011. 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. 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 first quarter ended March 31, 2011 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 - Basic and Diluted Income per Share

Basic income per share was computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted income 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.

Integrated Management Information, Inc.

Notes to the Financial Statements

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

	First Quarter ended
	Mar 31,		Mar 31,
	2011		2010
Basic:
Weighted average shares outstanding		20,764,368		20,846,814

Diluted:
Weighted average shares outstanding		20,764,368		20,846,814
Weighted average effects of dilutive securities		46,158		15,994
Total		20,810,526		20,862,808

Antidilutive securities:		1,353,500		8,541,500

Note 3 - 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.

The fair value of stock options is estimated using the Black-Scholes option-pricing model. No stock options were granted during the first quarters ended March 31, 2011 and 2010.

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 ASC Topic Nos. 718 and 505 (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 first quarters ended March 31, 2011 and 2010 was $0 and $63, respectively, and has been included in general and administrative expenses. 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.

Integrated Management Information, Inc.

Notes to the Financial Statements

Stock Option Plan Activity

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, 2010		7,848,500		$	1.74	$	0.01		0.12
Granted		—		$	—	$	—		—
Exercised		—		$	—	$	—		—
Canceled		(6,375,000	)	$	2.09	$	—		—
Outstanding, March 31, 2011		1,473,500		$	0.24	$	0.04		0.39	$	83,325
Exercisable, March 31, 2011		1,473,500		$	0.24	$	0.04		0.39	$	83,325

The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on March 31, 2011 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 March 31, 2011.

Note 4 - 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. Repurchased shares under the Stock Buyback Plan by year are as follows:

For the year to date period ended:	Number of Shares		Cost of Shares		Average Cost per Share

December 31, 2008		57,200	$	16,124	$	0.28
December 31, 2009		22,325		4,020	$	0.18
December 31, 2010		171,031		27,273	$	0.16
March 31, 2011		62,600		14,372	$	0.23
Total		313,156	$	61,789	$	0.20

The repurchased shares are recorded as part of treasury stock and are accounted for under the cost method.

Our stock buyback plan has been and will be used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. In the future, we may consider additional share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, and planned investment and financing needs.

Note 5 – 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

Integrated Management Information, Inc.

Notes to the Financial Statements

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 (NOL) 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. Utilization of our NOL carry forwards reduces our federal and state income tax liability incurred.

As of March 31, 2011 and December 31, 2010, we believe it is more likely than not that our net deferred tax asset will not be realized beyond the provision for income taxes due on taxable earnings for the year ended December 31, 2011; 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. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become taxable. Although we achieved net income for the year to date period ended March 31, 2011 and for the year ended December 31, 2010, we will continue to review various qualitative and quantitative data in regards to the realization of our deferred tax assts, including:

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

●	Accumulation of income (loss) before taxes utilizing a look-back period of three years;

●	Events within our industry;

●	The cyclical nature of our business;

●	The health of the economy; and

●	Historical trending.

If at some future time 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. 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.

Integrated Management Information, Inc.

Notes to the Financial Statements

Note 6 - Notes Payable

Notes payable consist of the following:


	March 31,		December 31,
	2011		2010

Equipment Note Payable	$	18,586	$	20,817
Lapaesotes Note Payable - Related Party	$	300,000	$	320,000
	$	318,586	$	340,817
Less current portion of notes payable and other long-term debt		9,304		9,130
Notes payable and other long-term debt	$	309,282	$	331,687

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 – Related Party

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 who is related to Pete Lapaseotes, a director; bear an interest rate of 9% per annum, payable quarterly.

During first quarter ended March 31, 2011, we paid an additional $20,000 towards the principal balance. We intend to continue making principal payments towards the balance as additional funds become available.

During April 2011, modifications to the terms of the existing agreement were completed. Such modifications included a reduction in the interest rate from 9% to 6% annually, as well as an extension of the maturity date from September 12, 2012 to March 31, 2014. Principal is due in full upon the maturity date; interest is payable quarterly.

Note 7 - Related Party Transactions

As previously discussed in Note 6, we have unsecured debt payable to a major shareholder who is related to Pete Lapaseotes, a director.

Note 8 - 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.

Integrated Management Information, Inc.

Notes to the Financial Statements

As of March 31, 2011, future minimum lease payments for our headquarters are as follows:


Years Ending December 31,	Amount
2011		36,531
2012		24,554
Thereafter		—
Total lease commitments	$	61,085

We also lease a copy machine with a base rent of $375.00 per month or $4,500 annually, which includes maintenance and all necessary copy supplies. The 60-month lease expires 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.

Note 9 - 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

Integrated Management Information, Inc.

Notes to the Financial Statements

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 10 - Recent Accounting Pronouncements

The pronouncements that we adopted for the year to date period ended March 31, 2011 did not have a material impact on the consolidated financial statements.

