U.S. SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                   FORM 10-QSB

 (Mark One)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
    1934

For the quarterly period ended July 31, 1997

|_| Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from _________ to _________

Commission file number   0-26238

                    The Source Information Management Company
        (Exact Name of Small Business Issuer as Specified in Its Charter)


             Missouri                                        43-1710906
 (State or Other Jurisdiction of                          (I.R.S. Employer
 Incorporation or Organization)                           Identification No.)

                             11644 Lilburn Park Road
                            St. Louis, Missouri 63146
                    (Address of Principal Executive Offices)


                                 (314) 995-9040
                (Issuer's Telephone Number, Including Area Code)


                               The Source Company
         (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

         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 |_|

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest  practicable date:  7,165,953 (as of July 31,
1997)

   Transitional Small Business Disclosure Format (check one):  Yes |_|  No |X|
<PAGE>
                   THE SOURCE INFORMATION MANAGEMENT COMPANY

                                      INDEX

                         PART I - FINANCIAL INFORMATION

                                                                      Page

ITEM 1.       Financial Statements

              Unaudited Balance Sheet as of July 31, 1997                1

              Unaudited Statements of Operations for the three
              months ended July 31, 1997 and 1996 and for the
              six months ended July 31, 1997 and 1996                    3

              Unaudited Statements of Cash Flows for the six
              months ended July 31, 1997 and 1996                        4

              Notes to Financial Statements                              5

ITEM 2.       Management's Discussion and Analysis                      12


                           PART II - OTHER INFORMATION

ITEM 2.       Changes in Securities                                     17

ITEM 4.       Submission of Matters to a Vote of Security Holders       17

ITEM 6.       Exhibits and Reports on Form 8-K                          17

<PAGE>
                                                             

                    THE SOURCE INFORMATION MANAGEMENT COMPANY

                             Unaudited Balance Sheet

                                  July 31, 1997
-------------------------------------------------------------------------------

Assets (Note 3)
Current
     Cash                                                        $      70,718
     Trade receivables (net of allowance for doubtful 
        accounts of $374,289) (Note 5)                              15,336,384
     Notes receivable - officers (Note 2)                              108,530
     Other current assets                                              272,378
-------------------------------------------------------------------------------
Total Current Assets                                                15,788,010
-------------------------------------------------------------------------------
Office equipment and furniture                                       2,030,361
Less accumulated depreciation and amortization                       1,313,535
-------------------------------------------------------------------------------
Net Office Equipment and Furniture                                     716,826
-------------------------------------------------------------------------------

Other Assets
     Notes receivable - officers (Note 2)                              135,048
     Goodwill (net of accumulated amortization of $134,267)          3,285,112
     Other                                                             154,050
-------------------------------------------------------------------------------
Total Other Assets                                                   3,574,210
-------------------------------------------------------------------------------
                                                              $     20,079,046
-------------------------------------------------------------------------------

                 See accompanying notes to financial statements

                                       1
<PAGE>
                    THE SOURCE INFORMATION MANAGEMENT COMPANY

                             Unaudited Balance Sheet

                                  July 31, 1997
------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
Current
     Checks issued against future deposits                   $        438,188
     Accounts payable and accrued expenses                            660,306
     Due to retailers (Note 6)                                        167,741
     Income tax payable                                               555,350
     Deferred income taxes (Note 7)                                    72,000
     Current maturities of long-term debt (Note 3)                  2,213,235
------------------------------------------------------------------------------
Total Current Liabilities                                           4,106,820
------------------------------------------------------------------------------
Long-term Debt, less current maturities (Note 3)                   10,960,682
------------------------------------------------------------------------------
Deferred Income Taxes (Note 7)                                        242,000
------------------------------------------------------------------------------
Total Liabilities                                                  15,309,502
------------------------------------------------------------------------------

Commitments and Contingencies
------------------------------------------------------------------------------

Redeemable Common Stock
     111,245 shares outstanding                                       503,820
------------------------------------------------------------------------------

Stockholders' Equity
     Common Stock, $.01 par - shares authorized, 
       20,000,000; outstanding 7,165,953                               71,659
     Additional paid-in capital                                     3,292,872
     Retained earnings                                                901,193
------------------------------------------------------------------------------
Total Stockholders' Equity                                          4,265,724
------------------------------------------------------------------------------

                                                             $     20,079,046
------------------------------------------------------------------------------

                 See accompanying notes to financial statements

                                       2
<PAGE>
<TABLE>

                    THE SOURCE INFORMATION MANAGEMENT COMPANY

                       Unaudited Statements of Operations

-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                Three Months Ended July 31,             Six Months Ended July 31,
                                             -----------------------------------    -----------------------------------
                                                    1997               1996                1997               1996
-----------------------------------------------------------------------------------------------------------------------

