UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: March 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-50373
 Horne International, Inc.
 
 Delaware
    
    90-0182158(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)2677 Prosperity Avenue, Suite 300, 
Fairfax, Virginia
    
    22031(Address of principal executive offices)
    
    (Zip Code)
 703-641-1100
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
  o þ




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TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of March 30, 2008 and December 30, 2007
    
    
    
    2Consolidated Statements of Operations for the fiscal quarters ended March 30, 2008 and
March 31, 2007
    
    
    
    3Consolidated Statement of Stockholders Equity for the fiscal quarter ended
March 30, 2008
    
    
    
    4Condensed Consolidated Statements of Cash Flows for the fiscal quarters ended
March 30, 2008 and March 31, 2007
    
    
    
    5Notes to Consolidated Financial Statements
    
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    
    15Item 4. Controls and Procedures
    
    
    
    15PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    
    16Item 1A Risk Factors
    
    
    
    16Item 6. Exhibits
    
    
   
    16




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March
    
    
    December30, 2008
    
    
    30, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    92
    
    
    $
    577Receivables, net
    
    
    1,045
    
    
    
    1,085Prepaid expenses & Other current assets
    
    
    1,283
    
    
    
    832Current assets of discontinued operations
    
    
    652
    
    
    
    1,832Total current assets
    
    
    3,072
    
    
    
    4,326Property and equipment, net
    
    
    848
    
    
    
    914Investments in joint ventures
    
    
    311
    
    
    
    311Other assets
    
    
    156
    
    
    
    158Other assets of discontinued operations
    
    
    4,297
    
    
    
    4,623TOTAL ASSETS
    
    $
    8,684
    
    
    $
    10,332LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    554
    
    
    $
    247Accrued expenses
    
    
    1,330
    
    
    
    1,729Deferred revenues
    
    
    87
    
    
    
    86Current portion of long-term debt
    
    
    260
    
    
    
    Current liabilities of discontinued operations
    
    
    694
    
    
    
    682Total current liabilities
    
    
    2,925
    
    
    
    2,744Long-term liabilities:Non-current liabilities of discontinued operations
    
    
    1,902
    
    
    
    1,969TOTAL LIABILITIES
    
    
    4,827
    
    
    
    4,713Commitments and contingencies (Note 10)Stockholders equity:Preferred stock, $0.0001 par value; 20,000,000 shares
authorized, none issued
    
    
    
    
    
    
    Common stock, $0.0001 par value; 80,000,000 shares authorized,
42,687,324 and 41,774,082 issued and outstanding
    
    
    4
    
    
    
    4Additional paid-in capital
    
    
    78,736
    
    
    
    78,616Accumulated deficit
    
    
    (74,883
    )
    
    
    (73,001
    )Total stockholders equity
    
    
    3,857
    
    
    
    5,619TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    8,684
    
    
    $
    10,332
  2




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Fiscal Quarter EndedMarch 30,
    
    
    March 31,2008
    
    
    2007RevenuesServices
    
    $
    1,216
    
    
    $
    1,965Cost of revenuesServices
    
    
    1,144
    
    
    
    1,729Gross profitServices
    
    
    72
    
    
    
    236Operating expenses
    
    
    911
    
    
    
    1,578Loss from operations
    
    
    (839
    )
    
    
    (1,342
    )Total non-operating income , net
    
    
    5
    
    
    
    131Loss before provision for income taxes
    
    
    (834
    )
    
    
    (1,211
    )Income tax benefit (expense)
    
    
    
    
    
    
    Loss before discontinued operations
    
    
    (834
    )
    
    
    (1,211
    )Loss from discontinued operations, net of tax
    
    
    (1,047
    )
    
    
    (758
    )Net Loss
    
    $
    (1,881
    )
    
    $
    (1,969
    )Weighted average common shares outstanding:Basic and diluted
    
    
    41,834,965
    
    
    
    41,406,035Basic and diluted earnings per shareLoss from continuing operations
    
    $
    (0.02
    )
    
    $
    (0.03
    )Loss from discontinued operations
    
    
    (0.02
    )
    
    
    (0.02
    )Net loss
    
    $
    (0.04
    )
    