Note 11 – Subsequent Events

On April 22, 2011, we entered into a U.S. Small Business Administration Note with Great Western Bank. The Note which matures on May 1, 2021 provides for $200,000 in additional working capital. The interest rate on the Note is at prime plus 2.5% and is adjusted quarterly. Principal and interest are payable monthly. As of April 22, 2011, the current effective rate is 5.75%. The note can be prepaid without penalties and contains certain customary affirmative and negative covenants.

The loan agreement is secured by the accounts receivable, property and equipment, and intangible assets of the Company. The Note is further guaranteed by John and Leann Saunders, founders of the Company, with a security interest in 3,000,000 shares of Integrated Management Information, Inc. stock. The 3,000,000 shares are personally owned by the Saunders.

Simultaneous with the closing of the new loan agreement with Great Western Bank, we amended the terms of our existing $300,000 in unsecured debt. The note is held by a major shareholder who is related to Pete Lapaseotes, a director of the Company. Modifications to the terms of the existing agreement include a reduction in the interest rate from 9% to 6% annually, as well as an extension of the maturity date from September 12, 2012 to March 31, 2014. Principal is due in full upon the maturity date; interest is payable quarterly.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

This information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Form 10−K for the fiscal year ended December 31, 2010. The following discussion and analysis includes historical and certain forward−looking information that should be read together with the accompanying consolidated financial statements, related footnotes and the discussion below of certain risks and uncertainties that could cause future operating results to differ materially from historical results or from the expected results indicated by forward−looking statements.

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 enable the traceability through to meat products. In the aftermath of the discovery of the first case of mad cow disease in the United States in December, 2003, US beef 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 products to other countries must participate in a USDA 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 enabling companies to maintain compliance with their export verification programs. We also created a unique source and age supplier verification system to comply with the Japanese export market. 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. Then in March 2010, in response to consumers’ demand of increased transparency regarding the origins and safety of their food, we introduced our “Where Food Comes From®” consumer labeling program. This program is a rigorous qualification protocol under which only those farmers, ranchers and processors who meet strict third-party verification requirements may display the distinctive “Where Food Comes From®” brand. It is the first of its kind that directly connects the consumer with the food supply chain in a way that fosters confidence at the point of purchase. We believe that as consumers become better educated, they will have more confidence in their food

purchase decisions. In addition to building consumer confidence, the “Where Food Comes From®” label gives producers and processors a way to enhance, differentiate and even protect their valuable brands.

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 July 2010, Korea announced that it will establish a “nationwide hog farm management system” that will enable a comprehensive farm-to-slaughter management of hogs to improve the farming environment and prevent swine fever. Earlier this year, Korea fully implemented a mandatory domestic beef tracing system. Korea also announced that by December 2010 all imported beef would also be subject to the mandatory beef tracing system. We believe this will continue to provide significant international verification opportunities in predominately Asian markets which have historically been difficult for US markets to penetrate.

●

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 protectionist in nature, the current agreement for supplying Japan—cattle must be age verified as 20 months of age or less—will stay intact. This sets the stage for continued growth in IMI’s third party source and age 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 for 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. We believe that as consumers become better educated they will have more confidence in their food purchase decisions. This demand should accelerate the growth of our “Where Food Comes From®” labeling program.

Management’s Strategy

For many quarters, management has been focusing its efforts on building a strong foundation to enhance profitability for the long term. Initially our efforts focused on our age and source verification services. Throughout 2009, we introduced a more robust offering of verification services. We also internally developed automated processes which improved our efficiency and reduced our employee headcount. As a direct result, total verification sales and hardware sales improved. We were able to provide more verification certifications (a multiple service offering) in a single audit but this type of service has marginal increases in revenue with declining profit margins as compared to our single service offerings. Interestingly enough, because our customers were seeing more profit per head from multiple verifications at a minimal increase in cost per verification service, they increased the number of cattle within each group audited. We benefitted from increased hardware sales which has higher profit margins due to our process automation.

In early 2009, we understood that all this work was necessary to build a solid foundation but we also recognized a “potential market saturation and decreasing profits dilemma” early on and began working toward a solution. Through our research and development, we learned that we needed to be on the cutting edge of this industry and that the most significant person to influence the food industry was the consumer. We were concerned about various food claims that the industry made without any third party verification. In response, we identified opportunities for horizontal and vertical integration. In addition to our current business structure, we knew we needed to develop a self-sustaining revenue stream with minimal management and labor costs, while simultaneously addressing food concerns near to our heart. We had built a company with strong credibility in the industry and we had the technical expertise to make our processes operate very efficiently. The opportunities that we identified in early 2009 are built upon the verification services we provide and the solid reputation we have built.