<S>                                          <C>                <C>                 <C>                <C>            
Service Revenues                             $     2,940,137    $     1,209,928     $     5,459,668    $     2,633,958
Merchandise Revenues                                       -                                  8,348            124,540
                                                                         94,602
-----------------------------------------------------------------------------------------------------------------------
                                                   2,940,137          1,304,530           5,468,016          2,758,498
-----------------------------------------------------------------------------------------------------------------------
Cost of Service Revenues                           1,590,631          1,146,254           2,851,857          2,351,092
Cost of Merchandise Sold                                   -                                 32,720             11,254
                                                                         11,254
-----------------------------------------------------------------------------------------------------------------------
                                                   1,590,631          1,157,508           2,884,577          2,362,346
-----------------------------------------------------------------------------------------------------------------------
                                                   1,349,506            147,022           2,583,439            396,152
Selling, General and Administrative
Expense                                              534,341                              1,062,128          1,671,502
                                                                        794,600
-----------------------------------------------------------------------------------------------------------------------
Operating Income (Loss)                              815,165          (647,578)           1,521,311        (1,275,350)
-----------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
            Interest income                            7,404                                 13,662
                                                                          7,284                                 16,240
            Interest expense                       (213,614)                              (415,750)          (114,178)
                                                                       (71,856)
            Other                                   (21,483)                               (40,625)
                                                                        (4,760)                               (10,715)
-----------------------------------------------------------------------------------------------------------------------
Total Other Income (Expense)                       (227,693)           (69,332)           (442,713)          (108,653)
-----------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes                    587,472          (716,910)           1,078,598        (1,384,003)
Income Tax (Expense) Benefit (Note 7)              (254,000)                              (489,000)            478,463
                                                                        281,599
-----------------------------------------------------------------------------------------------------------------------
Net Income (Loss)                            $       333,472    $     (435,311)     $       589,598    $     (905,540)
-----------------------------------------------------------------------------------------------------------------------

Earnings (Loss) per Share - Primary
and Fully Diluted                            $          0.03    $        (0.07)     $          0.07    $        (0.14)
-----------------------------------------------------------------------------------------------------------------------

Weighted Average of Shares Outstanding -
Primary and Fully Diluted                          7,127,482          6,546,092           7,087,838          6,463,909
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

                 See accompanying notes to financial statements

                                       3

<PAGE>
<TABLE>

                    THE SOURCE INFORMATION MANAGEMENT COMPANY

                       Unaudited Statements of Cash Flows
<CAPTION>
Six Months Ended July 31,                                                          1997                  1996
--------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                  <C>
Operating Activities
     Net income (loss)                                                      $         589,598    $        (905,540)
     Adjustments to reconcile net income
     to cash used in operating activities:
         Depreciation and amortization                                                184,851                98,812
         Provision for losses on accounts receivable                                   38,672              (35,394)
         Impairment of investment in limited partnership                               10,000                10,000
         Loss on disposition of assets                                                  1,338                     -
         Increase in cash surrender value of life insurance                          (33,743)                     -
         Deferred income taxes                                                      (116,000)             (114,191)
         Services received in exchange for Common Stock                                 8,000                     -
         Changes in assets and liabilities:
             Increase in accounts receivable                                      (1,855,845)             (975,001)
             Decrease (increase) in other assets                                       51,739             (557,556)
             Decrease in checks issued against future deposits                    (2,787,480)                     -
             Increase (decrease) in accounts payable and accrued expenses
                                                                                      399,071             (573,797)
             (Decrease) increase in amounts due customers                            (31,834)                 2,098
--------------------------------------------------------------------------------------------------------------------
Cash Used in Operating Activities                                                 (3,541,633)           (3,050,569)
--------------------------------------------------------------------------------------------------------------------

Investment Activities
     Acquisition of Mike Kessler & Associates, Inc., net of cash acquired           (349,777)                     -
     Acquisition of Magazine Marketing, Inc.                                                -             (275,000)
     Capital expenditures                                                           (125,521)             (115,360)
     Loan to affiliate                                                                (5,820)                     -
     Loan to officer                                                                 (10,000)                     -
     Collections from related party                                                         -                22,000
     Collections on notes receivable                                                        -                32,475
     Proceeds from sale of fixed assets                                                 2,000                     -
     Proceeds from surrender of life insurance policies                                83,959                     -
--------------------------------------------------------------------------------------------------------------------
Cash Used in Investing Activities                                                   (405,159)             (335,885)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                 See accompanying notes to financial statements

                                       4
<PAGE>
<TABLE>

                    THE SOURCE INFORMATION MANAGEMENT COMPANY

                       Unaudited Statements of Cash Flows
<CAPTION>

Six Months Ended July 31,                                                          1997                  1996
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>              <C>
Financing Activities
     Proceeds from issuance of Common Stock                                                 -                30,000
     Proceeds from issuance of Preferred Stock                                              -             1,922,075
     Borrowings under credit facility                                              17,218,000               281,318
     Principal payments on credit facility                                       (13,393,000)              (62,420)
     Borrowings under short-term debt agreements                                            -             2,076,000
     Repayments under short-term debt agreements                                     (34,098)             (325,000)
     Registration costs                                                              (58,310)                     -
     Preferred Stock dividends                                                            (3)                     -
--------------------------------------------------------------------------------------------------------------------
Cash Provided by Financing Activities                                               3,732,589             3,921,973
--------------------------------------------------------------------------------------------------------------------

(Decrease) Increase in Cash                                                         (214,203)               535,519

Cash, beginning of period                                                             284,921                23,828
--------------------------------------------------------------------------------------------------------------------

Cash, end of period                                                         $          70,718    $          559,347
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                 See accompanying notes to financial statements

                                       5
<PAGE>
                    THE SOURCE INFORMATION MANAGEMENT COMPANY

                          Notes to Financial Statements

1.     Unaudited Financial Statements

       In the opinion of management,  the unaudited financial  information as of
       July 31, 1997 contained herein reflects all adjustments  (consisting only
       of  normal  recurring  adjustments)  necessary  to  fairly  present  such
       information in accordance with generally accepted accounting  principles.
       The results of operations  for the six months ended July 31, 1997 are not
       necessarily indicative of the results to be expected for the entire year.


