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: June 28, 2009
 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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)3975 University Drive, Suite 100,Fairfax, Virginia
    
    22030(Address of principal executive offices)
    
    (Zip Code)
 703-641-1100
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
  o þ




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TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of June 28, 2009 and December 28, 2008
    
    
    2Consolidated Statements of Operations for the three and six month fiscal periods ended
June 28, 2009 and June 29, 2008
    
    
    3Consolidated Statement of Stockholders Deficit for the fiscal period ended
June 28, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the six month fiscal period ended
June 28, 2009 and June 29, 2008
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    18PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    19Item 1A Risk Factors
    
    
    19Item 6. Exhibits
    
    
    20




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##### 



June
    
    
    December28, 2009
    
    
    28, 2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    48
    
    
    $
    22Receivables, net
    
    
    730
    
    
    
    1,384Inventories
    
    
    
    
    
    
    Prepaid expenses & Other current assets
    
    
    107
    
    
    
    98Current assets of Discontinued Operations
    
    
    124
    
    
    
    98Total current assets
    
    
    1,009
    
    
    
    1,602Property and equipment, net
    
    
    101
    
    
    
    132Investments in joint ventures
    
    
    
    
    
    
    61Other assets
    
    
    57
    
    
    
    57Other assets of discontinued operations
    
    
    3,155
    
    
    
    3,480TOTAL ASSETS
    
    $
    4,322
    
    
    $
    5,332LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    343
    
    
    $
    454Accrued expenses
    
    
    518
    
    
    
    490Deferred revenues
    
    
    57
    
    
    
    97Current portion of debt
    
    
    625
    
    
    
    1,046Current liabilities of discontinued operations
    
    
    1,759
    
    
    
    1,771Total current liabilities
    
    
    3,302
    
    
    
    3,858Long-term liabilities:Non-current liabilities of discontinued operations
    
    
    1,755
    
    
    
    1,812TOTAL LIABILITIES
    
    
    5,057
    
    
    
    5,670Commitments and contingencies (Note 13)Stockholders  DeficitPreferred 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
    
    
    78,655
    
    
    
    78,772Accumulated deficit
    
    
    (79,394
    )
    
    
    (79,114
    )Total stockholders  Deficit
    
    
    (735
    )
    
    
    (338
    )TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    4,322
    
    
    $
    5,3320
    
    
    
    0
  2




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##### 



Quarter to Date
    
    
    Year to DateJune 28,
    
    
    June 29,
    
    
    June 28,
    
    
    June 29,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesServices
    
    $
    1,273
    
    
    $
    1,005
    
    
    $
    2,224
    
    
    $
    2,222Cost of revenuesServices
    
    
    909
    
    
    
    1,219
    
    
    
    1,531
    
    
    
    2,363Gross profit(loss)Services
    
    
    364
    
    
    
    (214
    )
    
    
    693
    
    
    
    (141
    )Operating expenses
    
    
    375
    
    
    
    2,704
    
    
    
    837
    
    
    
    3,616Loss from operations
    
    
    (11
    )
    
    
    (2,918
    )
    
    
    (144
    )
    
    
    (3,757
    )Total non-operating (loss) income, net
    
    
    (14
    )
    
    
    (110
    )
    
    
    (63
    )
    
    
    (106
    )Loss before discontinued operations
    
    
    (27
    )
    
    
    (3,028
    )
    
    
    (211
    )
    
    
    (3,863
    )Loss from discontinued operations
    
    
    (5
    )
    
    
    (353
    )
    
    
    (69
    )
    
    
    (1,400
    )Net Loss
    
    $
    (32
    )
    
    $
    (3,381
    )
    
    $
    (280
    )
    
    $
    (5,263
    )Weighted average common shares outstanding:Basic and diluted
    
    
    42,687,324
    
    
    
    42,687,324
    
    
    
    42,687,324
    
    
    
    42,263,499Basic and diluted earnings per shareLoss from continuing operations
    
    
    0.00
    
    
    
    (0.07
    )
    
    
    (0.00
    )
    
    
    (0.09
    )Loss from discontinued operations
    
    
    (0.00
    )
    
    
    (0.01
    )
    
    
    (0.00
    )
    
    
    (0.03
    )Net loss
    
    $
    (0.00
    )
    
    $
    (0.08
    )
    
    $
    (0.01
    )
    
    $
    (0.12
    )Net Loss
    
    
    (32
    )
    
    
    (3,381
    )
    
    
    (280
    )
    
    
    (5,263
    )Total comprehensive loss
    
    $
    (32
    )
    
    $
    (3,381
    )
    
    $
    (280
    )
    
    $
    (5,263
    )
  3




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##### 



Common Stock
    
    
    
    
    
    AccumulatedShares
    
    Amount
    
    APIC
    
    Deficit
    
    TotalBalance as of December 28, 2008
    
    
    42,687,324
    
    
    $
    4
    
    
    $
    78,772
    
    
    $
    (79,114
    )
    