    $
    (0.05
    )
  3




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Statement of Stockholders Equity
March 30, 2008
 Common Stock
    
    
    
    
    
    AccumulatedShares
    
    Amount
    
    APIC
    
    Deficit
    
    TotalBalance as of December 31, 2007
    
    
    41,774,082
    
    
    $
    4
    
    
    $
    78,617
    
    
    $
    (73,001
    )
    
    $
    5,620Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (1,882
    )
    
    $
    (1,882
    )Stock Issuances
    
    
    913,242
    
    
    $
    
    
    
    $
    200
    
    
    
    
    
    
    $
    200Share price guarantee settlement
    
    
    
    
    
    
    
    
    
    $
    (90
    )
    
    
    
    
    
    $
    (90
    )Option Issuances
    
    
    
    
    
    
    
    
    
    $
    9
    
    
    
    
    
    
    $
    9Balance as of March 30, 2008
    
    
    42,687,324
    
    
    $
    4
    
    
    $
    78,736
    
    
    $
    (74,883
    )
    
    $
    3,857
  4




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Statement of Cash Flows
Fiscal Quarter Ended
 March 30,
    
    
    March 31,2008
    
    
    2007Net loss from continuing operations
    
    $
    (834
    )
    
    $
    (1,211
    )Adjustments to reconcile net loss to net
Cash used in operating activitiesStock option issuances
    
    
    9
    
    
    
    5Depreciation/Amortization
    
    
    71
    
    
    
    259Decrease (increase) in balance sheet itemsReceivables
    
    
    39
    
    
    
    673Prepaid Expenses
    
    
    70
    
    
    
    (19
    )Accounts Payable
    
    
    309
    
    
    
    (126
    )Accrued Expenses
    
    
    (201
    )
    
    
    547Deferred Revenue
    
    
    
    
    
    
    (3
    )Other balance sheet changes
    
    
    4
    
    
    
    156Net cash (used in)provided by continuing operations
    
    
    (533
    )
    
    
    281Cash flows from investing activitiesCash settlement of share price guarantee
    
    
    (90
    )
    
    
    Cash invested in potential acquisition
    
    
    (521
    )Purchase of property and equipment
    
    
    (5
    )
    
    
    (39
    )Proceeds from the sale of equipment
    
    
    
    
    
    
    10Net cash used in investing activities
    
    
    (616
    )
    
    
    (29
    )Cash flows from financing activitiesCash borrowings
    
    
    260
    
    
    
    Net cash provided by financing activities
    
    
    260
    
    
    
    Cash flows provided by(used in) discontinued
operationsOperating
    
    
    404
    
    
    
    (620
    )Investing
    
    
    
    
    
    
    (33
    )Financing
    
    
    
    
    
    
    (17
    )Net decrease in cash and cash equivalents
    
    
    (485
    )
    
    
    (418
    )Cash and cash equivalents at beginning of period
    
    
    577
    
    
    
    4,185Cash and cash equivalents at end of period
    
    $
    92
    
    
    $
    3,767
    5




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1. BASIS OF PRESENTATION
   2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization and Nature of Business
   Revenue Recognition
   Income Taxes
  6




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Loss Per Share
   Impairment of Long-Lived Assets
  3. RECEIVABLES (000s)
  March
    
    
    DecemberAccounts Receivable
    

30, 2008
    
    

30, 2007Billed AR
    
    $
    918
    
    
    $
    712Unbilled AR
    
    
    89
    
    
    
    335Holdbacks
    
    
    48
    
    
    
    48Bad Debt Reserve
    
    
    (10
    )
    
    
    (10
    )Total AR
    
    $
    1,045
    
    
    $
    1,085
  7




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4. PREPAID EXPENSES (000S)
  5. PROPERTY AND EQUIPMENT (000s)
 March
    
    
    DecemberProperty & Equipment
    

30, 2008
    
    

30, 2007Leasehold Improvements
    
    
    754
    
    
    
    754Furniture & Fixtures
    
    
    270
    
    
    
    270Office Equipment
    
    
    307
    
    
    
    294Vehicles
    
    
    77
    
    
    