2.     Related Party Transaction

       The  Company  purchased  $174,000  in data  processing  services  from an
       employment  service  company  owned by certain  officers  of the  Company
       during the six months  ended July 31,  1996.  The Company  acquired  this
       employment service company for $45,000 on January 1, 1997.

       One of the  Company's  stockholders  also owns a majority of the stock of
       FMG, Inc.,  primarily an investing company. At July 31, 1996, the Company
       had a receivable  from FMG of $31,171 at prime plus .5%.  The  receivable
       was collected in full on November 5, 1996.

       The  Company  currently  leases  certain  office  space  from  businesses
       controlled by  stockholders  of the Company.  Amounts paid for the office
       space were  approximately  $108,000  and $95,000 for the six months ended
       July 31, 1997 and 1996,  respectively.  The Company occasionally charters
       an  airplane  owned  by a  partnership  in  which  one of  the  Company's
       stockholders  owns an  interest.  Amounts  paid to the  partnership  were
       $5,200  and $0  for  the  six  months  ended  July  31,  1997  and  1996,
       respectively.

       Certain  officers of the Company,  have from time to time,  received cash
       advances  from the Company.  The officers  executed  promissory  notes in
       favor of the Company in the  aggregate  amounts of  $243,578.  Such notes
       bear interest at the rate of 7.34% per annum.


                                       6

<PAGE>

3.     Long-term  Debt and Revolving Credit Facility
<TABLE>

       Long-term debt consists of:
<CAPTION>

       July 31,                                                                      1997
       -----------------------------------------------------------------------------------

<S>                                                                        <C>           
       Revolving Credit Facility                                           $   10,949,000

       Note payable to former owner of Mike Kessler &
       Associates, Inc., payable in full on January 5, 1998, interest
       at 6.25%, secured by a letter of credit for $2,231,912 for the
       benefit of the former owner                                              2,150,000

       Unsecured note payable to stockholder (former owner of
       Magazine Marketing, Inc.), non-interest bearing, payable
       in eight quarterly installments of $10,000, discounted
       based on the Company's effective borrowing rate                             28,664

       Term note payable in monthly installments of $629
       through November 1999, collateralized by an
       automobile                                                                  15,970

       Obligations under capital lease                                             30,283
       -----------------------------------------------------------------------------------
       Total Long-term Debt                                                    13,173,917

       Less current maturities                                                  2,213,235
       -----------------------------------------------------------------------------------

       Long-term Debt                                                      $   10,960,682
       -----------------------------------------------------------------------------------
</TABLE>

       The  Company  has an  agreement  providing  for a  revolving  loan  up to
       $12,500,000.  The bank has the right to terminate the agreement  upon not
       less than thirteen months prior written notice.  Borrowings bear interest
       at a rate  related to the  monthly  LIBOR  index  rate plus a  percentage
       ranging  from 2.5% to 3.5%,  depending  upon the ratio of funded  debt to
       earnings  before   interest,   taxes,   depreciation   and   amortization
       (effectively  9.1875%  at July  31,  1997).  Borrowings  are  secured  by
       personal  guarantees  of Messrs.  S. Leslie Flegel and William H. Lee and
       their  spouses  and by a  security  interest  in  substantially  all  the
       Company's assets including receivables,  inventory,  equipment, goods and
       fixtures, software, contract rights, notes, and general intangibles.

       The revolving  loan  agreement  requires the Company to maintain  certain
       ratios  and  a  specified  level  of  net  worth,  restricts  payment  of
       dividends,  and  limits  additional  indebtedness.  The  Company  was  in
       compliance with such ratios at July 31, 1997.


                                       7
<PAGE>
4.     Supplemental Cash Flow Information


       Supplemental information on interest and income taxes paid is as follows:

       Six Months Ended July 31,                   1997                 1996
       ----------------------------------------------------------------------

       Interest Paid                     $      359,000   $          112,000

       Income Taxes Paid (Refunded)      $    (122,000)   $          286,000
       ----------------------------------------------------------------------

       On  February  28,  1997,  7,721  shares of Common  Stock were issued as a
       dividend to the Preferred Stockholders.


5.     Advance Pay Program     

       The Company has  established  an Advance Pay Program.  Under this program
       the Company advances an agreed upon percentage of the incentive  payments
       otherwise  due the  retailer  from  magazine  publishers  upon  quarterly
       submission  of claims for such  payments.  The claims  otherwise  due the
       retailer  become due the Company.  Included in trade  receivables at July
       31, 1997 is  $11,159,322  due the  Company  under the Advance Pay Program
       (net of $3,782,255 due the program participants). Income from the program
       was  approximately  $1,838,000  and $483,000  during the six months ended
       July 31, 1997 and 1996, respectively.