    $
    (338
    )Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (280
    )
    
    $
    (280
    )Share price guarantee settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Option Issuances
    
    
    
    
    
    
    
    
    
    $
    14
    
    
    
    
    
    
    $
    14Balance as of June 28, 2009
    
    
    42,687,324
    
    
    $
    4
    
    
    $
    78,786
    
    
    $
    (79,394
    )
    
    $
    (604
    )
  4




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##### 



Statement of Cash Flows
 June 28,
    
    
    June 29,2009
    
    
    2008Net loss
    
    $
    (280
    )
    
    $
    (3,863
    )Adjustments to reconcile net loss to netCash used in operating activitiesStock option issuances
    
    
    14
    
    
    
    32Depreciation/Amortization
    
    
    31
    
    
    
    124Writedown of investments to fair value
    
    
    (10
    )
    
    
    169Gain on disposal of equipment
    
    
    
    
    
    
    (12
    )Cash provided by discontinued operations
    
    
    160
    
    
    
    Net loss from discontinued operations
    
    
    69
    
    
    
    Receivables
    
    
    654
    
    
    
    225Prepaid Expenses
    
    
    (9
    )
    
    
    1,280Accounts Payable
    
    
    (109
    )
    
    
    275Accrued Expenses
    
    
    (103
    )
    
    
    152Deferred Revenue
    
    
    (41
    )
    
    
    Other balance sheet changes
    
    
    
    
    
    
    1Net cash provided
by(used in) continuing
operations
    
    
    377
    
    
    
    (1,617
    )Cash flows from investing activitiesCash settlement of share price guarantee
    
    
    
    
    
    
    (90
    )Proceeds from joint ventures under the equity method
    
    
    71
    
    
    
    Cash invested in potential acquisition
    
    
    
    
    
    
    (521
    )Purchase of property and equipment
    
    
    
    
    
    
    (5
    )Proceeds from the sale of equipment
    
    
    
    
    
    
    17Net cash provided by(used in) investing activities
    
    
    71
    
    
    
    (599
    )Cash flows from financing activitiesNet cash (repayments)borrowings
    
    
    (421
    )
    
    
    1,235Net cash (used in)provided by financing activities
    
    
    (421
    )
    
    
    1,235Cash flows provided by(used in) discontinued operationsOperating
    
    
    
    
    
    
    416
   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
  Recent Accounting Pronouncements
   7




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, The FASB Accounting Standards Codification and Hierarchy of Generally
Accepted Accounting Principles a replacement of FASB Statement No. 162 FASB
Accounting Standards Codification TM
 The Hierarchy of Generally Accepted Accounting Principles,
 Amendments to FASB Interpretation No. 46(R) Consolidation of
Variable Interest Entities, Accounting for Transfers of Financial Assets. Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities
 a.
    The significant judgments and assumptions made by
an enterprise in determining whether it must
consolidate a variable interest entity and/or
disclose information about its involvement in a
variable interest entity;b.
    The nature of restrictions on a consolidated
variable interest entitys assets and on the
settlement of its liabilities reported by an
enterprise in its statement of financial position,
including the carrying amounts of such assets and
liabilities;c.
    The nature of, and changes in, the risks
associated with an enterprises involvement with
the variable interest entity; andd.
    How an enterprises involvement with the variable
interest entity affects the enterprises financial
position, financial performance and cash flows.
 8




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Business Combinations Noncontrolling
Interests in Consolidated Financial Statements
 Subsequent Events
 3. RECEIVABLES (000s)
  June
    
    
    DecemberAccounts Receivable
    
    28, 2009
    
    
    28, 2008Billed AR
    
    $
    604
    
    
    $
    1,277Unbilled AR
    
    
    79
    
    
    
    60Holdbacks
    
    
    48
    
    
    
    48Bad Debt Reserve
    
    
    (1
    )
    
    
    (1
    )Total AR
    
    $
    730
    
    
    $
    1,384
  9




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4. PROPERTY AND EQUIPMENT (000s)
 June
    
    
    DecemberProperty & Equipment
    
    28, 2009
    
    
    28, 2008Buildings & Improvements
    
    
    5
    
    
    
    5Furniture & Fixtures
    
    
    11
    
    
    
    11Office Equipment
    
    
    292
    
    
    
    292Vehicles
    
    
    38
    
    
    
    38Total
    
    $
    346
    
    
    $
    346Accumulated Depreciation
    
    
    (245
    )
    
    
    (213
    )Property & Equipment, net
    
    $
    101
    
    
    $
    132
 5. RELATED PARTY BORROWINGS
 Darryl Horne Notes
     Evan Auld-Susott Mortgage Note
  10




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John Krobath Notes
   6. STOCK TRANSACTIONS
  7. STOCK-BASED COMPENSATION
   11