In early 2010, we began to see some of the fruits of our labor. We were able to connect food processors and packers to those suppliers that provided product verified for the specific credence attributes demanded, thereby generating a new revenue stream based upon coordination within the food supply chain. We also introduced the “Where Food Comes From®” (WFCF) brand. Revenue generated from WFCF is based upon a similar supply chain sales model. Many long hours of research went into this project and currently we are working hard to market this program to the consumer. Research indicates that transparency in food production is becoming more and more important to consumers. We believe that the future growth of verification services will be achieved only through consumer awareness and demand. WFCF is a labeling program that reconnects the consumer to the farmers and ranchers that produce the food. For the consumer, it is a seal of approval on a package or an individual product that provides assurance that those marketing claims are authentic and have been verified by an accredited, unbiased third party.

During 2010, management, along with the assistance of industry consulting experts, intentionally made the decision to invest heavily in marketing our services and our WFCF labeling program to build consumer awareness. In February 2010, we announced our alliance with cowboy poet Baxter Black to promote our verification, identification and traceability solutions on RFD-TV’s “Cattlemen to Cattlemen” television program. In July 2010, Leann Saunders, our president, was a featured guest in an episode of Lifetime Television’s “The Balancing Act” to discuss our latest effort to connect consumers with the farmers that raise their food. For a replay of the video/television coverage, checkout this link: www.imiglobal.com/media/videogallery.asp.

For the third and fourth quarter of 2010 and first quarter of 2011, we generated a small but consistently growing revenue stream from our WFCF program. We will continue to invest heavily in marketing our verification services and our WFCF brand to build consumer awareness and demand through the use of videos, television exposure, word-of-mouth and the internet. We believe we are positioning ourselves to benefit significantly in 2011 and beyond, but, of course, no assurance can be given that this investment will generate future revenue nor can we determine for how long, if at all.

Financial Highlights

●	Revenues for the first quarter March 31, 2011 increased 20.8% over the same comparable periods in 2010. We are still experiencing significant growth in our US Verified product line and our supply chain coordination efforts.

●	Net income for the first quarter ended March 31, 2011 was $77,423 compared to net income of $40,581 for the same period 2010. This is our fifth consecutive quarter to achieve net income and we believe this is significant considering current economic conditions severely impacting the food industry.

●

On April 22, 2011 we restructured our debt facility to provide for $500,000 at more favorable interest rates. We renewed our existing $300,000 unsecured related party note for three years at a rate of 6.0%, a significant reduction over the previous rate of 9.0%. In addition, we initiated a new $200,000, 10-year loan with Great Western Bank at a rate of prime plus 2.5% - a current effective rate of 5.75%.

Seasonality

Our business is subject to seasonal fluctuations. Significant portions of our revenues are typically realized during the second and third 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 March 31, 2011, we had cash and cash equivalents of $476,375 compared to $513,076 of cash and cash equivalents at December 31, 2010. Our working capital at March 31, 2011 was $612,005 compared to $555,074 at December 31, 2010.

Net cash provided by operating activities during the year to date period ended March 31, 2011 was $4,354 compared to cash provided of $84,505 during the same period in 2010. Cash provided by operating activities is driven by our net income and adjusted by non-cash items. Non-cash adjustments primarily include depreciation, amortization of intangible assets and stock based compensation expense. The decrease was primarily due to the timing of cash receipts offset by better operating performance.

Net cash used in investing activities of $4,452 is attributable to capital expenditures during the first quarter ended March 31, 2011. During the prior comparable period, we spent $26,228 in capital assets. We also spent $8,500 to purchase the rights to the Nebraska Verified trademark. 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 used in financing activities of $36,603 during the year to date period ended March 31, 2011 was due to net repayments of $22,231 made under our notes payable and $14,372 in repurchases under our Stock Buyback program. Net cash used in financing activities of $13,348 during the first quarter 2010 was due to net repayments of $12,071 made under our notes payable and $1,277 in repurchases under our Stock Buyback program.

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 and overall improvement in our performance, we believe that we will achieve profitability for the year ended December 31, 2011. The culmination of all our efforts toward profitability 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 means to entry as imposed on international market imports/exports is via a quality verification program, like our USVerified™ product line.

Debt Facility

Off Balance Sheet Arrangements

As of March 31, 2011, we had no off-balance sheet arrangements of any type.

RESULTS OF OPERATIONS

First Quarter ended March 31, 2011 compared to the Same Period in Fiscal Year 2010

Revenues

Revenues are derived from sales of our USVerified identification and verification solutions, consulting services, web-based development and hardware sales. Revenues for the first quarter ended March 31, 2011 were $821,819 compared to $680,183 in the 2010 comparable period, an improvement of 20.8%. We still continue to experience double-digit sales growth from quarter over comparable quarter and we believe this is significant performance in light of the current economic conditions severely impacting the food industry.