6.     Due to Retailers        

       The Company has  arrangements  with certain of its customers  whereby the
       Company is authorized to collect and deposit in its own accounts,  checks
       payable to its customers for incentive payments.  The Company retains the
       commission related to such payments and pays the customer the difference.
       The  Company  owes  retailers  $167,741  at  July  31,  1997  under  such
       arrangements.

                                       8

<PAGE>
7.     Income Taxes

       Provision for federal and state income taxes  (benefit) in the statements
       of operations consist of the following components:

       Six Months Ended July 31,                     1997             1996
       ----------------------------------------------------------------------
        Current
          Federal                            $       482,000  $    (295,463)
          State                                      123,000       (110,000)
       ----------------------------------------------------------------------
       Total Current                                 605,000       (405,463)
       ----------------------------------------------------------------------
       Deferred
          Federal                                   (93,000)        (53,000)
          State                                     (23,000)        (20,000)
       ----------------------------------------------------------------------
       Total Deferred                              (116,000)        (73,000)
       ----------------------------------------------------------------------
       Total Income Tax (Benefit) Expense    $       489,000  $    (478,463)
       ----------------------------------------------------------------------

       Deferred   income  taxes   reflect  the  net  tax  effects  of  temporary
       differences between the carrying amount of the assets and liabilities for
       financial  reporting  purposes  and  the  amounts  used  for  income  tax
       purposes.  The sources of the temporary  differences  and their effect on
       deferred taxes are as follows:

        July 31,                                                    1997
        -------------------------------------------------------------------
        Deferred Tax Assets
           Allowance for doubtful accounts                   $     146,000
           Deferred compensation                                    22,000
           Other                                                    13,000
        -------------------------------------------------------------------
        Total Deferred Tax Assets                                  181,000
        -------------------------------------------------------------------
        Deferred Tax Liabilities
           Income not previously taxed under cash
           basis of accounting for income tax purposes             455,000
           Depreciation                                             25,000
           Other                                                    15,000
        -------------------------------------------------------------------
        Total Deferred Tax Liabilities                             495,000
        -------------------------------------------------------------------
        Net Deferred Tax Liability                                 314,000
        -------------------------------------------------------------------
        Classified as:
           Current                                                  72,000
           Non-current                                             242,000
        -------------------------------------------------------------------
        Net Deferred Tax Liability                           $     314,000
        -------------------------------------------------------------------

                                       9
<PAGE>
       The  following  summary  reconciles  income taxes at the maximum  federal
       statutory rate with the effective rate for the first six months of fiscal
       1998 and 1997:
<TABLE>
<CAPTION>

       Six Months Ended July 31,                                  1997            1996
       -----------------------------------------------------------------------------------
<S>                                                         <C>              <C>         
       Income tax expense (benefit) at statutory rate       $      367,000   $  (470,000)
       State income tax expense (benefit), net of
       federal income tax benefit                                   80,000       (58,000)
       Non-deductible meals and entertainment                       10,000         13,000
       Non-deductible goodwill amortization                         21,000          3,000
       Non-deductible officers' life insurance                       2,000         14,000
       Other, net                                                    9,000         19,537
       -----------------------------------------------------------------------------------
       Income Tax Expense (Benefit)                         $      489,000   $  (478,463)
       -----------------------------------------------------------------------------------
</TABLE>


8.     Business Combinations    

       On May 30,  1997,  the Company  acquired all of the stock of Mike Kessler
       and Associates, Inc. (MKA) for $2,500,000 of which $350,000 was paid upon
       closing.  The  balance  is due  January 5, 1998 with  interest  at 6.25%.
       Wachovia Bank of North  Carolina,  N.A. issued a standby letter of credit
       for  $2,231,912  for the benefit of the former  owner of MKA covering the
       period from May 30, 1997 through  January 31, 1998.  The seller  operated
       MKA as a business engaged in the collection of retail display  allowances
       for retail store chains.  The Company has continued the operation of such
       business and has continued servicing MKA's customer base.

       This  transaction has been accounted for as a purchase,  and accordingly,
       the assets and  liabilities  have been  recorded  at fair  market  value.
       Results of operations  have been included as of the effective date of the
       transaction.  The  purchase  price  exceeds  the fair value of the assets
       acquired in the amount of $2,324,346.


9.     Preferred Stock 

       In July 1997, the Company exchanged all 5,600  outstanding  shares of the
       Company's 1996 Series 7% Convertible  Preferred Stock for an aggregate of
       225,867 shares of Common Stock and non-transferable  warrants expiring in
       2000 to purchase  375,959  shares of Common Stock at an exercise price of
       $2.48 per share.  Such exchange  resulted in a  constructive  dividend of
       $109,937 which was reported in the fiscal quarter ending July 31, 1997.


10.    Reverse Stock Split

       On July 1, 1997,  the Company's  shareholders  approved a plan which gave
       the Board of  Directors  the  authority  to execute a 1 for 1.21  reverse
       stock split.  As of the  financial  statement  report date,  the Board of
       Directors has not effected the reverse stock split.


                                       10

<PAGE>
11.    Earnings Per Share 

       In  calculating  earnings per share,  Net Income for the three months and
       six months ended July 31, 1997 was reduced by a constructive  dividend of
       $109,937,  which  resulted  from the  exchange  of all 5,600  outstanding
       shares  of  Preferred  Stock  for  225,867  shares  of  Common  Stock and
       non-transferable  warrants expiring in 2000 to purchase 375,959 shares of
       Common Stock at an exercise price of $2.48 per share.