    77Total
    
    $
    1,408
    
    
    $
    1,395Accumulated Depreciation
    
    
    (560
    )
    
    
    (481
    )Property & Equipment, net
    
    $
    848
    
    
    $
    914
 6. BORROWINGS
 Darryl Horne Note
  7. STOCK TRANSACTIONS
   8




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8. STOCK-BASED COMPENSATION
   Number of shares
    
    Option PriceOptions Outstanding 12/31/2007
    
    
    1,912,514Granted
    
    
    Exercised
    
    
    Cancelled
    
    
    (1,395,514
    )
    
    
    1.55  1.65Options Outstanding 3/30/2008
    
    
    517,000
  Options Exercisable & OutstandingExercise
    
    Shares
    
    Shares
    
    Weighted AveragePrice
    
    Outstanding
    
    Exercisable
    
    Remaining Life (yrs)0.35
    
    
    180,000
    
    
    
    
    
    
    
    4.20.37
    
    
    50,000
    
    
    
    
    
    
    
    4.20.40
    
    
    60,000
    
    
    
    39,000
    
    
    
    4.20.50
    
    
    75,000
    
    
    
    45,000
    
    
    
    8.20.80
    
    
    150,000
    
    
    
    50,000
    
    
    
    1.21.28
    
    
    2,000
    
    
    
    2,000
    
    
    
    0.2517,000
    
    
    
    136,000Total options available to issue
    
    
    30,000,000Total options outstanding or exercised
    
    
    20,638,200Total options remaining
    
    
    9,361,800
 9. DISCONTINUED OPERATIONS
  10. COMMITMENTS AND CONTINGENCIES
 Legal Matters
  9




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Garrison Lawsuit
  11. SUBSEQUENT EVENTS
 Darryl Horne Notes and Loan Commitment
   Evan Auld-Susott and Trevor Foster Line of Credit Commitment
  10




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  FORWARD-LOOKING STATEMENTS
   DESCRIPTION OF THE COMPANY
   CRITICAL ACCOUNTING POLICIES
  11




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Revenue Recognition
   Net Operating Loss Carryforwards
  Impairment of Long-Lived Assets
  Off Balance Sheet Risk
  12




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COMPARISON OF THREE MONTHS ENDED MARCH 30, 2008 AND MARCH 31, 2007
  Consolidated Overview (000s)
 Fiscal Quarter Ended March2008
    
    2007Total CompanyTotal revenue
    
    $
    1,216
    
    
    
    100.0
    %
    
    $
    1,965
    
    
    
    100.0
    %Gross Profit
    
    
    72
    
    
    
    5.9
    %
    
    
    236
    
    
    
    12.0
    %Operating loss
    
    
    (839
    )
    
    
    -69.0
    %
    
    
    (1,342
    )
    
    
    -68.3
    %
    Services Segment (000s)
 Fiscal Quarter Ended March2008
    
    2007ServicesTotal revenue
    
    $
    1,216
    
    
    
    100.0
    %
    
    $
    1,965
    
    
    
    100.0
    %Gross Profit
    
    
    72
    
    
    
    5.9
    %
    
    
    236
    
    
    
    12.0
    %Operating gain
    
    $
    (194
    )
    
    
    -16.0
    %
    
    $
    (105
    )
    
    
    -5.3
    %
   13




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Corporate Expenses (000s)
 Fiscal Quarter Ended March2008
    
    2007Operating Loss
    
    $
    (645
    )
    
    $
    (1,237
    )
  Other Income
  Discontinued Operations
  Liquidity and Capital Resources
    14




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Foreign Exchange Risk
   ITEM 4. CONTROLS AND PROCEDURES
   15




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PART II - OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
  Garrison Lawsuit
  Item 1A. Risk Factors.
  ITEM 6. EXHIBITS
        16




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17




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*
    
    Indicates management contract or compensatory arrangement. 18




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SIGNATURES
  HORNE INTERNATIONAL, INC.By:
    /s/ Darryl K. HorneDarryl K. HornePresident and Chief Executive OfficerBy:
    /s/ John E, KrobathJohn E. KrobathInterim Principal Financial
and Accounting Officer 19