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Number of shares
    
    Option Price
    
    Weighted Average PriceOptions Outstanding 12/30/2008
    
    
    445,000Granted
    
    
    Exercised
    
    
    Cancelled
    
    
    (114,000
    )
    
    
    0.20 - 0.40
    
    
    
    0.38Options Outstanding 6/28/2009
    
    
    331,000
  Options Exercisable & Outstanding
 Exercise
    
    Shares
    
    Shares
    
    Weighted AveragePrice
    
    Outstanding
    
    Exercisable
    
    Remaining Life (yrs)0.20
    
    
    70,000
    
    
    
    70,000
    
    
    
    1.00.35
    
    
    70,000
    
    
    
    30,000
    
    
    
    3.00.40
    
    
    6,000
    
    
    
    6,000
    
    
    
    1.00.50
    
    
    75,000
    
    
    
    70,000
    
    
    
    6.50.80
    
    
    110,000
    
    
    
    100,000
    
    
    
    0.1331,000
    
    
    
    276,000Total options available to issue
    
    
    30,000,000Total options outstanding or exercised
    
    
    20,566,200Total options Remaining
    
    
    9,433,800
 8. DISCONTINUED OPERATIONS
     12




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9. COMMITMENTS AND CONTINGENCIES
 Legal Matters
  B-Stand Lawsuit
  10. SUBSEQUENT EVENTS
    
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  FORWARD-LOOKING STATEMENTS (Dollars in 000s except per share amounts)
  13




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DESCRIPTION OF THE COMPANY
  CRITICAL ACCOUNTING POLICIES
   Revenue Recognition
  Net Operating Loss Carryforwards
  14




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Impairment of Long-Lived Assets
  Off- Balance Sheet Risk
  COMPARISON OF THREE MONTHS ENDED JUNE 28, 2009 AND JUNE 29, 2008
  Consolidated Overview (000s)
 Three months ended June,2009
    
    2008Total revenue
    
    $
    1,273
    
    
    
    100.0
    %
    
    $
    1,005
    
    
    
    100.0
    %Gross Profit
    
    
    364
    
    
    
    28.6
    %
    
    
    (214
    )
    
    
    -21.3
    %Operating loss
    
    
    (11
    )
    
    
    -0.9
    %
    
    
    (2,919
    )
    
    
    -290.4
    %
   15




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Services Segment (000s)
 Three months ended June,2009
    
    2008ServicesTotal revenue
    
    $
    1,273
    
    
    
    100.0
    %
    
    $
    1,005
    
    
    
    100.0
    %Gross profit
    
    
    364
    
    
    
    28.6
    %
    
    
    (214
    )
    
    
    -21.3
    %Operating gain(loss)
    
    $
    344
    
    
    
    27.0
    %
    
    $
    (364
    )
    
    
    -36.2
    %
  Corporate Expenses (000s)
 Fiscal Quarter Ended June2009
    
    2008Operating Loss
    
    $
    (355
    )
    
    $
    (2,554
    )
  Other Income(Expense)
  COMPARISON OF SIX MONTHS ENDED JUNE 28, 2009 AND JUNE 29, 2008
  Consolidated Overview
 Six months ended June,2009
    
    2008Total revenue
    
    $
    2,224
    
    
    
    100.0
    %
    
    $
    2,222
    
    
    
    100.0
    %Gross Profit
    
    
    693
    
    
    
    31.2
    %
    
    
    (141
    )
    
    
    -6.3
    %Operating loss
    
    
    (144
    )
    
    
    -6.5
    %
    
    
    (3,757
    )
    
    
    -169.1
    %
  16




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Services Segment
 Six months ended June,2009
    
    2008ServicesTotal revenue
    
    $
    2,224
    
    
    
    100.0
    %
    
    $
    2,222
    
    
    
    100.0
    %Gross Profit
    
    
    693
    
    
    
    31.2
    %
    
    
    (141
    )
    
    
    -6.3
    %Operating gain
    
    $
    628
    
    
    
    28.2
    %
    
    $
    (365
    )
    
    
    -16.4
    %
   Corporate Expenses
 Six months ended June,2009
    
    2008Operating loss
    
    $
    (805
    )
    
    $
    (4,155
    )
  Discontinued Operations
  Liquidity and Capital Resources
    17




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Foreign Exchange Risk
  
 ITEM 4. CONTROLS AND PROCEDURES
   18




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  B-Stand Lawsuit
  
 Item 1A. Risk Factors.
  19




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ITEM 6. EXHIBITS
               20




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*
    
    Indicates management contract or compensatory arrangement. 21




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SIGNATURES
  HORNE INTERNATIONAL, INC.
 By:
    
    /s/ Darryl K. HorneDarryl K. HornePresident and Chief Executive OfficerBy:
    
    /s/ Paige E. ShannonPaige E. ShannonChief Financial Officer
 22