12.    Subsequent Event 

       On August 4, 1997, the Company filed a preliminary registration statement
       with the  Securities  and Exchange  Commission.  This  statement is being
       filed for the purpose of selling approximately 2,000,000 shares of Common
       Stock.  The Company  anticipates  the aggregate  selling price of all the
       securities to  approximate  $8,000,000.  The proposed issue date of these
       securities is expected to be in October, 1997.

       In September 1997, the Company issued to Aron Katzman, Harry L. Franc III
       and Timothy A. Braswell, each a director of the Company, non-transferable
       warrants  expiring  2000 to purchase an  aggregate  of 108,041  shares of
       Common Stock at an exercise price of $2.48 per share. Although the effect
       of this  transaction  will be reported in the third quarter,  the Company
       expects  that such  warrants  will be deemed to have an  aggregate  value
       ranging from $30,000 to $50,000.


                                       11
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

         This quarterly  report  contains  forward  looking  statements that are
necessarily subject to significant  uncertainties and risks, including,  but not
limited to those set forth in "RISK  FACTORS" in Form SB-2,  a copy of which may
be obtained without charge by written request to the Company.  When used in this
quarterly report, the words "believes," "anticipates," "intends," "expects," and
similar expressions are intended to identify forward-looking statements.  Actual
results  could be  materially  different  as a result of various  possibilities,
including increased competition, significant changes in the marketing strategies
of publishers, the inability of the Company to successfully manage its expansion
and the availability of suitable acquisition  candidates.  Readers are cautioned
not to place undue reliance on forward-looking  statements,  which speak only as
of the date hereof. The Company undertakes no obligation to publicly release the
results of any revisions to these  forward-looking  statements which may be made
to reflect  events or  circumstances  after the date  hereof or to  reflect  the
occurrence of unanticipated events.

Overview

         For more than 20 years, the Company and its predecessors  have provided
information  gathering,  consulting  and other  information  based  services  to
operators of mass merchandise,  grocery, convenience and pharmacy stores located
throughout the United States and eastern Canada. Currently, the Company provides
monitoring and documentation  services to approximately  710 retailers,  such as
Wal-Mart Stores, Inc., Kmart Corporation,  Target Stores, Inc., Food Lion, Inc.,
and W. H. Smith, Inc., in connection with processing and collection of incentive
payments from magazine  publishers on single copy sales of  approximately  6,000
magazine titles offered in approximately  70,000 stores. As an extension of this
service,  the  Company  established  its Advance  Pay  Program,  under which the
Company advances an agreed upon percentage of the incentive  payments due to the
retailer from magazine publishers. It then directly collects from the publishers
the claims due to the retailer.  In fiscal 1996 and 1997,  the Company  advanced
approximately   $1,783,000  and  $16,743,000  under  the  Advance  Pay  Program,
respectively.  In October 1996, the Company  expanded its services and potential
client base with the introduction of the Periodical Information Network ("PIN"),
an  information  service  in which the  Company  provides  subscribing  magazine
publishers with industry-wide,  single copy magazine sales information in a user
friendly  format.  Based  on  conversations  with  representatives  of  magazine
publishers,  the Company believes that publishers and advertisers  perceive that
PIN  provides a valuable  basis on which to formulate  marketing,  distribution,
advertising and other policies.

         A majority of the  Company's  revenues  are derived  from  service fees
earned in  connection  with the  collection  of incentive  payments  owed to the
Company's retailer clients from magazine publishers. Most such incentive payment
programs  offer  the  retailer  a cash  rebate,  equal  to a  percentage  of the
retailer's  actual  net  sales  of the  publisher's  titles,  which  is  payable
quarterly upon submission of a properly  documented claim. Under agreements with
its  retailer  clients,  the  Company  gathers  sales data,  submits  claims for
payment,  collects payments and receives a percentage of the aggregate  payments
collected on the retailers' behalf.  Claims for incentive payments are generally
submitted  to  the  publishers  quarterly  based  on  actual  net  sales  of the
publishers'  titles  recorded  in  the  previous  calendar  quarter.  Except  in
connection  with its Advance Pay Program,  the Company does not guarantee to its
retailer  clients any payments due to the client from magazine  publishers,  and
accordingly,  does not assume any credit  risk  associated  with such  incentive
payments.  In substantially  all the contracts under the Advance Pay Program the
Company bears the risk of  uncollectibility  associated with collecting payments
from publishers.  To date, the reserve maintained by the Company as an allowance
for  doubtful  accounts  in the  amount of 2% of  accounts  receivable  has been
adequate  to satisfy  any losses  incurred  by the  Company  from  uncollectible
accounts receivable.

         Under both the standard arrangement and the Advance Pay Program service
revenues  are  recognized  at  the  time  claims  for  incentive   payments  are
substantially  completed for  submission to the  publishers  based on the amount
claimed,  less an  estimated  reserve  necessary  to maintain an  allowance  for
doubtful  accounts of  approximately 2% of trade accounts  receivable.  However,
under the standard arrangement, invoices for services provided by the Company in
connection  with the claim  process are not issued  until the  Company  receives
settlement  of the claim.  Under the Advance Pay  Program,  the  customer is not
invoiced for the commission,  which is the difference  between the claim and the
advance amount.