During the first quarter ended March 31, 2011, our third party verification revenue, which includes sales of our USVerified solutions and related consulting, program development and web-based development services,

increased 19.2% to $684,847 compared to $574,359 in the same quarter 2010. The improvement is due in large part to increased demand in our US Verified NHTC product line and revenue generated from our supply chain coordination efforts.

Revenues derived from sales of hardware, primarily sales of cattle identification ear tags, increased 29.4% to $136,972 in the first quarter 2011 compared to $105,824 in the first quarter 2010.

Cost of Sales and Gross Margin

Cost of sales for the first quarter 2011 were $369,746 compared to $278,741 during the first quarter 2010. Gross margin for the first quarter 2011 slightly decreased 4 basis points to 55% of revenues compared to 59% for the first quarter 2010. Our gross profit was positively impacted by increased volume of verification audits which have a slightly greater labor cost. Accordingly, our gross margins decreased due to the slight shift in our sales mix as compared to first quarter 2010.

For a more detailed discussion regarding profitability, read “Management’s Strategy” above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the first quarter 2011 were $367,007, an increase of $14,325, or 4.1% over the first quarter 2010 amount of $352,682. The increase was directly attributed to increased spending in consulting, marketing and advertising. During the second quarter 2010, management, along with the assistance of industry consulting experts, intentionally made the decision to invest heavily in marketing our “Where Food Comes From®” labeling program to build consumer awareness. We believe that the future growth of verification services will be achieved only through consumer awareness and demand. We recognize that we are allocating significant funds to this effort but we are confident that we are heading in the right direction. This marketing decision and the decision to invest these funds in our future were made at a time when we recognized that our operations consistently generated sufficient cash flow. While we continue to generate a small but consistently growing revenue stream from our WFCF program, we cannot guarantee that our marketing investment will generate future revenue nor can we determine for how long, if at all. Therefore, this investment must be expensed in accordance with accounting principles generally accepted in the United States. For a more detailed discussion regarding our “Where Food Comes From®” labeling program, read “Management’s Strategy” above.

Net Income and Per Share Information

As a result of the foregoing, net income for the first quarter ended March 31, 2011 was $77,423 or less than a penny per basic and diluted common share, compared to net income of $40,581 or less than a penny per basic and diluted common share for the first quarter ended March 31, 2010.

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 policies

reflect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.

Revenue Recognition

Revenues are recognized only when realized / realizable and earned in accordance with generally acceptable accounting principles.

●	Revenue from product sales is recognized when the goods are shipped and title passes to the customer.

●	Revenue from contracts for consulting and website development is recognized on the percentage of completion method.

●	Revenue derived from our US Verified program is recognized using the Proportional Performance Model. Contracts are cancelable only for non-performance.

Allowance for Doubtful Accounts

The majority of our receivables are due from trade customers. Credit is extended based on our evaluation of the customer’s financial condition and generally collateral is not required. Accounts receivable are due approximately 30 days from invoice date and are stated at amounts due from customers net an allowance for doubtful accounts. Accounts receivable that are outstanding longer than the contractual payment terms are considered past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss and payment history, the customer’s current ability to pay its obligations to us and the condition of the general economy and the industry as a whole. We write off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Compliance 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, have 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.

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 1A. RISK FACTORS

Our business is subject to a number of risks, including those identified in Item 1A. — “Risk Factors” of our 2010 Annual Report on Form 10−K, that could have a material effect on our business, results of operations, financial condition and/or liquidity and that could cause our operating results to vary significantly from period to period. As of March 31, 2011, there have been no material changes to the risks disclosed in our most recent Annual Report on Form 10−K. We may also disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

ITEM 2. ISSUER PURCHASES OF EQUITY SECURITIES

On January 7, 2008, we announced our intention to buy back up to one million shares of our common stock from the open market. Repurchased shares under the Stock Buyback Plan by year are as follows:


For the year to date period ended:	Number of Shares		Cost of Shares		Average Cost per Share

December 31, 2008		57,200	$	16,124	$	0.28
December 31, 2009		22,325		4,020	$	0.18
December 31, 2010		171,031		27,273	$	0.16
March 31, 2011		62,600		14,372	$	0.23
Total		313,156	$	61,789	$	0.20

The repurchased shares are recorded as part of treasury stock and are accounted for under the cost method.

ITEM 6. EXHIBITS

(a) Exhibits

Number		Description
10.1		Loan Agreement between IMI Global, Inc. and Great Western Bank
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

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: May 13, 2011	Integrated Management Information, Inc.

	By:	/s/ John K. Saunders
		Chief Executive Officer

	By:	/s/ Dannette D. Henning
		Chief Financial Compliance Officer