                                       12
<PAGE>
Results of Operations

         The  following  table sets forth,  for the periods  presented,  certain
information  relating to the operations of the Company expressed as a percentage
of Total Revenues:
<TABLE>
<CAPTION>

                                            Three Months Ended July 31,          Six Months Ended July 31,
                                           1997                 1996              1997                1996
                                           ----                 ----              ----                ----

<S>                                         <C>                 <C>               <C>                <C>  
Service Revenues                            100.0%              92.7%             99.8%              95.5%

Merchandise Revenues                            -%               7.3%              0.2%               4.5%

Total Revenues                              100.0%             100.0%            100.0%             100.0%

Cost of Service Revenues                     54.1%              87.9%             52.2%              85.2%

Cost of Merchandise Sold                        -%               0.8%              0.6%               0.4%

Gross Profit                                 45.9%              11.3%             47.2%              14.4%

Selling, General &
  Administrative Expenses                    18.2%              60.9%             19.4%              60.6%

Operating Income (Loss)                      27.7%            (49.6)%             27.8%            (46.2)%

Interest, Net                               (7.0)%             (4.9)%            (7.4)%             (3.6)%

Other Income (Expense), Net                 (0.7)%             (0.4)%            (0.7)%             (0.4)%

Income (Loss) Before
  Income Taxes                               20.0%            (55.0)%             19.7%            (50.2)%

Net Income (Loss)                            11.3%            (33.4)%             10.8%            (32.8)%

</TABLE>

Service Revenues

         Increased  retailer  participation  in the  Advance  Pay  Program,  the
acquisitions of Magazine Marketing,  Inc., Readers Choice, Inc. and Mike Kessler
and Associates,  Inc. and the  implementation of PIN during the third quarter of
fiscal year 1997  contributed to an increase in service  revenue during both the
quarter and the six month period ended July 31, 1997 of approximately $1,730,000
and $2,826,000,  respectively,  over the comparable  periods in fiscal 1997. The
increases consisted of approximately $1,470,000 and $2,313,000, respectively, of
claims,  PIN and Advance  Pay Program  revenue  over the  comparable  periods in
fiscal 1997. Also, space design revenue  increased from $125,000 for the quarter
ended July 31,  1996 to $385,000  for the  quarter  ended July 31, 1997 and from
$182,000  for the six month  period  ended July 31, 1996 to $695,000 for the six
month period ended July 31, 1997. Currently, the Company is negotiating flat fee
arrangements;  however, historically, space design revenues have been recognized
as front end  display  manufacturers  ship the  displays to the  retailers,  the
timing of which is not within the Company's control.  Space design revenues have
historically  fluctuated  significantly  depending  upon a  variety  of  factors
including the number and magnitude of reconfiguration programs undertaken by the
Company's retailer clients and the timely shipping of displays by manufacturers.
As a result, variations in the timing and amounts of space design revenues could
have a material adverse effect on the Company's quarterly operating results.

Merchandise Revenues and Cost of Merchandise Sold

         As a result of its  relationships  with the  leading  retailers  in the
United States,  the Company has had opportunities  from time to time to purchase
merchandise,  such as gift and  greeting  cards,  caps and  other  leisure  time
products for resale to its retailer clients. However,  management has decided to
de-emphasize this portion of its business in order to dedicate more resources to
its core services.  The revenues derived from merchandising  sales are declining
while the inventory is being liquidated.

                                       13
<PAGE>
Cost of Service Revenues and Selling, General and Administrative Expense ("Total
Costs")

         Total  Costs for the six month  period  ended July 31,  1997  decreased
approximately  $109,000  compared  to the same  period  in the prior  year.  The
largest  decrease in Total Costs was in the data  processing  area.  These costs
decreased $174,000 over last year's comparable period due to the purchase of the
employment  service  company on January 1, 1997 which  previously  provided such
services.  However,  this decrease was partially  offset by an increase in wages
since the individuals  formerly employed by the employment  services company are
now employed by the  Company.  The  acquisitions  of Magazine  Marketing,  Inc.,
Readers  Choice,  Inc. and Mike Kessler and  Associates,  Inc. (MKA) have led to
increased costs, including wages,  amortization,  rent and depreciation.  Travel
and entertainment expenses decreased $38,000 and $16,000, respectively.  Lastly,
bad debt expense decreased $56,000 over the same period in the prior year.

         Total Costs for the second quarter increased over the second quarter of
the prior year by $184,000.  Bad debt expense  increased  $96,000 resulting from
the write-off of an  uncollectible  account.  The acquisition of MKA resulted in
costs of $200,000  during the quarter ended July 31, 1997.  Additionally,  legal
costs, depreciation expense, costs of seminars,  deferred compensation and costs
associated with filings  required by the Securities and Exchange  Commission and
Nasdaq increased  approximately  $56,000.  All other expenses  included in Total
Costs combined for a decrease of approximately $170,000.

Interest Expense

         Interest  Expense  increased  for the  three  month  and the six  month
periods  ended July 31,  1997  $142,000  and  $302,000,  respectively,  over the
comparable  periods  in the  prior  year.  This  increase  is  due to  increased
borrowings necessary to fund the Advance Pay Program.

Income Tax (Expense) Benefit

         The  effective  income  tax  rates  for the  three  month and six month
periods  ended July 31,  1997 were 43.2% and 45.3%,  respectively.  These  rates
varied from the  statutory  rate due to expenses not  deductible  for income tax
purposes. Such non-deductible expenses include meals and entertainment, goodwill
amortization, and officers' life insurance premiums.

Earnings Per Share

         In calculating  earnings per share, Net Income for the three months and
six  months  ended  July 31,  1997 was  reduced by a  constructive  dividend  of
$109,937,  which resulted from the exchange of all 5,600  outstanding  shares of
Preferred Stock for 225,867 shares of Common Stock and non-transferable warrants
expiring in 2000 to purchase 375,959 shares of Common Stock at an exercise price
of $2.48 per share.

Liquidity and Capital Resources

         The Company's primary cash requirements are for funding the Advance Pay
Program and selling, general and administrative expenses (particularly salaries,
travel and  entertainment)  incurred in connection with the  solicitation of new
clients and the maintenance of existing accounts.  Historically, the Company has
financed its business  activities  through  borrowings  under available lines of
credit, cash flow from operations and through the issuance of equity securities.

         Net cash used by operating  activities increased from $3,051,000 during
the six months  ended July 31, 1996 to  $3,542,000  during the six months  ended
July 31, 1997. During the six months ended July 31, 1997, $2,787,000 was used to
cover checks drawn against  future  deposits at January 31, 1997,  net cash used
for the  Advance  Pay  Program  was  approximately  $339,000  and cash  paid for
interest was $359,000.

         The average  collection  period for the six months  ended July 31, 1997
was 137 days  compared to 148 days for the six months ended July 31,  1996.  The
collection  periods  were  calculated  as  follows:  365  days/(Revenues/Average
Accounts  Receivable),  where  accounts  receivable  includes all trade accounts
receivable,  but only the commission  portion of amounts due from  publishers in
association with the Advance Pay Program.


                                       14
<PAGE>
         The Company is primarily engaged in the business of providing  services
to its retailer clients;  therefore,  its capital  expenditure  requirements are
minimal. At July 31, 1997, the Company had no outstanding  material  commitments
for capital expenditures.

         The Company has a credit  agreement  that provides for a revolving loan
of up to $12,500,000  with Wachovia Bank of North Carolina,  N.A.  Wachovia Bank
has the right to terminate  the  agreement  upon not less than  thirteen  months
prior written notice.  Borrowings bear interest at a rate related to the monthly
LIBOR index rate plus a percentage  ranging from 2.5% to 3.5% depending upon the
ratio of funded  debt to  earnings  before  interest,  taxes,  depreciation  and
amortization. Borrowings are secured by personal guarantees of Messrs. S. Leslie
Flegel  and  William H. Lee and their  spouses  and by a  security  interest  in
substantially  all of the Company's  assets  including  receivables,  inventory,
equipment,  goods and fixtures,  software,  contract rights,  notes, and general
intangibles.  Under the Credit  Agreement,  the  Company is required to maintain
certain financial ratios.  Although the Company was not in compliance at January
31,  1997,  with  the  requisite  ratio  of  Earnings  Before  Interest,   Lease
Obligations and Taxes to Interest Expense and Lease  Obligations  ("EBILT/IELO")
or the requisite ratio of Funded Debt to Total Capitalization  ("Debt/Cap"),  it
received  a  written  temporary  waiver  of  such  ratios  from  Wachovia  Bank.
Subsequently,  the Credit  Agreement  was amended to provide  the  Company  with
greater  flexibility with respect to the maintenance of certain financial ratios
including the EBILT/IELO and Debt/Cap ratios.  At July 31, 1997, the Company was
in compliance  with all financial  ratios  imposed by the Credit  Agreement,  as
amended,  and expects to remain in compliance through October 31, 1998. Although
the Company believes it is unlikely,  Wachovia Bank may decide to enforce any or
all of its remedies,  including  declaring the loan immediately due and payable,
if the financial  ratios are not  maintained.  Such action would have a material
adverse  effect on the financial  condition of the Company and would require the
Company to curtail the Advance Pay Program.

         At July 31, 1997, the Company's total long-term debt  obligations  were
$13,174,000.  Of such  amount,  $2,213,000  matures in the next 12  months.  The
Company  anticipates that the funds necessary to satisfy these  obligations will
be  derived  from the  proceeds  of the  offering  of equity  securities  and/or
additional bank borrowings.

                                       15
<PAGE>

         On May 30,  1997,  the  Company  acquired  all of the  stock of MKA for
$2,500,000 of which  $350,000 was paid upon closing.  The balance is due January
5, 1998 with interest at 6.25%.  Wachovia Bank of North Carolina,  N.A. issued a
standby  letter of credit for  $2,231,912 for the benefit of the former owner of
MKA covering the period from May 30, 1997 through  January 31, 1998.  The seller
operated  MKA  as a  business  engaged  in  the  collection  of  retail  display
allowances  for retail store chains.  The Company has continued the operation of
such business and has continued servicing MKA's customer base.

         In July 1997,  the holders of the Company's  1996 Series 7% Convertible
Preferred  Stock  exchanged all 5,600  outstanding  shares for 225,867 shares of
Common  Stock at an  effective  price of $2.48 per  share  and  non-transferable
warrants  expiring  in 2000 to  purchase  375,959  shares of Common  Stock at an
exercise  price of  $2.48  per  share,  before  giving  effect  to the  proposed
1-to-1.21 reverse stock split. Such exchange resulted in a constructive dividend
of $109,937 which was recorded in the fiscal quarter ending July 31, 1997.

         In September  1997, the Company issued to Aron Katzman,  Harry L. Franc
III and Timothy A.  Braswell,  each a director of the Company,  non-transferable
warrants  expiring  2000 to purchase an  aggregate  of 108,041  shares of Common
Stock at an  exercise  price of $2.48 per  share.  Although  the  effect of this
transaction will be reported in the third quarter, the Company expects that such
warrants  will be deemed to have an  aggregate  value  ranging  from  $30,000 to
$50,000.

         On  August  4,  1997,  the  Company  filed a  preliminary  registration
statement with the Securities and Exchange  Commission.  This statement is being
filed for the purpose of selling approximately 2,000,000 shares of Common Stock.
The Company  anticipates  the aggregate  selling price of all the  securities to
approximate $8,000,000.  The proposed issue date of these securities is expected
to be in October, 1997.

         Without  additional  financing,  the Company will not be able to expand
its  operations,  particularly  its Advance Pay Program,  in accordance with the
Company's  current  plan.  If the  proceeds of the  offering  together  with the
Company's currently available funds and internally  generated cash flows are not
sufficient  to  satisfy  its  financing  needs,  the  Company  likely  will seek
additional  funding  through  increased  bank  borrowings  and/or  the public or
private  sale of debt or  equity  securities.  There  can be no  assurance  that
additional  funds will be available on a timely basis, on acceptable terms or at
all, or that such funds, if raised, would be sufficient to permit the Company to
continue its  expansion as planned.  If the proceeds of the offering and funding
through  additional  public or  private  sale of debt or equity  securities  are
inadequate,  and borrowings  under the existing  credit facility or a comparable
replacement  thereof are not  available,  the Company may be required to curtail
the Advance Pay Program.

                                       16
<PAGE>
                           PART II - OTHER INFORMATION


Item 2.  Changes in Securities.

         (c) During the quarter ended July 31, 1997, the following  warrants for
the  purchase of shares of Common  Stock were  issued:  2,848  warrants at $4.20
expiring on November 20, 1998 and 4,518  warrants at $2.98  expiring on July 31,
1999 were issued to certain  financial  advisors of the Company in consideration
of prior services.  These  transactions were made in reliance on Section 4(2) of
the  Securities  Act based on the  sophistication  of the  acquiring  persons as
securities professionals.

         In July 1997,  the holders of the  Company's  1996 Series 7% Cumulative
Convertible  Preferred  Stock  exchanged all 5,600 shares into 225,867 shares of
Common  Stock at an  effective  price of $2.48 per  share  and  non-transferable
warrants  expiring  in 2000 to  purchase  375,959  shares of Common  Stock at an
exercise  price of $2.48 per share.  This  transaction  was made in  reliance on
Section 3(a)(9).

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

         (a) The Annual Meeting of the  Stockholders  of the Company was held on
July 1,  1997.  Of the  7,049,199  shares  entitled  to  vote  at such  meeting,
4,809,599 shares were present at the meeting in person or by proxy.

         (c) The proposal to amend the Company's  Articles of  Incorporation  to
decrease the number of authorized  shares,  reduce the Company's  stated capital
and to effect a 1-for-1.21 Reverse Stock Split was approved.  The purpose of the
Amendment  is to  increase  the per share bid in the Common  Stock and  possibly
promote greater liquidity for the Company's  shareholders.  The number of shares
voted for, against and withheld were as follows:

          For                        Against                     Withheld

        4,696,117                     113,482                        0

         The proposal to amend the Company's Articles of Incorporation to change
the name of the  Company to "The  Source  Information  Management  Company"  was
approved.  The  purpose of the  Amendment  is to better  reflect  the  Company's
current and  proposed  business  operations  and  attract a broader  spectrum of
investors,  which  should  benefit  both the Company and its  shareholders.  The
number of shares voted for, against and withheld were as follows:

          For                        Against                     Withheld

        4,809,599                       0                           0

         There were no broker non-votes regarding the election of officers,  the
approval of the Reverse Stock Split or he approval of the name change.

Item 6.  Exhibits and Reports on Form 8-K.

(a)      Exhibits.

         See Exhibit Index.

(b) No current reports on Form 8-K have been filed during the three months ended
July 31, 1997.

                                       17
<PAGE>
                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                    THE SOURCE INFORMATION MANAGEMENT COMPANY


Date:  September 15, 1997           /S/ W. BRIAN RODGERS
                                    --------------------------------
                                    W. Brian Rodgers
                                    Chief Financial Officer

                                       18
<PAGE>
                                  EXHIBIT INDEX

Exhibit
Number                     Description

11.1                       Statement re:  computation of per share earnings

27.1                       Financial Data Schedule (Filed in EDGAR version only)

                                       19